Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd - [2021] NSWSC 1692 - NSWSC 2021 case summary — Zoe

NSWNSWSC

Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd

[2021] NSWSC 1692

Supreme Court of NSW|2021-10-01|Before: Stevenson J

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Source facts

Court

Supreme Court of NSW

Decision date

2021-10-01

Before

Stevenson J

Source

Original judgment source is linked above.

Judgment (187 paragraphs)

[1]

Evidence Act 1995 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Arnold v Britton [2015] AC 1619 Atlas Construction Group Pty Ltd v Fitz Jersey Pty Ltd [2017] NSWSC 72 Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; 59 ACSR 373 Australian Securities and Investments Commission v Plymin (No 1) (2003) 46 ACSR 126; [2003] VSC 123 Beach Petroleum NL v Johnson (1993) 43 FCR 1; [1993] FCA 392 Bernard Elsey Pty Ltd v Federal Commissioner of Taxation (1969) 121 CLR 119; [1969] HCA 46 BM Sydney Building Materials Pty Ltd v AWT Building Group (Aust) Pty Ltd [2019] NSWSC 421 Box Valley Pty Ltd v Kidd [2006] NSWCA 26 Brash Holdings Ltd v Katile Pty Ltd [1996] 1 VR 24; (1994) 13 ACSR 504 Breen v Williams (1996) 186 CLR 71; [1996] HCA 57 Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 Cannane v J Cannane Pty Ltd (in liq) (1998) 192 CLR 557; [1998] HCA 26 Chan v First Strategic Development Corporation Ltd (in liq) [2015] QCA 28 Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 Connective Services Pty Ltd v Slea Pty Ltd (2019) 267 CLR 461; [2019] HCA 33 Crowe-Maxwell v Frost (2016) 91 NSWLR 414; [2016] NSWCA 46 Cuthbertson & Richards Sawmills Pty Ltd v Thomas [1998] SCACT 58; 28 ACSR 310 Darvall v North Sydney Brick & Tile Co Ltd (1989) 16 NSWLR 260 DSHE Holdings (Receivers and Managers Appointed) (in liq) v Abboud (No 3); National Australia Bank Ltd v Abboud (No 4) [2021] NSWSC 673 Dungowan Manly Pty Ltd v McLaughlin [2012] NSWCA 180; 90 ACSR 62 ET-China.com International Holdings Ltd v Cheung [2019] NSWSC 1874; 142 ACSR 121 ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; 150 ACSR 461 Exception Holdings Pty Ltd v Albarran (No 2) [2005] NSWSC 981 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd (2017) 94 NSWLR 606; [2017] NSWCA 53 Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53 Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Gautam v Health Care Complaints Commission [2021] NSWCA 85 Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187 Grove v Flavel (1986) 43 SASR 410; 11 ACLR 161 Heesh v Baker [2008] NSWSC 711; 67 ACSR 192 Helton v Allen (1940) 63 CLR 691; [1940] HCA 20 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64 In the matter of Centro Properties Ltd and CPT Manager Ltd in its capacity as responsible entity of Centro Property Trust [2011] NSWSC 1171; 87 ACSR 131 In the matter of CSR Ltd (2010) 183 FCR 358; [2010] FCAFC 34 In the matter of Molopo Energy Ltd; Molopo Energy Ltd v Keybridge Capital Ltd [2014] NSWSC 1864; 104 ACSR 46 In the matter of Rossfield Group Operations Pty Ltd & Morton Holdings Pty Ltd [1981] Qd R 372; (1980) 5 ACLR 237 Ishac v David Securities Pty Ltd (No 6) (1992) 7 ACSR 199 Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191; 63 ACSR 557 Kinsela v Russell Kinsela Pty Ltd (in liq) (1986) 4 NSWLR 722; 10 ACLR 395 Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (In Liq) (Receivers and Managers Appointed) (2017) 254 FCR 559; [2017] FCA 866 Lahey Constructions Pty Ltd v State of New South Wales [2021] NSWCA 69 Links Golf Tasmania Pty Ltd v Sattler (2012) 213 FCR 1; [2012] FCA 634 Linter Group Ltd (in liq) v Goldberg (1992) 7 ACSR 580 Lloyds Bank Ltd v Marcan [1973] 1 WLR 1387; 3 All ER 754 Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3 Melbase Corporation Pty Ltd v Segenhoe Pty Ltd [1995] FCA 279; 13 ACLC 823 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 Murphy Corporation Ltd v Acumen Design & Development (QLD) Pty Ltd [1995] 11 BCL 274 National Australia Bank Ltd v Clowes [2013] NSWCA 179 New Cap Reinsurance Corporation Ltd (in liq) v A E Grant [2008] NSWSC 1015 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; [1987] HCA 5 Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187; 14 ACSR 109 Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429; [2011] 1 WLR 770 Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151 Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 Puglia v Basol [2005] NSWSC 1271 Re Diplock's Estate [1948] Ch 465 Regal Castings Ltd v Lightbody [2009] 2 NZLR 433 Regentcrest plc (in liq) v Cohen [2000] All ER (D) 747; [2001] 2 BCLC 80 Rejfek v McElroy (1965) 112 CLR 517; [1965] HCA 46 Sandell v Porter (1966) 115 CLR 666; [1966] HCA 28 Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11 Silvera v Savic (1999) 46 NSWLR 124; [1999] NSWSC 83 Smith v Starke, in the matter of Action Paintball Games Pty Ltd (in liq) (No 2) [2015] FCA 1119; 109 ACSR 145 Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (The "Palitana") [1924] 20 Ll L Rep 140 Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; [2016] HCA 52 Treloar Constructions Pty Ltd v McMillan [2017] NSWCA 72; 120 ACSR 130 Walker v Wimborne (1976) 137 CLR 1; [1976] HCA 7 Watson v Foxman (1995) 49 NSWLR 315 Weaver v Harburn [2014] WASCA 227; 103 ACSR 416 Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1; [2012] WASCA 157 White in his capacity as joint and several liquidator of Port Village Accommodation Pty Ltd (in liq) v ACN 153 152 731 Pty Ltd (in liq) (2018) 53 WAR 234; [2018] WASCA 119 Yore Contractors Pty Ltd v Holcon Pty Ltd (1990) 2 ACSR 663 ZBB (Australia) Ltd v Allen (1991) 4 ACSR 495 Texts Cited: T F Bathurst and S Merope, "It tolls for thee: Accessorial liability after Bell v Westpac" (2013) 87 ALJ 831 J D Heydon, Heydon on Contract (2019, Thomson Reuters) J D Heydon, M J Leeming, P G Turner, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths) K Mason, J W Carter, G J Tolhurst, Mason & Carter's Restitution Law in Australia (3rd ed, 2016, LexisNexis Butterworths) P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Thomson Reuters) R P Austin and I M Ramsay, Ford, Austin and Ramsay's Principles of Corporations Law (17th ed, 2018, LexisNexis Butterworths) R P Austin, H A J Ford AM and I M Ramsay, Company Directors: Principles of Law and Corporate Governance (2005, LexisNexis Butterworths) Category: Principal judgment Parties: In proceedings 2017/11963: Fitz Jersey Pty Ltd (Plaintiff) Atlas Construction Group Pty Ltd (in liq) (First Defendant) Robert Yazbek (Second Defendant) Kebzay Pty Ltd (Third Defendant) Botany Road Project Pty Ltd (Fourth Defendant) Scott Sweeney (Fifth Defendant) Sweenham Pty Ltd (Sixth Defendant) Annette Yazbek (Seventh Defendant) Kebzay Custodian No. 2 Pty Ltd (Eighth Defendant) Castlefield Corner Pty Ltd (Ninth Defendant) 620 Botany Road Pty Ltd (Tenth Defendant) In proceedings 2019/305131: Robert Yazbek (First Plaintiff) Scott Sweeney (Second Plaintiff) Kebzay Pty Ltd (Third Plaintiff) Sweenham Pty Ltd (Fourth Plaintiff) Bruce Gleeson t/as Liquidator of Atlas Construction Group Pty Ltd (in liq) (First Defendant) Fitz Jersey Pty Ltd (Second Defendant) In proceedings 2020/87065: Fitz Jersey Pty Ltd C/- Economos Group Pty Ltd (Plaintiff) Bruce Gleeson t/as Liquidator of Atlas Construction Group Pty Ltd (in liq) (First Defendant) Robert Yazbek (Second Defendant) Scott Sweeney (Third Defendant) Representation: Counsel: M Christie SC with L Shipway, B Mostafa and M Sherman (Plaintiff) G A Sirtes SC with A R R Vincent and J Adamopoulos (Second to Tenth Defendants) Solicitors: Eakin McCaffery Cox (Plaintiff) Matthews Folbigg (First Defendant) Madison Marcus (Second to Tenth Defendants) File Number(s): 2017/11963; 2019/305131 and 2020/87065

[2]

table of contents The hearing Decision The course of events Prior to signing the Building Contract Discussions concerning management of units in the proposed development The 2010 "Development Agreement" First development application The Building Contract Second development application The water table issue 2012 - the "Finishes and appliances upgrades" - the "Upgrades Agreement" The events of 2013 The 2013 Agreement The progress claim for the $10 million Commencement of work on Separable Portion 2 The lack of reference to an entitlement to the Payment Claim Items The December 2013 GST Model The events of 2014 February 2014 correspondence with Atlas's insurance broker February 2014 profit forecast and summary of claims left against Fitz Jersey May 2014 cash flow and identification of amounts left to be paid by Fitz Jersey July 2014 cash flow September to December 2014 - final invoices The Exclusive Management Agency Agreement The events of 2015 Mr Yazbek ceases to be a director of Atlas Interim occupation certificate Discontinuance of Jobpac The events of 2016 The "Asper" development - Mr Yazbek's "crisis" Mr Sweeney's meeting with Mr Wong Relations restored between Mr Yazbek and Mr Sweeney Relations between Mr Wong and Mr Yazbek break down Fitz Jersey gives notice terminating the Exclusive Management Agency Agreement The October Letter The assertions in the October Letter concerning the events of February 2013 The significance of the October Letter Mr Wong's reply of 13 October 2016 The retainer of Mr Mort Jobpac The Payment Claim Ms Holland's email of 24 November 2016 The Payment Schedule Mr Mort's 1 December 2016 enquiry The statutory declarations Mr Sweeney's communications with quantity surveyors The Adjudication Application Mr Wong's statutory declaration The Adjudication Response Further advice from Mr Mort The events of 2017 The Adjudication Determination Commencement of the 2017 Proceedings Issue of the Adjudication Certificate and entry of judgment The Garnishee Order Preparation to declare the Dividends Mr White's recollection Friday 3 February 2017 The weekend of 4 and 5 February 2017 Monday 6 February 2017 The Dividends resolution The "Holland Letter" Tuesday 7 February 2017 The Payment of the Dividends The Shareholders' Loans Events thereafter The Liquidator's examinations Credit Demeanour The October Letter Mr Yazbek's evidence about the October Letter Mr Sweeney's evidence about the October Letter Mr Vartuli's evidence about the October Letter Mr Stevens' evidence about the October Letter The explanations Mr Wong has never asserted that the 2013 Agreement was as described in the October Letter Since 11 October 2016 the accounts given by Mr Yazbek, Mr Sweeney and Mr Vartuli of the 2013 Agreement are inconsistent with the assertions in the October Letter The responses to Mr Mort's 1 December 2016 email The "infamous" letter The Payment Claim The Adjudication Application and supporting statutory declarations It is improbable that all the matters asserted in the October Letter concerning the Payment Claim Items were agreed or estimated in February 2013 CPI Uplift Carbon Tax Costs Upgrades Early Completion Bonus Conclusion concerning the October Letter The 2013 Agreement Fitz Jersey's case Mr Wong's evidence about the 2013 Agreement The accounts given by Mr Yazbek, Mr Sweeney and Mr Vartuli Post contractual conduct Claims for the Payment Claim Items could have been made earlier A lack of reference in Atlas's books to a potential claim for the Payment Claim Items Conclusion as to the 2013 Agreement The Building Contract issues The 2013 Agreement What was the date of commencement of the WUC? Did WUC include design work? The defined terms Clause 14.1(a) Clause 14.3(f) the chapeau to cl 14.1 Clause 16A Clauses 16B and 18 Clause 17 Conclusion Was there a "Development Agreement"? Did Separable Portion 1 and Separable Portion 2 start on the same date? When did construction of Separable Portion 1 commence? When did construction of Separable Portion 2 commence? No Superintendent Can Atlas claim on a quantum meruit basis? Early completion bonus - entitlement - proper construction of the Building Contract Item 7 Items 29 and 30 Conclusion on construction Extensions of time Extensions of time for inclement weather Change in design of basement Public domain works Liquidated damages CPI Carbon Tax Upgrades Reimbursable costs The limitation issue The Emichrome issue "Reimbursements" - $7,429,883.24 Council fees and charges - $10,215,839.86 Authority fees and charges - $309,412.45 Other costs - $303,461.18 Reduction in the number of units The basement variation Conclusions concerning the Building Contract issues The Dividends claim Atlas had ceased trading The funds retained Declared as a matter of urgency No pressing need so far as shareholders were concerned What was the Directors' motivation? The Directors' understanding of the provisional nature of a payment under the SOPA The advice from Mr Mort The advice from Mr White Section 254T of the Corporations Act Section 254T(1)(a) - assets to exceed liabilities sufficient for the payment of the dividend AASB 111 The consequence of the application of AASB 111 AASB 137 Section 254T(1)(a) - the payment of dividends must not materially prejudice the company's ability to pay its creditors Was Fitz Jersey a creditor of Atlas when the Dividends were paid? Did the payment of the Dividends materially prejudice Atlas's ability to pay its creditors? The need for affirmative satisfaction The present case What should the Directors have done? The counterfactual Would a declaration of dividends have been made later in any event? Claim under s 37A of the Conveyancing Act That there was an alienation of property That the alienation of property was with intent to defraud creditors That a person be thereby prejudiced Breach of director's duties Duty to exercise their powers bona fide in the interests of Atlas as a whole Duty not to permit their interests to conflict with those of Atlas Duty not to exercise the power for an improper purpose Are these duties fiduciary duties? Voidable transactions under the Corporations Act Reasonable reliance on advice Claim under s 588FA - unfair preference Claim under s 588FB of the Corporations Act - uncommercial transaction Claim under s 588FDA of the Corporations Act - unreasonable director-related transaction Claim under s 588FC of the Corporations Act - insolvent transaction Voidable transactions - s 588FE of the Corporations Act Article 85 of Atlas's Constitution Breaches of duty The flow of funds Relief - equitable tracing No breach of fiduciary duty The Dividends were "not impressed with any equitable interest" Part of the Dividends paid to Kebzay was used by 620 Botany Road Pty Ltd to repay a loan owed to Kebzay No 3 Pty Ltd and therefore could be traced no further Part of the Dividend paid to Sweenham was paid to Castlefield Corner Pty Ltd Section 588FF of the Corporations Act Relief - statutory tracing - s 588FF of the Corporations Act Relief - damages and equitable compensation The Shareholders' Loans Conclusion

[3]

Judgment

On 17 December 2010, the plaintiff, Fitz Jersey Pty Ltd, entered into a contract (the "Building Contract") with the first defendant, Atlas Construction Group Pty Ltd, to construct a large mixed residential and commercial development on a property in Mascot owned by Fitz Jersey. The development was to be known as "Mascot Square" (the "Mascot Square Project").
The Building Contract provided for: 1. a contract sum of $180 million; [1] 2. reimbursement of the costs incurred by Atlas in respect of "design obligations"; and 3. reimbursement of a number of other items including "consultants or any design fees", "authority fees", "DA fees and other council charges" (the "Reimbursables").
Atlas commenced work on the development in 2010. Construction was completed by January 2016. Fitz Jersey makes no complaint about the quality of the work done by Atlas. This is not a defects case.
Ultimately, the development comprised 500 residential apartments together with some commercial space. The Building Contract provided for work to proceed in respect of two "separable portions" each comprising a number of towers. The parties referred to these as "Separable Portion 1" and "Separable Portion 2". In some documents the parties referred to these as "Stage 1" and "Stage 2".
Fitz Jersey is a property development company controlled by Mr Kie Chie Wong and his wife Ms Ann Pin Lim. The parties referred to Ms Lim as "Mrs Wong". I shall do the same.
Atlas was a building company owned and controlled by interests associated with its directors, Mr Robert Yazbek and Mr Scott Sweeney. It is now in liquidation.
Mr Wong and Mr Yazbek shared an extensive business relationship extending back to 1985. Prior to the Mascot Square Project, Mr Wong and Mr Yazbek had worked on a number of building projects, including the construction of Mr and Mrs Wong's residence in Maroubra and the construction of Mr and Mrs Wong's son's residence in Paddington. Mr Wong and Mr Yazbek had developed a relationship of mutual respect and trust.
However, in 2016, Mr Wong and Mr Yazbek fell out.
That led, in November 2016, to Atlas serving on Fitz Jersey a payment claim (the "Payment Claim") under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the "SOPA") for some $10.75 million.
The bulk of the amount claimed in the Payment Claim was for a "CPI increase" for the amount payable in respect of Separable Portion 2 (the "CPI Uplift"), an "Early Completion Bonus", "Carbon Tax Costs" and a claim for "Finishes and appliances upgrade" (the "Upgrades"). I will refer to these, together, as the "Payment Claim Items".
On 6 January 2017, an Adjudicator made a determination under the SOPA in favour of Atlas in the sum claimed (the "Adjudication Determination"). Atlas registered the Adjudication Determination as a judgment in this Court and procured the issue of a garnishee order (the "Garnishee Order"). Atlas caused the Garnishee Order to be served on Fitz Jersey's bank with the result that, on 3 February 2017, Atlas received the sum of some $11 million representing the amount of the Adjudication Determination together with interest and costs.
On 6 February 2017, Mr Yazbek and Mr Sweeney, as directors of Atlas, resolved to pay some $4 million of that $11 million to the Australian Taxation Office (ATO) and then resolved to declare dividends (the "Dividends") which caused all but $400,000 of the balance of the proceeds of the Adjudication Determination to be paid to the shareholders of Atlas. Those shareholders were companies associated with Mr Yazbek and Mr Sweeney; Kebzay Pty Ltd and Sweenham Pty Ltd respectively. Kebzay held 90% and Sweenham 10% of the issued share capital in Atlas.
Fitz Jersey contends that Atlas thereby acted in breach of s 254T of the Corporations Act 2001 (Cth) and in breach of Atlas's Constitution. Fitz Jersey also contends the Dividends constituted an alienation of property with intent to defraud creditors for the purpose of s 37A of the Conveyancing Act 1919 (NSW).
Fitz Jersey contends that, in resolving to declare the Dividends, Mr Yazbek and Mr Sweeney acted in breach of their duties as directors. Fitz Jersey also contends that the declaration and payment of the Dividends was a voidable transaction for the purposes of s 588FE of the Corporations Act by reason of being an unfair preference, uncommercial transaction, insolvent transaction and unreasonable director related transaction for the purposes of ss 588FA, 588FB, 588FC and 588 FDAC respectively of the Corporations Act.
The Dividends were paid on 8 February 2017.
On 6 February 2017, Mr Yazbek and Mr Sweeney also caused loans by Atlas to Kebzay and Sweenham (the "Shareholders' Loans") to be written off.
On 4 April 2018, Mr Yazbek and Mr Sweeney resolved to appoint administrators to Atlas. On 18 May 2018, the creditors of Atlas resolved to place the company into liquidation.
In June, July and November 2019 the Liquidator of Atlas conducted examinations (the "Liquidator's Examination") under s 596A of the Corporations Act of Mr Yazbek, Mr Sweeney and other persons to whom I will return.
On 16 September 2019, the Liquidator admitted Fitz Jersey as a creditor of Atlas in the sum of some $10.7 million. On 5 March 2020, that amount was increased to $12.8 million.
In December 2019, the Liquidator caused Atlas to assign to Fitz Jersey a number of causes of action against Mr Yazbek and Mr Sweeney (the "Assignments"). The Court approved the Assignments on 16 December 2019 pursuant to Corporations Act, Sch 2 - Insolvency Practice Schedule (Corporations), s 90-15(1) and ss 477(2B) and 477(2)(c) of the Corporations Act.
Fitz Jersey seeks to prosecute those causes of action in one of the three proceedings before the Court (the "2017 Proceedings").
The effect of the Assignments is that some part of the fruits of any success Fitz Jersey has in these proceedings will be paid to Fitz Jersey, and some to the Liquidator. I will invite submissions on this question, as appropriate, once these reasons are published.
The defendants to the 2017 Proceedings include Mr Yazbek, Kebzay, Mr Sweeney and Sweenham. Also joined as defendants are Mr Yazbek's wife, Mrs Annette Yazbek, and corporate entities associated with Mr Yazbek and Mr Sweeney. Fitz Jersey seeks to trace the funds represented by the Dividends into the hands of those parties.
It is in these proceedings that Fitz Jersey also alleges Mr Yazbek and Mr Sweeney acted in breach of their duties as directors by causing the Shareholders' Loans to be written off.
Two other proceedings were heard concurrently to the 2017 Proceedings, with evidence in each being evidence in the other. The parties referred to the other two proceedings as the "2019 Proceedings" and the "2020 Proceedings". Those proceedings involve appeals by Mr Yazbek and Mr Sweeney and by Fitz Jersey against the Liquidator's admission of Fitz Jersey as a creditor of Atlas. Mr Yazbek and Mr Sweeney contend that Fitz Jersey should not be admitted as a creditor of Atlas at all. Fitz Jersey contends that the amount to which it should be admitted should be increased significantly.
In the 2019 and 2020 Proceedings, Fitz Jersey makes a number of claims concerning Atlas's entitlements under the Building Contract (the "Building Contract Claims"). The Building Contract Claims include that Atlas was not entitled to the amounts claimed in the Payment Claim, that Fitz Jersey is entitled to liquidated delay damages ("Liquidated Damages") against Atlas and to restitution of various costs and charges that it paid Atlas during the course of construction. These matters are relevant to the amount for which Fitz Jersey can prove in Atlas's liquidation and to whether Atlas and Fitz Jersey have suffered damage by reason of the Dividends.
To a large extent, resolution of the issues in the 2017 Proceedings will resolve these issues.
Most of the hearing time before me was devoted to Fitz Jersey's "Dividends Claim".
At the heart of the Dividends Claim is the very serious proposition that by reason of an agreement (the "2013 Agreement") reached between Mr Wong, Mr Yazbek, and Mr Sweeney at a meeting in February 2013 (the "February 2013 Meeting"), Atlas had already been paid for the Payment Claim Items and thus that Mr Yazbek and Mr Sweeney "did not hold a genuine belief that Atlas was entitled" to make those claims in the Payment Claim.
Fitz Jersey's case is that, accordingly, Mr Yazbek and Mr Sweeney must have known, when they resolved to declare the Dividends, that by reason of s 32 of the SOPA, Fitz Jersey would ultimately be entitled to recover from Atlas the amount of the Adjudication Determination, that Fitz Jersey was thus a "creditor" of Atlas for the purposes of s 254T of the Corporations Act and that Atlas for that reason was not entitled to pay the Dividends. There is more to Fitz Jersey's Dividends Claim than this, but this suffices for the moment and for the purpose of explaining how the Dividends Claim relates to the Building Contract Claims.
To resolve Fitz Jersey's Dividends Claim, it is necessary to determine, amongst other things, whether Atlas was entitled to make the claims in the Payment Claim for the Payment Claim Items.
Resolution of that matter depends on, amongst other things, the ambit of the 2013 Agreement. Determination of the ambit of the 2013 Agreement depends, in turn, amongst other things, on what to make of a letter that Mr Yazbek, Mr Sweeney and a Mr David Stevens [2] sent to Mr and Mrs Wong on 11 October 2016 (the "October Letter"). That is because, in the October Letter, Mr Yazbek and Mr Sweeney [3] gave an account of the 2013 Agreement that they have since eschewed, including in their evidence before me.
Resolution of Fitz Jersey's Dividends Claim also requires resolution of Fitz Jersey's and Atlas's entitlements under the Building Contract which, in turn, depends on the ambit of the 2013 Agreement.

[8]

Discussions concerning management of units in the proposed development

In 2010, Mr Wong intended to retain all of the apartments in the development and lease them out, once they were completed. [18]
In that context, Mr Yazbek said that in around March 2010, shortly after Fitz Jersey had exchanged contracts to purchase the Mascot site, he had this conversation with Mr Wong: "[Mr Wong]: How are we going to do this development? [Mr Yazbek]: Would you like me to be part of the development as a developer? [Mr Wong]: Not this one, but the next ones because I want to keep all the apartments for this project and lease them out. I would like you to build it for me. Can you handle 300 units? [Mr Yazbek]: Of course, I can. [Mr Wong]: When I keep the 300 units, can you manage them for me? [Mr Yazbek]: Yes, I can, I will have to form a real estate arm of Atlas to do this and I will get my daughter involved. I will also charge project management fees for managing all this if I don't become the builder. I usually charge 5-10% of total development cost. However, if you give me the property management and I do the construction, I won't charge you development or project management fees or our margin for [Mr and Mrs Wong's son's] house. Also, it would be good that we do the managements because as the builders, we will know the whole building intricately and can manage all defects without any cost to you. [Mr Wong]: Ok … please build it and you can be the property managers."
Mr Yazbek said he believed that, as a result of this discussion, he and Mr Wong had an understanding that Mr Yazbek, or a related entity, would manage the properties after construction and that he in turn would forgo causing Fitz Jersey to be charged a project management fee.
Mr Wong denied that in 2010 he asked Mr Yazbek to manage the units. Mr Wong said he did not discuss with Mr Yazbek who was going to manage the rental of any units until 2014.
Mr Yazbek deposed that he discussed this further with Mr Wong at the February 2013 Meeting, to which I refer below.
By October 2016, it was Mr Yazbek's perception that Mr Wong had, in effect, reneged on this understanding. This appears to have contributed to their falling out in October 2016. I return to these matters below.

[14]

2012 - the "Finishes and appliances upgrades" - the "Upgrades Agreement"

Works continued on the project throughout 2012. Atlas invoiced Fitz Jersey for the work done. The invoices were paid promptly.
By July 2012, Mr Wong had decided that, once the project was completed, he would sell the apartments in Separable Portion 1 but retain those in Separable Portion 2. Mr Yazbek deposed that "as part of that process, I considered and determined that the apartments [that Mr Wong proposed to sell] would be more attractive to both owner-occupier purchasers as well as investors if they included superior internal fixtures and finishes, including better quality tapware and appliances".
These proposed improvements are the Upgrades which comprise one of the Payment Claim Items.
In that context, Mr Yazbek said he had this conversation with Mr and Mrs Wong: "[Mr Yazbek]: To give these apartments a point of difference, I think we should include upgraded internal fixtures and finishes. As you can appreciate you need different touches when selling an apartment as opposed to renting it. [Mr Wong]: Ok, what do you suggest? [Mr Yazbek]: I suggest that you upgrade the tapware to Hans Grohe which is a German product that provides a 15-year warranty and is much better quality than the tapware that is otherwise going to be installed. I also suggest you use AEG kitchen appliances, which are also German appliances and give 5-year warranties. In my view, purchasers will be more attracted to buying into a prestigious development. This will also give investors peace of mind with the warranties. [Mr Wong]: Ok, sounds good. What will it cost? Also, do you think we should do this for all apartments at the project? [Mr Yazbek]: I would estimate about $2 mill increase all up. Look, I think it would be beneficial for all apartments to have the upgrade, at least in terms of the increased warranties. If it helps, Atlas will only charge for the uplift in price between the standard products and the upgraded products. [Mrs Wong]: I think it is a good idea to upgrade all of the units, including the ones we are keeping, because of the additional warranties. [Mr Wong]: Ok, sounds good. Please go ahead for all apartments."
Mr and Mrs Wong denied having such a conversation with Mr Yazbek.
Mr Wong said that "I did not give an instruction or instructions to use better quality or more expensive fittings or appliances" and that "Mr Yazbek did not say that the appliances and fittings were going to be 'upgraded' and I never discussed any such 'upgrade' with him".
Mr Wong said that "on a number of occasions throughout the project" Mr Yazbek had said words to the effect "I am building a higher quality building. We are using things like German taps, better quality carpet, Daikin air conditioners and other good quality brands for things like washing machines" and that "I had not requested Mr Yazbek to do these things".
Mrs Wong said that she did not "hear or participate in a conversation with Mr Yazbek" to the effect of that asserted by Mr Yazbek but said that "at the beginning of the Mascot project" she recalled hearing Mr Wong and Mr Yazbek having a conversation to the effect: "[Mr Wong]: We want good quality apartments not poor quality ones. We want these apartments to be better than Meriton apartments. [Mr Yazbek]: These apartments are going to be much better than Meriton. We will use better quality finishes and German appliances."
Mrs Wong said: "I did not discuss any upgrade to the appliances or fittings for the Mascot development with Mr Yazbek or Mr Sweeney during the course of the project. I was never told that there would be an 'upgrade' to the appliances that would be installed in the units. I did not participate in any discussion involving Mr Yazbek in which he referred to changing appliances based on warranty periods."
In the October Letter, Mr Yazbek and Mr Sweeney stated: "Furthermore, we agreed to upgrade all the finishes on the job to be AEG appliance and Hans Grohe tapwear [sic] (still not done in the market to this day). This was an additional $2m in cost at no charge. This resulted in [a] 5 year warranty for AEG and 15 year warranty for Hans Grohe. We knew you were going to keep the units and wanted to ensure that you had the most durable product." (Emphasis added.)
Fitz Jersey accepted, in closing submissions, that this passage "lends some support to the notion that there was an agreement of the type claimed by Mr Yazbek for an upgrade to appliances and tapware".
However, the passage also states that any such agreement was on the basis that there would be "no charge" in relation to any such upgrade.
As I discuss below, there is controversy as to the accuracy of other statements made by Mr Yazbek and Mr Sweeney in the October Letter. But when this passage from the October Letter is seen in its context, I see no reason to doubt that it reflects Mr Yazbek's and Mr Sweeney's recollection that although the "upgrades" would cost an addition $2 million they would not be charged to Fitz Jersey.
I will return to this when considering the October Letter in detail but, for present purposes, record my finding that, if there was an agreement about the Upgrades of the kind for which Mr Yazbek contends, that agreement included a term that there be "no charge" to Fitz Jersey for the upgrades.
Mr Yazbek deposed that in August 2012 he had this further conversation with Mr Wong: "[Mr Yazbek]: I think you should also upgrade the carpet to a premium grade carpet for the stage 1 apartments to assist with the sale of those apartments. [Mr Wong]: I agree with that. What about stage 2? [Mr Yazbek]: It's probably not necessary, as most of these apartments are going to be rented. [Mr Wong]: Ok, let's go ahead with the upgrade for stage 1 apartments only."
Mr Wong denied having this conversation. He said: "I did not instruct Mr Yazbek to upgrade the carpets. I recall attending Building A during the construction phase when the lift was still not ready for use. At that time some sections of the carpet had been laid. Mr Yazbek said words to the effect: 'This is the type of carpet we are going to use.' Mr Yazbek did not ever mention an upgrade to the carpet."
In closing, Fitz Jersey submitted: "Again, like with the appliances and tapware claim, though one might not expect to see a written direction from Mr Wong if he had requested such a change, one would expect to see some other Atlas documentation clearly identifying the instruction and the upgrade that would be performed. But again, there is none".
Mr Yazbek and Mr Sweeney pointed to a number of emails in which carpet is referred to but, as Fitz Jersey submitted, they are equivocal as to whether there was an agreement of the kind deposed to by Mr Yazbek.
No reference is made to carpet in the October Letter.
In those circumstances, I am not satisfied that there was any agreement between Mr Yazbek and Mr Wong which would have justified Atlas making any additional charge for upgrading the carpet.

[15]

The 2013 Agreement

The most significant event in 2013 was the February 2013 Meeting at which the 2013 Agreement was reached.
Mr Wong, Mr Yazbek, Mr Sweeney and Atlas's then Chief Financial Officer, Mr Matthew Vartuli attended the meeting.
No participant in the meeting made a contemporaneous note of what was agreed at the February 2013 Meeting.
It is, however, common ground that at the meeting Mr Wong agreed to increase the contract price under the Building Contract by $10 million and that he caused Fitz Jersey to pay that extra $10 million to Atlas later in 2013. What is in dispute is what that $10 million was intended to cover.
In the October Letter, Mr Yazbek and Mr Sweeney purported to give an account of what was agreed at the February 2013 Meeting.
Before me, Fitz Jersey relied on the October Letter as setting out an accurate account of what was in fact agreed at the February 2013 Meeting. Its case that the amounts claimed by Atlas in the Payment Claim were, to Mr Yazbek's and Mr Sweeney's knowledge, false depends on this.
Mr Yazbek and Mr Sweeney dispute that what they wrote in the October Letter about the February 2013 Meeting was an accurate account of what happened and assert they wrote the letter to get Mr Wong "to the table".
According to the October Letter, the extra $10 million that Mr Wong agreed be paid pursuant to the 2013 Agreement was for the Payment Claim Items, that is: 1. the CPI Uplift; 2. the Early Completion Bonus; 3. the Carbon Tax Costs; and 4. the Upgrades.
I will return to the October Letter below. For the reasons I later explain, my conclusion is that it does not accurately set out the terms of the 2013 Agreement. None of Mr Wong, Mr Yazbek, Mr Sweeney or Mr Vartuli in their affidavits said that it did; nor did any of them give an account of what was agreed at the February 2013 Meeting to the effect asserted in the October Letter.
I will return to those matters but set out here the accounts given by the participants in their affidavits as to what was said in February 2013.
The accounts given in their affidavits by Mr Yazbek, Mr Sweeney and Mr Vartuli, although inconsistent with the October Letter, are consistent with what was in fact claimed in the Payment Claim so far as concerns the 2013 Agreement. These accounts are also consistent with the statutory declarations each made in December 2016 in support of the subsequent Adjudication Application. I return to these matters below.
It is common ground that the background to what was discussed at the February 2013 Meeting included that, as a result of the revisions to the development following the approval of the second development application: 1. as I have described above, the basement car park was to be built lower than originally envisaged and thus further into the water table; 2. the total number of apartments to be built in Separable Portion 1 1 and Separable Portion 2 was to be reduced from 515 to 500; and 3. the swimming pool originally envisaged for the development was not to be built.
Mr Wong's affidavit account of the meeting was that Mr Yazbek said words to the effect: "This project is costing more than I expected. I have to spend extra money on extra steel and concrete for the car park."
Mr Wong said that Mr Yazbek showed him a drawing, but that he said: "I don't understand that technical stuff."
Mr Wong said that Mr Yazbek continued: "With the possible introduction of the carbon tax on materials as well, everything is going to cost 5% more … I can only make about $8 million on the job."
Mr Wong said that he could not recall whether, at this meeting, Mr Yazbek also said that there were other matters that were causing increased costs of the project.
Mr Wong said that he did not believe what Mr Yazbek had said about the amount of profit he would make on the project but that "I did not want to argue with him, and I did not want him to stop work on the project if he was unhappy. I was also concerned that if I did not offer him something extra he might find a way to compromise on the quality of the work or do something to my disadvantage."
Mr Wong said that, for that reason, he asked Mr Yazbek: "[W]hat if I offer you $10 million more on top of the $180 million to finish the whole project?"
Mr Wong said that "I extended my hand and Mr Yazbek shook my hand".
Mr Wong said that he then asked either Mr Sweeney or Mr Vartuli: "Can you please put the $10 million in the next invoice?"
Thus, on Mr Wong's account of it in his affidavit, he made an unprompted suggestion to increase the contract price under the Building Contract by $10 million, as an extra "all up" payment to complete the job.
Mr Yazbek said that, about a week before the meeting he had a telephone conversation with Mr Wong: "[Mr Yazbek]: KC, we need to meet to talk about separable portion 2 and a variation for the basement and reduction in units. [Mr Wong]: No problem Robert, I will come and see you to discuss."
At the meeting, Mr Yazbek said that he had this conversation with Mr Wong: "[Mr Yazbek]: KC, as you know there were changes between the original and the approved development applications which required Atlas to push the carpark into the basement by two and half levels, into the water table. These works have now been carried out and the costs associated with these works were in excess of $15 million more than the works initially required in the original development application. Given that we also need to make an adjustment for the loss of 15 units and the swimming pool, valued at approximately $5 million, I propose that we agree to a $10 million variation to cover the additional basement works, the loss of units and the swimming pool. [Mr Wong]: I agree, that is fair."
Thus, on Mr Yazbek's account of it, the additional $10 million payment was a figure calculated by reference to the anticipated extra $15 million cost of lowering the car park/basement area further into the water table, less savings of $5 million anticipated by reason of the reduction in the number of apartments and the removal of the proposed swimming pool from the development.
Further to the conversation that Mr Yazbek said that he had with Mr Wong in March 2010, [21] Mr Yazbek said that during the February 2013 Meeting, he asked Mr Wong whether Mr Wong was "happy for Atlas to now commence works on Stage 2", that is, the works called for in relation to Separable Portion 2. As I have said, by now, Mr Wong had decided that Fitz Jersey would sell the apartments in Separable Portion 1 but retain and rent out the apartments in Separable Portion 2.
Mr Yazbek said that Mr Wong agreed and that they then had this conversation: "Once stage 2 is underway; we should formalise our agreement for us to provide property management services in relation to the stage 2 apartments that you intend to keep. We will start to set up everything for this."
Mr Yazbek said that Mr Wong said: "Sounds good, please go ahead".
Mr Yazbek said that he saw Mr Wong's response as confirming their understanding that, once Separable Portion 2 was complete, and the apartments in it rented out, an entity associated with Mr Yazbek would manage those apartments.
Mr Sweeney and Mr Vartuli gave similar accounts of the February 2013 Meeting to that of Mr Yazbek.
Mr Sweeney said he recalled that Mr Yazbek "did most of the talking" at this meeting and that Mr Yazbek said: "'[T]here have been significant costs associated with the basement works due to the complexity of lowering the basement into the water table' and 'the additional basement costs which Atlas have exceeds $15 million. You have seen for yourself how difficult and time consuming the construction of that basement has been and Scott [Sweeney] and I are now glad it is complete'."
Mr Sweeney continued: "I also recall Robert [Yazbek] explaining to Mr Wong that Atlas had incurred an additional $800,000.00 of remediation costs. Robert advised Mr Wong that 'Atlas would not charge him any of those costs as the agreement for demolition and remediation $1.2 million' [sic]."
Mr Sweeney deposed that thereafter he heard Mr Yazbek and Mr Wong have this conversation: "[Mr Yazbek]: We have valued the additional basement costs to be more than $15 million, however Atlas is willing to reduce the costs of the variation to $10 million. This will also cover the difference between the unit mix from 515 to 500 units and the loss of the swimming pool. [Mr Wong]: Ok I agree. [Mr Yazbek]: Okay great. Now that you have sold your shares, [22] I presume that you want us to proceed with stage 2 works. [Mr Wong]: Yes, let's finish it."
Mr Vartuli's recollection of the conversation was that Mr Yazbek said to Mr Wong: "It cost us over $15 million to build two and half levels into the basement. The works are complicated as we need to lower the basement into the water table. We also need to make an adjustment for the loss of 15 units, the swimming pool and the gym, which we have estimated to be around $5 million." And: "Having said all that, we propose that Atlas and Fitz Jersey agree on a $10 million plus GST variation that incorporates the basement, reduction in units and the exclusion of the swimming pool. What do you think?"
Mr Vartuli said that Mr Wong then said "[o]k. I agree" and that Mr Wong then shook hands with Mr Yazbek and Mr Sweeney.
Mr Vartuli said that "[n]o other variations or claims were discussed [at] the 2013 Meeting while I was in the room".

[19]

The December 2013 GST Model

The first of these is a "GST Model" that Mr Vartuli prepared on 3 December 2013. That document included the following table:
The model did not include any amounts for the Payment Claim Items, notwithstanding the fact that Atlas would then have been able to determine the amounts of the CPI Uplift, the Early Completion Bonus for Separable Portion 1 and the Upgrades to the apartments within Separable Portion 2.
In that regard, Mr Vartuli gave the following evidence: "Q. Had you thought that the total construction cost budgeted at this point in time was higher than $190 million, you would have had that higher figure, wouldn't you? A. Yes. Q. It was your understanding that if Atlas intended to charge Fitz Jersey more for construction costs, you would have taken that into account in providing the budgeted amount, wouldn't you? A. If it was my understanding of their intention, would it have been included in the budget amount, yes. Q. You tried to be as accurate as you could possibly be in providing that figure, didn't you? A. From what I was aware - yes, from what I was aware at the time, yes. Q. The true position is you did not provide for a figure above $190 million because you understood that Atlas didn't intend to charge [more than] $190 million for construction costs, didn't you? A. No, that's not - that's not right."
Mr Yazbek said: "Like, this is a budget, and a budget, you know, is - to us is a budget … it's not that accurate; it's a budget. We're not going to go through all the fine details. It's a budget".
Mr Yazbek said that the reason that the Payment Claim Items were not included in the budget was not because he had no intention of causing Atlas to charge for these items, but because "we were going to wait till the end of the project and sit with [Mr Wong] and work it out with him".
Mr Sweeney said that the document was prepared for Fitz Jersey's benefit and "it's got nothing to - it's not really to do with Atlas." That explanation cannot be correct. The document was clearly an internal Atlas document.

[20]

February 2014 correspondence with Atlas's insurance broker

In February 2014, Atlas's insurance broker, Mr Joe Gemmola from McCormick Harris, sought information as to the "actual value of work completed" for the period between 28 February 2013 to 28 February 2014. [24]
Mr Gemmola also asked for "the estimated value of work for the Mascot project for the 2014/15 year".
On 5 February 2014, Mr Sweeney forwarded Mr Gemmola's email to Mr Vartuli stating: "Can you provide: Mascot construction value of work for Feb13 to Feb14. We then need to estimate the value of work for the next 12 months at Mascot. This will be the residual remaining for the project."
Mr Vartuli replied: "$100,800,000 from Feb 13 to Feb 14. Residual value left in project: $31M."
On 11 February 2014, Mr Sweeney wrote to Mr Gemmola: "Please do not proceed until we meet as I want to double check figures first. ● Feb 13 to Feb 14 actual - $100,800,000 excl GST ● Estimate Feb 14 to Feb 15 - $31,000,000 excl GST ● Estimate of maintenance works - $50,000 excl GST Rae [25] - as discussed can I get a summary of all actuals and estimates since the policy started in Feb 2011. Note the Feb 2014 to Feb 2015 will be the last year of the policy in relation to construction works at Mascot Square."
On 14 February 2014, Mr Sweeney wrote to Ms Tory, with a copy to Mr Gemmola and Mr Vartuli: "Confirming the following for Mascot project. Please advise payment for this year asap. Revised contract value: $190,000,000 Completion of entire project due Dec 2014. ● 2011 - $12,600,000 actual ● 2012 - $45,600,000 actual ● 2013 - $100,800,000 actual ● 2014 - $31,000,000 estimate".
The four figures in the bullet points totalled $190 million, being the $180 million contract price in the Building Contract together with the $10 million paid as a result of the 2013 Agreement.
Mr Sweeney's email thus suggested that, as at 14 February 2014, Atlas's estimate of the "value of work for the Mascot project for the 2014/15 year" [26] was $31 million on the basis of total remaining construction costs of $190 million. Mr Sweeney made no reference to the Payment Claim Items.
Mr Sweeney said in cross-examination that: "… this is an internal email between me and Matt [Vartuli] about an estimate for insurance. I wouldn't have paid too much mind to it". And: "It's just an insurance estimate for the next 12 months".
That led to Mr Sweeney giving this evidence: "HIS HONOUR: Q. Was there a reason you didn't include CPI uplift and early completion bonus in this letter? A. I hadn't thought about them for this letter. It was just, basically, going back to the insurer with an estimate. MR CHRISTIE: Q. You used the word 'just', 'It was just going back to the insurer with an estimate', but you understood that the estimate was critical information relevant to the calculation of the premium, didn't you? A. No, I never thought about it at that stage like that. I just gave them what was left in the construction contract that we had. Q. If the value of construction work previously done was understated, then you would be required then and there to top up the premium for the previous year, wouldn't you? A. Yes. Well, I think we give the actual as they go along, yes."
Fitz Jersey submitted that the "obvious explanation" for Mr Sweeney's failure to refer to the Payment Claim Items was that he understood them to have been incorporated into the 2013 Agreement.
Fitz Jersey made a like submission in relation to further documents, to which I refer in the following narrative of events, in which no reference was made to the Payment Claim Items. As I have said, I will return to the significance of these "omissions" when considering the 2013 Agreement. For now, in what follows, I will record the documents in question but not repeat, each time, Fitz Jersey's "obvious explanation" submission.

[29]

Discontinuance of Jobpac

Atlas used a software program called "Jobpac" which Mr Vartuli described as a "cost management software".
On 6 December 2015, Mr Sweeney sent an email to Mr Vartuli: "Are we discontinuing Jobpac? I do not need it and I think the costs of $594 per month are excessive. Please confirm and I will let them know".
Mr Vartuli replied: "Yes - let's close it".
Mr Vartuli agreed that the Jobpac software was necessary to make some aspects of claims against Fitz Jersey.
Mr Sweeney gave this evidence about Jobpac in cross-examination: "Q. Can you describe what 'Jobpac' was? A. Yes, it's a construction accounting software. Q. Used to record costs and expenses; isn't that right? A. Yes. I think it's the full - it does financials, everything. Q. Can I suggest that you wouldn't shut this down until all claims on Fitz Jersey had been made; isn't that right? A. No, that's not the case. That's not related at all. Q. I see. In any event, if you turn the page over, and go to page 16346, you did end up shutting it, didn't you? A. Yes. Q. All right. Now, you can close that. HIS HONOUR: Q. Is that because you migrated to a different [form of] accounting software? A. Yes, we migrated to Xero because it was cheaper and the company had gotten simpler by then. Q. Is that X-E-R-O? A. X-E-R-O, yes. MR CHRISTIE: Q. Didn't you need Jobpac in order to make the claim on Fitz Jersey? A. Didn't we need Jobpac? We needed it for some items, yes. We needed to get access to it. Q. Can I suggest that you would not have closed it down if you considered that you had further claims to be made against Fitz Jersey, correct? A. That's not correct. They are not related. Q. I thought you just said you needed Jobpac in order to make the claim against Fitz Jersey? A. I think they were part of the claim for works outside the boundary, which we hadn't calculated everything there, that I needed to get that information. Q. You can't say they are unrelated, can you? A. Well, there was a small part of that claim that required that information, yes."
Similarly, Mr Vartuli gave this evidence: "Q. If you thought that Atlas was owed money by Fitz Jersey, you wouldn't have allowed Jobpac to be turned off before claiming that money from Fitz Jersey; isn't that right? A. No, I don't agree with that."
Shortly before service of the Payment Claim, Mr Vartuli caused Atlas to revive its subscription to Jobpac. Fitz Jersey submitted that this showed that the fact that in December 2015 Mr Sweeney caused Atlas to cease to use Jobpac bespoke Mr Sweeney's understanding that Atlas then had no further claims on Fitz Jersey. However, in the absence of evidence as to how the Xero software, to which Atlas migrated following the shutting down of Jobpac, operated, I do not see what conclusion I can draw about this.

[32]

Relations restored between Mr Yazbek and Mr Sweeney

Evidently, at around this time, Mr Yazbek wished to resume his role as director of Atlas.
Thus, on 20 September 2016 Mr Sweeney, on behalf of Sweenham wrote to Mrs Yazbek referring to a "proposed circular resolution" sent to Sweenham on 19 September 2016 "proposing resolutions for the appointment of Mr Vartuli and Mr Yazbek as directors".
In his letter, Mr Sweeney argued against Mr Vartuli becoming a director and complained about recommendations that Mr Vartuli made: "… as to the appropriateness of declaring dividends, the payment of which has brought about the situation that, at the present time, [Atlas] is without funds to meet a number of debts".
In cross-examination, Mr Sweeney agreed that, at this time, he was "worried about the solvency of Atlas".
Nonetheless, Mr Sweeney disputed that the time of his conversation with Mr Wong was an "ideal time" to ask Mr Wong to pay the Payment Claim Items.
In his 20 September 2016 letter, Mr Sweeney also said: "It is inappropriate for Mr Vartuli to be a director of [Atlas] and Sweenham believes [Atlas] may, in fact, have claims against him in relation to the way in which he has managed the preparation of accounts over the last number of years …".
In the Liquidator's Examination, Mr Sweeney accepted that this was not true.
The following exchange took place between Mr Miller SC, who was briefed for the Liquidator, and Mr Sweeney: "Q. It is inappropriate for Mr Vartuli to be a director of the company and Sween[ham] believes the company may in fact have claims against him in relation to the way in which he has managed the preparation of accounts over the last number of years." Was that the fact or not? A. Privilege. No, that is not fact. Q. So that was a lie, was it? A. Privilege. Lie is probably a bit strong a term, it was just a way to get their attention. Q. A little fib maybe? A. Privilege. We were having an argument at the time. It would be a bit harsh from Mr Vartuli for me to say that was a fib. Q. Let me put it neutrally, that was untrue? A. Privilege. That's correct. Q. You are quite happy to put your signature over something that was untrue? A. Privilege. No, I'm not happy to do that. Q. But you did it? A. Privilege. In the circumstances, yes, I had to."
Mr Yazbek resumed his position as a director of Atlas on 27 September 2016. Other than what I have set out, the circumstances in which this occurred were not explored before me.

[33]

Relations between Mr Wong and Mr Yazbek break down

Also, at around this time, the relationship of trust that had hitherto existed between Mr Wong and Mr Yazbek broke down.
Mr Yazbek professed not to know precisely why this occurred.
The explanation given in Fitz Jersey's closing submissions was that "after speaking with Mr Sweeney, Mr Wong was upset with Mr Yazbek and refused to speak to him" and that Mr Wong had received advice from his former accountant, Mr George Vernados, that the 8.8% management fee in the 7 November 2014 Exclusive Management Agency Agreement with Serendipity was excessive.
Mr Vartuli said that in about September 2016, Mr Wong called him and said: "I heard that Robert [Yazbek] has not paid subcontractors for Mascot Square. Tell Robert to stop being greedy and to pay the subcontractors. Robert has made a lot of money on the project and should be paying everyone".
Mr Vartuli said he relayed this to Mr Yazbek who said that he had tried to call Mr Wong but that Mr Wong did not return his calls.
Mr Vartuli said in his affidavit that in late September 2016 he had this conversation with Mr Wong: "[Mr Wong]: Tell Robert that I used to trust him 100%, and now I only trust him 99%. [Mr Vartuli]: Why, KC? [Mr Wong]: Just tell Robert that."
Mr Vartuli's then spoke to Mr Yazbek: "[Mr Vartuli]: KC told me to tell you that he used to trust you 100%, and now he only trusts you 99%. [Mr Yazbek]: Did he say why? [Mr Vartuli]: No, that is all he said to me."
Mr Vartuli said that sometime later Mr Wong called him and they had this conversation: "[Mr Wong]: Why did you tell Robert that I don't trust him? [Mr Vartuli]: I only relayed the message you asked me to relay. [Mr Wong]: Ok. I don't want you to do my personal accounting work anymore. George Venardos is going to look after it. He knows more about some other issues that I am having in the British Virgin Islands."
At around this time, Mr Yazbek called on Mrs Wong at Mr and Mrs Wong's home. Mr Wong said that, after that visit, Mrs Wong said to him: "Robert came to the house and told me a lot of things about Scott. He said Scott is not trustworthy and once he wanted to cut corners on Mascot Square but Robert stopped him … Robert visited the house. You better be careful, Robert said that if you want to play games with him, he will play games too."
Whether or not Mr Vartuli's evidence, or Mr Wong's evidence of his conversations with Mrs Wong, explains why it was that Mr Wong fell out with Mr Yazbek, the die was cast. So far as the evidence discloses, Mr Wong and Mr Yazbek have not spoken since.

[35]

The October Letter

The October Letter went through several drafts. Mr Vartuli circulated the first draft on the morning of 10 October 2016.
Mr Vartuli's draft included the following: "● With funding now assured, we met in February 2013 to discuss the status of stage 2 of the project. ● We calculated that according to the contract we were entitled to the following:- o CPI increases from 2011 to commencement of stage 2: $6.3m o Early completion bonus calculated at $3,575 per day x 2 years = $2.5m o We withheld 4 months of extension of time claims = $400k o Carbon tax costs which lead to increase in cost by 0.8% = $1.5m o Basement lowering (being a potential variation) including contamination, spoil, engineering, dewatering, additional time and shoring = $15m o Upgrade to sales = $2m o Less: Loss of 15 units at 85sqm at a cost of $3,500sqm = $4.5m o Less: Swimming pool $300k o Total = $22.9m ● We also underlined the additional benefits you would and have obtained including: - o 15 months rent earlier than anticipated equating to a potential $13.3m in net income; o The use of the tax losses; o The construction of Jersey Road at cost. Notwithstanding our right to charge $400k as per our contract; o The setup and running of the sales office, marketing and advertising; and o The use of the $7.5m tax deduction. ● At the end of the meeting, we agreed to a $10m variation and a commitment from you to provide us with the property management".
Mr Vartuli's draft thus purported to be an account of the 2013 Agreement.
Mr Stevens proposed relatively minor changes to Mr Vartuli's draft.
Mr Vartuli circulated a further draft which included changes suggested by Mr Yazbek. One of the changes made at Mr Yazbek's instigation was to delete the last dot point in Mr Vartuli's original draft and to replace it with the following: "We underline that per the contract; we were entitled to $22.9m in additional charges. Notwithstanding that, we also did not charge for the Jersey Road property which was approx. $400k + GST. At the end of the meeting, we agreed to a $10m variation and a commitment from you to provide us with the property management. Based on your comments to David [Stevens], it appears you no longer want to honour this agreement. If that remains true, we will need to assess our options under the contracts to determine if there is outstanding money owed to us".
Later on 10 October 2016, Mr Sweeney circulated a further copy of the draft on which he had made some manuscript notes. Mr Sweeney's email read: "Only minor comments or changes. The letter is good."
The next day, 11 October 2016, Mr Yazbek, Mr Sweeney and Mr Stevens signed the final version of the October Letter.
The October Letter was addressed to Mr and Mrs Wong. It opened: "It is with an immeasurable amount of disappointment that we write you this letter. Robert has tried on multiple occasions to discuss with KC his concerns but he has refused to answer his calls or agree to meet with him. We have decided to write this letter to set out our views. We were advised by David Stevens that you wish to terminate the property management agreement at Mascot Square. We understand you are unhappy with the terms we originally agreed and in your words 'the problem with Robert and Scott'. We are very upset that you feel this way and that you have not taken the opportunity to speak to us directly about this prior to your discussion with David. Furthermore, we are also disappointed that you asked Mr George Vernados to scrutinize our dealings and suggest we participated in some form of wrong doing towards you and your family. Put simply, this decision and the way you have gone about it is unfair. Before doing into detail, we emphasize that ALL our dealings with you, have always been with your best interests in mind. We also underline that all our business and personal dealings have been built on a foundation of trust. We know that you imparted a great deal of trust in Robert to manage and ensure these projects be delivered to you. Robert has never let you down to this day."
There are then listed a large number of matters that the letter's authors contended had been "done over the years to underline our commitment to you and your family".
As I have mentioned, [31] one of those matters included: "Furthermore, we agreed to upgrade all the finishes on the job to be AEG appliance and Hans Grohe tapwear [sic] (still not done in the market to this day). This was an additional $2m in cost at no charge. This resulted in [a] 5 year warranty for AEG and 15 year warranty for Hans Grohe. We knew you were going to keep the units and wanted to ensure that you had the most durable product".
The letter then turned to the February 2013 Meeting and stated, in the final iteration of the passage in Mr Vartuli's draft that I have set out above: "With funding now assured, we met in February 2013 to discuss the status of stage 2 of the project. We calculated that according to the contract we were entitled to the following:- ◦ CPI increases from 2011 to commencement of stage 2: $6.3m ◦ Early completion bonus calculated at $3,575 per day x 2 years = $2.5m ◦ 4 months of extension of time claims = $400k ◦ Carbon tax costs which lead to increase in costs by 0.8% = $1.5m ◦ Basement lowering (being a potential variation) increasing costs including soil removal, contamination, cut off bentonite wall, waterproofing, shoring, anchoring, spoil, engineering, dewatering, additional time = $15m ◦ Upgrade to sales = $2m ◦ Less: Loss of 15 units at 85sqm at a cost of $3,500sqm = $4.5m ◦ Less: Swimming pool $300k ◦ Total = $22.9m". (Emphasis added.)
I have emphasised, by underlining, the three matters that, on Mr Yazbek's, Mr Sweeney's and Mr Vartuli's affidavit account of the 2013 Agreement, were the components of the calculation leading to the agreed further payment by Fitz Jersey to Atlas of $10 million: the lowering of the basement, the reduction in the number of apartments and the elimination of the swimming pool.
I have emphasised, using italics, the items that Mr Yazbek and Mr Sweeney [32] in this letter contended had been discussed at the February 2013 Meeting but which (a) were not mentioned in their affidavit accounts of that meeting and (b) were said by each [33] in cross-examination before me not to have been discussed in February 2013.
These are the Payment Claim Items: the CPI Uplift, the Early Completion Bonus (which incorporates the "extension of time" claim), the Carbon Tax Costs and the Upgrades.
The letter continued (based on the passage introduced to the draft by Mr Yazbek [34] ): "We underline that per the contract; we were entitled to $22.9m in additional charges. Notwithstanding that, we also did not charge for the Jersey Road property which was approx. $400k + GST. At the end of the meeting, we agreed to a $10m variation and a commitment from you to provide us with the property management. Based on your comments to David [Stevens], it appears you no longer want to honour this agreement. If that remains true, we will need to reassess our options under the contracts to collect the outstanding money owed to us that is due".
Mr Yazbek here referred to Mr Wong not honouring his "commitment" concerning "property management". This was a reference to Mr Yazbek's understanding, based on his October 2010 and February 2013 conversations with Mr Wong, that interests associated with him (ultimately Serendipity) would manage the apartments in Separable Portion 2 that Fitz Jersey proposed to retain. As I have said, Mr Yazbek said that he felt upset and disappointed that on 6 October 2016 Fitz Jersey had given notice that the Exclusive Management Agency Agreement was to be terminated. Mr Yazbek said he felt that Mr Wong had thereby "reneged" on his arrangements with Mr Yazbek.
The reference to Atlas needing to "reassess" its "options under the contracts to collect the outstanding money owed to us that is due" led to the service of the Payment Claim.
Thus, Mr Sweeney gave this evidence, in answer to a question from me: "Q. So you were foreshadowing, in those last few words, were you, a decision to make a claim for CPI, carbon tax, early completion bonus, that you've been telling me was something you hadn't hitherto decided to make? A. That's correct, your Honour".

[39]

The retainer of Mr Mort

In mid-October 2016, Atlas retained Mr Scott Mort, a building and construction lawyer from Bradbury Legal.
In 2010, when an employed solicitor at Gadens Lawyers, Mr Mort had assisted in the drafting of the Building Contract.
Mr Mort made an affidavit in the proceedings before me. He was not cross-examined. His evidence is thus unchallenged.
Mr Mort deposed that in mid-October 2016, Mr Sweeney telephoned him and said: "Rob [Yazbek] wants to speak to you about Mascot. Atlas is owed a lot of money by Fitz Jersey. Can you come out and meet with us?"
Several days later Mr Mort met with Mr Sweeney and Mr Vartuli. Mr Mort said Mr Yazbek may also have been present.
Mr Mort said they discussed Mr Wong's 6 October 2016 notice of termination of the Exclusive Management Agency Agreement.
Mr Mort deposed that he then had the following conversation with Mr Sweeney: "Mr Sweeney: Fitz Jersey has terminated our property management agreement. Fitz Jersey owes Atlas a lot of money under the construction contract too. We have never claimed everything we are entitled to because we were going to do another development together but now that doesn't look likely. [Mr Mort]: I will look into the property management issue. Please send me a copy of the agreement and the termination letter. I will also need some details about what is owed by Fitz Jersey under the construction contract. When did Atlas complete the works? Mr Sweeney: In about January this year. [Mr Mort]: Has Atlas issued a payment claim since then? Mr Sweeney: No, we probably should have, but as I said, we thought we would work it all out next project. [Mr Mort]: Okay, well there is probably still an available reference date that Atlas can use to issue a payment claim under the Security of Payment Act. That may be the quickest and least expensive option to recover what is owed. Can you send through some information about how much is still owed to Atlas and what it is in relation to? I'll have a look at it and come back with options. Mr Sweeney: Will do. Thanks." (Emphasis added.)
I will return to the passage I have emphasised when considering the ambit of the 2013 Agreement. For present purposes, the point is that Mr Sweeney was instructing Mr Mort, during what he must have then regarded as a confidential and privileged occasion, that Atlas had not to date claimed all to which it was entitled under the Building Contract.
Mr Mort's evidence also makes clear that he made the suggestion that Atlas make the Payment Claim under the SOPA.
Thus, Mr Mort deposed: "I recall suggesting that Atlas issue a payment claim pursuant to the [SOPA], as opposed to adopting another means to make a claim for unpaid amounts under the Contract, because Mr Sweeney informed me during our conversation … that Atlas had completed works in about January 2016 and had not issued a payment claim since then, which meant that Atlas had an available reference date and was still in time to issue a payment claim in accordance with the SOPA. In my experience as a construction lawyer, pursing a claim under the SOPA was quicker, cheaper and/or more effective than pursuing a claim by other means and had the benefit of being able to be enforced as a judgment if successful at adjudication."
On 17 October 2016, Mr Sweeney sent Mr Mort a copy of the Building Contract as well as "a letter we sent to KC"; obviously the October Letter.
Mr Mort replied the same day: "Thanks for sending this through. To get the claim process rolling, are you able to provide me with a claim summary in respect of the Mascot project? I.e.: 1. A breakdown of Atlas' claims for all work completed (including variations such as the carpark) on the project (whether claimed previously or not); 2. A summary of payments made to date; 3. Any design costs incurred (if not included in 1 above); and 4. A copy of the last payment claim submitted on the project to date. As discussed, we will look at this from a Security of Payment point of view in isolation with the plan of going through that claim process and hopefully ending up with a statutory debt. Once this process is triggered, we will look at the bigger picture (including the Jersey Rd works) and prepare a letter of demand with a view of getting KC to the table to work something out."
On 18 October 2016, Mr Vartuli sent an email to Mr Yazbek and Mr Sweeney: "I have collated the information [Mr Mort] requested below. I had a brief chat with him this morning to understand how we wanted this presented. He explained that for now, he just wants a confirmation of the amounts that were invoiced and what the work was for as a starting point to preparing a claim for the variation. He is looking to brief a QS to quantify the true cost of the additional basement, notwithstanding the additional payments we were entitled to under the contract."
On 24 October 2016, Mr Sweeney sent an email to a quantity surveyor, Mr Keng Choo from Kinlay Grinham Casey Burne, stating that: "As discussed this morning we are submitting a claim for additional works on a project recently completed. We require assistance in quantifying the costs for these additional works. The additional works related to a deeper excavation for a basement below the water table in Mascot."
On 25 October 2016, Mr Mort sent an email to Mr Sweeney and Mr Vartuli: "1. Scott/Matt - can you please advise of the existence of any documentation (directions, orders, emails, meeting minutes, file notes, claims correspondence or other) (if any) in relation to the $10M variation. It is very important that we characterise what this variation was for (and what it wasn't for). We will need to know if there is anything 'out there' that might contradict our claim, so that we can frame the claim appropriately."
It is clear from Mr Mort's reference to "the $10M variation" that Mr Sweeney or Mr Vartuli had said something to him about the 2013 Agreement.
In closing submissions, it was suggested on behalf of Fitz Jersey that this reference suggested "some degree of apprehension regarding the interaction between the claim that was being prepared and the 2013 Agreement" on the part of Mr Sweeney and Mr Vartuli.
It was also suggested on behalf of Fitz Jersey that: "This careful focus on the content of that agreement, at a time when, on the Directors' view of things, there was no reason to think Fitz Jersey would dispute what had occurred at the [February 2013] meeting, suggests that they knew this issue would be disputed."
However, I do not see anything sinister in Mr Mort's expressed need to know if there was anything "out there" in relation to the "$10M variation" that "might contradict our claim".
Although this matter was not explored in cross-examination, it appears probable to me that, by 25 October 2016, Mr Mort had seen the October Letter and had been told that there was no contemporaneous note or record of the February 2013 Meeting or the 2013 Agreement.
Mr Mort said that at around this time he advised Mr Sweeney: "Atlas should only include items that can be substantiated one way or another. Given the current relationship, Fitz Jersey will obviously resist this claim and we may end up at adjudication, so Atlas will need to be able to prove its claim to an adjudicator."
On 26 October 2016, Mr Sweeney replied to Mr Mort's 25 October 2016 enquiry by saying that he did not believe Fitz Jersey had any documents other than the October Letter and Atlas's 23 October 2013 payment claim for the $10 million agreed at the February 2013 Meeting.
A short time later Mr Sweeney sent Mr Mort a copy of the October Letter.

[45]

The Principal reserves its rights in relation to the Early Completion Bonus claimed and paid to date in relation to Separable Portions 1 and 2." (Emphasis in original.)

The references in this table to "Early Completion Bonus[es]" assumes a significance in relation to the parties' contentions as to the nature of the agreement so far as concerns those bonuses. [37]
In the Payment Schedule, Fitz Jersey contended that Atlas was not entitled to a progress payment by reason of the "absence of a reference date within the last 12 months".
The Payment Schedule also asserted a "Previous Commercial Settlement" in following terms: "2.1 The Principal and the Contractor agreed a commercial settlement of all claims by the Contractor under the Contract, including a final adjusted contract price of $232,998,469.48 (including GST). In this regard, the Principal refers to the letter dated 11 October 2016 from Messrs Yazbek, Scott Sweeney and David Stevens on behalf of the Contractor to Mr Kie Che Wong and Ms Anne Pin Lim on behalf of the Principal, which acknowledges this settlement agreement. 2.2 This settlement included the payment of a lump sum of $10,000,000 [excluding GST) to the Contractor which was expressed to be in full and final satisfaction of all claims of the Contractor under the Contract. 2.3 The Contractor accepted this payment. 2.4 As a consequence of the above, and under the principle of accord and satisfaction, the Contractor is not entitled to claim any further progress payments under the Contract."
Fitz Jersey was here asserting, in effect, that the October Letter accurately set forth the terms of the 2013 Agreement.
On 29 November 2016, having read the Payment Schedule, Mr Mort telephoned Mr Sweeney and gave him this advice: "Fitz Jersey say they owe Atlas nothing, but oddly there is no reasons provided that challenge the entitlement or value of any of the items claimed. Broadly, the schedule challenges payment on two discrete grounds only, which we hadn't considered, the first being there is no valid reference date for which the Payment Claim to attach to, and the second being an alleged 'all in' settlement agreement, which seems to relate to the basement variation back in the first separable portion. We will need to prepare an adjudication application. In the application, we will need to set out why we are entitled to payment of all the claims made in the Payment Claim. In doing so, we will only need to address the two allegations they have made in the payment schedule. Fitz Jersey will be entitled to file an adjudication response, but it will be limited to those two issues raised in the payment schedule."
Mr Sweeney responded: "I know, it's strange. I can't believe they didn't directly deal with any of the items claimed in their schedule. It just goes to show that they have no reason to object to entitlement to the money. They are just trying to use these conjured up reasons to avoid paying what they owe us. Please go ahead with preparing the adjudication application. Let me know if there is anything else that you need."

[46]

Mr Mort's 1 December 2016 enquiry

On 1 December 2016, Mr Mort sent an email to Mr Yazbek, Mr Sweeney and Mr Vartuli stating: "In addition to whatever information and evidence you can gather about works being performed on site on January this year, can each of you (separately) please, in your own words describe your recollection of 'the meeting' and 'the deal'. I will use these as a basis of your stat decs, which I will prepare and have you sign on Monday or Tuesday next week. I will need details including but not limited to: … • The date of the meeting • Your employment position at the time of the meeting • The location of the meeting • Your role/involvement at the meeting • Who else was at the meeting (and who did they represent) • The purpose of the meeting • Your understanding at the time of 'the deal' (ie what was the $10M variation to cover)".
Mr Mort's reference to "the meeting" and "the deal" was, obviously, a reference to the February 2013 Meeting and the 2013 Agreement.
Mr Vartuli replied a few hours later: "Date of meeting: Approx Feb 2013 (awaiting confirmation) … The purpose of the meeting was to:- 1. Determine whether Fitz Jersey were going to continue to sell the 185 apartments in stage 1 2. Discuss the extra cost of going into the basement two extra levels as well as providing credits for the loss of units, swimming pool, and Gym; and 3. Discuss Property Management. The understanding of the deal: Robert Yazbek and Kie Che Wong shook hands on a $10m variation to compensate for the extra levels of basement less the credits for the loss of units and Swimming pool. After that, Mr Wong asked me to prepare a cash flow projection for him for the remainder of the job."
Mr Sweeney replied, also on the same day: "The date of the meeting was sometime in February 2013 … My role at the meeting was to provide any required detailed construction information relating to the lowering of the basement however minimal input was required from me as Robert Yazbek explained in detail the reasoning behind the proposed $10 million variation to the contract. … … During the meeting Robert Yazbek provided a summary to KC as to why a variation was to be charged and what that variation encompassed. Robert explained, not for the first time, why almost 1.5 years after commencement we were only commencing finishes to stage 1. This explanation encompassed a detailed summary of the required basement lowering due to the revised DA. Robert explained that … there was additional time and cost in lowering the basement into the water table and having to excavate and shore up the structure. After explaining that credits for reduction of 15 apartments from the original DA were also to be deducted from this additional cost, Robert also explained that we had worn some $800,000 in contamination costs that would not be charged despite not being noted on any of the environmental consultant reports. Robert then advised that due to our ongoing relationship we were willing to agree to a $10 million variation for all these additional costs despite our actual costs being somewhat higher. KC immediately agreed to the variation proposed. KC then shook Robert's and then my hand and left the office. Our understanding was that once this was done the variation was agreed and no further discussion or documentation was required. At no stage was this to be considered a final settlement on the contract and given the timing there was no way we could have known what future additional variations would eventuate. The project at that stage had fallen behind due to the complexity of the in ground works, issues with neighbours and severe weather that continually delayed [the] project."
The following day Mr Yazbek's Executive Assistant sent Mr Mort Mr Yazbek's response to Mr Mort's 1 December 2016 enquiry. That response included: "- The date of meeting KC Wong was around February/March 2013 … - The purpose of the meeting was to discuss with KC the continuation of the Mascot Square development by getting his approval so we can prepare and commence Stage 2 - I also discussed with him the difference of the contract signed DA submitted plans with the final council approved DA plans of 10 million dollars - I then explained the difference being and showed him on plan, pushing the car park an extra two and a half floors into the water table while the original plan was sitting on top of the water table and mainly above ground - We showed him the extra cost difference (15 million dollars) to do the deeper basement, minus the credits which was 15 less units and the swimming pool and gym (5 million dollars) which was according to the contract. This left a variation of an extra 10 million dollars. - He agreed with the calculations and shook my and Scott's hand in agreement to the 10 million dollar variation - I then briefly mentioned our previous discussions about Atlas forming a Real Estate arm to manage the 315 apartments that Fitz Jersey was going to hold onto and he agreed that he wanted us to be the Building and Property Managers."
Mr Yazbek, Mr Sweeney and Mr Vartuli were not cross-examined about what they said in these emails to Mr Mort about the content of the 2013 Agreement. The only cross-examination on these emails was of Mr Vartuli in relation to another aspect of the emails, to which I refer below. The account each gave as to the 2013 Agreement was inconsistent with what Mr Yazbek and Mr Sweeney had said in the October Letter but, in substance, the same as they gave in the statutory declarations to which I will shortly refer and in their evidence before me.
I will return to these emails when considering the parties' submissions concerning the October Letter and the 2013 Agreement. I see the emails as providing a vital insight into the true position in relation to these issues. The communications are on their face privileged as they are confidential communications made between officers of Atlas and Atlas's solicitor made for the purpose of the solicitor giving legal advice to Atlas. [38] During closing submissions, I was informed that the reason these otherwise privileged documents have come to light is that the Liquidator made them available to those advising Fitz Jersey. Whether or not Mr Yazbek, Mr Sweeney or Mr Vartuli at the time understood the implications of that privilege was not explored in cross-examination, but they each must have understood the communications to be confidential. I return to this below.

[47]

The statutory declarations

In support of the Adjudication Application that Atlas was to make on 13 December pursuant to s 17 of the SOPA, Mr Yazbek, Mr Sweeney and Mr Vartuli made statutory declarations on 6 December 2016 in which they gave an account of the February 2013 Meeting.
Each was consistent with the affidavit evidence given before me.
In his statutory declaration, Mr Yazbek stated: "During the meeting, I explained (in detail) to Mr Wong that the discrepancies between the original and the approved development applications brought about the need to push the carpark into the basement by two and half levels, entering the water table (the Variation). This was not the first time that we had discussed the details of the Variation with Mr Wong, but the timing of the works were now at a stage where costs could be meaningfully discussed. The costs associated with the Variation exceeded $15,000,000. I suggested, based on discussions with Mr Sweeney and review of project costs, that the Variation be valued at $10,000,000 to take into consideration the credit that Fitz Jersey was entitled to under the contract due to the loss of 15 units and the swimming pool that would result from the Variation (approximately $5,000,000). This approach seemed entirely commercial and beneficial to both parties (particularly Fitz Jersey). Mr Wong agreed to this and shook my hand, then he shook hands with Mr Sweeney, which I took to mean that he accepted the offer. During the remainder of the meeting, Mr Wong and I discussed the formation of a real estate arm to manage the apartments that Fitz Jersey were intending to retain. This was an arrangement that had been discussed previously and while no binding agreement was reached at the meeting, Mr Wong continued to express his interest and we agreed in principle with respect to such an arrangement."
In his statutory declaration, Mr Sweeney said: "During the meeting, Mr Yazbek explained in detail to Mr Wong the necessity and scope of the Variation. There were significant costs associated with the Variation due to the complexity of lowering the basement into the water table. Based on figures prepared by Atlas and my role as project manager, these costs exceeded $15,000,000. Mr Yazbek also explained to Mr Wong that Atlas had, in addition, borne approximately $800,000 in related remediation costs that would not be charged to Fitz Jersey despite not being noted on any of the environmental consultant reports. Mr Yazbek communicated to Mr Wong that Atlas had valued the Variation in excess of $15,000,000, but that Atlas was willing to offer an agreed value of the Variation of $10,000,000, which represented a significant reduction in the true cost of the associated works to Atlas. I understand this offer was made in light of preserving the ongoing relationship between the two parties and to take into account the credit to be applied under the contract in relation to the reduction in lettable floor space associated with the revised development application. Mr Wong verbally accepted this offer and then shook Mr Yazbek's hand and then my hand, which I understood to represent confirmation of the deal and therefore believed no further discussion or documentation was required regarding the Variation."
In his statutory declaration, Mr Vartuli said: "My role at the meeting was simply to provide financial information to Mr Yazbek and Mr Sweeney if required, this however was not necessary. During the meeting, Mr Yazbek and Mr Wong agreed on a $10,000,000 variation. It was my understanding that this was in relation to large-scale basement works carried out by Atlas and a contractual credit in relation to the loss of approximately 15 units and a swimming pool from the original scope of works … an arrangement that had been discussed previously and while no binding agreement was reached at the meeting, Mr Wong continued to express his interest and we agreed in principle with respect to such an arrangement."
Earlier in his statutory declaration, Mr Vartuli said: "It was my understanding that the purpose of the meeting was to: a. determine whether Fitz Jersey was going to continue selling the apartments while the Project remained in stage one; and b. discuss the costs associated with adding two levels into the basement and the resulting loss of units, swimming pool and gym."
In cross-examination and final submissions much was made of the fact that, in his 1 December 2016 email to Mr Mort, Mr Vartuli had said that "the purpose of the meeting" was also to "discuss Property Management".
On behalf of Fitz Jersey it was submitted that Mr Vartuli's omission of this detail from his statutory declaration showed that he had "made a dishonest statutory declaration in support of the Adjudication Application". I do not accept that submission. In his 2 December 2016 response to Mr Mort's enquiry and in his statutory declaration, Mr Yazbek said that "property management" was discussed, namely the management of the apartments that Fitz Jersey proposed to retain in Separable Portion 2. An obvious reason why Mr Vartuli may not have referred to this aspect of the February 2013 Meeting was that it was not relevant to the matters claimed in the Payment Claim or to be claimed in the Adjudication Application.

[48]

Mr Sweeney's communications with quantity surveyors

I have referred to Mr Sweeney's engagement of Mr Choo from Kinlay Grinham Casey Burne to prepare a valuation of the change in the basement structure of the project.
On 1 December 2016, Mr Choo sent Mr Sweeney his report. He valued the basement variation at $10,388,020 (excluding GST).
On the same day Mr Sweeney retained a different quantity surveyor, Mr Tom Lander of Washington Brown, and asked him to value the basement works "for the purposes of a payment claim and any subsequent legal action".
Mr Sweeney said that his reference to "subsequent legal action" was to an adjudication under the SOPA.
On 12 December 2016, Mr Lander sent Mr Yazbek, Mr Sweeney and Mr Vartuli a draft report which valued the basement variation at $15,016,836.
Mr Sweeney sent an email to Mr Lander stating, amongst other things: "Overall costs are fine just need refinement on the breakup of costs. It is however, a little bit too close, can you make $14.86 mill instead of $15".
In cross-examination, Mr Sweeney agreed that he was suggesting to Mr Lander that Mr Lander's conclusion as to the costs of the basement variations was so close to the estimate that Mr Yazbek put to Mr Wong in February 2013, that it might appear to be a contrived figure. Mr Sweeney agreed that, for that reason, he suggested Mr Lander might consider altering his opinion by lowering it to a figure in the order of $14.86 million.
As it turned out, Mr Lander's ultimate valuation was $14,711,359.
This led to Mr Sweeney giving this evidence in cross-examination: "Q. When you asked him to change the figure, it wasn't because you thought the figure was wrong, was it? A. No. No, it just - but ours was a rough estimate and he's come back with the same amount but $16,000. Q. Did you think it was a bad look, did you? A. Yes. Q. Did you just pluck 14.86 out of the air, did you? A. I'm not sure, but, yes, it could have been, but it's just - I just don't think it looked very good. Q. So the optics were bad, were they? A. Correct. HIS HONOUR: Q. Just so I can follow, Mr Sweeney, you're suggesting that the QS changed his carefully thought-out figure because it looked too good to be true, is that the idea? A. Look, your Honour, we did brief him on the situation, and Rob and I had always roughly estimated that that basement was 15 million, and that goes back to the letter in October, and for him to come up with 15,016,000, I thought it was ridiculous, yes. Q. Did you doubt that he had done his calculations professionally? A. I - look, I saw his report, it's a very basic report. He'd have to answer that question, but Q. But did you think he was giving you the answer he thought you wanted? A. No, I can't answer that, your Honour. I don't think so, because he's done his report. I can't comment on the - he'd done the calculations and, but I just thought Q. I'm not asking you to comment on what he thought. I'm asking you about what you thought. Did you think that the QS had - Mr Lander - tried to give you an answer that he thought you'd like? A. Yes, I just thought it was too close to what our estimate had been, your Honour, yes. I thought it was strange. Q. Right. Can you just go back to my question. Do you think that he was trying to give you an answer that would please you and, therefore, you suggested to change it to something different? It doesn't look good, does it; do you agree? A. No, I agree with your Honour. I agree. HIS HONOUR: All right, Mr Christie. MR CHRISTIE: Thank you, your Honour. Q. Mr Sweeney, don't you think it is dishonest to ask an expert to change his opinion because it doesn't look good? A. No, I'm not sure. Q. Don't you think it was dishonest on your part to ask the expert to change the figure in the way you've described? A. Yes, I shouldn't have asked him that. I should have just left it. Q. So it was dishonest, wasn't it? A. I just don't think it was the right thing to do. I wasn't trying to be dishonest. Q. But you were being dishonest, weren't you? A. I wasn't intentionally being dishonest, no."
The evidence does not reflect well on Mr Sweeney, as he acknowledged.

[49]

The Adjudication Application

On 13 December 2016, Atlas served on Fitz Jersey an Adjudication Application pursuant to s 17 of the SOPA.
Mr Mort was alert to the fact that the claims made in the Payment Claim concerning the Payment Claim Items (the CPI Uplift, the Early Completion Bonus, the Carbon Tax Costs and the Upgrades) were inconsistent with the statements made about those matters in the October Letter.
Thus, on 12 December 2016, the day before the Adjudication Application was served, Mr Mort emailed Mr Yazbek, Mr Sweeney and Mr Vartuli: "The submissions are nearly done. I probably have another hour or so to finish them up, just as regards the infamous 'letter'. I read it again a few times over the weekend and I don't think we can say it came from Serendipity. From the language, it is clear that the writer is writing from Atlas' point of view in certain parts. To this end, I intend to explain that the letter was penned by directors of Atlas and Serendipity, addressing KC's obligations to both parties. I will send through the updated submissions later this morning for your final review."
Mr Mort's reference to "the infamous 'letter'" is, obviously, a reference to the October Letter.
Later on 12 December 2016, Mr Mort returned to the subject of the October Letter and wrote to Mr Yazbek, Mr Sweeney and Mr Vartuli: "Given the 2nd issue revolves entirely around this letter and we are explaining away the letter, I think it would be in our best interest to include a copy of the letter in our application. It would look strange if we tried to hide it, and in any event, they will include it in their response."
It is evident, from Mr Mort's description of the October Letter as being "infamous", that he had discussed its inconsistency with the manner in which the 2013 Agreement had been dealt with in the Payment Claim with some or all of Mr Yazbek, Mr Sweeney and Mr Vartuli. Although the matter was not explored in cross-examination, one or more of Mr Yazbek, Mr Sweeney and Mr Vartuli must have instructed Mr Mort that, despite its terms, the October Letter did not reflect their recollection of what had been agreed in February 2013. Indeed, the responses that Mr Yazbek, Mr Sweeney and Mr Vartuli made to Mr Mort's 1 December 2016 email are consistent only with that conclusion.
This conclusion is also supported by Mr Yazbek's evidence given in cross-examination: "Q Now, do you recall considering that letter at that time? A. That's the October letter? Q. Yes. A. Yes, we were going to give Scott Mort that letter, yes. Q. And you understood, in your mind, it was important to explain away the letter; is that correct? A. Yes, yes, I did. … HIS HONOUR: Q. Mr Christie I think is asking you this: you didn't say anything in the affidavit you swore in these proceedings to "explain away" the October letter. Do you agree with that? A. No, I did explain to Scott Mort the October letter." (Emphasis added.)
Although Mr Yazbek's evidence in the passage I have emphasised was not responsive to my question, it confirms to my mind that Mr Yazbek explained to Mr Mort that the October Letter did not represent his recollection of the February 2013 Meeting. This explains the explanation, to which I will return, that Mr Mort sought to give about the October Letter in the Adjudication Application. It is also consistent with the account given by Mr Yazbek, Mr Sweeney and Mr Vartuli of the 2013 Agreement in their statutory declarations made in support of the Adjudication Application.
Further, support for these conclusions arises from the following evidence given by Mr Sweeney: "Q. You knew that that letter was of significant importance in these proceedings, didn't you? A. With respect, I think it's of significant importance on your side, but it's not as much importance on our side. … Q. And you knew, even from the adjudication process, that Fitz Jersey relied upon that letter, didn't you? A. Yes, I knew they'd mentioned it in their response - I think the payment schedule. Q. Now you're telling his Honour, 'Oh, it couldn't be right because it used the wrong tenses', for example, didn't you? A. Amongst other things, yes. Q. And the first time you've ever said that is today, isn't it? A. To? To who? I've said that before to other people, but in - to his Honour, yes, today. Q. You've never said that ever in any document before the court, have you? A. I don't think so, no. Not in my affidavit, it doesn't have that, no." (Emphasis added.)
The cross-examiner did not explore to whom Mr Sweeney was referring when he said he had spoken about the use of "wrong tenses" in the October Letter "before to other people".
I infer that Mr Sweeney was referring to Mr Mort.
Further, in Mr Mort's later email of 12 December 2016, he spoke of "explaining away the letter". I would infer from this that Mr Mort had advised Mr Yazbek, Mr Sweeney and Mr Vartuli that the October Letter stood in such stark contrast to the claim articulated in the Payment Claim that it ought be disclosed, and explained, in the Adjudication Application.
Mr Mort dealt with the matter head on in the Adjudication Application and advanced many of the arguments that the Directors now make in these proceedings.
Thus, part of the Adjudication Application read: "The letter referred to in the Payment Schedule [the October Letter], while it addressed some of the debts under the Contract, does not represent the [Atlas's] position under the Contract, and indeed, was not even prepared or sent by [Atlas], but by various individuals who are directors of not only [Atlas] but also another entity (Serendipity Property Group Pty Limited). The letter, while referencing certain debts under the Contract to [Atlas], addressed many other unrelated debts from [Fitz Jersey] (and related entities) to various entities (admittedly related to directors of [Atlas]). The letter outlines and summarises some of the many negotiations that have taken place between [Fitz Jersey] (and related entities) and the directors of [Atlas] and Serendipity Property Group. It sets out some of the variables previously discussed by these parties in attempting to arrive at a holistic agreement as to [Fitz Jersey's] debt. As mentioned above, these discussions have been between March 2016 - October 2016 and have not resulted in any agreement. This is why [Atlas] has abandoned such discussions and now seeks adjudication on the debts owed to it under the Contract. [Fitz Jersey's] key assertion is that the letter indicates a meeting took place between [Atlas] and [Fitz Jersey] in which it was agreed that a payment of $10,000,000 would be made by [Fitz Jersey] to [Atlas] in full and final settlement of all claims by [Atlas] under the Contract. [Atlas] strongly denies this and regards such an assertion as fanciful. The assertion simply cannot be supported for reasons including: (a) Although the letter itself was dated October 2016, the meeting referred to in the letter took place in or around February 2013 (this is confirmed on page 3 of the letter). This was prior to the commencement of separable portion 2 (more than half of the works under the Contract) and years before the completion of the works. There is no way of knowing what additional works were to be performed at this point, and no reason for either party to make such a deal at that time. (b) [Fitz Jersey], in its Payment Schedule, notes that it has paid [Atlas] the Early Completion Bonuses as claimed, even though it also seems to contend that these bonus payments (among others) were waived by [Atlas] in lieu of accepting the $10,000,000 payment in 2013. (c) Even if [Atlas] and [Fitz Jersey] were to make such a deal (which is denied), there is no commercial possibility that a deal of such magnitude would not be carefully documented (by either party). There is no doubt that a person with as much business experience and knowledge as Mr Kie Chie Wong would insist on such a settlement being carefully documented and a deed executed before making payment of a sum of this size (or any settlement sum). (d) Even if [Atlas] and [Fitz Jersey] were to make such a deal (which is denied), in the absence of any written agreement, release or waiver by [Atlas], [Atlas's] entitlements in relation to claiming payment for work under the Contract cannot be affected. To this end, [Atlas] refers to clause 43 of the Contract which provides: 'Except as provided at law or in equity or elsewhere in the Contract, none of the terms of the Contract shall be varied, waived, discharged or released, except with the prior written consent of the parties.' The letter, unhelpfully, appears to mix comments in relation to the meeting in 2013 and settlement negotiations in 2016, however these are two very distinct subject matters." (Emphasis in original.)
In these passages, Atlas sought to distance itself from the assertions made in the October Letter concerning the 2013 Agreement and stated that the letter "does not represent [Atlas's] position under the contract".
The Adjudication Application, somewhat disingenuously, and inconsistently with what Mr Mort had said in his first 12 December 2016 email, said that the letter was "not even prepared or sent by [Atlas]" but rather by the directors of Serendipity. It also, somewhat blithely, asserted that the October Letter "outlines and summarises some of the many negotiations that have taken place" between the parties [39] and that it "unhelpfully" appeared to "mix" comments in relation to the meeting in 2013 and settlement negotiations in 2016.
I do not find these passages in the Adjudication Application to be an entirely satisfactory explanation for the divergence between the assertions in the October Letter and the Payment Claim.
However, the contentions advanced by Atlas in the Adjudication Application so far as concerns the 2013 Agreement are in substance those advanced before me.
Thus, Atlas also contended in the Adjudication Application: "[Atlas] agrees and acknowledges that a meeting took place in or around February 2013 and that an agreement was reached under which [Atlas] agreed to accept $10,000,000 as the sum of an agreed variation, which took into account certain works and deductions that had been undocumented and unassessed up until that time. These variations were: (a) Works involved in lowering and extending the carpark below the site (valued by [Atlas] to be in excess of $15,000,000). This variation included lowering the basement two and a half levels into the ground, remediating contaminated soil, engineering, dewatering and shoring; (b) Contract Sum reduction pursuant to clause 47 (valued under the Contract to be -$4,500,000); and (c) Contract Sum reduction due to the deletion of a swimming pool from the works (valued by [Atlas]at approximately -$500,000). Also at that meeting, [Fitz Jersey] and [Atlas] discussed the commencement of separable portion two and when the financing would be available for this to proceed."
In substance, these are the same matters for which the Directors contend in these proceedings.
In the Adjudication Application it was also asserted: "As stated above, [Atlas] and [Fitz Jersey] have been seeking (since the works reached practical completion in January this year) to negotiate a settlement in respect of the outstanding debt under the Contract. As also stated above, such negotiations have been unsuccessful. These negotiations have not been because of any payment dispute related to the Contract, but have been largely due to other arrangements between [Fitz Jersey] (and related entities) and [Atlas] (and related entities) with respect to works and services that are unrelated to the Contract. The parties have discussed various non-monetary forms of compensation (such as future project work and facility management agreements), to 'wrap up' all debts, however no agreement has been reached."
The statement that Atlas had been seeking to negotiate a settlement with Fitz Jersey since January 2016 was not true, as both Mr Yazbek and Mr Sweeney acknowledge.
I will return to this when dealing with Fitz Jersey's submissions on credit.

[54]

Commencement of the 2017 Proceedings

On 13 January 2017, Fitz Jersey filed a Summons in this Court seeking a declaration that the Adjudication Determination was void and an order in the nature of certiorari quashing the Adjudication Determination.
This was the commencement of the 2017 Proceedings. The Summons had a return date of 3 February 2017.
Fitz Jersey also filed a Technology and Construction List Statement. The List Statement contended that the Adjudicator has no jurisdiction to make a determination of the Adjudication Application because the Payment Claim was not a valid payment claim under the SOPA. In effect, the List Statement repeated the reference date argument made in the Payment Schedule and in the Adjudication Response.
Fitz Jersey did not seek a stay on the enforcement of the Adjudication Determination.
On 13 January 2017 Mr Sweeney asked Mr Mort "what are your thoughts on the summons?".
Mr Mort replied: "Unless Fitz Jersey take steps to restrain Atlas from enforcing the determination, Atlas can continue with enforcement. I don't think they can establish any jurisdictional error, which is the only basis to appeal an adjudication. Even if they requested an undertaking to refrain from enforcement as is the usual case, their claim has very poor prospects. I am astounded that they haven't requested that we refrain from enforcement. I would like to discuss this peculiar position with counsel. The only way I can see them successfully recovering the garnished funds would be to commence proceedings under the contract and somehow prove that there has been an overpayment, but their payment schedule seems to indicate that there are no contractual grounds to assert any overpayment".
By then Mr Mort had already retained Mr Roberts. Mr Mort said that in mid-January 2017 he wrote to Mr Roberts and Ms Julie Wright of counsel (who had been retained earlier) and that they had this conversation: "[Mr Mort]: This is a peculiar situation. Fitz Jersey are challenging the adjudication but have not sought to restrain Atlas from enforcing the determination. I am of the view that Atlas can continue to take steps to enforce the determination. What do you both think? Mr Roberts: I agree. If no steps have been taken to restrain Atlas from enforcement of the determination, then there is nothing stopping Atlas from enforcement. In my view, if the determination is enforced, the summons would cease to have any further purpose. Ms Wright: I agree. I can't believe that Gillis Delaney have not requested an undertaking that you refrain from enforcing the determination pending the jurisdictional challenge, but they haven't, so enforcement is still available."
On 16 January 2017 Ms Holland wrote to Mr Mort requesting copies of various documents including the development approvals, the architectural plans, all as-built drawings and documentary evidence of increases or decreases in the scope of work.
This request reflected the fact that Fitz Jersey held very little documentation concerning the project.

[56]

The Garnishee Order

On 17 January 2017, Mr Mort applied for the Garnishee Order, directed to Fitz Jersey's bank, the National Australia Bank Ltd (NAB).
Mr Mort reported to Mr Yazbek, Mr Sweeney and Mr Vartuli that: "We should receive the Garnishee Order from the Court early next week. The effect of the Garnishee Order is that [the National Australia Bank] would be compelled to pay to Atlas the amounts held in Fitz Jersey's accounts to satisfy the amount of the judgment (to the extent possible) … Once served on NAB, NAB will have 14 days to comply with the Garnishee Order, i.e. pay the money to Atlas."
On 18 January 2017, Mr Sweeney emailed Mr Mort: "Why does the garnishee order take until next week? Is there any way to get it quicker? Once served on [NAB] can [Fitz Jersey] still injunct the garnishee order? How do you serve the order on [NAB]? Would Gillis Delaney know we have the debt judgment?"
Later that day Mr Mort replied: "The application for a Garnishee Order will go before a Registrar for consideration before the Garnishee Order is ultimately made. Unfortunately, there is no means to expedite this process and we are in the Court's hands as to how long we wait for the Garnishee Order. … It is possible that Fitz Jersey could seek to injunct NAB's compliance with the Garnishee Order. That would require an urgent application to the Court and require Fitz Jersey to explain why an injunction is necessary. We would obviously do what we can to oppose such an injunction being ordered. … Neither a copy of the Judgment nor the garnishee order are served on Gillis Delaney. So far as we are aware, Gillis Delaney presently has no idea that the judgment has been entered against Fitz Jersey. We would imagine that once the Garnishee Order is served on the bank, and the funds frozen, it will quickly come to both Fitz Jersey's (and Gillis Delaney's) attention as to what has transpired."
The Garnishee Order was issued on 27 January 2017 and served on NAB that day.
Mr Sweeney asked Mr Mort: "How do the [NAB] know where to transfer the funds?"
Mr Mort replied: "They are required to send us a cheque (made out to Atlas, but at our address). Will be a big week next week (once KC discovers the funds are frozen)."
On 20 January 2016, Mr Mort replied to Ms Holland's letter of 16 January 2017 refusing to provide the documents requested and giving reasons for that refusal by reference to particular provisions in the Building Contract.

[57]

Preparation to declare the Dividends

On 31 January 2017, Mr Vartuli telephoned Mr White at EY.
In his affidavit, Mr White deposed to this conversation: "[Mr Vartuli]: The directors of Atlas want to declare a dividend. We are expecting the sum of $11 million to be received within the next week or so. … [Mr Vartuli]: I need you to provide Rob and Scott advice as [to] whether they are able to pay a dividend and what matters they will need to consider. … [Mr White]: You need to make sure that Atlas has sufficient assets to pay its debts as and when they fall due. Am I right in thinking that as Atlas has not been actively trading for over a year, there would be minimal liabilities? … Mr Vartuli: That's correct. The only issue we have at the moment is with Fitz Jersey. It's commenced proceedings seeking to set aside the security of payments order decision, which underpins the $11 million Atlas is due to receive from Fitz Jersey. [Mr White]: Have you received any advice in respect of Fitz Jersey's prospects of success? Mr Vartuli: Yes we have, from Scott Mort, a solicitor, and a barrister's opinion. They have advised us that Fitz Jersey has virtually no chance of success. They have also said that Atlas is entitled to keep the $11 million from Fitz Jersey. [Mr White]: Ok. Have you prepared an up-to-date balance sheet of Atlas? Mr Vartuli: Yes I have. I have booked it as a debtor, have recognised some retentions and about a $1 million of GST owing. [Mr White]: You should pay all the GST to the ATO. Also, leave a sufficient amount of money in the company to cover any unexpected liabilities, then you should be ok to pay the balance to shareholders."
There was evidence that, throughout the project, the Directors had resolved to declare dividends in favour of their companies, Kebzay and Sweenham, as and when funds were available for that purpose. However, this is the first reference in the evidence of the Directors' intention to declare the Dividends the subject of Fitz Jersey's claim in these proceedings.
Mr White said that Mr Vartuli then asked him to assist in preparation of draft minutes and that Mr Vartuli said: "Scott [Sweeney] and Rob [Yazbek] want to make sure that all their ducks are in a row before paying the dividend".
On 31 January 2017, Mr Vartuli prepared the first draft of the minutes ultimately executed on 6 February 2017 by Mr Yazbek and Mr Sweeney recording their resolution to make a payment to the ATO and to pay the Dividends.
Mr Vartuli sent a copy to Mr Sweeney and, later in the day, to Mr White.
On 1 February 2017, Mr White returned Mr Vartuli's draft with some suggested additions.
Between 1 and 6 February 2017, several iterations of the draft were prepared.
At 3.31pm on 1 February 2017, Mr Mort sent an email to Mr Sweeney, Mr Yazbek and Mr Vartuli: "Gents We have spoken to NAB a few times today. We are presently informed that: 1. A cheque for the full amount of the garnishee order will be processed overnight; 2. It will be mailed tomorrow from NAB Melbourne via express post to our office; and 3. We cannot collect the cheque from Melbourne (because I know that is your next question). So, all going to plan, we will receive a cheque for approx. $11M here on Friday. As soon as it is received, we will let you know so that you can immediately collect and deposit. For the avoidance of doubt, this is good news. Commercially, every effort should be made to get the cheque into your account before we go to court at noon, but obviously, there are no guarantees as to what time we will receive it."
Later on 1 February 2017, Mr Sweeney sent an email to Mr Yazbek and Mr Vartuli, which read: "I spoke to [Mr Vartuli] and his discussion with Peter White. I still think the sooner we call the dividend the better for the following reasons: At the moment our knowledge as directors is the following: ● We have an adjudication in our favour. ● We have Judgment from the supreme court of a debt. ● We have no other significant liabilities. ● We should leave $400,000 in the account for current and future operational liabilities ● They have a summons on Friday to argue that the adjudicator did not have jurisdiction to adjudicate on the case. We strongly disagree with this and it has been covered in the adjudication. ● Our legal advice is that their case is weak to have the adjudication overturned. ● At no stage have they said we are not entitled to the money. ● They have stated we had an overall agreement for 10 million final variation but have no evidence to back this up and we strongly disagree with this. This was also covered in the adjudication. ● They did not injunct us from collecting our debt as they were entitled to do. That's their issue not ours. Further: We have waited for this money for over a year to try and sort out an agreement with KC. So it is reasonable that as soon as we have the funds we pay it out to shareholders. Circumstances may change in the near future but we can only act on what we know now. Happy to discuss tomorrow. I will see the bank in the morning and keep you updated." (Emphasis added.)
In cross-examination, and in closing submissions, Fitz Jersey placed great weight on the passages in this email which I have emphasised.
In relation to the statement in the email that "I still think the sooner we call the dividend the better" by Mr Sweeney, Mr Yazbek agreed that Mr Sweeney had previously said to him "that exact thing, 'the sooner we call the dividend the better'".
Mr Sweeney said in cross-examination: "Q. So you wanted to get the money in as soon as possible and then call the dividend, right? A. Yes, that was - that's right. Q. And that was your view after you'd spoken to Mr Vartuli; correct? A. Yes. Q. That was because you wanted to get the money out of Atlas as soon as you could; correct? A. Not as soon as I could but, yes, I wanted to be paid a dividend. Q. Yes. You wanted the money out of Atlas as soon as possible, didn't you? A. Well, more I wanted the shareholder to get the money as soon as possible, yes."
Mr Sweeney's statement that "we have waited for this money for over a year to try and sort out an agreement with KC" was similar to the statement made in the Adjudication Application to the effect that there had been negotiations throughout 2016 with Mr Wong. As Mr Sweeney knew, this was not true.
Mr Sweeney concluded by saying that "circumstances may change in the near future".
In relation to that statement Mr Sweeney gave this evidence: "Q. The circumstances which might change might be that there may be an order - a claim, I should say, for the repayment of that amount under the construction contract; correct? A. Yes, it could have, but it hadn't happened at that stage."
Mr Yazbek was taken to this passage of the email and gave this evidence: "Q. Then the letter says: Circumstances may change in the near future but we can only act on what we know now. Do you see that? A. Yes. Q. You understood from that that that meant that there was the possibility that Mr Wong may pursue Atlas under the contract? A. Yes. Q. And you wanted to get the money out of Atlas before he did so, didn't you? A. Well, we were going to pursue it if he was. It made no difference, because if he was going to pursue it we were going to defend it anyway, like we are doing now. So we declared the dividend."
Later Mr Yazbek said: "Q. What did you understand by the words "circumstances may change in the near future but we can only act on what we know now"? What did you understand that to mean? A. That KC might pursue the - to get his money back, because he was upset that we garnished his money."
In his affidavit, Mr White said that on 1 February 2017 he had this further conversation with Mr Vartuli: "Mr Vartuli: Hi Peter, we have received an email from Bradbury saying we are going to receive the $11 million tomorrow. Scott and Rob want to declare a dividend as soon as possible. Have you had a chance to look at the draft minutes of meeting yet? [Mr White]: I have. I think we need to set out a detailed background as to how Atlas received the $11 million from Fitz Jersey, explain why Atlas is entitled to retain the funds and set out details of the proceedings commenced by Fitz Jersey. I think we also need to prepare cash flow projections for the next 12 months if you haven't done so already. Mr Vartuli: I will include the additional information in the minutes, thanks."

[58]

Mr White's recollection

During the Liquidator's Examination Mr White was not able to recall the conversations with Mr Yazbek to which he had deposed in his affidavit in these proceedings.
Before me, Mr White gave this evidence: "Q. You could not recall the events of 31 January and 1 February 2017 [at the Liquidator's Examination], but you say 20 or so months later, or almost 24 months later, when it came time to make your affidavit, you could recall those things? A. Very much so. Under the heat of the bright lights of the 597 examination and the vigour of Mr Miller's interrogation, no, I could not."
Mr White earlier said that he had been able to refresh his memory by having: "… the benefit of the emails that had gone backwards and forwards from 31 January to 6 February, to remind me of the conversation that had happened, which of course I didn't have the benefit of during the 517 examination. I was able to refer to the extraneous materials in swearing this affidavit."
Mr White was asked which emails he had used to refresh his memory. Mr White identified some emails. Fitz Jersey submitted that it is improbable that those documents could have assisted Mr White to recall the critical conversations.
Ultimately, Mr White gave this evidence: "Q. Given what you said to Mr Miller, do you accept that in paragraphs 85 through to 89 of your affidavit, what you said there isn't a true recollection of what actually happened at the time, but is the product of your reflecting on matters since that time and recreating them in your mind? A. I don't think that's fair at all. Q. You don't accept that's fair, even though you couldn't tell Mr Miller anything about these conversations? A. Under the bright lights with no opportunity to reflect on conversations that you have - I don't profess to be able to remember what I had for breakfast four days ago, but if you give me a week or two to think about it, I'll remember. So ... Q. Well, I A. ... recall, which is what Mr Miller was asking."
Fitzy Jersey submitted that the accounts given by Mr White in his affidavit of his conversation with Mr Vartuli "cannot be accepted as an accurate reflection of what was said at the time" and: "Rather, it is likely that this evidence reflects a reconstruction of events by Mr White (it is not suggested that this means the evidence was intentionally wrong). In light of what is said in the preceding paragraph regarding the Mr White's evidence about advice regarding Atlas's Constitution, the reconstruction cannot be accepted as accurate."
I do not accept that submission. I accept Mr White's evidence that, having reflected more carefully, for the purpose of these proceedings, on what was said in his conversations with Mr Vartuli, he was able for that purpose to recall their substance, notwithstanding the fact that he was not able to do so at the Liquidator's Examination. Although Fitz Jersey's submission was that Mr White had unintentionally reconstructed his recollection, Fitz Jersey's submission was, in substance, that Mr White had made up his affidavit account of his conversation with Mr Vartuli. I do not accept that this is what happened.
In cross-examination Mr White gave further evidence as to what advice he ultimately proffered to Mr Yazbek and Mr Sweeney about the Dividends. I will return to that below.

[59]

Friday 3 February 2017

Fitz Jersey's Summons in the 2017 Proceedings, filed on 13 January 2017, was returnable for directions before Hammerschlag J at midday in the Technology and Construction List on 3 February 2017.
During the morning on 3 February 2017, Ms Holland circulated proposed "consent orders" for the progress of Fitz Jersey's challenge to the Adjudication Determination. Those proposed orders included that Fitz Jersey pay the amount of the Adjudication Determination into Court pending the outcome of the challenge to the Adjudication Determination.
A short time later, at 11.16am, the NAB paid Atlas $11,023,799.76 in response to the Garnishee Order.
Fitz Jersey was at this stage unaware that the Garnishee Order had been applied for, issued, and now complied with.
Fitz Jersey only became aware these matters a short time later when, at Court, Mr Mort told Ms Holland what had occurred.
At Court, Mr Mort and Ms Holland had this conversation: "[Ms Holland]: Do you have any issue with the proposed consent orders? [Mr Mort]: Well I don't think we need a timetable. Our client has already garnished the funds. The horse has bolted. [Ms Holland]: What? That's news to me. I will inform the Court. And I'm calling Michael Christie."
Hammerschlag J stood the 2017 Proceedings over until 10 February 2017.
At around this time Mr Vartuli and Mr White had this conversation: "Mr Vartuli: We have received the $11 million from Fitz Jersey which should clear in the next few days. Rob and Scott just wanted to have a chat with you before paying the dividend. [Mr White]: Ok. There is nothing in the constitution that would prevent you from paying the dividend. However, before you do that you need to make sure there are sufficient assets to pay all debts as and when they fall due. … I understand that you have already been provided with legal advice that Fitz Jersey's prospects of success are virtually zero."
During the afternoon of 3 February 2017, Ms Holland wrote to Mr Mort: "We refer to the hearing in the Supreme Court before Hammerschlag J today. We confirm our request made in open court today for copies of the documents upon which your client relied in obtaining a judgment against our client, and in enforcing that judgment, be provided to us this afternoon. We note that we have not yet received any such documents. So that we can obtain instructions on the matter, please provide copies of these documents by no later than 5.00pm today. As stated in today's hearing, we anticipate receiving instructions to make an appropriate application to the court for orders in relation to the receipt by your client of the amount of the adjudication determination, adjudication fees and interest, along with the continuation of the proceedings. Please confirm by no later than 5.00pm today that your client undertakes to not disburse or otherwise take any action to dispose of the moneys it has received pursuant to the garnishee order executed with the National Australian Bank. Please note that if we do not receive such an undertaking by 5.00pm today, our client will rely on this letter in support of any application it deems appropriate to make to the Court in the circumstances."
Later on 3 February 2017, Mr Mort responded: "As discussed today, please find attached documents in relation to the enforcement of the determination, all of which are on the court file and available to your client. In relation to the other matters raised in your letter: 1. There is no basis for seeking any undertaking from our client in relation to the disposal our client's money; and 2. The time for injunctive relief has long passed, and as such, there is no basis for your client to apply to the court for any orders in relation to the receipt of the judgment debt. In circumstances where your client intends to apply to the court as foreshadowed in your letter, we request that you provide us with notice of the basis of such application."

[61]

Monday 6 February 2017

During the morning of 6 February 2017, Mr Vartuli circulated a further draft of the proposed directors' minutes.
Around noon, Mr White sent an email commenting: "● I think we need to include a statement to the effect that 'the company can pay its debts as and when they fall due' after payment of the dividend. ● We should include mention of the advice from Counsel (in addition to the comments of the Court) that the prospects of a contrary judgment are extremely low. ● Where the Court says such things, refer to it in the transcript of the judgment (which you should order from the Court)."
A few minutes later, Mr Vartuli emailed Mr White, with a copy to Mr Yazbek and Mr Sweeney, an amended version of the draft minute and stating "[p]lease confirm this is ok to proceed". Mr White did not reply to that enquiry until 5.20pm by which time the resolution to declare the Dividends had been passed.
A short time later, Ms Holland followed up the letter sent the previous day stating: "Our client holds great concern about your client's ability to repay the amount obtained pursuant to the Garnishee Order served on the National Australia Bank Limited dated 27 January 2017. Please note that we will be making an application to Justice McDougall in the Supreme Court at 2:00pm today for orders including (but not limited to) an order that your client provide the information requested in our letter."
Mr Mort replied: "Finally, as to the alleged 'urgency of the matter', our client has obtained and executed judgment in circumstances where it was entitled to do so. Your client could have taken, but chose not to, steps to restrain our client from obtaining judgment, or, if it had a basis to do so, sought to stay the judgment pending resolution of the underlying dispute. Having elected not to take those steps, it is not open to your client to now allege that matters are 'urgent'. Any urgency that exists (and we do not see that there is any) is of your client's making."
Sometime between 1pm and 2pm, Mr Mort telephoned Mr Sweeney and had this conversation: "[Mr Mort]: I have received a letter from Gillis Delaney. They are approaching the Court at 2pm today as what would appear to be a final effort to stop Atlas from using the funds. Mr Sweeney: How do you think they will go? [Mr Mort]: Not well. In my opinion, the horse has bolted. Atlas has already been paid. I am not aware of anything that would permit the Court to reverse a garnishee order. Mr Sweeney: No worries, please let me know how it goes."
At 2pm on 6 February 2017, Fitz Jersey made an application to McDougall J for an order that the amount paid to Atlas under the Garnishee Order be repaid to Fitz Jersey so that Fitz jersey could pay it into Court, or alternatively an order that Atlas swear an affidavit setting out in effect what happened to the money.
Mr Sweeney telephoned Mr Yazbek to inform him of Fitz Jersey's application. During that telephone conversation they had this conversation: "[Mr Yazbek]: I think we need to wait to declare a dividend until KC's application has been determined. This is the first time he has sought a freezing order and he will make our life hell unless we make sure we cross all our I's and dot all our t's [sic]. I know Fitz Jersey has no genuine entitlement to that money. Mr Sweeney: I agree. Let's just see what the outcome of today is."
McDougall J dismissed Fitz Jersey's application for interlocutory injunctive relief. His Honour held that although "there may be a legitimate basis for impugning the adjudicator's determination", the relief should be refused on discretionary grounds particularly because Fitz Jersey had not hitherto sought to restrain Atlas from enforcing the Adjudication Determination and because "in the present case, there is no evidence to suggest that [Atlas], if called upon, would not be able to repay the $11 million". [41]
At about 4.30pm, Mr Mort telephoned Mr Yazbek and Mr Sweeney and had this conversation: "[Mr Mort]: Fitz Jersey's application was dismissed with costs. Mr Sweeney: That's good news. What does that mean for their summons? [Mr Mort]: The summons is still on foot, but it is now even more apparent that the summons is unlikely to succeed, because the money has been paid. The Act has done its job. In my view, there was no jurisdictional error. If Fitz Jersey keeps running the application as pleaded, it will just hit a brick wall. Even his Honour agreed that the horse has bolted in circumstances where Fitz Jersey has paid the adjudication amount."
Following that telephone conversation, Mr Sweeney then said to Mr Yazbek: "I think we can declare the dividend now".
Mr Yazbek and Mr Sweeney had not informed Mr Mort of their intention to declare a dividend. Mr Mort did not learn of the declaration and payment of the Dividends until the following year.
In his affidavit Mr Yazbek said: "I did not tell Mr Mort that Mr Sweeney and I intended to declare a dividend that day because he had told us we were entitled to keep it, and we also obtained advice from Mr White, who is an accountant as well as a solicitor. Mr Mort is not a financial advisor or a financial lawyer. He is a construction lawyer. He could not provide us with advice on paying a dividend."

[62]

The Dividends resolution

At around 5pm on 6 February 2017, Mr Yazbek and Mr Sweeney, as directors of Atlas, met.
The Minutes of the meeting record: "The directors summarised the process which they undertook to collect unclaimed monies pursuant to the building contract with Fitz Jersey … regarding the Mascot Project. After numerous attempts to settle this matter with Fitz Jersey during the preceding 12 months, the company issued an invoice for $10,748,466.31 (inc GST) in accordance with the Building and Construction Industry Security of Payment Act 1999 (SOP) on 15 November 2016."
The Minutes thus repeated the statements that had been made in the Adjudication Application, and in Mr Sweeney's 1 February 2017 email to the effect that there had been attempts to settle matters with Fitz Jersey during the proceeding 12 months. Each of Mr Yazbek and Mr Sweeney knew that this was not true.
The Minutes then purported to recite what had occurred since Atlas served the Payment Claim. Although the Minutes read as if those matters were discussed at the meeting, Mr Yazbek and Mr Sweeney agreed that the Minutes had been prepared in advance and were adopted without discussion.
After reciting the events which had occurred since Atlas served its payment claim in November 2016, the minutes continued: "Financial Statements: The interim management Accounts for the company for the period ended 3 February 2017 were tabled. Directors have reviewed these unaudited financial statements and have formed the opinion that they are materially correct. The management accounts as tabled indicate the following: - Total Assets: $11,139,355 Total Liabilities: $4,024,016 Including: Retentions: $66,221 GST payable: $971,803 Income Tax Payable: $2,985,992 Total Funds available for distribution: $7,115,339 It was resolved that funds of $400,000 will remain in the company as an appropriate contingency for any retentions payable when due, further defect rectification works required at the Mascot Square project funds for further legal action as proposed below preliminary expenses for 620 Botany Road Project for Amara Living and any ad hoc expenses as and when required. Payments to Australian Taxation Office (ATO): IT WAS RESOLVED that the following payment be made to the ATO immediately: - Integrated Client Account: $3,957,795.61 (to meet GST and Forecast Income Tax Liability) Declaration of Divided: IT WAS FURTHER RESOLVED that the directors of the company recommend the payment of a dividend from the profits of the company as follows: Share type: $1.00 ORD Class Shares Fully Paid Date declared: 6 February 2017 Amount per share: $27.13 Dividend type: Interim Proposed payment date: 6 February 2017 IT WAS FURTHER RESOLVED, pursuant to Section 202-5 of the Income Tax Assessment Act, that the dividend approved above be 100% franked. IT WAS FURTHER RESOLVED that the Company can pay its debts as and when they fall due after payment of the proposed dividend. Further Claims: IT WAS RESOLVED for the company's [sic] to exhaust its legal options in relation to recovering the monies for the unpaid works for the following projects:- Maroubra Gateway - $155,000 (ex GST) Jersey Road - $355,369.68 (ex GST) Project Management at Mascot Square - $13,000,000 (ex GST) Closure: There being no further business the meeting was closed."
At 5.20pm Mr White replied to Mr Vartuli's midday enquiry as to whether it was "ok to proceed" by emailing that it was "good to go".
By then, the resolution to declare the Dividends had been passed. Evidently, none of Mr Yazbek, Mr Sweeney or Mr Vartuli were concerned to wait for Mr White's final confirmation of the form of the minute.

[66]

The Shareholders' Loans

On 6 February 2017, Kebzay was indebted to Atlas in the sum of $449,085 and Sweenham in the sum of $6,000.
These sums were the amounts that remained owing by Kebzay and Sweenham to Atlas from larger amounts that, over the years, had been loaned by Atlas to Kebzay and Sweenham. Atlas had loaned these amounts from monies retained from amounts contingently due by Atlas to various subcontractors (the "Retentions").
The loans were payable on demand and, during 2015 and 2016, Atlas had called on Kebzay and Sweenham to repay the loans as and when Atlas was required to return the Retentions to the subcontractors.
By 6 February 2017, Atlas had no further obligation to return any of the Retentions to any of its subcontractors. That is, as between Atlas and its subcontractors, Atlas was entitled to retain the Retentions because the subcontractors had failed to carry out requisite work or rectify defects.
Thus, as at 6 February 2017, Atlas did not need to call on the loans in order to pay the Retentions to subcontractors.
Nonetheless, monies remained owing by Kebzay and Sweenham to Atlas.
On 6 February 2017, Mr Vartuli caused the loans to be written off.
Mr Vartuli explained: "… as a result of the partial and whole write offs [of retentions due to subcontractors] there was no need for the shareholder loans to remain on the books. At the time, Atlas had no substantial creditors. As such, I wrote off the shareholder loan accounts against the retention write offs. I did not recall whether it was Robert [Yazbek] or Scott [Sweeney] who authorised me to process the loan write offs, however I would not have processed the loan write offs without authorisation from a director on behalf of Atlas. It was standard practice for Atlas to write off shareholder loans against retention write offs or dividends."
In the Liquidator's Examination, Mr Vartuli said that, nonetheless, he for some reason backdated the write offs to the dates that appear in the General Ledger.
Despite Mr Vartuli's evidence, and despite the fact that Mr Yazbek and Mr Sweeney had admitted in their List Response that the Shareholders' Loans were "written off on or about 6 February 2017", in closing submissions it was submitted on their behalf: "While the assertions of the write offs suggest that they took place around the time of the 6 February 2017, the general ledger of Atlas in fact shows that the write offs took place between 1 and 11 November 2016."
Reference was made to entries in Atlas's General Ledger Report of manual journal entries suggesting that the write offs had occurred on those November dates.
This submission was repeated orally.
It should not have been made.
It was contrary to the evidence and to the admission the List Response.
I will return to Fitz Jersey's submission as to the implications of these write offs later in these reasons.

[67]

Events thereafter

On 9 February 2017, Fitz Jersey filed a Notice of Intention to Appeal from McDougall J's decision of 6 February 2017.
That appeal was heard on 3 March 2017 and dismissed on 23 March 2017. [42]
On 6 April 2017, Fitz Jersey filed an Amended Summons in the 2017 Proceedings seeking an order that the judgment obtained by Atlas against Fitz Jersey as a result of the Adjudication Determination be set aside and an order that Atlas repay the amount that Atlas had garnished from Fitz Jersey's bank account.
On 27 October 2017, the 2017 Proceedings were listed for directions before Hammerschlag J.
The following exchange took place between Hammerschlag J and senior counsel for Fitz Jersey: "CHRISTIE: Your Honour may recall this case has been running in which a garnishee order was obtained for some $10 million. HIS HONOUR: Yes. Is this the same old one? We're fighting about the same old one that got paid? CHRISTIE: That's right, your Honour. HIS HONOUR: I understand Ms Wright's annoyance CHRISTIE: One of the issues, your Honour, concerns the reference date which ultimately turns upon the date of practical completion. We are in the course of completing our expert evidence. We may need to amend our pleadings and we won't be able to obtain instructions between now and the next few days when our client returns from overseas. We simply ask that the matter be stood over for a week. … [HIS HONOUR]: How much money was that garnishee for again? CHRISTIE: About ten or 11 million. HIS HONOUR: How much was collected on the garnishee? CHRISTIE: The entirety HIS HONOUR: So now what? What are you doing? You're now fighting the substantive question of liability? CHRISTIE: No, we're fighting the adjudication determination but your Honour, it is really in my mind because it may well be that is the best way to proceed. HIS HONOUR: It may be but it sounds to me, Mr Christie, like it's the only way to proceed. CHRISTIE: May it please the Court. HIS HONOUR: The choice is unitary, not binary."
The exchange with Hammerschlag J makes clear that, as at 27 October 2017, Fitz Jersey's focus in the 2017 Proceedings remained on challenging the Adjudication Determination rather than the underlying issues under the Building Contract.
Nonetheless, during 2017, Atlas discovered to Fitz Jersey many thousands of documents. Fitz Jersey also caused some 35 subpoenas to be issued to various subcontractors and consultants resulting in the production, between July and August 2017, of approximately 26 folders of documents.
On 11 December 2017, after Fitz Jersey had obtained these documents, Ms Holland circulated to Mr Mort a proposed Further Amended List Statement which, for the first time, made claims under the Building Contract.
That Further Amended List Statement was ultimately filed on 2 February 2018.
Thereafter, as I have set out earlier, on 4 April 2018, Mr Yazbek and Mr Sweeney resolved that Atlas be placed into voluntary administration. A short time later, on 18 May 2018 Atlas was placed into liquidation.

[70]

Demeanour

I am conscious of the restraint I must exercise in forming a view about the credibility of Mr Wong, Mr Yazbek, Mr Sweeney and Mr Vartuli based upon their demeanour when giving evidence. Giving evidence is a stressful, alien experience for most people. I have in mind Atkin LJ's familiar aphorism that "an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of the evidence with known facts, is worth pounds of demeanour". [43]
I must weigh my impressions as to demeanour "carefully against the probabilities" and "examine whether the disputed evidence is consistent with the incontrovertible facts". [44]
However, as cross-examination of each Mr Yazbek and Mr Sweeney exceeded three days, and that of Mr Wong exceeded a day, I have had a lengthy period during which to observe the manner in which those witnesses gave evidence.
That opportunity was, if anything, the better by reason of the proceedings being conducted virtually. The witnesses were facing the camera through which their evidence was being recorded and thus, more or less, directly towards me.
This was of less significance in the case of Mr Wong and Mr Yazbek, who were sitting on the far side of the table on which the camera recording their evidence was mounted. However, in the case of Mr Sweeney and Mr Vartuli, the camera was placed directly in front of their seated position, thereby giving me a much clearer view of the manner in which they gave their evidence than would have been possible during a live hearing.
I did not gain the impression, from what I saw of the manner in which Mr Yazbek, Mr Sweeney and Mr Vartuli gave evidence, that they were doing otherwise than endeavouring to give the best of their recollection.
I am less confident as to what conclusion, if any, I should draw from the manner in which Mr Wong gave his evidence. Mr Wong has Parkinson's Disease and said that his affliction is affecting his memory at a rate that has progressed over recent years. He gave his evidence cautiously and professed not to recall many details.
However, in relation to the critical issue of what he said to Mr Yazbek during the 2013 meeting, he presented as having a clear recollection.
Returning to Mr Yazbek and Mr Sweeney, their evidence did establish that on a number of occasions they have made statements that they must have known not to be true.
I describe in detail below Mr Yazbek's and Mr Sweeney's involvement in the October Letter. Their involvement in the October Letter does them no credit.
Both Mr Yazbek and Mr Sweeney were involved in the formulation of the Adjudication Application's wording. As I set out above, the Adjudication Application contains statements as to negotiations with Mr Wong during 2016 that Mr Yazbek and Mr Sweeney must have known were not true.
Both signed the minutes of 6 February 2017 which contained similarly untrue statements about such negotiations.
Both Mr Yazbek and Mr Sweeney lodged proofs of debt with the Administrators of Atlas in which they falsely asserted that Atlas had made no loans to shareholders. As I have set out above, Atlas made loans to both Kebzay and Sweenham.
Mr Sweeney also made the statement in his 20 September 2016 letter to Mrs Yazbek to which I have referred that, at the Liquidator's Examination, he accepted was untrue.
As to Mr Vartuli, he was also a party to the creation of the October Letter. He also knew of the false statements in the Adjudication Application and in the 6 February 2017 minutes concerning the state of negotiations with Fitz Jersey in 2016.
These are all matters to be borne in mind when considering critical events, especially the October Letter and the 2013 Agreement.
However, as I have said, I am able resolve those issues without undue reliance on matters of credit.

[72]

Mr Yazbek's evidence about the October Letter

In his affidavit, Mr Yazbek gave this evidence about the October Letter: "By 11 October 2016, KC still refused to speak with me. I was very disappointed because I was ready and able to address any concerns he had. As a last resort, on 11 October 2016, I signed a letter addressed to KC and [Mrs Wong]. Mr Sweeney and Mr Stevens (on behalf of Serendipity Property) also signed this letter. The objective of this letter was to get KC to meet with us face to face to discuss his concerns and repair our relationship of over 30 years, although at this stage I still did not understand why KC had not returned my calls and therefore, what part of our relationship KC considered required repairing. In addition, I wanted to speak to KC about the completion of the development and the final payment that Fitz Jersey would need to make to Atlas. The letter was also prepared in order to put KC on notice that if he did not talk to us, Atlas would pursue all unpaid monies it was entitled to pursue against Fitz Jersey for the work performed at, and in respect of, the Mascot Development. In this respect, in sending this letter, I did not intend to give up any of Atlas's rights it may have against Fitz Jersey or KC."
When first asked about the October Letter, Mr Yazbek gave this evidence: "Q. So it was - you ensured that the letter was truthful, didn't you? A. Yes. Q. And accurate? A. I don't know about accurate, but it was - you know, if I want accuracy I go to my lawyer. Q. Well, it was truthful; correct? A. Yes, to the best of my knowledge, yes."
However, Mr Yazbek went on to say that, despite the terms of the October Letter, the CPI Uplift, the Early Completion Bonus and the Carbon Tax Costs were not discussed at the February 2013 Meeting.
Mr Yazbek then gave this evidence in answer to questions from me: "HIS HONOUR: Mr Yazbek, you just said you discussed some of the matters listed in that point under the heading "We calculated that according to the contract we are entitled to the following". Which ones do you say were not discussed in 2013? A. We didn't discuss the CPI, didn't discuss early completion bonus or the extensions of time, the carbon tax. We discussed the basement lowering and we discussed the 15-unit credit, and the swimming pool credit. Q. Aren't you saying here that every matter listed there was discussed in February 2013? A. Yes, well, that's wrong, that wasn't - we didn't discuss all that in 2013. That was only calculated by quick calculation before we sent this letter out, of the CPI and the early completion bonus, and all that. Q. … Why did you say in this letter that all those matters were discussed in February 2013, if that was not true? A. I can't understand, your Honour, where I said I discussed all those in 2013. Q. I'm looking at your words: We calculated ... Past tense: ... that according to the contract we were entitled ... Past tense: ... to the following. Weren't you setting out there what you said you calculated in February 2013? A. Yes, it wasn't meant to read that way, your Honour. We didn't discuss those at that meeting. We never discussed those early completion bonuses or - we couldn't discuss the early completion bonus. We hadn't completed at that time." (Emphasis in original.)
A short time later, Mr Yazbek gave this evidence: "Q. I asked you earlier on whether you ensured that at the time you wrote this letter and sent it, that the letter was truthful, and you said, "Yes, to the best of my knowledge, yes, it was truthful"? A. It was truthful - of truthful, but I don't know how accurate it was. Like I said, if it was - if I needed accurate, I would have got the calculations correct and, you know, the lawyer would have drafted something. But it was just a letter to send to KC to show him all the things that we've done, and what we haven't claimed for, so that he could talk to me. This was to me not a legal letter. This was drafted by David Stevens, a real estate agent. We just signed the letter in anticipation that KC would talk to us, and work it out. HIS HONOUR: Q. Mr Yazbek, do you need a lawyer to assist you to write a truthful letter, do you? A. No, I don't, but a legal letter, yes. MR CHRISTIE: … The simple point is, Mr Yazbek, you made the payment claim because Mr Wong had terminated the management agreement; isn't that the case? A. No. It's the case that I was upset about the management agreement, but I still wanted to talk to KC, but I wasn't terminated - sorry, the Security of Payment Act was for the remainder of the contract. As well."

[73]

Mr Sweeney's evidence about the October Letter

In his affidavit Mr Sweeney simply said of the October Letter: "Mr Wong never provided an explanation at the time for his decision to terminate the Agency Agreement. Mr Wong refused to speak to Robert [Yazbek], David [Stevens] or me in relation to the Termination Notice, despite what I believe were numerous attempts to do so. Robert had attempted to contact Mr Wong on numerous occasions after receiving the Termination Notice by text message and calling him. I even tried to ring Mr Wong to see if I could get in contact with him. Mr Wong never returned our phone calls or text messages. At one point, I contacted Mrs Wong, I recall her saying words to the following effect of "It is up to KC, he handles the business side of things, I cannot speak for him". After several attempts to contact Mr Wong, Robert, Mr Stevens, Matt and I prepared a letter dated 11 October 2016 to Mr Wong setting out our concerns in an attempt to get Mr Wong to contact us".
When first asked about the October Letter, Mr Sweeney gave this evidence: "Q. You gave careful attention to this before you signed it, didn't you? A. I gave it due attention before I signed it, yes. Q. Well, you'd seen a number of previous drafts, so it's fair to say that you were familiar with the document in large measure before you even signed it; correct? A. Yes I was familiar with the document, yes. Q. Everything in it is truthful, isn't it? A. At that time, yes, for the - yes."
However, a short time earlier Mr Sweeney had given this evidence: "Q. Otherwise, you regarded [the October Letter] as a fair summary of what the $10 million was for, didn't you? A. No, I did not. That wasn't the intention of the letter. It was [not intended to be] minutes of that meeting or a summary of the meeting at all. It was a letter sent to KC and Ann to encourage a meeting with them so we could avoid probably where we are now, and have a face-to-face meeting."
This response from Mr Sweeney was not followed up by the cross-examiner. In particular, Mr Sweeney was not tackled about the apparent inconsistency between his answers, and the form of the October Letter.
That led me to have this exchange with Mr Sweeney: "HIS HONOUR: Q. Mr Sweeney, you said to Mr Christie earlier that the summary in the earlier drafts of this letter of the February 2013 meeting were not, in your view, a fair summary of the meeting? A. Yes, your Honour. Q. Looking at the document you signed and going to page 17505, halfway down you said out there, don't you, what you assert was agreed at the meeting in February 2013, don't you? A. No, your Honour, I don't agree with that. That wasn't - my reading of it, and I agree it's a poorly written letter, but it was no means meant to be minutes of that meeting or what was agreed. None of those - not none of them, but a number of those items were never discussed in the meeting in 2013 and were never mean to be - are not included in the $10 million variation. This is just a list here to show what we're entitled to claim under the contract. Some of those items had already been claimed and agreed in the $10 million varied, but it's not meant to be a summary of that variation in 2013, but it's meant to show the amount of money that we could be due and, hopefully, get Mr Wong to sit down with us."
Mr Sweeney then gave evidence occupying almost four pages of the transcript, to which I will return, to the effect that statements made in the October Letter concerning certain of the Payment Claim Items, namely the Early Completion Bonus and the Upgrades could not, for various reasons, have been matters agreed at the February 2013 Meeting.
In the course of that evidence Mr Sweeney said: "Your Honour, I'd say the tenses and stuff in this part of the letter are incorrect, and that may be an issue with a community writing of the letter, because David Stevens and Matthew Vartuli wrote this letter mostly. It should be 'we are entitled to that', and even - some of the items in it couldn't possibly have been discussed."
Later, Mr Sweeney gave this evidence in response to a question from me: "Q. I suspect at the end of this case Mr Christie is going to submit to me the way you have expressed yourself here, can only be saying that these were the matters discussed back then in February 2013, and if he were to say that, what would your answer be? A. I would say we didn't discuss these in 2013, and that wasn't the intention of the letter. This letter was not written to provide minutes of the meeting back in 2013. It was written in order to get Mr Wong to sit down with us and discuss the moneys that were owed under the contract. I think we'd already given up on the property managements at this stage, but we knew we had contractual rights. We wanted to sit down with him and go through those with him. That was the reason the letter was written and why they are listed out like that. The tenses and that, I can't - I can't - I didn't write these - I didn't write any of this letter. I sent an email of what I thought should be in it. It's poorly written, but it's certainly no minutes of a meeting that we had in 2013. Q. You saw draft after draft of this letter before you signed it, didn't you? A. Your Honour - I read the whole letter, I wasn't focusing just on this one section."

[74]

Mr Vartuli's evidence about the October Letter

In his affidavit, Mr Vartuli simply said of the October Letter: "On 11 October 2016, Robert Yazbek, Scott Sweeney and David Stevens co-signed a letter to KC Wong and his wife, Ann Pin Lim, concerning various matters relating to the property management agreement and the contract … I assisted with the drafting of the letter. … I typed the letter based on comments provided to me by Robert, Scott and David."
Mr Vartuli gave this evidence about the October Letter in answer to questions from me: "HIS HONOUR: Q. Mr Vartuli, I will be more specific. The letter reads as if you are setting out there what happened at the February 2013 meeting. Are you telling me that even though that's what it seems to say, that is not what you say happened at the February 2013 meeting? A. That's right, your Honour. Q. How do you explain that? How do you explain that you drafted a letter which appears to read as though you are setting out what happened at a meeting in February 2013, but it's not a truthful account of what happened at the meeting? A. Some of those things, your Honour, probably we wouldn't have known at the time of the meeting, but the idea of the letter was that basically highlight to Mr Wong all the - all the things that we'd done, the commercial relationship that they'd built and to say there are some things here that we haven't charged for and if you don't talk to us, we are going to charge for them. That was the purpose of the letter. It wasn't meant to be of that meeting. Q. That doesn't quite answer my question, which is why did you state in the drafting of a letter which reads as if you are setting out what actually happened in February 2013, if it wasn't true that that's what you thought actually happened at that meeting? A. Your Honour, I'd say it was just badly drafted. But it wasn't meant to be a note of the meeting. But it's not very well drafted. That's my only explanation for it."
Mr Miller asked Mr Vartuli questions about the October Letter in the Liquidator's Examination: "Q. Where you were setting out in this letter an account of events that had occurred, and where you had personal knowledge of those events, you drew on your personal knowledge, correct? A. In some instances yes, but in other instances I would have asked whoever it would have been for clarification if I was unsure of it. Q. That's why I say, where you had personal knowledge you drew on your personal knowledge? A. Right. Q. Where you set something down as a [fact] [45] that had occurred or an event of which you had personal knowledge you sought to do so truthfully and correctly, right? A. Yep. … Q. You didn't put something in this letter that you didn't think was accurate in this draft? A. Yeah, that's correct, yes. Q. So then one of the things that was the subject of focus in this letter, and you know, indeed became the subject of focus in the adjudication proceedings, it was a discussion that occurred in February 2013, correct? A. Yes. Q. You were at this meeting that occurred in February 2013? A. I was at it for a period of time. Q. Let me be clear on that. Were you at that meeting in February 2013 during the part of the meeting at which there was a discussion about a $10 million variation? A. Yes, I was. Q. You didn't keep any notes of that? A. No. Q. And when you came to include in the 10 October letter, that's 10 October 2016 letter, the event that had occurred in February 2013, you did that from your recollection of what had happened some three and a half years earlier without the benefit of any notes? A. It would have been a recollection based on not only mine but Scott, Mr Yazbek and Mr Sweeney's. Q. Indeed. This was a workshop recollection, can I put it that way? A. Correct. Q. It wasn't your own independent recollection, the events of what occurred in February 13 that are set out in this letter was the product of all three of you? A. Yeah, it wouldn't have been -- Q. Applying your mind to it? A. It wouldn't have been my independent recollection, no. Q. You don't actually have any independent recollection of precisely what was said at that meeting in February 2013, do you? A. I wouldn't say the precise wording or what was stated, no sorry. When I say that, I couldn't give you a word by word blow of what happened in that meeting. Q. What's left is your memory of or your impression of the effect of what was said and agreed, is that fair? A. Yes, that would be fair."
In contrast to Fitz Jersey's position before me, it appears that the Liquidator's position was that the October Letter was not an accurate account of the 2013 Meeting.
Thus, Mr Miller put to Mr Vartuli, shortly after the passages to which I have referred: "Q. You agree, don't you. What was not said, put it this way, at February 2013, was that the company had, as at February 2013, CPI increase entitlements of $6.3 million? A. That was not said at the meeting. Q. No. What was not said at February 2013 was that the company was entitled to $2.5 million of early completion bonus, correct? A. That was not said at the meeting is that what you're saying? Q. Yes? A. No, it wasn't said at the meeting. Q. It couldn't have been because that all hadn't occurred until 2015 or 16? A. It would have been clarified until then. Q. You wouldn't know - A. Sorry, I wouldn't know, no. Nor would Mr Yazbek or Mr Sweeney. Q. These were matters and circumstances that didn't come to pass for years later? A. That's probably right, yes. Q. Like upgrades to sales. That was something that happened years later? A. No, that's - I'd probably say no, that's not correct."
My attention was not drawn to any like cross-examination of Mr Yazbek or Mr Sweeney by Mr Miller.

[76]

The explanations

Thus, the evidence of Mr Yazbek, Mr Sweeney and Mr Vartuli was that the October Letter was written with the objective of encouraging Mr Wong to meet with them to discuss a way forward. Mr Vartuli said the objective was "to get KC to meet with us face to face to discuss his concerns and repair our relationship of over 30 years". Mr Sweeney said that the letter was "meant to show the amount of money that we could be due and, hopefully, get Mr Wong to sit down with us".
Mr Sweeney agreed that the letter was "poorly written", was "just a list … to show what we're entitled to claim under the contract" and was by "no means meant to be minutes of that meeting".
Mr Vartuli agreed that that the letter was "badly drafted" and was intended to "highlight to Mr Wong … all the things we'd done" and "wasn't meant to be a note of the meeting".
In closing submissions, Fitz Jersey submitted that the latter evidence from Mr Sweeney and Mr Vartuli was so similar that it "casts doubt over the reliability of both of their evidence on the point". But this was not put to either Mr Sweeney or Mr Vartuli.
At one point, I asked Mr Vartuli whether he had spoken to Mr Yazbek or Mr Sweeney about "what evidence you should give in these proceedings about this letter". Mr Vartuli replied, "No, I haven't".
No other such question was asked of Mr Yazbek, Mr Sweeney or Mr Vartuli.
In those circumstances, I can see no basis upon which I could conclude that Mr Yazbek, Mr Sweeney and Mr Vartuli have colluded in relation to the evidence that they have given about the October Letter.
The October Letter was carefully written. As I have described, Mr Vartuli prepared a draft which was settled on the basis of suggestions from Mr Yazbek, Mr Sweeney and, less importantly, Mr Stevens.
Accepting that there was, to use Mr Sweeney's words, a "community writing" of the document, I am not persuaded that the use of wrong "tenses and stuff" explains the form of the document. Despite Mr Sweeney's and Mr Vartuli's protestations that the letter was not supposed to be a "minute" of the February 2013 Meeting, that is how it reads. The letter reads as if it is an account of what its authors contend was agreed at the February 2013 Meeting. That account is deployed in the letter to argue for the reasonableness of Atlas's conduct in agreeing to a $10 million payment for the various items listed, which include the Payment Claim Items; and to lead to the complaint that Mr Wong no longer wanted to "honour" his "commitment" to "provide us with the property management" of the apartments in Separable Portion 2.
I am not able to accept that any of Mr Yazbek, Mr Sweeney or Mr Vartuli somehow misunderstood the effect of the language which they chose to use in the October Letter.
Rather, I find that they deliberately chose to convey that the terms of the 2013 Agreement were as set out in the October Letter.
However, for the reasons that follow, I am also persuaded that Mr Yazbek, Mr Sweeney and Mr Vartuli did not believe, when they composed, and in the case of Mr Yazbek and Mr Sweeney, signed, the October Letter that it accurately set forth their recollection of the 2013 Agreement.
This conclusion reflects badly on Mr Yazbek and Mr Sweeney. They sent a letter to Mr and Mrs Wong which contained allegations that they understood to be untrue.
However, I see that question as being distinct from the wider question of what was in fact agreed at the February 2013 Meeting.
I have three reasons for concluding that the account given by Mr Yazbek and Mr Sweeney in the October Letter of the 2013 Agreement did not reflect their true understanding of the terms of the 2013 Agreement.

[77]

Mr Wong has never asserted that the 2013 Agreement was as described in the October Letter

The first relates to Mr Wong's evidence.
In closing submissions, Fitz Jersey said that "it is true that Mr Wong does not give evidence that recites a version of the 2013 meeting that covers off all the matters in the October 2016 Letter".
That understates matters. A more complete statement is that Mr Wong has never asserted that the October Letter accurately set out the terms of the 2013 Agreement.
In his affidavit in chief, Mr Wong simply said that he received the October Letter after having told Mr Stevens that "the management agreement will be terminated".
In his affidavit in reply, Mr Wong did not respond to the evidence that Mr Yazbek gave in his affidavit about the October Letter.
In cross-examination, Mr Wong said that he read the October Letter "very briefly" and passed it on to the "lawyers"; although, as I have said, in his letter of 13 October 2016 he said that he had "reviewed the contents of" the October Letter.
It is not surprising that Mr Wong did not give evidence that he believed that the October Letter represented the true position as, at least in one respect, the October Letter contradicts the evidence that Mr Wong has given.
As I have set out, the October Letter asserts that Atlas agreed to update the finishes in some of the units at an additional cost of $2 million, albeit at "no charge". Mr Wong's evidence is that there was no such agreement.
Although Mr Wong's account of the 2013 Agreement included a reference to Mr Yazbek speaking about the "possible introduction of the carbon tax on materials", his account of the 2013 Agreement was nothing like that asserted in the October Letter.
As Mr Yazbek, Mr Sweeney and Mr Vartuli were cross-examined on the basis that the October Letter set out what happened at the February 2013 Meeting and the terms of the 2013 Agreement, I had this exchange with senior counsel for Fitz Jersey during his cross-examination of Mr Yazbek: "HIS HONOUR: Mr Christie, can I ask you this before Mr Yazbek comes back so I can follow where you are going: your last few questions on Friday were, I assume, directed to what Mr Yazbek said in the 11 October 2016 letter. MR CHRISTIE: That's correct. HIS HONOUR: Is it your case, or will it be your case, that what was agreed in February 2013 was as set out in that letter? MR CHRISTIE: Yes, your Honour. HIS HONOUR: I ask, because your client hasn't given evidence to the effect that that's what was said. His accounts say a briefer - - - MR CHRISTIE: We understand that, your Honour."
Several days later, during cross-examination of Mr Sweeney, I had this further exchange with counsel: "HIS HONOUR: I raised this question with you when you were asking Mr Yazbek questions about this. You are putting to this witness as to the truth, as your case, are you, what is said in the 11 October 2016 letter? MR CHRISTIE: That's correct, your Honour. HIS HONOUR: I will need to understand in due course how you could have instructions to do that. Your client does not say anything about that in his affidavit. He didn't say anything about this in his evidence. It is not as if you are asking this witness, "Is it true that", which might go to the witness's credit when you come to tackling him about the letter, but you are putting to him these things as the fact and, at the moment, I don't understand how you can do that. MR CHRISTIE: Yes, your Honour. Can I just reflect on that for a moment and take some instructions? HIS HONOUR: Yes, but if you ask the questions, you should know the answer."
In response, senior counsel later drew my attention to Mr Wong's affidavit evidence, that I have set out above, that he could not recall whether at the February 2013 Meeting Mr Yazbek had also said that there were other matters that were causing increased costs of the project. Senior counsel continued: "So we'll be submitting in due course that Mr Wong's evidence on its face is incomplete and that the October Letter, which Mr Yazbek said was truthful, is, firstly, the best evidence; and further, it is an admission. And in light of other evidence, other circumstantial evidence, it indicates that it is the most probable version of what took place at the meeting."
In final submissions, the Directors contended that the October Letter could not constitute an admission "when there is no fact in issue because Mr Wong has not given evidence about that fact" and that the October Letter "cannot be a self-referential admission".
Whether or not the October Letter can be an admission, it is certainly evidence of post contractual conduct capable of relevance to the question of the terms of the 2013 Agreement. [46]
Nonetheless, my conclusion is that Mr Wong's recollection of the 2013 Agreement is no more than as set out in his affidavit. I find that Mr Wong does not have a recollection that the terms of the 2013 Agreement were as set out in the October Letter.
Otherwise, surely, he would have said so.
I find that to be a reason to be cautious about accepting Fitz Jersey's submission that the October Letter is the "most reliable" record of the 2013 Agreement.
It appears to me to be more likely that it has been seized upon, by those advising Fitz Jersey, as a means by which to take Fitz Jersey's case to a point beyond the limits of Mr Wong's recollection.

[87]

Early Completion Bonus

However, Mr Sweeney's evidence concerning the Early Completion Bonus was that it would not have been possible in February 2013 for the parties to arrive at the conclusion stated in the October Letter concerning that matter.
The October Letter stated that a matter agreed at the February 2013 Meeting was: "Early completion bonus calculated at $3,575 per day x 2 years = $2.5M".
As I discuss in more detail below when considering the Building Contract issues, cl 34.8 of the Building Contract provided for an Early Completion Bonus of $3,575 for each of Separable Portion 1 and Separable Portion 2 for each day by which practical completion was achieved earlier than the date for practical completion.
There is an issue in these proceedings, which I deal with later in these reasons, as to whether any Early Completion Bonus was payable if Separable Portion 1 and Separable Portion 2 commenced on different dates.
As at February 2013, Atlas had not finished work on Separable Portion 1 and had not commenced work on Separable Portion 2.
In those circumstances, Mr Sweeney said that it would have been impossible for there to have been an agreement, as at February 2013, about the payment by Fitz Jersey to Atlas of an Early Completion Bonus or let alone one calculated over a two year period.
Mr Sweeney said: "… you would have to see into the future, is what I'm saying. An early completion bonus would be something that would be calculated at the end of a stage, but at that stage we didn't even have the start date for stage 2. We hadn't even - for all we knew, KC could have gone 'Well, don't start, don't start stage 2 until the end of the year'. We didn't know".
Mr Sweeney continued: "The EOT claims, extension of time claims, there would have been - at 2013, why we would give up - like, for example, if, say, something like COVID happened in 2013 and our job site got shut for a year and I would give up all our rights to extensions of time at that meeting? It doesn't make - like - so, to calculate what the EOTs were for the project at that time, when we'd just started - we were halfway in the structure of stage 1 and hadn't started stage 2; we couldn't have."
Later in the cross-examination, it was suggested to Mr Sweeney that it would have been possible in February 2013 to make an estimate of the Early Completion Bonus that Atlas might be entitled to. However, Mr Sweeney disputed this.
This exchange occurred: "MR CHRISTIE: Q. What I'd like to suggest to you, sir, is that you were able to make a rough estimate of the early completion bonus as at late February or March 2013? A. I mean, if I look at this document you've just given me here, which was sent on 3 April 2014 - so a year later - a year and a bit later, the estimate for completion is still - is six months out from our final OC. So even a year, a year before, not two and a half years before, we are already six months out. I don't believe it was - we could have done that at that stage, with any accuracy at all to come to an estimation." (Emphasis added.) And: "Q. What I'm suggesting to you is that as at February or March 2013, you were able, or Atlas was able, to provide a rough estimate as to the early completion bonus for [Separable Portion 2]; do you agree with that? A. Oh, I can agree - as I said, you could estimate anything, but there would be zero accuracy to it. You couldn't have known that far out with all the variables - extensions of time. I mean, we didn't finish one part of the project when we wanted to. It's like any construction job, it's near - like, so many things go into it. To estimate that far out, to call that a rough estimate is an understatement." (Emphasis added.)
Mr Sweeney's point, which I accept, was that while it might theoretically have been possible in February 2013 to come up with an estimate of the Early Completion Bonus to which Atlas might in the future be entitled, any such estimate could be little better than a guess.
I find this to be a compelling reason to conclude that, despite the terms of the October Letter, any Early Completion Bonus to which Atlas might become entitled was not discussed at the February 2013 Agreement and is not the subject of the 2013 Agreement.

[89]

The 2013 Agreement

It is common ground that at the February 2013 Meeting the parties reached a binding agreement that Fitz Jersey pay to Atlas a further $10 million by way of an increase of the Contract Sum under the Building Contract.
None of Mr Wong, Mr Yazbek, Mr Sweeney or Mr Vartuli made a contemporaneous note or record of the meeting as to what was agreed.
The only documentary record of what was agreed is in Atlas's 15 October 2013 progress claim for the $10 million which described the relevant "item" as being "Additional Construction Cost as agreed". [50] I see that description of the subject of the 2013 Agreement as being neutral in relation to the issues I must determine.
So far as the evidence reveals, none of Mr Wong, Mr Yazbek, Mr Sweeney or Mr Vartuli turned their minds to recalling and reducing to writing their recollection of the 2013 Agreement until October or November 2016. Again, this is a neutral factor, as this applies to each of the four men.
In closing submissions my attention was drawn to the familiar and memorable observations of McLelland CJ in Eq in Watson v Foxman [51] that: "[H]uman memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience."
Particularly in a case such as this, where a comprehensive attack has been made by both sides on the credit of the witnesses called by the other, the most reliable guide as to what in all probability occurred comprises the "contemporary materials, objectively established facts and the apparent logic of events". [52]
It is for Fitz Jersey to prove the contents of the 2013 Agreement. As that agreement was reached orally, is not the subject of any contemporaneous note or memorandum, and where the participants did not seek to record in writing the recollection of what occurred for a period of over three years, it is necessary that Fitz Jersey actually persuade me that the 2013 Agreement was in the terms contended.
As Hammerschlag J said in BM Sydney Building Materials Pty Ltd v AWT Building Group (Aust) Pty Ltd: [53] "Where a party seeks to rely upon spoken words as a foundation for a cause of action the conversation must be proved to the reasonable satisfaction of the Court. This means that the Court must feel an actual persuasion of its occurrence or its existence. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, 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 of whether the issue has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences Briginshaw v Briginshaw; [54] Helton v Allen; [55] Rejfek v McElroy; [56] Watson v Foxman … at 319". (Emphasis added.)

[90]

Fitz Jersey's case

In its List Statement, now the Fourth Further Amended Technology & Construction List Statement, Fitz Jersey propounds three alternative formulations of the 2013 Agreement.
The first, described in the List Statement as the "Settlement Agreement" is: "In about 2013, Fitz Jersey and Atlas agreed that Fitz Jersey would pay Atlas the sum of $10,000,000 (plus GST) in addition to the Fixed Contract Price by way of consideration for any additional construction costs that might otherwise be claimable, whether at the time of the agreement or thereafter, by Atlas under the Construction Contract".
The contention here is that the effect of the 2013 Agreement was that Fitz Jersey would pay Atlas $10 million on account of "any additional construction costs" that might "be claimable" at the time, or at any time "thereafter".
Thus, the "Settlement Agreement", if proved would have the effect that, in consideration of Fitz Jersey making a further payment of $10 million to Atlas, Atlas agreed to forego any claim for "additional construction costs" then, and until the end of the project; no matter how such a claim might arise and notwithstanding the provisions in the Building Contract for, amongst other things, variations and extensions of time.
Alternatively, Fitz Jersey propounds what it described as the "Alternative Settlement Agreement" as follows: "In the alternative …, in about 2013, Fitz Jersey and Atlas agreed that Fitz Jersey would pay Atlas the sum of $10,000,000 (plus GST) in addition to the Fixed Contract Price by way of consideration for any additional costs to Atlas in constructing the basement car park for the Project and any additional costs to Atlas caused by the introduction of the Carbon Tax".
The "Alternative Settlement Agreement", if proved, would have the effect of precluding Atlas from making any further claim for additional costs associated with the basement car park (Atlas makes no such claim) and for Carbon Tax Costs (a relatively minor aspect of its Payment Claim). However, it would not preclude Atlas from making a claim in respect of the CPI Uplift, Early Completion Bonus or the Upgrades. Arguably the "Alternative Settlement Agreement" would require Atlas to give Fitz Jersey a credit in relation to the reduction in the number of units from 515 to 500 as, on this iteration of the 2013 Agreement, that factor was not mentioned.
Fitz Jersey did not, in final submissions, pursue the "Alternative Settlement Agreement" contention with any enthusiasm. That was for good reason as, in my opinion, Mr Wong's evidence as to what was agreed at the February 2013 Meeting provides no support for it. On Mr Wong's account of it, he offered the $10 million "to finish the whole project"; not only in relation to the basement and Carbon Tax Costs.
Finally, Fitz Jersey contends for the "2nd Alternative Settlement Agreement" as follows: "In the alternative …, in about 2013, Fitz Jersey and Atlas agreed that factoring in a deduction for a reduction in the number of units and the omission of a swimming pool from the structures to be constructed under the Project, Fitz Jersey would pay Atlas $10,000,000 plus GST in consideration for matters including any claim or entitlement that Atlas had, might have or might later have …: (a) in relation to Separable Portion 2 for an increase in any part of the Fixed Contract Price on account of CPI; (b) for any early completion bonus under the Construction Contract; (c) for costs for any extension of time claim under the Construction Contract; (d) in respect of increased costs of the Project due to the carbon tax; (d) for costs related to the change in the basement structure to be constructed under the Project, including the lowering of the basement structure."
The "2nd Alternative Settlement Agreement" depends entirely on the proposition that the statements made by Mr Yazbek and Mr Sweeney in the October Letter accurately recorded what occurred in the February 2013 Meeting. As I have rejected Fitz Jersey's case in relation to the October Letter, I will not further consider the "2nd Alternative Settlement Agreement".

[91]

Mr Wong's evidence about the 2013 Agreement

I have set out above the evidence given by Mr Wong in his affidavit before me concerning the 2013 Agreement.
To reiterate, Mr Wong said that Mr Yazbek said: "This prospect is costing more than I expected. I have to spend extra money on extra steel and concrete for the car park". And: "With the possible introduction of the carbon tax on materials as well everything is going to cost 5% more. I can only make about $8 million on the job".
Mr Wong said that he could not recall whether Mr Yazbek said that there were "other matters" that were causing cost increases but that he, Mr Wong, said: "What if I offer you $10 million more on top of the $180 million to finish the whole project".
In cross-examination, Mr Wong said: "I did not say that exactly the word. What I did was after hearing his - look like sorrowful expression, there is not - making not enough money, I realise that the steel price did increase, did cost him money and I want him to continue to do the job, not in the - in - work with in - somewhere abandon the project, so I say to him, 'What about I offer you $10 million to forget about the whole thing and you complete the whole project?' That's what I said. And then I know he - he - he - I know his reaction, so I immediately send out my hand to shook hand with him. He sort of hesitate for a while but, eventually, he shook hand with me." (Emphasis added.)
Thus, on Mr Wong's account of it, he made an unprompted suggestion to increase the Contract Price under the Building Contract by $10 million. And this in the absence of any preceding discussion with Mr Yazbek about what "extra money" and increased costs Atlas would incur by reason of the two elements that Mr Wong said Mr Yazbek mentioned: extra steel for the car park and the possible introduction of the carbon tax.
In cross-examination, Mr Wong offered this evidence as to how he arrived at the figure of $10 million: "Q. Just let me finish, Mr Wong - a $10 million variation to cover the additional basement work, the loss of the units and the swimming pool. A. I don't remember. Q. That is how the figure of $10 million was arrived at, wasn't it? A. I disagree. I don't remember -- Q. Well --- A. -- why I offer 10 million. Could be out of certain thing, like compassionate ground or $10 million is a round figure, or what." And: "HIS HONOUR: Q. Mr Wong, do you recall how you calculated the $10 million figure that you refer to in your affidavit and your statutory declaration? A. I didn't calculate anything, your Honour. Q. Did you just pluck a figure out of the air? It's a big amount, isn't it? A. It's a quite a big amount, but to the whole project it's not that big." And: "Q. I understand that, Mr Wong, but despite the fact that your dealings with Robert were very simple, you could have offered him $1 million, couldn't you? A. One million is too small, I think. But the $10 million come up not from calculation, not from - something called, he say, material increase --- Q. But - sorry, Mr Wong. A. I don't know how I arrive at $10 million, but I offer $10 million at that time. Q. Can I suggest to you, Mr Wong, that the $10 million figure was proposed not by you, but it was proposed by Mr Yazbek? A. I deny that. Q. And that Mr Yazbek said to you if you take off $5 million of the increased costs of $15 million, then you arrive at $10 million, and you agreed to that amount? A. No such conversation, I'm sorry. Q. You had absolutely no reason to just come up with a figure of $10 million, did you? A. I don't know. Q. You were someone who was careful with money, weren't you? A. Yes, but I'm also very generous. Q. You may be generous, but you're also a businessman, aren't you? A. Yes. Q. You would have been concerned to not just throw around large sums of money such as $10 million for no good reason, would you? A. I don't know how to answer. I don't know." And: "Q. As a careful businessman, you would not have offered $10 million if there was not a sound basis for arriving or using that figure? A. Well, based on Robert's words, say that the material costs include the future - it's the future material cost will increase. Q. Well --- A. Normally, I don't ask increase, I just put a figure 10 million to cover whatever it is, increase. Q. Mr Yazbek was not talking to you about future costs; he was talking to you about the costs that Atlas had already incurred in constructing the basement car park --- A. He did mention about this material cost were going to cost my project more in future - I'll record more - a material increase in future, it was going to cost my project more. Q. By how much? $100? $1 million? $500? A. No, he didn't tell. Q. If he hadn't give you any figure and it could have been $2 million, why would you have offered $10 million? A. Well, I'm generous and compassionate. Q. So what you ask his Honour to believe is that you offered $10 million to Mr Yazbek because you were being generous and compassionate; is that correct? A. To cover the material cost increase and future material cost."
The effect of this evidence is that, according to Mr Wong, he did not apply any process of reasoning to reach the figure of $10 million but "just put a figure of $10 million to cover" whatever increases in cost because he was "generous and compassionate".
In my opinion, a fair description of what Mr Wong said he did was, as I enquired of him, to "pluck a figure out of the air".
I find this evidence troubling. It appears to me to be improbable that a businessman and property developer of Mr Wong's deep experience would offer to resolve a problem, of the kind that he said Mr Yazbek described, in such a peremptory manner. It also appears to me to be improbable that a builder of Mr Yazbek's deep and lengthy experience would accept such an offer as an "all in" settlement of the issues that he had, on Mr Wong's evidence, raised with Mr Wong.
As at February 2013, construction of Separable Portion 1 had not been completed. Construction of Separable Portion 2 had not commenced. The Building Contract provided for such matters as variations and extensions of time. As the Directors submitted, it would have been a major risk for Atlas, at such a relatively early stage of the project (which had already faced challenges with a development approval) to relinquish the entirety of its contractual rights in exchange for an amount that, as Mr Wong accepted, was not a large sum in the context of the lump sum price of $180 million.

[92]

The accounts given by Mr Yazbek, Mr Sweeney and Mr Vartuli

I have set out above the accounts given in the affidavits of Mr Yazbek, Mr Sweeney and Mr Vartuli of the February 2013 Meeting.
The effect of their evidence is that Mr Yazbek proposed a $10 million increase in the Contract Price under the Building Contract by reference to three specified integers: the increased costs of lowering the basement car park, the reduction in the number of apartments in the development from 515 to 500 and the elimination of the swimming pool.
The recollections of Mr Yazbek, Mr Sweeney and Mr Vartuli as to what was said do not precisely align. But it is clear from their evidence that, on their account of it, the $10 million figure was arrived at by reference to the integers to which I have referred.
I see no basis to conclude that Mr Yazbek, Mr Sweeney and Mr Vartuli have colluded to give consistent evidence. It was not suggested to them in cross-examination that they had.
As I have set out, their accounts as to what happened at the February 2013 Meeting first emerged in response to Mr Mort's email enquiry of 1 December 2016.
In effect, Mr Yazbek, Mr Sweeney and Mr Vartuli repeated those accounts of the 2013 Agreement in the statutory declarations they made in December 2016 and in their affidavits in these proceedings.
The objective circumstances are consistent with the accounts given by Mr Yazbek, Mr Sweeney and Mr Vartuli. As a matter of fact, because of the second development approval, it was necessary to, at an increased cost, lower the basement car park into the water table. As a matter of fact, the number of apartments was reduced from 515 to 500. As a matter of fact, it had been decided that no swimming pool would be constructed in the development.
These matters all point to the probability that Mr Wong's recollection of what was said at the February 2013 Meeting is not correct and that, rather, the recollections of Mr Yazbek, Mr Sweeney and Mr Vartuli should be preferred.

[94]

Claims for the Payment Claim Items could have been made earlier

Atlas did not make any claim for the CPI Uplift, the Early Completion Bonus, the Carbon Tax Costs and the Upgrades until it served the Payment Claim.
It is true, as Fitz Jersey pointed out, that under the Building Contract Atlas could have made these claims much earlier.
It is also true, as Fitz Jersey submitted, that Mr Yazbek and Mr Sweeney gave different explanations as to why they had decided to not make a claim for the Payment Claim Items until service of the Payment Claim in November 2016.
Mr Yazbek's explanation was: "In October 2016, after it became apparent that the relationship with KC was irreparable and that KC would no longer communicate with me, Atlas sought legal advice from Mr Mort, principal of Bradbury Legal (formally of Gadens), the solicitor who prepared the Construction Contract, to provide advice as to what Atlas was entitled to claim against Fitz Jersey pursuant to the Construction Contract or otherwise for the work performed at the Mascot Development. At this time, I was of the view that Fitz Jersey owed Atlas in excess of $20 million for variations pursuant to the Construction Contract and services which had been provided but for which Atlas had not been paid."
In cross-examination it was put to Mr Yazbek that he had caused Atlas to delay charging Fitz Jersey for the CPI Uplift "because that had been the subject of the 2013 [A]greement".
Mr Yazbek replied: "No. I was always going to charge KC for that, but that was going to be left towards the end, to explain to him - because that's how KC worked, to explain to him - because he likes doing things, 'Wait till it's finished, then we can organise things'. So the construction payments was just to pay the cash flow for the subbies and I wasn't concerned for these other bits and pieces until the end of the project, where I would then get it calculated and me and Scott Sweeney to sit down and explain it to him. That's how we worked." And: "HIS HONOUR: Q. Mr Yazbek, what you said was that Mr Wong liked to do things and you quoted him, 'Wait till it's finished then we can organise things'. Are you saying that he literally said that or that was your impression that that was his position? A. No, I did tell him there were variations and he did tell me many times, 'Wait till it's finished and then we can finalise everything'. But at the same time, KC was thinking about joining me in 620 Botany Road, which was Amara Living, and that we could do a deal with transferring what he owes us there to - into the 620 development, the Amara development. So I was in no rush and he was in no rush to pay, or me to - for me to put invoices in for the rest of the claim. I was in no rush for that. I knew he was good for the money, and that at the end of the day, if he did not want to enter into 620 Botany Road, which was Amara, which he always intended wanting to do, then we would finalise the deal with the construction side of things. So it was no rush to ask for the money from KC Wong. We had the cash flow, we made our profits, that could have waited and my concern was to complete Asper to fund the settlement of Amara. But KC knew what these - the CPI and the bonuses. He knew about that. I always used to talk to him about that. We had a lot of conversations on a weekly basis up to the time he didn't want to talk to me."
During the proceedings, it was emphasised that Mr Wong was a very prompt payer and that he caused Fitz Jersey to promptly settle Atlas's progress payments.
It was also common ground before me that Mr Wong is a wealthy man. Thus, as Mr Yazbek said in the evidence I have just quoted, Mr Wong was "good for the money".
The Mascot Square Project was very profitable from Atlas's point of view.
On Mr Wong's account of the February 2013 Meeting, Mr Yazbek said "I can only make about $8 million on the job".
In Mr Sweeney's September 2016 conversation with Mr Wong, both Mr Wong and Mr Sweeney agreed that Mr Wong asked how much Atlas had made on the project. On Mr Sweeney's account of it, he told Mr Wong that Atlas had made "a lot more" than $10 million. On Mr Wong's account of it, Mr Sweeney told him that Atlas made "more" than "between $40 and $50 million".
Whatever the true position is about that, I found particularly significant Mr Yazbek's statement, as I have set out above, that there was "no rush to ask for money" from Mr Wong because "we had the cash flow, we made our profits". That suggests that from Mr Yazbek's point of view, the Mascot Square Project was profitable and that it was for that reason not necessary for Atlas to pursue such claims as the CPI Uplift, the Early Completion Bonus, the Carbon Tax Costs and the Upgrades.
In his affidavit, Mr Sweeney gave this explanation for Atlas's decision to claim for these items: "After receiving the 13 October 2016 Letter, [57] it was apparent to me that we would not be getting any future work from Mr Wong and there was no commercial benefit in providing any discount or not pursing all valid claims under the Construction Contract. I was always aware that Atlas was entitled to various claims under the Construction Contract, that Atlas had not fully pursued. Robert and I had a conversation to the following effect shortly after receiving the 13 October Letter: [Mr Yazbek]: I think we should pursue all outstanding claims that Atlas has against Fitz Jersey and Mr Wong. [Mr Sweeney]: I agree, I will contact Scott Mort for advice on how to proceed with this course of action."
In cross-examination, Mr Sweeney gave this evidence: "Q. I see. Now, given that Mr Wong was a man who paid for work before it was even performed, don't you think Mr Wong would have been reasonable in considering any extra payment you believed you were entitled to? A. I can't speak for Mr Wong. Q. I see. But you can't give any explanation to his Honour why Atlas refrained from claiming some of these amounts for almost three years, can you? A. For almost three - from this point, the job was still in full flight. We hadn't finished one building in stage 2 and, as I said, with all those variations that we claimed in 2016, we knew we were entitled to those variations and we'd always reserved our rights to. Q. But I think you acknowledged before that as early as November 2013, in your mind, Atlas was entitled to payment for certain items. A. That's correct, the early completion bonus on stage 1 and the upgrade to PC items. Q. Yes, and I'm suggesting you can't provide any explanation as to why a claim for those amounts was deferred for three years, can you? A. Other than we were waiting to the end for the variations and it was a commercial decision for Rob and I whether we decided to charge part of them, all of them, we hadn't decided yet."
Mr Sweeney's explanation is a little different from that of Mr Yazbek. Whereas Mr Yazbek deposed that he had always intended that Atlas would in due course claim for Payment Claim Items, Mr Sweeney's evidence was that, until October 2016, he and Mr Yazbek had not made a decision about that matter.
I do not attach great significance to that difference because there is objective confirmation that, in October 2016, Mr Yazbek and Mr Sweeney's state of mind was that Atlas was entitled to make the claim for the Payment Claim Items.
That confirmation comes from the unchallenged evidence of Mr Mort. As I have set out above, [58] in mid-October, Mr Sweeney instructed Mr Mort: "Fitz Jersey has terminated our property management agreement. Fitz Jersey owes Atlas a lot of money under the construction contract too. We have never claimed everything we are entitled to because we were going to do another development together but now that doesn't look likely." (Emphasis added.)
As I have said, [59] Mr Sweeney made this statement to Mr Mort on an occasion he must have regarded as being confidential and privileged. I see no reason to think that Mr Sweeney was doing anything other than truthfully relaying to Mr Mort Atlas's position.
In these circumstances, my conclusion is that there are three reasons why Mr Yazbek and Mr Sweeney did not cause Atlas to make a claim against Fitz Jersey for the Payment Claim Items earlier than in the Payment Claim.
The first was because Mr Yazbek understood that Mr Wong could be relied upon to pay any amounts to which Atlas was entitled under the Building Contract promptly. The second was because Mr Yazbek thought that the project had been sufficiently profitable such that Atlas need not necessarily make a claim for the Payment Claim Items at all. The third was because of the prospect that Atlas, or some other entity associated with Mr Yazbek and Mr Sweeney, might pursue further development opportunities with Mr Wong.
I am satisfied on the basis of this evidence that these decisions were not made because of any apprehension on the part of Mr Yazbek and Mr Sweeney about the terms of the 2013 Agreement.

[98]

What was the date of commencement of the WUC? Did WUC include design work?

A question arises as to the date of commencement of the WUC, or "Work Under Contract".
This gives rise to what I have found to be a very difficult question of construction.
The principles of construction to be applied are well known. The leading statement is in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd: [60] "The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. … Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. However, sometimes, recourse to events, circumstances and things external to the contract is necessary."
It has also been said, correctly, that: "[T]he only relevant meaning is that which the text conveys. This follows from the need to ascertain the intention expressed in the document. Although, as discussed below, context and purpose are relevant, ultimately the court must attribute meaning to the words actually used." [61] (Emphasis in original.)
The parties' submissions in relation to the proper construction of this aspect of the Building Contract focused on the "words actually used".
Fitz Jersey's case is that, on the proper construction of the Building Contract, WUC includes design work.
There is no dispute that Atlas performed design work for the project, commencing in March 2010, some nine months before the Building Contract was executed on 17 December 2010.
I do not see the fact that Atlas performed this design work prior to entry into the Building Contract as being itself significant. It would have been open to the parties to make provision in the Building Contract for work commenced earlier. [62] The question is whether that is what the parties did here.
The issue is of vital importance because, if Fitz Jersey is correct: 1. WUC commenced in March 2010; 2. it follows that work on both Separable Portion 1 and Separable Portion 2 commenced on that date; and 3. it would follow that Atlas had no entitlement to an Early Completion Bonus and indeed, would be liable to pay Liquidated Damages to Fitz Jersey.
Under the Building Contract the "contract sum" was comprised of the lump sum of $180 million (increased by reason of the 2013 Agreement to $190 million) and: "… reimbursement of the costs incurred by the Contractor [63] with respect to the Contractor's design obligations."

[99]

The defined terms

The "Contractor's design obligations" was defined to mean: "… all tasks necessary to design and specify the Works required by the Contract, including preparation of the design documents ...". (Emphasis in original.)
"[D]esign documents" was defined to mean: "… the drawings, specifications and other information, samples, models, patterns and the like required by the Contract and created … for the construction of the Works." (Emphasis in original.)
Thus, both the definitions of "[c]ontractor's design obligations" and "design documents" referred to the design of "the Works".
The expression "the Works" was defined to mean: "… the whole of the work to be carried out and completed in accordance with the Contract … which by the Contract is to be handed over to the Principal". [64] (Emphasis in original.)
Thus, the definition of "the Works" referred to the whole of "the work" (lower case) under the Contract.
In turn the "work" was, somewhat unhelpfully, simply defined to include: "… the provision of materials."
WUC was defined as follows: "… the work which the Contractor is or may be required to carry out and complete under the Contract and includes variations, remedial work, construction plant and temporary works, and like words have a corresponding meaning." (Emphasis in original.)
The adjacent marginal note read: "WUC (from 'work under the Contract')".
"[D]ate of commencement" was defined to mean: "… the date that the Contractor commences WUC including in respect of separable portions." (Emphasis in original.)
Thus, "WUC" is "the work", not "the Works", that Atlas was required to carry out under the Building Contract.
As "the Works" means "the whole of the work" to be carried out, there is an argument that the parties intended that "the work" include "the Works".
That suggests, although not unambiguously in my view, that, looking at the definitions alone, "the Works" is a subset of "WUC" and not the other way around.
It would follow that, as the "[c]ontractor's design obligations" are defined by reference to design of "the Works" rather than "the work", the "WUC" would include "design".
However, there are a number of other clauses in the Building Contract which suggest, and in my opinion compel, a different conclusion.

[109]

Did Separable Portion 1 and Separable Portion 2 start on the same date?

It is common ground that the Building Contract contemplated that Separable Portion 1 and Separable Portion 2 could start at the same time, or at different times.
It is also common ground that the Building Contract provided that the time for practical completion was: 1. 48 months if the Separable Portions were commenced at the same time; and 2. 30 months for each Separable Portion if they commenced on different dates.
Fitz Jersey's primary submission was that the Separable Portions commenced on the same date, namely, March 2010, by reason of the fact that WUC included design work. For the reasons I have set out above, I have not accepted that submission.
In my opinion, the evidence shows that the parties conducted themselves upon the basis that Separable Portion 1 commenced earlier than Separable Portion 2.
As I have set out above, on 7 September 2011, Atlas wrote to Fitz Jersey advising commencement of "Stage 1 works".
To repeat, Atlas wrote: "Please be advised Atlas will commence contract works at 619 Gardeners Rd Mascot on the 12th of September 2011. Stage 1 works incorporate the construction of the Basement Car Park, Ground floor podium and buildings A, B and C."
The first work that Atlas caused to be performed was excavation for a bentonite cut-off wall for the basement car park. By reason of the change of design as anticipated by the second development application there was now to be a joint car park for Separable Portion 1 and Separable Portion 2. The result was that, necessarily, work on that joint car park commenced at the same time. Nonetheless, it is clear that the parties regarded this work as being referrable only to Separable Portion 1.
On 15 December 2011, Atlas sent to Fitz Jersey a Progress Claim 4 for $3,300,000 (plus GST). On the reverse of that Progress Claim was a "Progress Claim Master Sheet" in the following form:
The Master Sheet differentiated between the work done for Stage 1 and Stage 2 [66] and showed Progress Claim 4 under the heading "Total This Claim" and the amount of all "Previous Claims" under the heading "Stage 1".
The Master Sheet recorded that no amount had been claimed by Atlas in respect of Stage 2.
Similarly, the Progress Claim Master Sheet on the reverse of Atlas's 15 February 2013 claim for $4.8 million was in this form:
This schedule showed that Atlas's claim for $4.8 million was only for work on Stage 1 (for work on Buildings A, B and C) and that Atlas's "Claim[s] to Date" were a fraction under $70 million, including $34.2 million for the basement car park: all described as work under Stage 1.
This payment claim was made at about the time of the February 2013 Meeting and thus about the time of the 2013 Agreement.
As I have said, it was at the February 2013 Meeting that Mr Yazbek and Mr Sweeney were hoping to get permission from Mr Wong to proceed with Separable Portion 2, that is Stage 2.
On 16 April 2013, Atlas sent a further payment claim to Fitz Jersey. This payment claim was for $11 million (plus GST). The Progress Claim Master Sheet on the reverse of this claim was in the following form: [67]
As can be observed from this Master Sheet, the claims made by Atlas in respect of work on the basement car park were attributed only to Stage 1 with Atlas contending that 93.8% of the basement car park work had been by then performed.
The Master Sheet also shows that Atlas had commenced making claims in respect of Stage 2.
Mr Wong caused Fitz Jersey to pay these invoices without demur.
The parties thus conducted themselves on the basis that the work done by Atlas in respect of the basement car park was referrable to Separable Portion 1 and not Separable Portion 2. This was notwithstanding the fact that ultimately, the excavation would provide for a car park for use by occupants of both Separable Portions.
For those reasons, my conclusion is that work on Separable Portion 1 commenced prior to work on Separable Portion 2.

[114]

Early completion bonus - entitlement - proper construction of the Building Contract

Clause 34.8 of the Building Contract provided that Atlas was entitled to an Early Completion Bonus if it achieved practical completion earlier than the date for practical completion.
The Building Contract made a different provision for the date for practical completion depending on whether work on Separable Portion 1 commenced on the same date as work on Separable Portion 2. [69]
It is common ground that if work on the two Separable Portions commenced at the same time, Atlas had 48 months to achieve practical completion.
On the other hand if, as I find did happen, work on Separable Portion 1 commenced on a different date to work on Separable Portion 2, Atlas had 30 months to achieve practical completion for each Separable Portion.
Fitz Jersey contends that, assuming (as I have found) that work on the two Separable Portions commenced on different dates, on the proper construction of the Building Contract, Atlas had no entitlement to an Early Completion Bonus.
This contention gives rise to another difficult question of construction. Again, the parties' submissions were focused on the language used in the Building Contract.
Clause 34.8 provided: "34.8 Bonus for early practical completion If the date of practical completion is earlier than the date for practical completion the Superintendent shall certify as due and payable to the Contractor the bonus in Item 30(a) for every day after the date of practical completion to and including the date for practical completion. The Contractor hereby waives that part of a bonus exceeding the Item 30(b) amount." (Emphasis in original.)
Clause 34.8 thus contemplated the possibility that Atlas would achieve practical completion earlier than the date for practical completion and that, if that occurred, Atlas be paid a "bonus" at the daily rate specified in "Item 30(a)".
Clause 34.7 contained a corresponding provision contemplating the possibility that Atlas did not achieve practical completion by the date for practical completion and provided for Liquidated Damages at the daily rate specified in "Item 29".
The Building Contract contained an Annexure entitled "Part A" which comprised a total of 37 "Items". I will call this "General Annexure Part A".
General Annexure Part A included two separate sub-annexures each labelled "Part A Separable Portions" which were to be completed "only if the Contract provides for separable portions". As the Building Contract did "provide for separable portions", the two sub-annexures were completed. [70] I will call these documents the "Separable Portions Part A". Apart from describing the Separable Portions themselves differently, they were completed (or not completed: I will return to this) in the same way.
Each of the Separable Portions Part A documents contained 6 of the 37 "Items" listed in General Annexure Part A; namely Items 7, 14, 15, 29, 30 and 31. Unlike Item 30 in General Annexure A, Item 30 in the Separable Portions Part A documents contained sub-Items 30(a) and 30(b); consistently with the references in cl 34.8 of the Building Contract.
Items 14, 15 and 31 in the Separable Portions Part A documents were completed in the same manner as their analogues in General Annexure Part A. These items are not centrally relevant to the construction question I am considering. However, items 7, 29 and 30 in the two Separable Portions Part A documents were completed in a different manner than in General Annexure Part A.

[116]

Items 29 and 30

Items 29 and 30 of General Annexure Part A were the following form:
A number of things should be noted about these provisions.
The first is that they provided for Liquidated Damages or an Early Completion Bonus at the rate of $7,150 per day.
The second is that there was no Item 30(a) or 30(b) as contemplated by cl 34.8 of the Building Contract.
The third is that the footnote to each of Item 29 and Item 30 provided that "[i]f applicable" those provisions should be deleted and instead the parties should complete the equivalent item in the "separable portions section" of the Annexure Part A; that is in the Separable Portions Part A documents.
The only occasion on which it would be "applicable" to delete Items 30 and 31 of the General Annexure Part A and instead to complete the "equivalent item" in the Separable Portions Part A documents would be when, as happened, the development was to proceed in Separable Portions. This was also contemplated by the provision in the Separable Portions Part A documents that they should only be completed in that event. [71]
In the Separable Portions Part A documents, Items 29 and 30 were in the following form:
Thus, Item 29 here provided for Liquidated Damages at the Rate of $3,575 per day (half the rate specific in Item 29 of the "General Annexure Part A").
Item 30 contained a sub-Item 30(a) and 30(b) (as contemplated by cl 34.8) but was left blank.
Fitz Jersey's case is that the parties left Item 30 blank deliberately, thus bespeaking their intention that if the Separable Portions were commenced separately, and even if Atlas achieved practical completion of those Separable Portions earlier than the date of practical completion, it would nonetheless not be entitled to an Early Completion Bonus. It was a corollary of that submission that Atlas would nonetheless be exposed to the possibility of paying Liquidated Damages if it did not achieve practical completion of each Separable Portion by the date for practical completion of that Separable Portion.
Fitz Jersey did not point to any reason why the parties would make a different provision for an Early Completion Bonus merely because the Separable Portions were commenced on different dates; nor why the parties would agree that Atlas was not entitled to an Early Completion Bonus merely because the Separable Portions were commenced on different dates. I can see no rational reason why the parties would so intend. It would be a commercial absurdity to suppose that the parties intended that if the Separable Portions happened to commence on different dates, no matter what the reason, Atlas would remain exposed to the possibility of paying Liquidated Damages for delayed completion, but not be entitled to an Early Completion Bonus for early completion.
It is obvious to me that Item 30 in each of Separable Portion Part A documents were left blank by mistake.
As I have said, the footnote to Items 29 and 30 in General Annexure Part A, and the provision in the Separable Portions Part A documents show that it was the parties' intention that if, as was the case here, the development proceeded by Separable Portions, Items 29 and 30 in the General Annexure Part A would be deleted. Instead, the "equivalent item in the separable portions section of Annexure Part A" that is, Items 29 and 30 in each of Separable Portion Part A documents, would be completed.
"Something has gone wrong" [72] with the manner in which Item 30 of Separable Portion Part A documents was completed, namely, the parties inadvertently failed to delete the provision in Items 29 and 30 General Annexure Part A and to complete the corresponding items in the Separable Portions Part A documents by inserting the daily rate of $3,575.
This conclusion is also consistent with the references in cl 34.8 to Items 30(a) and 30(b), which items appear only in the Separable Portions Party A documents, and not in General Annexure Part A.
The Directors did not seek equitable rectification of the Contract but submitted that rectification is available by construction.
In Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq), Leeming JA said: [73] "At common law, if the error is clear, and it is also clear what a reasonable person would have understood the parties to have meant, then the mistake may be corrected as a matter of construction." [74]
Leeming JA continued: [75] "Two conditions are necessary in order to correct the contractual language in this manner: (a) that the literal meaning of the contractual words is an absurdity and (b) that it is self-evident what the objective intention is to be taken to have been: see Mainteck Services Pty Ltd v Stein Heurtey SA [76] approving National Australia Bank Ltd v Clowes [77] …, where it was stated at [34]: '[34] Where both those elements are present … ordinary processes of contractual construction displace an absurd literal meaning by a meaningful legal meaning.' Likewise, in the United Kingdom, the court must be satisfied both as to the mistake and the nature of the correction. [78] The court must be satisfied of those matters to a high level of conviction. To use the language of Dixon CJ and Fullagar J in Fitzgerald v Masters [79] …, it must be 'clearly necessary in order to avoid absurdity or inconsistency'."
It is of course true that, as Lord Hoffmann said in Chartbrook Ltd v Persimmon Homes Ltd [80] that the Court does "not readily accept that people have made mistakes in formal documents". [81] Nonetheless, as his Lordship continued: "[T]here is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant." [82]
Further, the parties post-contractual conduct is consistent only with them understanding that Atlas was entitled to an Early Completion Bonus, assuming the contractual entitlements for such a bonus were satisfied, whether or not Separable Portion 1 was commenced on a different date to Separable Portion 2.
Thus, in its calculation in its Payment Schedule that the Scheduled amount was $NIL, Fitz Jersey recited that it had paid Atlas an Early Completion Bonus for Separable Portion 1 in the sum of $1,229,800 and in respect of Separable Portion 2 in the sum of $600,600. [83]

[119]

Extensions of time for inclement weather

Ms Wenham allowed 174.5 working days for inclement weather, whereas Mr Peter allowed 119.5 days for Separable Portion 1 and 194.5 days for Separable Portion 2.
Mr Peter made his assessment on the basis of an "Inclement Weather Day Register" maintained by Atlas.
Mr Sweeney gave this evidence about the Inclement Weather Day Register: "Additionally, throughout the life of the project, weather affected our ability to complete work on certain days. On the project, Atlas maintained an excel spreadsheet titled 'inclement weather day register' (Inclement Weather Register) which would be circulated internally from time to time. The inclement weather register was upkept by Michael Chircop for the period of his employment. Michael would only claim EOT's for inclement weather or other obvious factors that affected the site on a day to day basis. Michael would not update the register for EOT's for additional works that fell outside the contract scope as he was not aware of the exact terms of the Construction Contract. When I assisted with putting together our final payment claim, I updated the Inclement Weather Register by reviewing the Bureau of Meteorology (BOM) to ascertain days in which work was not carried out by bad weather and from my knowledge of what was occurring on site each day by using my emails and Aconex and my general knowledge of the project as the project manager. I followed the daily rainfall taken from Sydney Airport. I only included days which had rain above 10mm and occasionally subsequent recovery days."
Ms Wenham did not have regard to Atlas's Payment Claim of the Inclement Weather Day Register.
Rather, Ms Wenham sought to verify the dates in the Inclement Weather Day Register by reference to Bureau of Meteorology records of rainfall and other weather events in the Mascot area generally and her own assessment of whether what was reported in the Inclement Weather Day Register was likely to have stopped work.
I see no reason to doubt the accuracy of the Inclement Weather Day Register maintained by Atlas, notwithstanding the fact that Mr Sweeney made the adjustments to which he referred when preparing the Payment Claim.
I also see no basis to conclude that the Inclement Weather Day Register, as adjusted by Mr Sweeney, was not an accurate and fair guide of the extent to which inclement weather delayed the progress of the development.
For those reasons, I propose to adopt Mr Peter's conclusions, in preference to those of Ms Wenham.

[125]

Upgrades

In the Payment Claim, Atlas claimed $978,890 for "Carpet and PC Item Upgrades". The "PC Items" were the AEG appliances and Hans Grohe tapware that Mr Yazbek and Mr Sweeney stated in the October Letter were "an additional $2m in cost at no charge".
For the reasons I set out earlier, I have no reason to doubt that this reflected Mr Yazbek's recollection that although these "upgrades" would cost an additional $2 million they would not be charged to Fitz Jersey.
Leaving aside allegedly upgraded carpet, the amount claimed for these items before me was calculated by the Directors' quantity surveyor, Mr Madden, to be $759,988 as set out in his schedule attached. Attachment A - Madden Table (141221, pdf)
It is common ground that there is a mathematical error in this schedule and that it overstates Atlas's claim by $67,387 (excl GST).
The Scope of Works specified in the Building Contract was, relevantly, that all units should include: "Stainless steel kitchen appliances including gas cook top and dishwasher (Westinghouse or equivalent)". And: "Caroma or equivalent bathroom PC items".
Most of the items in Mr Madden's table are either Hans Grohe or AEG PC items (and therefore ones that Atlas said it had installed at "no charge") or Caroma items.
My attention was not drawn to any evidence showing that any other item in Mr Madden's schedule was otherwise than "equivalent" to Westinghouse, that being the standard specified in the Building Contract.
As to the claim made by Atlas in the Payment Claim for "carpet", the Directors contended for an amount of $151,515 for upgraded carpet.
The Contract provided for "tile and carpet to living areas and kitchens" and "carpet to bedrooms" without specifying what standard of carpet was to be used.
The Directors rely upon the conversation to which Mr Yazbek deposed with Mr Wong that I have set out above. [84] As I have set out, Mr Wong denied that conversation. For the reasons there set out, I am not able to be satisfied that the conversation took place as Mr Yazbek deposes.
In any event, Mr Sweeney's contemporaneous communications suggests that there was no carpet upgrade at the time.
For example, on 16 August 2012, Atlas's architect, Turner & Associates, wrote to Mr Sweeney stating: "It had been mentioned by Atlas that they were investigating an alternative carpet and kitchen benchtop but are awaiting clarification on this."
Mr Sweeney replied to that email stating: "We are going to try to stick with the lined carpet from Feltex pending pricing, at least for the first 185 apts."
At that stage, carpet needed to be organised for Separable Portion 1 which appears to explain Mr Sweeney's reference to the "first 185" apartments. His language is not that of change or upgrade.
In those circumstances, I am not persuaded that the Directors have established that Atlas had an entitlement to the upgrades contended for.

[126]

Reimbursable costs

In the Payment Claim, Atlas referred to the following amounts as having been "paid to date": 1. $7,429,883 for "Reimbursable Costs"; 2. $10,215,839 for "Council fees & charges"; 3. $309,412 for "Authority fees & charges"; 4. $303,461 for "Other costs".
Fitz Jersey contends that Atlas was not entitled to some of these amounts.
The Building Contract provided for: 1. a contract sum of $180 million, later increased to $190 million by reason of the 2013 Agreement; 2. reimbursement of the costs incurred by Atlas in respect of "design obligations"; and 3. reimbursement of the Reimbursables.
Clause 2.1(b) of the Building Contract provided that Fitz Jersey would pay Atlas: "… for work for which [Fitz Jersey] agrees pursuant to subclause 2.6 to reimburse [Atlas] for costs incurred …".
By cl 2.6 of the Building Contract, Fitz Jersey agreed to reimburse Atlas "for all costs incurred in relation to the Contractor's design obligations".
As I have set out earlier in relation to the question of whether WUC included design work, the expression "Contractor's design obligations" was defined to mean: "… all tasks necessary to design and specify the Works required by the Contract, including preparation of the design documents and, if the documents stated in Item 10 as describing [Fitz Jersey's] project requirements include preliminary design, developing the preliminary design".
Item 10 was left blank.
"Design documents" was defined, in turn, to mean: "The drawings, specifications, and other information, samples, models, patterns and the like required by the Contract and created (and including where the Contractor's requires those to be by [Atlas]) for the construction of the Works."
The Reimbursables were listed in Part E of the Building Contract as follows: [85] "Exclusions and/or Principal costs ● Consultants or any design fees. Note - Consultants will be paid at cost by Atlas and reimbursed by Fitz Jersey. ● Authority fees and long service leave charges. ● DA fees and other council charges. ● Any works outside of the site boundaries (footpath, road widening etc) ● Service upgrades or capping off existing services."
Fitz Jersey accepts that if a fee or a subcontractor cost was charged to Atlas and that fee or subcontractor cost fits properly within any of the bullet points set out under the heading "Exclusions and/or Principal costs", that amount is properly reimbursable by Fitz Jersey to Atlas. Fitz Jersey accepts that it is not material if a particular fee or charge was shown under the wrong heading in the Payment Claim.

[129]

"Reimbursements" - $7,429,883.24

Atlas made a claim for these "reimbursements" on the basis that they fell within the first bullet point referred to above, namely, "Consultants or any design fees".
Fitz Jersey accepts that, of this sum, Atlas was entitled to $6,046,518.
The dispute is as to the balance of $1,383,365.24.
Of that sum, Fitz Jersey's quantity surveyor expert, Mr David Hardiman, has identified a large number of items that, in his opinion, cannot be characterised as "Consultants or any design fees".
The total amount of the items so identified is $1,083,611.27.
Mr Hardiman listed the items that he contended could not be characterised as "consultants or any design fees" in the attached table, which also includes the response made to Mr Hardiman's contentions by the Directors' quantity surveyor, Mr David Madden, and Mr Hardiman's rejoinder. Attachment B - Hardiman (773083, pdf)
In closing submissions, the Directors accepted that Mr Madden had identified invoices totalling $314,855.42 that "are probably not reimbursable".
In closing submissions, Fitz Jersey identified invoices from five subcontractors identified in Mr Hardiman's schedule as being "plainly not reimbursable" under any of the heads of Reimbursables and not otherwise chargeable.
These were: 1. invoices from Aconex Ltd for the supply of an electronic communications and document management system; 2. invoices from CMS Surveyors Pty Ltd for surveying work carried out after the commencement of the excavation work on the site which Mr Hardiman concluded was a "necessary part of Atlas's construction work" and not design work; 3. invoices from Dancorp Contracting Pty Ltd for "construction management services" which Mr Hardiman opined was a "necessary part of Atlas' construction work and not design work"; 4. invoices from Environmental Investigations Pty Ltd for water testing and other environmental compliance reports, which again Mr Hardiman opined was a "necessary part of Atlas' construction work and not design work"; and 5. invoices from Clearwater Asset Services Pty Ltd for "traffic control" which Mr Hardiman opined was, again, a "necessary part of Atlas' construction work".
Otherwise, in closing submissions, I was not taken to the detail of Mr Madden's response to these, and other contentions of Mr Hardiman, nor to Mr Hardiman's rejoinder.
However, on behalf of Fitz Jersey it was submitted that: "For the most part, Mr Madden only offers speculative assumptions about the basis on which the relevant invoice was claimed by Atlas to constitute a Reimbursable Cost. Those assumptions are generally not supported by any direct evidence and therefore cannot be given any weight."
From my analysis of Mr Madden's comments, this appears to be a fair summary of them.
Mr Hardiman also identified a large number of invoices, totalling $299,754.49 which he summarised as being "claimed costs for which substantiation has not been found".
Mr Hardiman concluded invoices were not "substantiated" if he was not able to locate a hard or soft copy of the invoices, even if there were a "line item" in Atlas's electronic Jobpac records that suggested such an invoice had been received by Atlas.
Mr Hardiman summarised those costs in the document attached. Attachment C - Hardiman (2691235, pdf)
However, as the Directors pointed out, all of the invoices in respect of which Atlas sought and obtained reimbursement from Fitz Jersey, including those under this heading, were recorded in Atlas's Jobpac system by reference to the issuer of the invoice, and the date and amount of the invoice. Print outs from the Jobpac system recording these matters is in the Court Book.
There is no suggestion that the Jobpac entries were maintained otherwise than in the normal course of business. I see no reason to doubt their accuracy.
Accordingly, I find that an entry in the Jobpac system to be a sufficient substantiation of the existence of an invoice for present purposes.
In these circumstances, I find that Fitz Jersey is entitled to be reimbursed for the amount that Mr Hardiman identified as not being able to be characterised as consultant's fees: $1,083,611.27.

[139]

Declared as a matter of urgency

As I have set out above, things moved rapidly following publication of the Adjudication Determination on 6 January 2017 and the issue of an Adjudication Certificate on 16 January 2017.
Thus, so far as concerns the Garnishee Order: 1. on 17 January 2017, the Adjudication Certificate was filed as a judgment in this Court; 2. on 17 January 2017, Mr Mort applied for the Garnishee Order; 3. on 18 January 2017, Mr Sweeney asked Mr Mort "[w]hy does the garnishee order take until next week?" and "[i]s there any way to get it quicker?"; 4. on 27 January 2017, the Garnishee Order was served on NAB; 5. on 1 February 2017, Mr Mort told Mr Sweeney, Mr Yazbek and Mr Vartuli that NAB would process a cheque for the full amount of the Garnishee Order "overnight", that the cheque would be mailed from Melbourne by express post on 2 February 2017, and that "every effort should be made to get the cheque into your account before we go to court at noon" on Friday 3 February 2021; 6. on 3 February 2017, NAB paid Atlas $11,023,799.76 in response to the Garnishee Order; 7. over the weekend of 4 and 5 February 2017, Mr Vartuli wrote to Mr Yazbek and Mr Sweeney saying that "the funds have landed just not available yet" and Mr Sweeney responded that the "funds will have cleared by Monday"; and 8. the funds cleared on 6 February 2017.
By no later than 31 January 2017, Mr Yazbek and Mr Sweeney had decided to declare the Dividends.
Thereafter, steps to prepare the documents necessary to cause the Dividends to be paid were taken urgently and in anticipation of Atlas's receipt of the proceeds of the Garnishee Order (the "Garnisheed Amount").
Thus: 1. on 31 January 2017, Mr Vartuli telephoned Mr White saying that Mr Yazbek and Mr Sweeney "want to declare a dividend" and were "expecting the sum of $11 million to be received within the next week or so"; 2. on the same day, Mr Vartuli sent Mr White a draft of the minutes of the proposed meeting of directors at which the Dividends would be declared; 3. on 1 February 2017, Mr White returned Mr Vartuli's draft with some suggested additions; 4. further drafts of the minutes were exchanged over the next few days; 5. on the same day, Mr Sweeney sent an email to Mr Yazbek and Mr Vartuli stating that "the sooner we call the dividend the better"; 6. on 3 February 2017, Mr Vartuli told Mr White that Atlas had "received the $11 million from Fitz Jersey which should clear in the next few days" and that Mr Yazbek and Mr Sweeney wanted to "have a chat with you before paying the dividend"; 7. over the weekend of 4 and 5 February 2017, Mr Sweeney wrote to Mr Yazbek and Mr Vartuli about transferring "the dividends first thing Monday" and stating "I think we should do this asap" and Mr Vartuli circulated a note with the amount of the Dividends to be paid and a further draft of the proposed directors' minutes; 8. at around noon on 6 February 2017, Mr Vartuli sent Mr White an email attaching the proposed final version of the draft directors' minute and asked for confirmation that "this is okay to proceed"; 9. at around 4.30pm on 6 February 2017, Mr Mort told Mr Yazbek and Mr Sweeney that Fitz Jersey's application before McDougall J had failed following which Mr Sweeney said to Mr Yazbek "I think we can declare the dividend now"; and 10. Mr Yazbek and Mr Sweeney then resolved to declare the Dividends without waiting to hear Mr White's response to Mr Vartuli's midday inquiry as to whether it was "okay to proceed".

[140]

No pressing need so far as shareholders were concerned

Throughout the project, it had been Mr Yazbek's and Mr Sweeney's practice to declare dividends in favour of Kebzay and Sweenham, rather than pay themselves a salary or drawings.
However, so far as Kebzay and Sweenham were concerned, there was no pressing need for the declaration of the Dividend in their favour to be made on 6 February 2017.
As to Kebzay, Mr Yazbek gave this evidence: "Q. Well, Kebzay Pty Limited was not pressing for a dividend payment, was it? A. I can't recall. No, I can't answer that, I don't know. You'll have to ask Matthew Vartuli that question. Q. So you've got no idea? A. No, I can't recall. Q. Sitting here today, you can't say to his Honour that as far as you were aware, Kebzay urgently needed the money, can you? A. No. It was up to Kebzay and Matthew Vartuli to organise that we needed the money."
Atlas paid Kebzay the Dividend of $6,103,420 on 8 February 2017.
On 9 February 2017, Kebzay transferred $6,103,000 to Kebzay Investments Pty Ltd where the funds remained until 27 June 2017.
In those circumstances, Mr Vartuli gave this evidence: "Q. Well, the money just sat - it's true, isn't it, that once the money was paid to Kebzay and ended up in the account of Kebzay Investments, it sat there until June 2017, didn't it? A. I think there was some of it that was used for other things, but I'd say the balance of it stayed there. Q. So what I'm suggesting to you is that there was no urgent need for the money, looking at it from Kebzay Pty Ltd's point of view? A. Are you asking me to confirm that that's the case? Is that what you're asking me, Mr Christie? Q. Yes. A. Okay, yes."
Atlas paid the Dividend of $678,156 to Sweenham on 8 February 2017.
It remained in Sweenham's bank account until 20 February 2017 until it was transferred to a company called SGS Investments Pty Ltd.
The funds were largely used to contribute to the acquisition of a property in Bondi by a company called Castlefield Corner Pty Ltd in May 2017.
Mr Sweeney gave this evidence in an affidavit he swore shortly before the hearing: "In the below paragraphs I have set out the transactions which occurred following the payment of the dividend from Atlas on 8 February 2017 … On 20 February 2017, Sweenham transferred the sum of $700,000.00 to SGS Investments. On the same day upon receipt of the funds, SGS Investments transferred the same $700,000.00 to an off-set account held by [my] wife and me. At the time, I was unsure what I would do with the money, and it did not earn any interest in either the Sweenham account or [the] SGS account, so it was best held in my offset account where I was able to obtain a benefit of off-setting [the] interest payable on a [sic] Jodi and I had for our house." (Emphasis added.)
I discuss these matters in greater detail below when dealing with the question of tracing.
For present purposes, the point is that neither Kebzay nor Sweenham was in urgent need of funds as at 6 or 8 February 2017.

[141]

What was the Directors' motivation?

The pace with which matters progressed from mid-January 2017 to 6 February 2017 shows that Mr Yazbek and Mr Sweeney had determined to enforce the Adjudication Determination as vigorously and expeditiously as possible and to declare the Dividends and thereby dispose of the vast bulk of the proceeds of the Adjudication Determination and the Garnisheed Amount as soon as possible.
They kept a close watch of the progress of NAB's processing of the Garnishee Order, the likely time of the funds' arrival in Atlas's account and of the clearance of those funds, the current pendency of the 2017 Proceedings, including Fitz Jersey's 6 February 2017 application to have the amount of the Adjudication Determination returned to Fitz Jersey so that it could pay the funds into Court.
As soon as Mr Mort told Mr Sweeney and Mr Yazbek that Fitz Jersey's application had been unsuccessful, and without getting a final clearance from Mr White, Mr Yazbek and Mr Sweeney resolved to declare the Dividend.
Neither Kebzay nor Sweenham had a need for the funds that would warrant such haste.
Mr Yazbek agreed in cross-examination that the declaration of the Dividend left no money sufficient for Atlas to continue to defend the proceedings commenced by Fitz Jersey. Thus, Mr Yazbek gave this evidence: "Q. You hadn't left any money in Atlas to deal with litigation with Fitz Jersey, had you? A. No, we didn't - no, I didn't. The only money that was left there was to pursue the other amounts of money. Q. At paragraph 360, you say - this is on the next page, 366: I was not concerned about Atlas's prospects of successfully defending the purported claims brought against Atlas by Fitz Jersey. However, I was concerned by the legal fees that Atlas would have had to pay in order to defend the proceedings in light of KC's financial status. A. Well, just to remind you, in March 2018 I was diagnosed with motor neurone disease and the doctor told me I had two years to live. So, yes, that kind of made my decisions later on that I didn't need any stress. So, yes, I didn't want to continue and fight something that he wasn't entitled to, in my opinion. I didn't need that stress." (Emphasis in original.)
Mr Yazbek continued: "Q. Can I suggest to you that you were concerned about Atlas's prospects - sorry, you were concerned about Atlas's prospects of successfully defending the claims brought by - - - No, I was concerned that he was going to toss millions of dollars in to defend this, which has happened, which I didn't want to do. Q. And, in fact, you were concerned - - - A. And that I - - - Q. You were concerned about - - - HIS HONOUR: Mr Yazbek, you had not finished your answer. MR CHRISTIE: Yes, your Honour. THE WITNESS: And I knew that I was right. MR CHRISTIE: Q. You say you knew you were right, but you knew that only a court could determine that, didn't you? A. You don't need to go to court to know that you were right. I knew we were right at the time. Q. I see. I want to suggest to you that not only in 2018, but by 7 February 2017, you were concerned about any possible outcome of litigation between Fitz Jersey and Atlas, weren't you? A. Yes. I didn't want to toss away money, thrown at this. KC can afford it, I can't. Q. One way to avoid tossing away money was to pay the dividend, wasn't it? A. No. We were going to pay the dividend no matter what. The dividend was there to be paid. We always paid our dividend." (Emphasis added.)
Mr Yazbek and Mr Sweeney must have known that Mr Wong would cause Fitz Jersey to seek to recover the money that had been garnisheed from Fitz Jersey's account.
Mr Sweeney was referred to that possibility when he said in his 1 February 2017 email that "circumstances may change in the near future"; [87] as both Mr Sweeney [88] and Mr Yazbek [89] acknowledged.
Indeed, Mr Yazbek said he understood that Mr Wong would "make our life hell unless we make sure we cross all our I's and dot all our t's [sic]." [90]
Further, Mr Yazbek gave this evidence about his state of mind after Mr Mort told him of the Holland Letter: "Q. You understood that as far as Fitz Jersey was concerned, it had an entitlement to the repayment of the adjudicated amount? You understood that was their position, didn't you? A. Well, that was their opinion. Q. Yes, and not only that, you knew that they put that position forward because they said Atlas was not entitled to the amount under the contract - you understood that to be their position, didn't you? A. Well, that was their position." (Emphasis added.)
Mr Sweeney must also have understood this.
In these circumstances, my conclusion is that, as Fitz Jersey submitted, Mr Yazbek's and Mr Sweeney's motivation in declaring and paying the Dividends was to remove funds from Atlas before Fitz Jersey could further progress the claim they understood Fitz Jersey was bound to make to recover the Garnisheed Amount, being the claim foreshadowed in Ms Holland's 5 February 2017 email [91] and, in terms, following declaration of the Dividends in the Holland Letter which foreshadowed a "claim for repayment of the garnisheed amount of $11,023,799.76".

[142]

The Directors' understanding of the provisional nature of a payment under the SOPA

It is well established that the object of the SOPA is to provide "a speedy and effective means of ensuring cash flow to builders from the parties with whom they contract". [92] The Act creates "a 'pay now, argue later' system for the prompt resolution of disputes concerning progress payments". [93] Under that system, "a progress payment, on account, should be made promptly and … any disputes over the amount finally due should be decided separately", with that later "final determination" to "be by a court or by an agreed alternative dispute resolution procedure". [94]
Inherent in a payment under the SOPA is that is it provisional. Thus, in Lahey Constructions Pty Ltd v State of New South Wales, [95] Bell P [96] stated: "[The] summary adjudication process under the Security of Payments Act [is] designed not to determine liability on a final basis but to facilitate provisional payment for cashflow purposes."
A payment under the SOPA is an "interim payment on account". [97]
By February 2017, Mr Yazbek and Mr Sweeney had been engaged in the construction industry for many years. Mr Yazbek obtained his building qualifications and licence in 1979 and had worked in the construction industry between then and the time of the Mascot Square Project. Mr Sweeney had been involved in the building industry since 1999.
Both must have been familiar with the SOPA and the interim nature of payments made under that Act.
At the Liquidator's Examination, Mr Sweeney agreed that he understood this.
Thus, he gave this evidence: "Q. And you knew that in the event that if Atlas Construction Group was to be successful that there would arise a statutory debt under the building and construction industry Security of Payment Act? A. Privilege. Yes, I did. Q. And you knew that such a statutory debt could be enforceable by way of a judgment? A. Privilege. I wouldn't have known the technicalities of that but I knew it would be a debt due. Q. A debt due under the act and you well knew as well that it was a debt due, if it was made under the act, that could be subject to a claim back by Fitz Jersey under the contract, correct? A. Privilege. I've always known that Fitz Jersey could claim under the contract at any stage. Q. That was an interim arrangement under the building and construction industry Security of Payment Act wasn't it, it wasn't a final arrangement? A. Privilege. What do you mean by "interim"? Q. I mean you well knew in February 2017 that if money was ordered to be paid under that Act, there could be a claim back by Fitz Jersey for it for a final reckoning under the contract, correct? A. Privilege. I knew Fitz Jersey could make a claim under the contract."
Before me, Mr Sweeney stated that this evidence was true.
On the other hand, Mr Yazbek gave this evidence before me: "Q. Now, you understood, as at 31 January 2017, that the adjudicator's determination did not prevent Fitz Jersey from claiming the money back, which had been determined by the adjudicator, did you? A. No, I didn't know that. Q. As at February 2017, you had been in the construction industry for, what, 40 years? A. Yes. Q. You'd been in the construction industry since the Security of Payment Act came into existence? A. Yes. Q. You had received payment claims under the Security of Payment Act? A. One, yes. Q. No, in the course of your career as a director of construction companies, you had received payment claims under the Security of Payment Act on numerous occasions, hadn't you? A. Received, as in invoices or actually go through the process? Q. I'll start again. As someone who had many years experience in the construction industry - - - A. Yes. Q. - - - you yourself had received from subcontractors many invoices, payment claims, under the Security of Payment Act? A. Yes. Q. And you'd even been to the adjudication stage, hadn't you? A. Once. Q. And you understood that these payments were interim and on account only? A. No, I didn't understand that. Q. You knew that they may need to be repaid? A. No, I never thought that. Q. And - - - A. When the adjudicator - - - Q. Can I suggest to you that you are not being truthful to the court in saying that, Mr Yazbek. A. No. The adjudication, to me, that's it."
I do not accept this evidence. I do not accept that a builder with Mr Yazbek's vast experience in the construction industry would not understand that payments made under the SOPA were interim or provisional and thus that the payment to Atlas of the amount garnisheed from Fitz Jersey's bank account was not a final payment but was one that Fitz Jersey could contest on the occasion when Atlas's and Fitz Jersey's final rights under the Building Contract were determined.
Mr Yazbek accepted that he ensured that Atlas sent its clients a notation that "[t]his is a claim under the Building and Construction Industry Security of Payment Act". He said he understood that "if a payment schedule was not provided in response to a payment claim within time, the full amount claimed would become payable under the Security of Payment Act". He had been to the adjudication stage under the SOPA on a previous occasion. He had attended Continuing Professional Development seminars that referred to the SOPA and its basic features. He acknowledged that the SOPA was "a big game-changer in the industry in terms of payment".
In any event, later in his cross-examination, Mr Yazbek said that he understood, in early February 2017 that "there was a possibility that Mr Wong may pursue Atlas under the contract".

[143]

The advice from Mr Mort

The Directors relied on the advice they got from Mr Mort and Mr White.
Turning first to Mr Mort, I have set out that in mid-October 2016, Mr Sweeney, on behalf of Atlas, retained Mr Mort to advise Atlas about the recovery of what Mr Sweeney described to Mr Mort as being "a lot of money under the construction contract" that Fitz Jersey owed Atlas. [98]
Mr Mort advised Atlas to proceed under the SOPA by issuing a payment claim.
Mr Mort gave advice as to the contents of the Payment Claim and, later, the Adjudication Application.
Mr Mort also gave advice to Mr Yazbek and Mr Sweeney as to the contentions advanced by Fitz Jersey in the Payment Schedule and in the Adjudication Response.
That advice included: 1. on 29 November 2016, that Fitz Jersey had not sought to "challenge the entitlement or value of any of the items claimed" in the Payment Claim but had rather raised only "two discrete grounds" being that there was "no valid reference date for which the payment claim to attach to" and "alleged 'all in' settlement agreement" (that is, the 2013 Agreement); [99] 2. on 21 December 2016, that he could not see how an Adjudicator could accept that the submissions put forward in the Payment Schedule [100] and that he would "be very surprised if Atlas did not receive a favourable determination"; [101] 3. on 12 January 2017, following publication of the Adjudication Determination, that there did not appear to be any basis upon which Fitz Jersey could contend the Adjudicator had made jurisdictional error; [102] 4. on 13 January 2017, he did not think that Fitz Jersey could "establish any jurisdictional error" and that "their claim has very poor prospects"; [103] 5. in mid-January 2017, as Fitz Jersey had not sought to restrain Atlas from enforcing the Adjudication Determination, that Atlas should "continue to take steps to enforce the determination"; [104] 6. on 6 February 2017, that Fitz Jersey's application to require Atlas to return to Fitz Jersey the garnisheed funds so that Fitz Jersey could pay those funds into Court would not go well because "the horse has bolted"; [105] and 7. later on 6 February 2017, after Fitz Jersey's application had been dismissed "[t]he summons is still on foot, but it is now even more apparent that the summons is unlikely to succeed". [106]
As I have said, Mr Yazbek and Mr Sweeney did not seek Mr Mort's advice about the Dividends. Mr Mort said he did not become aware of the payment of the Dividends until the middle of 2018.
Mr Yazbek and Mr Sweeney were cross-examined as to whether they sought advice from Mr Mort about what was described in submissions as "Atlas' final rights"; that is, as to what entitlement Atlas would ultimately be shown to have as against Fitz Jersey under the Building Contract.
Mr Yazbek gave this evidence: "Q. And you knew that if you consulted Mr Mort and if you asked him whether he was able to provide any advice on the payment of the dividend, that advice might have interfered with your ability to declare the dividend; you knew that, didn't you? A. No, I didn't. Q. You knew that Mr Mort's advice had been limited to the validity of the adjudication determination and the validity of the garnishee order; isn't that right? A. You've got the money, you do what you do with it. Q. He had not provided you with any advice on the question of the final liability, if any, of Fitz Jersey to - sorry, I will start again. He did not advise you on any question to do with the final liability, if any, that Atlas might have to the Fitz Jersey, did he? A. No, he gave us advice that there was no hope for them to get their money." (Emphasis added.)
The cross-examination later turned to when Mr Mort told Mr Yazbek about the Holland Letter, and thus of Fitz Jersey's stated intention to amend its Summons to include a claim for repayment of the Garnisheed Amount on the basis that Atlas was not entitled to these monies under the Building Contract. Mr Yazbek gave this evidence: "Q. Yes. And you, upon receiving this correspondence from Mr Mort, did not say to him or ask him, 'Do they have an entitlement to a repayment of this amount under the contract'? A. I would have asked him, I would have said, 'What chances do they have', and he said, 'No, we received everything according to the contract'." (Emphasis added.)
In the passages I have emphasised, Mr Yazbek gives an account of the advice he received from Mr Mort which goes beyond that which I have set out above, particularly from Mr Mort's affidavit itself.
Mr Sweeney gave more nuanced evidence: "Q. But my question was: you never received advice on the prospects of success if there was litigation to determine the final rights of the parties? A. Litigation on what basis? I don't understand - like, if you said to me, oh, they were trying to get back - on the whole thing, had he given us advice - I don't really understand which part of the claim you're talking about, on prospects. Q. I'm talking about the final entitlements of the parties under the contract, including the final entitlement of either Atlas to retain the adjudicated amount, or Fitz Jersey to have the adjudicated amount returned. A. Yes. At that stage, our advice - and this was given at the time of the payment claim - was that we were entitled to those moneys and that was our - that was our opinion then as well. HIS HONOUR: Q. Did you get advice that Atlas would be entitled to hang on to the money, no matter what Mr Wong tried to do, or not? A. Well, no, not in those terms, but our advice was that their jurisdictional claim was destined to fail and there was no other claim on foot. So as far as we were concerned at that time, the money was ours." (Emphasis added.)
A short time later, Mr Sweeney gave this evidence: "Q. Well, you don't think it's relevant for Mr Mort to provide advice as to the prospects of Atlas retaining the adjudicated amount in any final proceedings? A. He hadn't - he provided us advice on our payment claim, and the claims we had made were legitimate, and we'd be entitled to keep that money. But there's no -- he never gave us any reason to say we wouldn't be entitled to keep that money. Q. You don't think it was relevant for Mr Mort to provide advice as to the prospects of Atlas retaining the adjudicated amount in any final proceedings before paying the dividend; is that what you're telling his Honour? A. No, but - no, what I'm saying is Mr Mort had given us advice on our claim, and his advice was that we were entitled to that money and nothing had happened since then for us to be advised otherwise. Mr Mort hadn't advised me otherwise." (Emphasis added.)
In his affidavit, Mr Mort said: "I did not provide any advice to Atlas in respect of the payment of a dividend, but I did advise Atlas that they were entitled to the funds they received as a result of the Adjudication Determination and the Garnishee Order, and that Fitz Jersey's prospects of success in relation to the [Summons filed on 13 January 2017] were poor." (Emphasis added.)
I find this unchallenged evidence to be the most reliable guide as to what advice Mr Mort in fact gave Mr Yazbek and Mr Sweeney about Atlas's "entitlement" to the Garnisheed Amount. It accords in substance with Mr Sweeney's evidence.
Contrary to Mr Yazbek's evidence, I think it unlikely that Mr Mort would have advised that there was "no hope for [Fitz Jersey] to get their money" or that Atlas had "received everything according to the contract". Mr Mort was an experienced construction lawyer, obviously familiar with the SOPA and the provisional and interim nature of payments made under the SOPA. The only information Mr Mort had about Fitz Jersey's position under the Building Contract was that revealed in the Payment Schedule and in the Adjudication Determination; namely, the reference date point and Fitz Jersey's contentions concerning the 2013 Agreement.
Mr Mort obviously thought little of the reference date point and, so far as concerns the 2013 Agreement was doubtless being guided by his instructions from Mr Yazbek, Mr Sweeney and Mr Vartuli as to what occurred at the February 2013 Meeting. Otherwise, he was in no position to advise Mr Yazbek and Mr Sweeney that there was "no hope" that Fitz Jersey would ultimately prevail or that Atlas had received "everything according to the contract". Indeed, in closing submissions, it was submitted on behalf of both Fitz Jersey and the Directors that Mr Mort was not in a position to give such advice.
In any event, it was not put to Mr Mort that he gave advice to the effect alleged by Mr Yazbek.
Mr Mort's advice was confined to the task at hand: making the Payment Claim, following it up with the Adjudication Application, realising the proceeds of the resultant Adjudication Determination and advising on Fitz Jersey's prospects of overturning the Adjudication Determination.
I have found that Mr Yazbek and Mr Sweeney understood that the payment to Atlas represented by the Garnisheed Amount was interim and provisional and that, to adopt Mr Sweeney's words at the Liquidator's Examination, that "Fitz Jersey could make a claim under the contract". [107] They must have known that Mr Wong would cause Fitz Jersey to seek to enforce such rights as it had under the Building Contract and, to the extent possible, recover the Garnisheed Amount.
They did not seek, and Mr Mort did not give advice about that matter.

[144]

The advice from Mr White

I have described how, on 31 January 2017, Mr Vartuli, on behalf of Atlas, retained Mr White to provide Mr Yazbek and Mr Sweeney with "advice as [to] whether they are able to pay a dividend and what matters they will need to consider" in that regard.
As I have set out, Mr White gave the following advice: 1. on 31 January 2017, in his conversation with Mr Vartuli, that it would be necessary to ensure "that Atlas has sufficient assets to pay its debts as and when they fall due" and that Mr Yazbek and Mr Vartuli should "leave a sufficient amount of money in the company to cover any unexpected liabilities"; 2. on 1 February 2017, that the relevant directors' minutes should "set out a detailed background as to how Atlas received the $11 million from Fitz Jersey" and "explain why Atlas is entitled to retain the funds and set out details of the proceedings commenced by Fitz Jersey"; 3. also on 1 February 2017 that Atlas should "prepare cash flow projections for the next 12 months"; 4. on 3 February 2017, that there was "nothing in the constitution that would prevent you from paying the dividend" but that "you need to make sure there are sufficient assets to pay all debts as and when they fall due"; 5. on 6 February 2017, that the relevant minutes should "include a statement to the effect that '[Atlas] can pay its debts as and when they fall due' after payment of the dividend" and should "include mention of the advice from Counsel … that the prospects of a contrary judgment are extremely low"; and 6. later on 6 February 2017, and after the Dividend had been declared, Mr Vartuli's final draft of the minute was "good to go".
Ultimately, in cross-examination, Mr White gave this evidence: "Q. And being told about that advice, the information you received when you were told about that advice, that then formed the premise for your advice, I assume? A. I never really provided advice. What I did was I shaped the matters for deliberation about what needed to be resolved and have clarity in their resolution in order to discharge their obligations under 254T. So it wasn't so much, 'I'm now giving the papal blessing to this'; it was more, 'These are the matters that you need to take into consideration'. Q. All right. You say you didn't give the directors of the company advice in that period we are talking about? A. Not in - is it a good idea, or is it not, or is it permitted, or is it not. It was in deciding as directors to declare a dividend, these are the things you ought to take into consideration. The old and the new 254T and the company's constitution, dividends payable out of profits, future creditors, and the like. That manifested itself in multiple iterations of the draft minutes we exchanged between those two dates. Ultimately, they formed a different view than the one I recommended." (Emphasis added.)
As this evidence reveals, the advice Mr White gave Mr Vartuli and Mr Sweeney was limited. It was limited to the matters arising under s 245T of the Corporations Act and under Atlas's Constitution that would require consideration before a dividend was declared. It was also as to the form of the minutes to record the declaration of the Dividends; although, as Mr White noted in the last sentence I have set out, ultimately a different form of Minutes was used than that which Mr White recommended.
In this evidence, Mr White is clear that he did not give advice about whether it was "a good idea" for Mr Vartuli and Mr Sweeney to declare a dividend or whether the declaration of the Dividends was "permitted" under either s 254T or under the Constitution.
Thus, although Mr Vartuli retained Mr White to give advice "as [to] whether they are able to pay a dividend", Mr White did not give any advice to that effect. The advice ultimately given was of a mechanical nature. As he said, he did not seek to give a "papal blessing" to the declaration of the Dividends.

[145]

Section 254T of the Corporations Act

Section 254T of the Corporations Act provides: "Circumstances in which a dividend may be paid (1) A company must not pay a dividend unless: (a) the company's assets exceed its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend; and (b) the payment of the dividend is fair and reasonable to the company's shareholders as a whole; and (c) the payment of the dividend does not materially prejudice the company's ability to pay its creditors. Note 1: As an example, the payment of a dividend would materially prejudice the company's ability to pay its creditors if the company would become insolvent as a result of the payment. Note 2: For a director's duty to prevent insolvent trading on payment of dividends, see section 588G. (2) Assets and liabilities are to be calculated for the purposes of this section in accordance with accounting standards in force at the relevant time (even if the standard does not otherwise apply to the financial year of some or all of the companies concerned)."
Section 124(1)(d) of the Corporations Act provides that a company has the power to "distribute any of the company's property among the members". Section 254U, which applies as a replaceable rule, [108] permits directors of a company to determine that a dividend is payable and to fix the amount of the dividend, the time for payment of the dividend and the method of its payment. As a replaceable rule, s 254U may be displaced by a company's constitution. [109] Here, Atlas's Constitution provided that replaceable rules applied to the extent that they were not displaced or modified by the Constitution. The Constitution then effectively restated s 245U but also provided that a dividend could only be paid out of the profits of the company.
The effect of s 124(1)(d) and the relevant provisions of Atlas's Constitution was to confer upon the Directors a discretionary power to declare and pay dividends.
That power was to be exercised in a manner consistent with the requirements of s 254T and Atlas's Constitution.
The present form of s 254T was introduced into the Corporations Act by the Corporations Amendment (Corporate Reporting Reform) Act 2010 (Cth). Prior to the amendment, s 254T provided that a "dividend may only be paid out of profits of the company".
Since s 254T has been amended, it is now lawful to pay dividends out of capital provided that the requirements of s 254T are observed.

[146]

Section 254T(1)(a) - assets to exceed liabilities sufficient for the payment of the dividend

As set out above, s 254T(1)(a) provides that a company must not pay a dividend unless immediately before the dividend is declared its assets exceed its liabilities by an amount sufficient for the payment of the dividend.
Section 254T(2) provides that, for that purpose, a company's assets and liabilities are to be calculated in accordance with accounting standards in force at the relevant time.
Fitz Jersey and the Directors adduced evidence from expert accountants on this question; Mr John Leotta for Fitz Jersey and Mr Christopher Westworth for the Directors.
In their joint report, Mr Leotta and Mr Westworth agreed: "… • the profit of Atlas for the period 1 July 1016 (sic: 2016) to 7 February 2017 and the net assets at the times the dividend was declared (6 February 2017) and paid (8 February 2017) required determination in accordance with Australian accounting standards; • the contract between Atlas and Fitz Jersey was one that was subject to the requirements of AASB 111; • recognition of the funds claimed pursuant to the Payment Claim required consideration of paragraphs 11, 13 and 14 of AASB 111; and • if funds were received, but not recognised as revenue, then it would be necessary to consider the recording or a corresponding liability in the financial statements."
The Garnisheed Amount received by Atlas on 3 February 2017 was an asset in Atlas's hands.
However, as the experts agreed, if the Garnisheed Amount could not be recognised as revenue, then a corresponding liability was also necessary to be recognised.
Mr Leotta explained this in concurrent evidence in answer to a question from me: "HIS HONOUR: What is the consequence of Atlas receiving this money prior to it having an entitlement to call it revenue? MR LEOTTA: So, your Honour, the [Garnisheed Amount] would then be recognised as cash at bank, because the money has been received, but effectively the other side of that accounting entry would then be a liability, so deferred revenue, so it would sit on the balance sheet, until such time as that criteria for entitlement as revenue is met so that that revenue can be included in the profit and loss. Otherwise, if that criteria is not met, then that liability crystallises and there is an obligation to pay some or all of it back to the company." (Emphasis added.)
Mr Westworth did not dispute this statement by Mr Leotta. Indeed, it is consistent with the last bullet point of their agreed position, as I have set out above.
Thus, the experts' agreed position was that if the Garnisheed Amount could not be recognised as revenue, Atlas could treat it as an asset (cash at bank) but would also have to book a liability being "deferred revenue".
Mr Leotta and Mr Westworth, in their reports, referred to two accounting standards, AASB 111 and AASB 137.

[147]

AASB 111

The only standard to which the experts referred to as being relevant to the question of whether the Garnisheed Amount could be treated as revenue was AASB 111. AASB 111 is entitled "Construction Contracts".
As I have set out, Mr Leotta and Mr Westworth agreed that "the contract between Atlas and Fitz Jersey was one that was subject to the requirements of AASB 111". The debate between Mr Leotta and Mr Westworth was whether the requirements of AASB 111 were satisfied. Mr Leotta contended that they were not, and Mr Westworth contended that they were.
Nonetheless, in closing written submissions the Directors contended that AASB 111 had no application to payments made under the SOPA. I will return to this below.
It was common ground between Mr Leotta and Mr Westworth that AASB 137 only has application if AASB 111 is not engaged.
AASB 111 came into effect on 1 January 2005.
It describes its "objective" as follows: "The objective of this Standard is to prescribe the accounting treatment of revenue and costs associated with construction contracts. Because of the nature of the activity undertaken in construction contracts, the date at which the contract activity is entered into and the date when the activity is completed usually fall into different reporting periods. Therefore, the primary issue in accounting for construction contracts is the allocation of contract revenue and contract costs to the reporting periods in which construction work is performed."
As is there stated, a "primary issue in accounting for construction contracts is the allocation of contract revenue".
The Standard dealt with contract revenue in cll 11 to 15.
Clause 12 provided that: "Contract revenue is measured at the fair value of the consideration received or receivable."
Neither Mr Leotta nor Mr Westworth contended that Atlas's receipt of the Garnisheed Amount should be treated as "consideration received" for the purposes of cl 12 of the Standard. That was, no doubt, because Atlas did not receive the Garnisheed Amount as a payment under the Building Contract, but, rather, under the SOPA and on account of its entitlements under the Building Contract.
Instead, Mr Leotta and Mr Westworth focused on cl 14 of the Standard which is in the following terms: "A claim is an amount that the contractor seeks to collect from the customer or another party as reimbursement for costs not included in the contract price. A claim may arise from, for example, customer caused delays, errors in specifications or design, and disputed variations in contract work. The measurement of the amounts of revenue arising from claims is subject to a high level of uncertainty and often depends on the outcome of negotiations. Therefore, claims are included in contract revenue only when: (a) negotiations have reached an advanced stage such that it is probable that the customer will accept the claim; and (b) the amount that it is probable will be accepted by the customer can be measured reliably."
Clause 14 is directed to the question of whether a contractor may treat as contract revenue an amount that is not "received" or "receivable" under the construction contract but is, rather, an amount that the contractor "seeks to collect" under the construction contract from the principal for "costs not included in the contract price".
The clause refers to the uncertainty which might arise in relation to such a claim. It is directed to whether a sufficient level of certainty can be established as to the claim being realised so as to warrant it being included in contract revenue.
The clause speaks of certainty often depending on the outcome of negotiations and then refers to matters that must be established in order that an amount claimed may be included in contract revenue.
Those matters are, implicitly, that negotiations have taken place, and explicitly that, first, negotiations have reached an advanced stage such that it is probable the customer will accept the claim, and second, the amount that the customer will accept can be measured reliably.
Here, there had been no negotiations between Fitz Jersey and Atlas, let alone negotiations that had reached an advanced stage such that the amount Fitz Jersey would be willing to accept in relation to the amounts sought in the Payment Claim could then be measured reliably. Instead, Atlas had invoked the provisions of the SOPA and achieved success; albeit on the interim or provisional basis for which the SOPA provides.
I raised this matter with Mr Westworth as follows: "HIS HONOUR: May I ask you this, just looking at the words of clause 14 of the standard, assume these facts: there's been an adjudication determination, for $10 million, and after the resolution to declare the dividend but before the dividend is paid, Fitz Jersey notified Atlas that they proposed to amend its summons to seek repayment of the adjudicated amount. In those circumstances, do you say that for the purposes of 14(b), you could measure reliably what sum a reasonable person in Fitz Jersey's position would accept? MR WESTWORTH: Not if there was a substantial - substantive claim for repayment that would overturn the adjudication. HIS HONOUR: The question for the standard is can you reasonably measure the amount that is probable that the customer, acting reasonably, would accept. I can't, at the moment, see how you could reasonably measure what amount this customer would accept when, although it had suffered an adverse determination, it had announced it was proposing - it would seek to recover the amount? What's the answer to that? MR WESTWORTH: The answer to that is - I mean, it depends on the strength of the adjudication and the extent to which the adjudication was overturned. It depends on whether the claim in respect of that particular matter - the overturning is in respect of that matter or whether it's bringing new claims for other deficiencies in the building contract."
Mr Westworth's contention that the requirements of cl 14 were satisfied was based upon his understanding that a payment to a contractor under the SOPA was equivalent to a payment following a final determination of the contractor's rights as against the principal.
Thus, Mr Westworth gave this evidence: "HIS HONOUR: Mr Westworth, can I ask you this, arising out of something you said earlier: do you agree that revenue can't be recognised until all the processes that the building contract allows have been exhausted? MR WESTWORTH: Yes - sorry, I say yes. If there was an adjudication that supervenes some of that, then that adjudication, in my mind, stands in place of ensuring that all of those things are gone through, on the basis that I have an assumption that the adjudicator would have observed those processes and they have been observed. HIS HONOUR: You are assuming, are you, that that adjudication itself has the effect of exhausting all the processes that the building contract allows? MR WESTWORTH: For that particular claim, yes."
Mr Westworth was not correct in thinking that an adjudication process under the SOPA had the effect of "exhausting all the processes that the building contract allows".
In those circumstances I cannot see how the requirement of AASB 111 were satisfied.
If they were not, and if AASB 111 applies, Atlas was not entitled to book the Garnisheed Amount as revenue under AASB 111 and was obliged to book the liability as deferred revenue.
As I have said, the Directors contended that, despite Mr Westworth's focus on AASB 111, that Standard did not apply to claims made under the SOPA.
It is true that the Standard does not refer, in terms, to the SOPA. But the Standard came into effect after the SOPA was proclaimed and deals specifically with construction contracts. Further, the opening sentence of cl 14 is expressed sufficiently widely to cover any claim that a contractor seeks to collect for costs not included in the price under the construction contract.
In any event, as I have said, Mr Westworth accepted that the Standard applied to the Building Contract and did not dispute the potential application of the Standard to Atlas's receipt of the Garnisheed Amount under the SOPA.
The result is that, as at 6 February 2017, the date that the Dividends were declared, Atlas did not have assets exceeding its liabilities sufficient to allow payment of the Dividends.
Accordingly, the requirements for s 254T(1)(a) were not satisfied.

[148]

The consequence of the application of AASB 111

The Directors pointed to what they contended to be alarming consequences from this conclusion.
These were encapsulated in questions that the Directors' senior counsel put to Mr Leotta in cross-examination, in this passage: "MR SIRTES: One more question, Mr Leotta. If the money is classified once Atlas receives it, or not even Atlas, for example, any builder, receives it, if it's classified as a liability, does that mean they put the money aside; they can't actually use it? MR LEOTTA: That's right. If there is no other cash, so if it goes into a pool of funds and there is that equivalent money available to be able to be paid out, then you may not have to reserve that specific amount of cash, but if there is nothing else in that balance sheet to meet that liability, then I would - and it's a different question there, your Honour, but then you would expect that, yes, that money would be set aside because otherwise there's no means to pay that liability in the event that it had to be paid at a future date. HIS HONOUR: Set aside until when? MR LEOTTA: Until such time as there was resolution of the matter, your Honour, either through negotiation or final judgment. MR SIRTES: If I'm a builder and I receive that money, you're saying that I can't pay my subbies with it? MR LEOTTA: If that is the only money you have and there's no other money coming in, your Honour, then, again, that is not a matter for me as an accountant, I think there's bigger issues there around going concern and making payments, you know, whilst being a going concern, but if you're asking me if there was an active business trading as usual, and this money came in, and therefore the money got pooled, could you continue to pay your contractors and still have sufficient funds available should you need to meet your liabilities? Then absolutely, you would do that in the normal course of business. However, if there was no other means to derive any other cash, and you were then paying that cash out of your bank account but you still have a liability, in effect, you now have no means to pay that liability. So I suppose the answer is it does - it does depend on the circumstances of the operations of that company."
Thus, Mr Leotta's evidence, which I accept, was that the fact that a payment received by a contractor under the SOPA could not be treated as revenue did not have the effect that the contractor could not use the money.
As Fitz Jersey submitted: "The booking of a deferred revenue liability when funds are received under the Security of Payment Act is no different to the booking of a deferred revenue liability where, for example, a deposit is received in advance of work done. The booking of the liability does not, of itself, prevent the funds being used for the purposes of the business - for instance paying creditors, or purchasing materials. The concept of insolvency … is not a balance sheet test, but, in effect, one of cash flow. There is nothing to stop a builder using funds received under the Security of Payment Act for business purposes so long as the builder remains, to use the terms of s 95A of the Corporations Act, 'able to pay all [its] debts, as and when they become due and payable'."
What Atlas could not do in this case was to use the Garnisheed Amount received under the SOPA to fund the payment of the Dividends because, for the reasons I have set out, at the time the Dividends were declared Atlas's assets did not exceed its liabilities sufficient for the payment of the Dividends.
As Fitz Jersey submitted: "There is no difficulty with this result. The Security of Payment Act was introduced to 'stamp out the practice of developers and contractors delaying payment to subcontractors and suppliers'… not to enable cash flow to fund payments to builders' shareholders. The use of the Security of Payment Act to fund dividends is inimical to the purpose that the Act was intended to serve. Such a practice is inconsistent with the idea of an interim determination of rights. If, as the Court should [find], the effect of AASB 111 and s 254T(1)(a) is to significantly curtail builders' rights to fund dividends out of money obtained under the Security of Payment Act, then this is a salutary outcome, not a problematic one."

[151]

Was Fitz Jersey a creditor of Atlas when the Dividends were paid?

I have found that under the Building Contract, Atlas was not entitled to claim and recover all the amounts in the Payment Claim, and was, therefore, not entitled to the entirety of the Garnisheed Amount.
In particular, I have found that: 1. the CPI Uplift had been overstated in the Payment Claim by $226,587; 2. the Carbon Tax Costs have not been proved; 3. the Upgrades claim was not established; 4. Fitz Jersey is entitled to be reimbursed: 1. $1,083,611.27 in respect of the "Reimbursement Sum"; and 2. $53,794 on account of the amounts paid to Atlas for "Council fees and charges".
I have found that Atlas was not disentitled to an Early Completion Bonus by reason only of work to Separable Portions 1 and 2 commencing on different dates. I have also made findings in relation to the extensions of time to which Atlas was entitled. However, I received no submissions about, and am unable to determine, the value of any Early Completion Bonus to which Atlas was entitled. In particular, I am not able to say whether Atlas was entitled to the Early Completion Bonuses claimed in the Payment Claim: $1,229,800 for Separable Portion 1 and $600,000 for Separable Portion 2. It was not suggested on behalf of the Directors that Atlas was entitled to a greater Early Completion Bonus than was claimed in the Payment Claim.
Accordingly, the amount that Atlas recovered from Fitz Jersey under the SOPA, the Garnisheed Amount, is considerably in excess of its entitlement under the Building Contract (the "Excess").
Although the amount of the Excess can only be determined by reference to my findings concerning the Building Contract issues, Fitz Jersey's entitlement to the Excess has existed at all times since the events giving rise to that entitlement occurred.
The making of the Adjudication Determination and Atlas's successful recovery of the amount the subject of the Adjudication Determination did not alter this.
This is by reason of s 32 of the SOPA which provides that nothing in Pt 3 of the SOPA affects any right that a party to a construction contract may have under the contract.
By reason of cl 37.2 of the Building Contract, all payments made by Fitz Jersey to Atlas, [110] were on account only. Fitz Jersey had a contractual right to repayment of amounts overpaid.
On the date that the Dividends were paid, 8 February 2017, Fitz Jersey was not able to articulate its claim for the Excess. That was because of what Fitz Jersey described as the "information asymmetry" between it and Atlas at that time. Fitz Jersey was not able to articulate its claim for the Excess until it had access to the relevant documentation during the course of 2017, in the circumstances I have described.
But Fitz Jersey's entitlement to the Excess existed from February 2017 by reason of: 1. the events that happened during the course of the Building Contract; and 2. the payment from Fitz Jersey's bank account to Atlas of the Garnisheed Amount.
Contrary to the Directors' submissions, it is not the case that as at 8 February 2017, "Fitz Jersey had no 's 32' claim under the contract against Atlas". Fitz Jersey had not then made a "s 32 claim" and did not do so until December 2017. But Fitz Jersey's entitlement to make a "s 32 claim" had by then accrued. There was nothing more that needed to occur to perfect Fitz Jersey's entitlement to bring its "s 32" claim, apart from it obtaining documents from Atlas to enable it to know the true extent of that claim and how to frame the claim. The events giving rise to its claim had occurred prior to Atlas's receipt of the Garnisheed Amount. No doubt the time during which Fitz Jersey was required to bring the claim had started running well before Atlas received the Garnisheed Amount.
For those reasons, my conclusion is that Fitz Jersey was a creditor of Atlas on the date that the Dividends were paid.
I have been able to reach this conclusion without reference to authority.
Cases decided in the context of Ch 5 of the Corporations Act have accepted that the word "creditor" may extend to those entitled to prove in a winding up: for example, Heesh v Baker. [111]
In Re Centro Properties Ltd and CPT Manager Ltd in its capacity as responsible entity of Centro Property Trust, [112] Barrett J (as his Honour then was) expressed the tentative view that: "… the reference in s 254T(1)(c) to a company's 'creditors' is a reference to the persons who would be entitled to prove in a hypothetical winding up." [113]
His Honour qualified his tentative opinion by pointing out that, because the Corporations Act has no general definition of "creditor", the "meaning of the term in a particular provision will be very much influenced by context". [114]
His Honour observed that: "… the affording of 'creditor' status, for the purposes of proof in a winding, to persons having claims merely sounding in damages may not be something that should be taken into account in construing the term 'creditors' in a quite different part of the legislation." [115]
I see nothing in these observations inconsistent with my conclusion that Fitz Jersey was a creditor of Atlas on 8 February 2017. That is, whether or not Barrett J's tentative conclusion that "creditor" for the purposes of s 254T includes any party that would be entitled to prove in a hypothetical winding up (which, of course, would include Fitz Jersey as it has in fact proved in Atlas's winding up), Fitz Jersey was, in my opinion, on any view of the matter, a creditor of Atlas at the relevant time.
The parties also referred to the recent consideration by Ball J of s 254T in DSHE Holdings (Receivers & Managers Appointed) (in liq) v Abboud (No 3), National Australia Bank Ltd v Abboud (No 4). [116]
His Honour considered whether the reference to "creditor" in s 254T included a reference to future creditors and said: "As to the first of these issues, the prohibition is on the payment of the dividend. Consequently, at the time a dividend is declared or the date for its payment is fixed, the directors must, consistently with their duties under s 180, consider what creditors the company is likely to have at the time of payment and whether the interests of those creditors will be materially prejudiced. In that sense, the directors may be required to consider future creditors at the time they consider the issue. However, there is nothing in s 254T to suggest that it operates as a prohibition on the payment of a dividend because of the effect of the payment on persons who do not exist at the time that it is made. The ordinary meaning of the word creditors does not extend to future creditors in that sense; and it is difficult to see how the section could be applied if it was intended to cover future debts. How far into the future, for example, would it be necessary to look to consider whether the payment of a dividend would materially prejudice a future creditor?" [117] (Emphasis added.)
Although the Directors relied upon this passage, I do not think it assists them. Fitz Jersey was not a "future creditor" of the kind to which Ball J was referring in the passage I have emphasised. It was not a person who did not "exist" at the time the Dividends were paid. The "future creditors" in focus in DSHE Holdings were persons with whom the relevant entity could in the future be expected to contract and incur debts to at some undefined future point during the course of its trade. Fitz Jersey was not in that position. It was in an existing contractual relationship with Atlas and was a party that, I have found, by reason of the SOPA, had overpaid its counter party and was entitled to recoup the overpayment.
For these reasons, my conclusion is that Fitz Jersey was a "creditor" of Atlas on the date the Dividends were paid.

[153]

The need for affirmative satisfaction

Section 254T provides that a company "must not" pay a dividend "unless", relevantly, the payment of the dividend does not materially prejudice its ability to pay its creditors.
In relation to a relevantly indistinguishable provision in the Corporations Act, it has been held a company will not be able to take the proscribed action unless affirmatively satisfied that taking the action will not so prejudice its ability to pay its creditors.
Thus, in In the matter of Molopo Energy Ltd; Molopo Energy Ltd v Keybridge Capital Ltd, [126] White J (as his Honour then was) said, in relation to s 256B(1) of the Corporations Act (which provides that a company may reduce its share capital if the reduction does not materially prejudice the company's ability to pay its creditors): "Counsel for the plaintiff submitted that if the company were in a position where it appeared that a reduction might materially prejudice its ability to pay its creditors, that is, if it could not affirmatively say that the reduction did not have that effect, then the reduction was prohibited. In my view, this argument is open to the plaintiff. I think it is correct." [127] (Emphasis in original.)
White J's decision was cited with approval by Markovic J in Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (in liq) (Receivers and Managers Appointed) which was concerned with s 257A of the Corporations Act, which provides a company may buy back its own shares if the buy-back does not materially alter its ability to pay its creditors. [128]
White J found support for his conclusion in s 1324(1B) of the Corporations Act which provides that if the ground relied on in an application for an injunction under s 1324(1) was a contravention of, relevantly, s 256B, the court must assume the conduct complained of contravenes the section unless "the company or person proves otherwise".
Thus, his Honour said, immediately after the passage I have set out: "Section 1324(1B) is consistent with this construction. Under s 1324B(1B) the proof that the company would need to adduce on a challenge to a reduction of capital by a creditor would be proof that the reduction does not, not that it might not, affect its ability to pay its creditors".
Section 254T is not referred to in s 1324B(1B) and my attention was not directed to any other like provision of the Corporations Act in which s 254T is referred to.
However, in my opinion the language used in s 254T, which is, if anything, stronger than that used in ss 256B and in ss 257A, is itself sufficient to compel the same conclusion in relation to s 254T as White J came to in relation to s 256B and Markovic J in relation to s 257A.
A company "must not" pay a dividend "unless" each of the requirements of s 254T(1)(a), (b) and (c) is satisfied. On its proper construction, the effect of the section is that unless it can be affirmatively said by a company that the declaration of a dividend will not materially prejudice its ability to pay its creditors, the payment of the dividend is prohibited.
The Directors did not make a submission to the contrary. Indeed, their closing submissions in effect accepted that this was correct.

[154]

The present case

For the reasons I have set out, my conclusion is that Fitz Jersey was a creditor of Atlas when the Dividends were paid on 8 February 2017.
It is obvious that the payment of the Dividends did, as a matter of fact, materially prejudice Atlas's ability to pay Fitz Jersey whatever amount Fitz Jersey might ultimately prove to be its entitlement under the Building Contract: as it turns out, the Excess.
For that reason alone, Atlas was not entitled to pay the Dividends.
Further, Atlas was not able to pay the Dividends unless it was affirmatively able to say that the payment of the Dividends would not materially prejudice its ability to pay its creditors, and Fitz Jersey in particular. For all practical purposes, this means that Atlas could not resolve to pay the Dividends unless Mr Yazbek and Mr Sweeney could have had such affirmative satisfaction.
In my opinion, they could not have been so affirmatively satisfied.
It is true that Mr Yazbek's and Mr Sweeney's only knowledge of Fitz Jersey's contentions concerning its entitlements under the Building Contract were those revealed in the Payment Schedule and in the Adjudication Response. It is also true that I have found that their view about Fitz Jersey's contentions concerning the 2013 Agreement was correct.
However, they: 1. knew that the payment Atlas received by reason of the Garnisheed Amount was an interim or provisional payment; 2. on receipt of the Ms Holland's 5 February 2017 email and the Holland Letter, knew that Fitz Jersey's "position" and "opinion" was that it was entitled to recover the Garnisheed Amount; 3. knew Mr Wong would "make our life hell" following payment of the Garnisheed Amount; 4. knew Mr Wong had the financial resources to cause Fitz Jersey to prosecute such case as it had under the Building Contract to recover the Garnisheed Amount; 5. must have known that Mr Wong would cause Fitz Jersey to take all steps available to it to recover the Garnisheed Amount; 6. had resolved to declare the Dividends urgently, as soon as the Garnisheed Amount cleared, in circumstances where neither Kebzay nor Sweenham had urgent need for the funds; 7. had resolved to declare the Dividends with the object of removing funds from Atlas before Fitz Jersey could progress the claim foreshadowed in the Holland Letter; 8. were going to pay the Dividends "no matter what"; 9. had obtained no legal advice from Mr Mort about the declaration of the Dividends and only the procedural accounting advice from Mr White that I have outlined; 10. had not sought or obtained advice from Mr Mort as to Atlas's ultimate entitlement to retain the Garnisheed Amount; and 11. knew Atlas had no significant source of future income and would, following payment of the Dividends, retain a relatively small amount of funds which they had earmarked for purposes other than paying Fitz Jersey.
In these circumstances, my opinion is that Fitz Jersey was correct to submit that Mr Yazbek and Mr Sweeney could not have had the requisite level of satisfaction that payment of the Dividends would not materially prejudice Atlas's ability to pay its creditors, while there was any significant uncertainty regarding the position vis-à-vis Fitz Jersey.
For the reasons I have set out, there was considerable uncertainty about that position.

[155]

What should the Directors have done? The counterfactual

In closing submissions, on behalf of the Directors, the rhetorical question was asked: how long must the Directors of a company that has received a payment under the SOPA wait for a "section 32" claim to be made before declaring a dividend from the funds received?
Thus, the Directors submitted: "In Fitz Jersey's case narrative corporate governance, including the orderly declaration of dividends, involves suspending normal aspects of such governance, including the use of money obtained from a judgment, for the life of a limitation period. It must follow from Fitz Jersey's case narrative that there was no point in time when it was lawful behaviour for Atlas to declare a dividend. It was necessary for Atlas to lockdown that money, in the absence of any court order to do so, as if it were injuncted merely because Fitz Jersey had threatened, but not brought a claim."
In closing oral submissions, senior counsel for the Directors said: "We say that simply knowing that there is a potential for that money to be paid back does not mean that a company in the position of Atlas, or indeed any other company, has to stop and take no step whatsoever and sit and quake in its boots, waiting for the possibility that at some stage over the next six years there may well be a claim that emerges under section 32."
These submissions do not take into account the extraordinary circumstances in which the Directors found themselves in February 2017.
The Directors knew that Atlas was, in February 2017, at the end of its corporate life, had no significant future revenue, was in a dispute with Fitz Jersey under the Building Contract and would have minimal assets if the Dividends were paid.
It was for Atlas, and thus, in effect, for the Directors, to achieve the requisite level of satisfaction that the Dividends could be declared in light of the provisions of s 254T of the Corporations Act. Atlas could not lawfully declare the Dividends until the requisite degree of certainty could be achieved.
Steps Atlas could have taken, short of waiting for the expiry of the limitation period, included: 1. giving Fitz Jersey notice of its intention to declare the Dividends and thereby giving Fitz Jersey an opportunity to seek injunctive relief, if so advised; 2. seeking directions in the 2017 Proceedings that Fitz Jersey make such claim under the Building Contract as was available to it within a designated time period; and 3. seeking to have any such claim expedited or referred out for decision under Uniform Civil Procedure Rules 2005 (NSW), r 20.14.
Atlas was not obliged to take any such steps. But nor was it entitled to pay the Dividends otherwise than consistently with s 245T.
As Fitz Jersey submitted, if this was a problem for the Directors, that was because of the unusual circumstances I have set out above. As was put in final submissions "… this was a problem for them, for them to be certain. It wasn't for us. It was a matter for them to be confident they could retain the money on a final basis and it was for them to take all steps to do that. If they have to wait, they have to wait".

[159]

That the alienation of property was with intent to defraud creditors

This is the key element for the purposes of these proceedings. There was no controversy as to the relevant principles.
They are that: 1. it is "necessary to show the existence of an intention to hinder, delay or defeat creditors and in that sense to show that accordingly the debtor had acted dishonestly"; [129] 2. it is not necessary "to show that the debtor wanted creditors to suffer a loss or that the debtor had a purpose of causing loss"; [130] 3. it is "not necessary to establish that the transferor of the property in question actually had in mind an intention to defraud creditors if the effect of what that person did would reasonably be expected to have such a consequence"; [131] 4. if a person "disposes of an asset which would be available to his creditors with the intention of prejudicing them by putting it, or its worth, beyond their reach, he is in the ordinary case acting in a fashion not honest in the context of the relationship of debtor and creditor"; [132] 5. the relevant intent of hindering, delaying or defeating creditors will be made out where there is an intention of the transferor, it not being necessary to demonstrate that the proscribed intention was the sole intention, or even a predominate or substantial intention [133] although the intention cannot be "merely incidental" to other intentions; [134] and 6. the relevant intention can be inferred from the circumstances particularly where, relevantly, the "natural consequence" of the disposition is the eventual delay of creditors, [135] the alienation was made voluntarily [136] and the alienation was made in haste. [137]
In my opinion, all of those elements are present in this case and show that Atlas, by acting through Mr Yazbek and Mr Sweeney, had the requisite intention. There was no pressing need to declare the Dividends. The Dividends were declared in great haste. Mr Yazbek's state of mind was that Atlas was "going to pay the dividend no matter what".
Most importantly, the Directors' motivation was to remove funds from Atlas before Fitz Jersey could further progress the claim they understood Fitz Jersey was bound to make to recover the Garnisheed Amount, as foreshadowed in Ms Holland's 5 February 2017 email and in the Holland Letter. The effect of the declaration of the Dividends was to leave Atlas with no money to deal with Fitz Jersey's foreshadowed claim, let alone sufficient to refund the Garnisheed Amount.
It is true that the Directors sought advice from Mr Mort and Mr White. However, that advice was limited in the ways I have set out above.
I find that Atlas paid the Dividends with the intent of defrauding its creditor, Fitz Jersey, within the meaning of s 37A as construed by the authorities to which I have referred.

[162]

Duty to exercise their powers bona fide in the interests of Atlas as a whole

A director must act bona fide in the interest of a company as a whole.
The duty is a subjective one.
In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3), [141] Drummond AJA said: [142] "In my opinion, the duty of directors to act bona fide in the interests of the company is subjective in that whether it has been fulfilled depends on the directors honestly believing that their actions were in the interests of the company. … I think the law was correctly stated by Jonathan Parker J in Regentcrest plc (in liq) v Cohen [2000] All ER (D) 747; [2001] 2 BCLC 80 where his Honour said [at] [120]: 'The duty imposed on directors to act bona fide in the interests of the company is a subjective one … The question is not whether, viewed objectively by the court, the particular act or omission which is challenged was in fact in the interests of the company; still less is the question whether the court, had it been in the position of the director at the relevant time, might have acted differently. Rather, the question is whether the director honestly believed that his act or omission was in the interests of the company. The issue is as to the director's state of mind. No doubt, where it is clear that the act or omission under challenge resulted in substantial detriment to the company, the director will have a harder task persuading the court that he honestly believed to be in the company's interests; but that does not detract from the subjective nature of the test …".
Though the test as described here is subjective, there are limits. A director cannot escape the reach of the duty by adjudging the interests of the company to be such as no reasonable board of directors would judge those interests to be: R P Austin and I M Ramsay, Ford, Austin and Ramsay's Principles of Corporations Law (17th ed, 2018, LexisNexis Butterworths) at [8.100.6].
In considering what is in "the best interest of the corporation" directors may have to consider the interest of creditors.
Thus, in Australian Securities and Investments Commission v Maxwell, [143] Brereton J (as his Honour then was) said: "The words 'in the best interests of the corporation' emphasise the significance of the relevant constituencies - in particular, the shareholders as a whole, and the creditors in the case of impending insolvency. This duty is imposed not to secure compliance with the various requirements of the Corporations Act, but, as it was at general law, to prevent abuses of directors' powers for their own or collateral purposes." [144]
Similarly, in Kalls Enterprises Pty Ltd (in liq) v Baloglow, [145] Giles JA observed: "At least where the company is facing insolvency as well as considering the company's interests the directors must consider the interests of its creditors: Walker v Wimborne (1976) 137 CLR 1; Kinsela v Russell Kinsela Pty Ltd (in liq) (1986) 4 NSWLR 722; 10 ACLR 395. In Grove v Flavel (1986) 43 SASR 410 at 421; 11 ACLR 161 at 170 the court said that the interests of creditors must be considered where to the knowledge of the directors there is a real and not remote risk of insolvency, and of course, the risk includes the effect of the dealing in question … It is sufficient for present purposes that, in accord with the reason for regard to the interests of creditors, the company need not be insolvent at the time and the directors must consider their interests if there is a real and not remote risk that they will be prejudiced by the dealing in question."
The "real and not remote risk" test is adopted in Ford, Austin and Ramsay's Principles of Corporations Law [146] where it is suggested that the duty to consider the interests of creditors arises where a company is "facing insolvency (there is a real and not remote risk of insolvency)" or where "some contemplated transaction threatens the solvency of the company."

[164]

Duty not to exercise the power for an improper purpose

Finally, Fitz Jersey submitted that the Directors had a duty "not to exercise a power conferred upon the relevant director in order to obtain some private advantage or for any purpose foreign to the power (that is, to exercise the powers conferred upon him for a proper purpose)".
A director must not exercise his or her power for any collateral or improper purpose, but only for the purposes for which they were conferred.
The principles were summarised in the familiar statement by Ipp J (as his Honour then was) in Permanent Building Society (in liq) v Wheeler: [150] "The principles applicable in determining whether directors of a company have acted for an improper purpose and in abuse of their powers are well settled. Relevantly, as regards the issues that arise in this case, it may be said that those principles are: (a) Fiduciary powers and duties of directors may be exercised only for the purposes for which they were conferred and not for any collateral, or improper purpose. (b) It must be shown that the substantial purpose of the directors was improper or collateral to their duties as directors of the company. The issue is not whether a management decision was good or bad; it is whether the directors acted in breach of their fiduciary duties. (c) Honest or altruistic behaviour by directors will not prevent a finding of improper conduct on their part if that conduct was carried out for an improper or collateral purpose. Whether acts were performed in good faith and in the interest of the company is to be objectively determined, although statements by directors about their subjective intentions or beliefs will be relevant to that inquiry. (d) The court must determine whether but for the improper or collateral purpose the directors would have performed the act impugned."
An assessment of whether a director has exercised his or her powers for an improper purpose involves a two-step process: 1. first, the Court must ascertain the purposes for which the power in question may or may not be exercised; and 2. second, the Court must determine the substantial purpose for which the power was exercised, and whether it was permissible.
This question is to be determined objectively.

[165]

Are these duties fiduciary duties?

Fitz Jersey submitted that each of these duties was a fiduciary duty.
There is a controversy about this, the nature of which I summarised in ET-China.com International Holdings Ltd v Cheung: [151] "In Westpac Banking Corporation v Bell Group Ltd (in liq) … the Western Australian Court of Appeal found that the obligation of directors to exercise their powers bona fide for the benefit of a company was a fiduciary obligation: see Lee AJA at [897]-[899]; Drummond AJA [1949]-[1956]; Carr AJA [2721]-[2733]. It has been said that, prior to the decision in Westpac v Bell Group: "… the following propositions were generally accepted: 1. Directors' fiduciary obligations were limited to those of a proscriptive nature. The breach of those obligations would render directors liable to the company and provided the preconditions in Barnes v Addy were satisfied, third parties who received company property or knowingly participated in breaches by the directors of their fiduciary obligations, could be held accountable to such breaches. 2. Although the equitable obligations of directors extended beyond those proscriptive obligations, a contravention of them would not lead to accessorial liability on Barnes v Addy principles. That is not to say that a transaction entered into for an improper purpose could not be set aside against a person who was not a purchaser for value without notice. 3. A transaction entered into by directors believing it to be in the best interests of the company and not in order to obtain an advantage for themselves or for a third party was not a breach of fiduciary obligations such to attract accessorial liability under Barnes v Addy principles. In particular, transactions entered into in breach of a duty of care by directors or falling short of an objective standard considered appropriate by a court did not constitute a breach of a fiduciary obligation." (The Hon T F Bathurst and S Merope, "It tolls for thee: Accessorial liability after Bell v Westpac" (2013) 87 ALJ 831 at 834.)
In ET-China, I set out [152] the submissions of counsel for the first defendant in that case, which submissions were in effect adopted by the Directors in this case: "First, the nature and scope of fiduciary duties under Australian law have been addressed by the High Court in a series of decisions starting with Breen v Williams (1996) 186 CLR 71; [1996] HCA 57. This clear line of authority establishes that Australian law does not recognised prescriptive fiduciary obligations. Rather, equity ensures that fiduciaries act with undivided loyalty to their principals by imposing and strictly enforcing two proscriptive fiduciary duties: a duty not to profit from the fiduciary position, and a duty not to act in a position of conflict. Second, those principles apply equally to all fiduciaries, including directors. While fiduciaries may and often do woe other duties as an incident of their position (trustees being the obvious example) this does not mean that every duty owed by a fiduciary is of a fiduciary nature. In particular, the directors' duties to act in the best interests of the company and for a proper purpose are not fiduciary duties. Third, the decision in [Westpac v Bell Group] is plainly wrong. It is inconsistent with the High Court authority, and the consistent treatment of that authority in this court. It should not be followed."
For the reasons I set out below, my conclusion is that the Directors were in breach of each of the duties the subject of Fitz Jersey's submissions, including the proscriptive, and uncontroversially fiduciary, duty not to act in conflict. It is therefore not necessary for me to express a view about whether the Directors' prescriptive duties were also fiduciary.

[167]

Reasonable reliance on advice

In answer to all these complaints, the Directors submitted that an assessment of their conduct must take into consideration s 189 of the Corporations Act.
Section 189 provides: "Reliance on information or advice provided by others If: (a) a director relies on information, or professional or expert advice, given or prepared by: (i) an employee of the corporation whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned; or (ii) a professional adviser or expert in relation to matters that the director believes on reasonable grounds to be within the person's professional or expert competence; or (iii) another director or officer in relation to matters within the director's or officer's authority; or (iv) a committee of directors on which the director did not serve in relation to matters within the committee's authority; and (b) the reliance was made: (i) in good faith; and (ii) after making an independent assessment of the information or advice, having regard to the director's knowledge of the corporation and the complexity of the structure and operations of the corporation; and (c) the reasonableness of the director's reliance on the information or advice arises in proceedings brought to determine whether a director has performed a duty under this Part or an equivalent general law duty; the director's reliance on the information or advice is taken to be reasonable unless the contrary is proved."
The Directors submitted: "Far from being cavalier, the Directors were advised at all material times from two independent professional advisers: (a) Scott Mort, solicitor, who advised the directors as to the prospects of Fitz Jersey over-turning the adjudicator's determination, and senior and junior counsel (whose advice was obtained by Mr Mort); and (b) Peter White, chartered accountant and lawyer, who advised as to declaration of Dividend."
However, as I have set out above, advice that the Directors received from Mr Mort and Mr White was limited.
As for Mr Mort, his advice was as to the processes under the SOPA and as to Fitz Jersey's prospects of having the Adjudication Determination quashed. Mr Mort was not asked to and did not give advice about Fitz Jersey's prospects of making a "s 32 claim" under the Building Contract. Mr Mort was not asked to give advice about the Dividends and, indeed, did not know about them until the following year.
As for Mr White, for the reasons I have set out, his advice was mechanical in nature and, in particular, was not as to whether the declaration of the Dividends was "a good idea".
For those reasons, and assuming that such reliance as the Directors gave on the advice they received from Mr Mort and Mr White satisfies the requirements of s 189 of the Corporations Act and is, thus, taken to be "reasonable", it does not, in my opinion, take the Directors' position any further.

[168]

Claim under s 588FA - unfair preference

Fitz Jersey submitted that the payment of the Dividends was an "unfair preference" for the purposes of s 588FA of the Corporations Act.
Section 588FA(1) provides: "Unfair preferences (1) A transaction is an unfair preference given by a company to a creditor of the company if, and only if: (a) the company and the creditor are parties to the transaction (even if someone else is also a party); and (b) the transaction results in the creditor receiving from the company, in respect of an unsecured debt that the company owes to the creditor, more than the creditor would receive from the company in respect of the debt if the transaction were set aside and the creditor were to prove for the debt in a winding up of the company; even if the transaction is entered into, is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency."
Assuming Atlas's contravention of s 254T of the Corporations Act did not have the effect of rendering void the declaration of the Dividends (a matter about which I received no submissions), once the Dividends were declared Kebzay and Sweenham became creditors of Atlas for the amount of the Dividends. [153]
The payment of the Dividend resulted in Kebzay and Sweenham receiving from Atlas more than they would receive from Atlas in respect of that debt if the transaction was set aside and Kebzay and Sweenham were to prove in Atlas's winding up for the debt.
By receiving the Dividends, Kebzay and Sweenham received 100 cents in the dollar of the debts due to them (assuming that they were creditors as at 8 February 2017). Were Kebzay and Sweenham to prove in the winding up of Atlas they would receive either nothing (on the basis that the Liquidator refused to accept their proof of debt because of the contravention of s 254T), or considerably less than 100 cents in the dollar as they would have to prove in Atlas's winding up in competition with Fitz Jersey.
The Directors submitted that the claim that the payment of the Dividends was a preference would fail "if the Dividend payment was lawful or Fitz Jersey is found not to have been a creditor at the time of the Dividend Payment" but otherwise offered no resistance to these conclusions.

[169]

Claim under s 588FB of the Corporations Act - uncommercial transaction

Fitz Jersey submitted that the declaration and payment of the Dividends was also an "uncommercial transaction" for the purpose of s 588FB of the Corporations Act.
Section 588FB is in the following terms: "Uncommercial transactions (1) A transaction of a company is an uncommercial transaction of the company if, and only if, it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to: (a) the benefits (if any) to the company of entering into the transaction; and (b) the detriment to the company of entering into the transaction; and (c) the respective benefits to other parties to the transaction of entering into it; and (d) any other relevant matter. (2) A transaction may be an uncommercial transaction of a company because of subsection (1): (a) whether or not a creditor of the company is a party to the transaction; and (b) even if the transaction is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency."
By declaring the Dividends, Atlas contravened s 254T of the Corporations Act and made an alienation of property with intent to defraud its creditors for the purpose of s 37A of the Conveyancing Act. It must follow that the declaration of the Dividends was an uncommercial transaction.
That is because no reasonable person in Atlas's circumstances would have entered a transaction which caused those contraventions.
Senior counsel for the Directors accepted that this was so, subject to one qualification. Thus, we had this exchange: "HIS HONOUR: I would have thought, and I need to look at these cases, if a company contravened a transaction - if a company declaring a dividend contravened 254T, it is hard to see that you can conclude that a reasonable person in the company's position would have entered into the transaction. On the other hand, if it does not contravene section 254T, the reverse would seem to apply. MR SIRTES: We agree. HIS HONOUR: One seems to follow from the other. MR SIRTES: We agree with that analysis, your Honour."
Counsel then continued: "We say it is more likely than not that a contravention of 254T may enliven 588FB, but it is not invariable…".
Counsel then submitted that a reasonable person in Atlas's position would consider there was a benefit to Atlas in causing a dividend to be paid to Mr Sweeney because he "was effectively driving this construction", and "the only way he was paid was through a dividend" and that the payment of the dividend "ensures that Mr Sweeney gets paid for the labour he is providing and the services he is providing".
It is true that the evidence establishes that the means by which Mr Yazbek and Mr Sweeney were rewarded for their services to Atlas was by payment of dividends.
However, I cannot see how it could follow that it was in Atlas's interests that it pay a dividend to Mr Yazbek or Mr Sweeney in contravention of s 254T of the Corporations Act.
I find the declaration and payment of the Dividends to be an uncommercial transaction for the purpose of s 588FB of the Corporations Act.

[170]

Claim under s 588FDA of the Corporations Act - unreasonable director-related transaction

Fitz Jersey submitted that the declaration and payment of the Dividends was also an unreasonable director-related transaction for the purposes of s 588FDA of the Corporations Act.
Section 588FDA is in the following terms: "Unreasonable director-related transactions (1) A transaction of a company is an unreasonable director-related transaction of the company if, and only if: (a) the transaction is: (i) a payment made by the company; or (ii) a conveyance, transfer or other disposition by the company of property of the company; or (iii) the issue of securities by the company; or (iv) the incurring by the company of an obligation to make such a payment, disposition or issue; and (b) the payment, disposition or issue is, or is to be, made to: (i) a director of the company; or (ii) a close associate of a director of the company; or (iii) a person on behalf of, or for the benefit of, a person mentioned in subparagraph (i) or (ii); and (c) it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to: (i) the benefits (if any) to the company of entering into the transaction; and (ii) the detriment to the company of entering into the transaction; and (iii) the respective benefits to other parties to the transaction of entering into it; and (iv) any other relevant matter. The obligation referred to in subparagraph (a)(iv) may be a contingent obligation. Note: Subparagraph (a)(iv)--This would include, for example, granting options over shares in the company. (2) To avoid doubt, if: (a) the transaction is a payment, disposition or issue; and (b) the transaction is entered into for the purpose of meeting an obligation the company has incurred; the test in paragraph (1)(c) applies to the transaction taking into account the circumstances as they exist at the time when the transaction is entered into (rather than as they existed at the time when the obligation was incurred). (3) A transaction may be an unreasonable director-related transaction because of subsection (1): (a) whether or not a creditor of the company is a party to the transaction; and (b) even if the transaction is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency."
Relevantly to the Dividends issue, what must be established under s 588FDA is that: 1. there was a payment by Atlas or a transfer or other disposition of Atlas's property; [154] 2. to a "close associate" of Mr Yazbek or Mr Sweeney as directors of Atlas, or to a person "on behalf of" or "for the benefit of" such a "close associate"; [155] and 3. the payment was made in circumstances where it might be expected that a reasonable person in Atlas's circumstances would not have entered the transaction, having regard to the benefits and detriment to Atlas in entering the transactions and the benefits to other parties to the transaction and "any other relevant matter". [156]
In that regard: 1. the test is objective; 2. the question is what a reasonable person in the company's position would do in the circumstances; 3. the circumstances include the facts and circumstances of, and surrounding, the transaction; and 4. the transaction can be an unreasonable director-related transaction even if there is no impropriety or breach of directors' duties. [157]
In closing submissions, senior counsel for the Directors did not dispute that Fitz Jersey had established the matters in (a) and (b) of [1148] above.
As to the matter in (c), it is obvious that no reasonable person in Atlas's position would pay a dividend in contravention of the requirements of s 254T of the Corporations Act, let alone in circumstances where the payment constituted an alienation of property intended to defraud creditors for the purposes of s 37A of the Conveyancing Act.
Further, counsel in effect accepted that if by paying the Dividends Atlas had contravened s 254T of the Corporations Act, it would follow that it had engaged in a transaction that a reasonable person in Atlas's position would not have engaged in and thus, the requirements of (c) were also established.
Thus, I had this exchange with counsel: "HIS HONOUR: If there has been a breach of 254T, I think the calculus would be that there was a disposition to a close associate of a director, and a reasonable person in the company's circumstances would not have contravened 254T. MR SIRTES: Your Honour, there is no question - we are not taking the point that (1)(b) is not engaged. We accept that (1) (b) is engaged. Your Honour, if 254T has not been contravened, it would be, we would say, impossible to find that the declaration of a dividend would ever offend 588FDA. HIS HONOUR: That is the more difficult question, yes."
I find that the payment and declaration of the Dividends was an unreasonable director-related transaction for the purposes of s 588FDA of the Corporations Act.

[171]

Claim under s 588FC of the Corporations Act - insolvent transaction

Fitz Jersey also submitted that the declaration and payment of the Dividends was an "insolvent transaction" for the purpose of s 588FC of the Corporations Act.
Section 588FC provides: "Insolvent transactions A transaction of a company is an insolvent transaction of the company if, and only if, it is an unfair preference given by the company, or an uncommercial transaction of the company, and: (a) any of the following happens at a time when the company is insolvent: (i) the transaction is entered into; or (ii) an act is done, or an omission is made, for the purpose of giving effect to the transaction; or (b) the company becomes insolvent because of, or because of matters including: (i) entering into the transaction; or (ii) a person doing an act, or making an omission, for the purpose of giving effect to the transaction."
I have found that the declaration and payment of the Dividends was both an unfair preference given by Atlas and an uncommercial transaction of Atlas.
In order that it also be an insolvent transaction for the purpose of s 588FC it is necessary also to show that, relevantly, Atlas became insolvent "because of … the declaration and payment of the Dividends".
Section 95A of the Corporations Act provides: "Solvency and insolvency (1) A person is solvent if, and only if, the person is able to pay all the person's debts, as and when they become due and payable. (2) A person who is not solvent is insolvent. Note: A company is taken to be insolvent if the company proposes a restructuring plan to creditors (see subsection 455A(2))."
I have found that Fitz Jersey was a "creditor" of Atlas at the time that the Dividends were paid. I have found that Fitz Jersey then had an accrued right to sue Atlas for the amount due to it under the Building Contract.
The expression "debt" is not defined in the Corporations Act.
Although a right to general contractual damages is not a debt, a right to an amount that could be "clearly ascertainable and not a matter for assessment" may be a debt. [158]
The question of whether debt is incurred depends on when, in substance and commercial reality, the company is exposed to the relevant liability. [159]
Fitz Jersey also had a restitutionary entitlement to recover the amount due under the Building Contract by reason of s 32(3)(b) of the SOPA which provides: "Effect of Part on civil proceedings … (1) In any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal - (a) must allow for any amount paid to a party to the contract under or for the purposes of this Part in any order or award it makes in those proceedings, and (b) may make such orders as it considers appropriate for the restitution of any amount so paid, and such other orders as it considers appropriate, having regard to its decision in those proceedings."
Further, as s 95A refers to a person's inability to pay all the person's debts, there is no reason to exclude the contingent or prospective debts. [160]
I have made findings which allow it to be determined what amount was due by Atlas to Fitz Jersey under the Building Contract. In my opinion that amount was a debt.
Such a debt was one which was "due and payable", as Fitz Jersey was entitled then to sue Atlas to judgment immediately, without any intervening event occurring. [161] As it happened, Fitz Jersey was not in a position to do that because in February 2017 it did not have sufficient documentation to hand. That is, it could not then, as a practical matter, make its "s 32 claim" under the Building Contract. But its entitlement to do so had arisen.
Further: "… the notion of 'become due' is a legal one, and … a debt is not rendered 'not yet due' by reason of nothing more than the fact that the creditor has, to date, forborne from pursuing recovery". [162]
For these reasons, and consistently with my conclusion that Fitz Jersey was a creditor of Atlas at the time the Dividends were paid, my conclusion is that the amount that, based on my findings as to the Building Contract issues, can now be found to be due by Atlas to Fitz Jersey was a debt "due and payable" at that time.
The payment of the Dividends left Atlas with a little over $400,000 in liquid assets. Its financial statements at FY17 showed a total equity of a little over $200,000. Atlas had no significant source of future revenue. The payment of the Dividends rendered Atlas unable to pay Fitz Jersey and thus unable to pay its debts as and when they fell due and thus insolvent.
On behalf of the Directors, it was submitted that this conclusion was not open in the absence of evidence led by Fitz Jersey as to insolvency. However, although expert forensic accounting evidence as to insolvency is often helpful, the question of insolvency is ultimately one for the court. [163]
Further, on behalf of the Directors it was submitted that "another aspect to solvency is the company's ability to turn to third parties for funds". Reference was made to Mr Yazbek's evidence that: "It was my general practice in the management of Atlas that I did not leave large amounts of money sitting in the Atlas' bank account. This was because the funds did not earn interest and could be more profitably applied elsewhere. I was not concerned if the bank account balance was low because I could loan Atlas any money to ensure it paid its debts as and when they fell due."
However, Mr Yazbek did not give evidence of his preparedness to advance funds to Atlas for the purpose of Atlas meeting such obligations as it may be proved to have to Fitz Jersey.
Further, where: "… the financial support is being provided by a director or related entity, and in circumstances where there is no formalised agreement or understanding, what is required is cogent evidence which enables the court to conclude that there is such a degree of commitment on the part of the provider of the financial support to continue it, such that it can be said that at any point of time it was likely to be continued, with the result that, at any of those times, the company was able to pay its debts as and when they fell due." [164]
There is no such evidence here.
For these reasons, my conclusion is that the payment of the Dividends did render Atlas insolvent and that, accordingly, the declaration and payment of the Dividends was an insolvent transaction for the purposes of s 588FC of the Corporations Act.

[173]

Article 85 of Atlas's Constitution

Article 85 of Atlas's Constitution provided that "dividends may only be paid out of profits of the Company".
Fitz Jersey made numerous references in its closing submissions to Atlas having contravened Article 85 but, in the passages of its submissions directed to Article 85 did not, so far as I can make out, actually develop an argument that the Dividends were not paid out of profits.
Having at one point of its closing submissions made the point that the question of "profits" was a matter to be determined in accordance with accounting standards (a matter about which Mr Leotta and Mr Westworth were agreed [170] ) Fitz Jersey submitted, without analysis of any accounting standards: "Assuming that the payment of the Dividend contravened Atlas's Constitution, then the Directors should be held liable for breach of contract. This issue only matters if the Directors are not held to be liable to Fitz Jersey [sic: Atlas] for damages or equitable compensation in the amount of the Dividends due to their breaches of their duties of care or fiduciary duties".
The reference in this submission to the Directors being "held liable for breach of contract" was a reference to Fitz Jersey's submissions concerning s 140 of the Corporations Act which provides, relevantly: "Effect of constitution and replaceable rules (1) A company's constitution (if any) and any replaceable rules that apply to the company have effect as a contract: (a) between the company and each member; and (b) between the company and each director and company secretary; and (c) between a member and each other member; under which each person agrees to observe and perform the constitution and rules so far as they apply to that person."
In the absence of a developed submission that the Dividends were not paid out of profits I do not propose to consider this point further, save to record that in Dungowan Manly Pty Ltd v McLaughlin, [171] Bathurst CJ said that there was "some doubt as to whether the statutory contract formed by s 140 of the Act gives rise to a claim for damages for breach". [172]

[174]

Breaches of duty

I have found that the Directors caused Atlas to pay the Dividends in circumstances where: 1. Atlas's assets did not exceed, in an amount sufficient for the payment of the Dividends, its liabilities immediately before the Dividends were declared; 2. the payment of the Dividends materially prejudiced Atlas's ability to pay its creditors, and Fitz Jersey in particular; 3. the Directors' motivation in declaring the Dividends was to remove funds from Atlas before Fitz Jersey could further progress the claim, the Directors' must have understood Fitz Jersey was bound to make to recover the Garnisheed Amount; 4. Atlas thereby contravened s 254T of the Corporations Act; and 5. Atlas made an alienation of property with intent to defraud its creditors, and Fitz Jersey in particular, for the purposes of s 37A of the Conveyancing Act.
It was not in Atlas's interests that it act in contravention of s 254T or make an alienation of property with intent to defraud its creditors.
I have also found that by resolving to declare the Dividends, the Directors caused Atlas to make an undue preference for the purposes of s 588FA of the Corporations Act, enter an uncommercial transaction for the purposes of s 588FB of the Corporations Act, and engage in an insolvent transaction for the purposes of s 588FC of the Corporations Act.
I have also held that the Directors engaged in an unreasonable director-related transaction for the purposes of s 588FDA of the Corporations Act.
It was not in Atlas's interests that this conduct occur.
It was, on the other hand, in the Directors' interests that the events giving rise to these matters, the declaration and payment of the Dividends occur.
It must follow from these conclusions that the Directors have acted in breach of their obligations: 1. to exercise their powers bona fide and in the interests of Atlas as a whole; 2. to exercise their power for a proper purpose; 3. not to exercise their powers to obtain a private advantage for themselves; and 4. not to permit their interests to conflict with those of Atlas.
As I have said, there is no controversy that the latter duty was fiduciary in nature.

[175]

The flow of funds

Fitz Jersey presented detailed submissions concerning the transactions and cash movements following the payment of the Dividends to Kebzay and Sweenham on 6 February 2017.
Those contentions were summarised in two documents entitled "Transactions Following Payment to Kebzay Pty Ltd" and "Sweenham Transactions". Copies of those documents (the "Kebzay Flow Chart" and "Sweenham Flow Chart" respectively) are attached. Attachment E - Flow Charts (116734, pdf)
Ultimately, in final submissions, the Directors accepted that "the calculations" in those documents were correct.
The Directors also accepted the correctness of the following analysis made by Fitz Jersey concerning the proceeds of the Dividends paid to Kebzay and Sweenham.
As to the dividend paid to Kebzay: "As a result of the tracing analysis above, Fitz Jersey can trace a proportion of the dividend payment into: (a) the hands of [Botany Road Project Pty Ltd], through which, in economic terms, the funds flowed and which obtained the economic benefit of the trust distribution by [Kebzay Investments Pty Limited] that included almost all of the Yazbek Dividend … Fitz Jersey can identify the acquisition of a right in respect of which $6,096,584 of its value was attributable to the Yazbek Dividend. (b) the hands of [620 Botany Road Pty Ltd], which received at least $5,521,065 in dividend monies, consisting of: (i) $627,475.00 in payments which were made to it by [Kebzay Investments Pty Ltd] between 4 April and 19 June 2017 …; and (ii) $4,893,590 in monies which were paid to it on 27 June 2017 …; (c) the hands of Kebzay Custodian No 2 [Pty Ltd], which received at least $4,893,590 in dividend monies, as a result of the transaction on 27 June 2017 …; (d) Mr and Mrs Yazbek's interest in the Avalon Property (being $3,904,157.19), as a result of the contribution of: (i) $1,015,038.00 in traceable proceeds which were paid as part of the deposit paid on 29 September 2017 …; and (ii) $2,889,119.19 in traceable proceeds which were paid as part of the purchase price on or around 25 October 2017 ..."
As to the dividend paid to Sweenham: "(a) $76,456.65 in traceable proceeds which were paid as part of the deposit paid on 30 March 2017 [in respect of Sweenham's investment in the property purchased by Castlefield Corner Pty Ltd] …; (b) $454,599.48 in traceable proceeds which were paid as part of the purchase price on or around 18 May 2017 …; and (c) at least $19,894.79 in monies, which were paid to Castlefield [Corner Pty Ltd] between 29 May and 8 June 2017."
Fitz Jersey accepted that it is not entitled to double recovery and submitted that "this may be dealt with by an appropriate order limiting the maximum recovery".
I will invite submissions as to how that process should be undertaken.

[182]

Relief - statutory tracing - s 588FF of the Corporations Act

Section 588FF provides, relevantly: "Courts may make orders about voidable transactions (1) Where, on the application of a company's liquidator, a court is satisfied that a transaction of the company is voidable because of section 588FE, the court may make one or more of the following orders: (a) an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction; (b) an order directing a person to transfer to the company property that the company has transferred under the transaction; (c) an order requiring a person to pay to the company an amount that, in the court's opinion, fairly represents some or all of the benefits that the person has received because of the transaction; (d) an order requiring a person to transfer to the company property that, in the court's opinion, fairly represents the application of either or both of the following: (i) money that the company has paid under the transaction; (ii) proceeds of property that the company has transferred under the transaction; … (2) Nothing in sub-section (1) limits the generality of anything else in it. … (4) If the transaction is a voidable transaction solely because it is an unreasonable director-related transaction, the court may make orders under subsection (1) only for the purpose of recovering for the benefit of the creditors of the company the difference between: (a) the total value of the benefits provided by the company under the transaction; and (b the value (if any) that it may be expected that a reasonable person in the company's circumstances would have provided having regard to the matters referred to in paragraph 588FDA(1)(c)."
Orders under s 588FF of the Corporations Act may be made "on the application of a company's liquidator".
The Liquidator has assigned to Fitz Jersey his entitlement to make an application under s 588FF.
Fitz Jersey accepts that, nonetheless, any relief granted should be for the payment or transfer of property to "the company", that is Atlas, in liquidation.
It has been held that: "It is clear from the text and purpose of s 588FF(1) that the relief is intended to be restitutionary in nature, in the sense that its purpose is to recover company property, or the value thereof, that is or has been in the hands of the defendant. It is not concerned with compensation for loss or damage suffered by the company." [180]
Further, as Barrett J said in New Cap Reinsurance Corp Ltd v A E Grant: [181] "The purpose of an order under s 588FF(1)(a) for the payment of money to a company in liquidation is not to compensate or make whole that company. The section does not create a proprietary right of any kind in the company [citations omitted]. As with preference avoidance provisions in bankruptcy, the objective is to adjust the rights of creditors among themselves in such a way as to eliminate the effects of favourable treatment afforded to one or more creditors, to the exclusion of others, in the period immediately before an insolvent administration commences. As is said [in] M G R Gronow "McPhersons Law of Company Liquidation", fifth edition (current looseleaf): the focus [of] the relief that is available (under s 588FF(1)) where a payment or transaction is voidable under the Division is to enable the restoration to the company of money and other property that has been alienated, and to relieve it of the burden of liabilities of the kind mentioned."
The Court's discretion is broad and is not necessarily constrained by factors that might arise in an exercise of equitable tracing.
The Court's task is to make orders that give effect to the statutory scheme under Pt 5.7B, which is concerned with the recovery of property or money for the benefit of the creditors of the company in liquidation.
Fitz Jersey placed particular emphasis on the breadth of the language used in s 588FF(1)(c) which enables the Court, on the application of the liquidator, to require a person pay to the company the "benefits" the person has received "because of" the voidable transaction in question.
In White in his capacity as joint and several liquidator of Port Village Accommodation Pty Ltd (in liq) v ACN 153 152 731 Pty Ltd (in liq), [182] the Court said (footnotes omitted): "The words 'because of' in s 588FG(1)(a) and s 588FF(1)(c) are, it may be accepted, words of causation. Although causation is essentially a question of fact determined by the application of common sense, a common sense answer must be given in the context of, and informed by, the relevant legal framework in which the question is asked. As McLure P observed in Weaver, [183] the relief under s 588FF(1) is intended to be restitutionary in nature. It is designed to 'remedy depletion' of the assets of the insolvent company, principally for the benefit of its unsecured creditors."
In my opinion, Fitz Jersey was correct to submit that the language of s 588FF(1)(c) does not require a strict application of the rules of equitable tracing. It merely requires common sense causation between the voidable transaction and the benefit received. Unlike a knowing receipt claim, it does not focus on the knowledge of a recipient.
The analysis conducted by Fitz Jersey as set out above shows that each of Botany Road Projects Pty Ltd, 620 Botany Road Pty Ltd, Kebzay Custodian No 2 Pty Ltd, Mr Yazbek, Mrs Yazbek and Castlefield received "benefits" "because of" the voidable transactions to which I have referred.
In their closing written submissions, the Directors made no reference to s 588FF, apart from reciting it as an element of Fitz Jersey's claim. In those submissions, the Directors asserted that Fitz Jersey's contentions concerning ss 588FA, 588FC and 588FDA were "unsustainable" but only because "each of them hinges on a finding that Fitz Jersey was a creditor at the time of the payments".
It was only in the Directors' "Note in Reply" delivered following oral submissions that attention was directed to the ambit of s 588FF. In that note, the point made was that because, it was said, Fitz Jersey could not demonstrate that Atlas had suffered any loss as a result of the payment of the Dividends, its submissions concerning the breadth of s 588FF(1)(c) "adopts the conceptual lens of loss seen through the eyes of Fitz Jersey and not the liquidator of Atlas".
However, as the authorities I have set out make clear, s 588FF is not directed to recompensing any loss of the company in liquidation may have suffered but, rather, to restoring to that company assets for the benefit of its creditors.
Otherwise the Directors did not challenge Fitz Jersey's contentions concerning s 588FF nor deal with the authorities I have set out above concerning the section.
Turning to the particular transactions relied on by the Directors, the process of "statutory tracing" permitted by s 588FF enables Fitz Jersey, as assignee of the Liquidator, to "trace" the benefit of the proceeds of the voidable transactions, that is the Dividends: 1. through the hands of Kebzay and Sweenham; 2. through the hands of 620 Botany Road Pty Ltd and Kebzay No 3 Pty Ltd; and 3. to Castlefield Corner Pty Ltd.
I propose to invite submissions from Fitz Jersey as to the precise orders that it, as assignee of the Liquidator, proposes. I will give the Directors an opportunity to make submissions about the form of those orders.

[184]

The Shareholders' Loans

I have outlined above the circumstances in which the Shareholders' Loans were written off on 6 February 2017.
The loans were written off. That is, they were forgiven.
Fitz Jersey contends that the writing off of the Shareholders' Loans was an unreasonable director-related transaction for the purposes of s 588FDA of the Corporations Act.
I have set out the provisions of s 588FDA above.
Relevantly to the Shareholders' Loans issue, what must be established is: 1. a payment made by Atlas or a transfer or other disposition of Atlas's property; [184] 2. to a "close associate" of Mr Yazbek and Mr Sweeney, as directors of Atlas, or to a person "on behalf of" or "for the benefit of" such a "close associate"; [185] and 3. in circumstances where it might be expected that a reasonable person in the circumstances would not have entered the transaction, having regard to the benefits and detriment to Atlas in entering the transaction and the benefits to other parties to the transaction and "any other relevant matter". [186]
The Directors did not contest the propositions that the writing off of the Shareholders' Loans constituted either a payment by Atlas or a transfer or other disposition of property by Atlas to a "close associate" of one of Atlas's directors.
Debate focused on the question of whether it might be expected that a reasonable person in Atlas's circumstances would not have entered into the transaction; that is, would not have written off the Shareholders' Loans.
In that regard, as I have set out above, it is established that: 1. the test is objective; 2. the question is what a reasonable person in the company's position would do in the circumstances; 3. the circumstances include the facts and circumstances of, and surrounding, the transaction; and 4. the transaction can be an unreasonable director-related transaction even if there is no impropriety or breach of directors' duties. [187]
The Directors pointed to the fact that, as at 6 February 2017: 1. Atlas was a small proprietary company for the purposes of s 45A(2) of the Corporations Act; 2. it had only two directors who were familiar with the operations of the company; 3. it had only two shareholders who were associated with the directors; 4. it was a "non-reporting company" in accounting terms; 5. Atlas then had no substantial creditors (leaving Fitz Jersey aside and noting that the ATO was paid the amount owing to it); 6. Mr Yazbek was in the process of retiring from his role as a builder; 7. the loans were made from monies that Atlas had retained from amounts retained in relation to subcontractors; and 8. for those reasons Atlas was no longer obliged to pay those retained amounts to the subcontractors and Atlas no longer needed to call on the loans for that purpose.
However: 1. there was no benefit to Atlas in entering into the transaction (it was in substance a gift made by Atlas to the shareholders); 2. there was a detriment to Atlas as a result of the transaction as it lost a chose in action against Kebzay and Sweenham of $449,085 for Kebzay and $6,000 for Sweenham; and 3. there was an obvious, and corresponding, benefit to Kebzay and Sweenham.
In those circumstances, I am satisfied that a reasonable person in Atlas's position would not have written off the loans and that, accordingly, they were unreasonable director-related transactions for the purposes of s 588FDA of the Corporations Act.
In substance, the Directors answer to this aspect of Fitz Jersey's claim was that if the Shareholders' Loans had not been written off, they would have been paid to Kebzay and Sweenham as dividends. This appeared to be an argument that Atlas had suffered no loss by reason of the write offs.
However, neither Mr Yazbek nor Mr Sweeney gave evidence that, had the Shareholders' Loans not been written off, they would have caused dividends in corresponding amounts to have been declared in favour of Kebzay and Sweenham.
In the absence of such evidence, I am not prepared to so find.

[186]

Endnotes

Increased in 2013 to $190 million in the circumstances I discuss below.
To whom I will return.
And also Mr Stevens, but as he was not present at the February 2013 Meeting, this is of less significance.
See [490] to [600] below.
See [601] to [665] below.
See [667] to [894] below.
See [971] to [1081] below.
See [1082] to [1097] below.
See [1129] to [1134] below.
See [1135] to [1144] below.
See [1145] to [1153] below.
See [1154] to [1175] below.
See [1176] to [1177] below.
See [1183] to [1189] below
See [1177] to [1254] below.
See [1199] to [1238] below.
See [1221] to [1238] below.
As I set out below, by July 2011, Mr Wong had decided to sell the apartments in Separable Portion 1 and retain only those in Separable Portion 2.
The parties were accustomed to referring to, and addressing, Mr Wong as "KC".
Work Under Contract.
See [52] above.
This was a reference to the fact that Mr Wong had recently sold shares in Fortescue Mining N L, the proceeds of which he used to fund the development.
See [641] to [659] below.
Atlas's insurance ran from February to February each year.
Ms Rae Tory, an employee of McCormick Harris.
Adopting the words from Mr Gemmola's email of 4 February 2014.
Excluding GST.
See [2(c)] above.
As I have said, he also signed the October Letter.
As I have said, it was also signed by Mr Stevens.
See [82] above.
As well as Mr Stevens, although his role was not, in final submissions, said to be significant in this respect.
And by Mr Vartuli.
The last sentence has been changed from "to determine if there is outstanding money owed to us" to "to collect the outstanding money owed to us that is due"
That is, Gross Floor Area: obviously a reference to the reduction in units from 515 to 500.
Evidently a reference to the elimination of the swimming pool.
See [747]ff below.
Evidence Act 1995 (NSW) s 118.
At par 45.
Mr Mort must have intended to refer to the Adjudication Response.
Atlas Construction Group Pty Ltd v Fitz Jersey Pty Ltd [2017] NSWSC 72, particularly at [22]-[24] and [27].
Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd (2017) 94 NSWLR 606; [2017] NSWCA 53.
Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (The "Palitana") [1924] 20 Ll L Rep 140 at 152.
Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187 at [27] (Ipp JA; Mason P and Tobias JA agreeing).
The transcript of the Liquidator's Examination says "factor" but this is obviously an error.
See J D Heydon, Heydon on Contract (2019, Thomson Reuters) at 9.1560 and the authorities there cited.
See [297]-[299] above.
Gross Floor Area.
Although, as I have said, the letter earlier said that there would be "no charge" for these matters.
See [128] above.
(1995) 49 NSWLR 315 at 319.
See for example, Gautam v Health Care Complaints Commission [2021] NSWCA 85 at [25] (Leeming JA, Simpson AJA agreeing) and Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31] (Gleeson CJ, Gummow and Kirby JJ).
[2019] NSWSC 421 at [51].
(1938) 60 CLR 336 at 362; [1938] HCA 34.
(1940) 63 CLR 691 at 712; [1940] HCA 20.
(1965) 112 CLR 517 at 521; [1965] HCA 46.
Being Mr Wong's letter set out at [250] above.
At [257].
At [258].
(2015) 256 CLR 104; [2015] HCA 37 at [46], [48] and [49] (French CJ, Nettle and Gordon JJ).
P Herzfeld and T Prince, Interpretation, (2nd ed, 2020, Thomson Reuters) at [19.60].
See Murphy Corporation Ltd v Acumen Design & Development (QLD) Pty Ltd [1995] 11 BCL 274 at 280 (G N Williams J) (and the cases cited therein).
That is Atlas but, for the purposes of dealing with the contractual provisions I will use the word "contractor" as this is the expression used in the Building Contract.
That is, Fitz Jersey.
At [57]-[61].
That is, Separable Portion 1 and Separable Portion 2.
The yellow highlighting is included in the electronic copy in the Court Book and is of no present significance.
For example, Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; [1987] HCA 5 at 237 (Brennan J).
See [715] above.
The Separable Portions were described in those documents as "Separable portion No1 - DA1 North" and "Separable portion No2 - DA1 South".
See [758] above.
To adopt Lord Hoffmann's words, to which I will return.
(2019) 99 NSWLR 317; [2019] NSWCA 11.
At [6].
At [8]-[10].
(2014) 89 NSWLR 633; [2014] NSWCA 184 at [117]-[119].
[2013] NSWCA 179.
Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429 at [21]; [2011] 1 WLR 770 (Lord Neuberger); Arnold v Britton [2015] AC 1619; [2015] UKSC 36 at [78] (Lord Hodge).
(1956) 95 CLR 420; [1956] HCA 53 at 426-427.
[2009] 1 AC 1101.
At [23].
At [25].
See [288] above.
See [73]-[92] above.
Omitting some items not presently relevant.
See [439] above.
See [378] above.
See [384] above.
See [385]-[386] above.
See [418] above.
See [410] above.
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 at [43] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).
Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151 at [102] (McColl JA).
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd at [39] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).
[2021] NSWCA 69 at [8].
With whom Bathurst CJ agreed.
Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; [2016] HCA 52 at [4] (Kiefel, Bell, Gageler, Keane and Gordon JJ); Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd at [39].
See [257] above.
See [293] above.
As I have said above, Mr Mort must have intended to refer to the Adjudication Response.
See [346] above.
See [348] above.
See [355] above.
See [356] above.
See [416] above.
See [420] above.
See [938] above.
See, ss 135 and 141, Item 33B.
See, s 135(2).
Except any "final payment"; but there was no "final payment": see [851]-[852] above.
[2008] NSWSC 711 at [46]-[50]; 67 ACSR 192 (Barrett J) and Brash Holdings Ltd v Katile Pty Ltd [1996] 1 VR 24 at [33].
[2011] NSWSC 1171; 87 ACSR 131.
At [48].
At [49].
At [49].
[2021] NSWSC 673.
At [455].
At [457].
(2010) 183 FCR 358; [2010] FCAFC 34.
Which states that "a company may reduce its share capital in a way that is not otherwise authorised by law if the reduction … does not materially prejudice the company's ability to pay its creditors …".
At [45].
At [457].
(2019) 267 CLR 461; [2019] HCA 33.
Which states that "a company may financially assist a person to acquire shares … in the company … only if … giving the assistance does not materially prejudice … the company's ability to pay its creditors".
At [26] (Kiefel CJ, Gageler, Keane, Gordon and Edelman JJ).
[2014] NSWSC 1864; 104 ACSR 46.
At [87]-[88].
(2017) 254 FCR 559; [2017] FCA 866 at [81] (Markovic J).
Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3 at [32] (French CJ, Gummow, Crennan and Bell JJ) citing with approval Regal Castings Ltd v Lightbody [2009] 2 NZLR 433 at 456-457 (Blanchard and Wilson JJ).
Ibid.
Cannane v J Cannane Pty Ltd (in liq) (1998) 192 CLR 557; [1998] HCA 26 at [92] (Kirby J).
Lloyds Bank Ltd v Marcan [1973] 1 WLR 1387 at 1390-1391; 3 All ER 274 (Russell LJ), cited with approval in Marcolongo v Chen at [32].
Marcolongo v Chen at [57] (Heydon J).
Marcolongo v Chen at [87] (Heydon J).
Marcolongo v Chen at [24].
Marcolongo v Chen at [25].
Marcolongo v Chen at [80], [83].
Lloyds Bank Ltd v Marcan at [96] cited with approval in Marcolongo v Chen at [32].
Silvera v Savic (1999) 46 NSWLR 124; [1999] NSWSC 83 at [72] (Hodgson CJ in Eq).
See Puglia v Basol [2005] NSWSC 1271 at [20] (Barrett J).
(2012) 44 WAR 1; [2012] WASCA 157.
At [1988].
[2006] NSWSC 1052; 59 ACSR 373.
At [106].
[2007] NSWCA 191 at [162]; 63 ACSR 557 at 559; (Giles JA, with whom Ipp and Basten JJA agreed).
At [8.100.12].
See, Links Golf Tasmania Pty Ltd v Sattler (2012) 213 FCR 1; [2012] FCA 634 at [540] (Jessup J).
The words of Mason J in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64 at 103.
For example, Hospital Products Ltd at 68 (Gibbs CJ).
(1994) 11 WAR 187 at 218; 14 ACSR 109.
[2019] NSWSC 1874 at [463]-[464]; 142 ACSR 121; appeal dismissed in Et-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; 150 ACSR 461.
At [465].
Section 254V of the Corporations Act.
Section 588FDA(1)(a)(i).
Section 588FDA(1)(b).
Section 588FDA(1)(c).
See, Smith v Starke, in the matter of Action Paintball Games Pty Ltd (in liq) (No 2) [2015] FCA 1119 at [104]-[108]; 109 ACSR 145 (Gleeson J); cited with approval in Crowe-Maxwell v Frost (2016) 91 NSWLR 414; [2016] NSWCA 46 at [70]-[71] (Beazley P, Macfarlan and Gleeson JJA agreeing); Weaver v Harburn [2014] WASCA 227 at [91]-[93]; 103 ACSR 416 (McLure P).
Box Valley Pty Ltd v Kidd [2006] NSWCA 26 at [14] (Bryson JA; Basten JA and Gzell J relevantly agreeing).
Australian Securities and Investments Commission v Plymin (No 1) [2003] VSC 123 at [516]; (2003) 46 ACSR 126 (Mandie J).
New Cap Reinsurance Corporation Ltd (in liq) v A E Grant [2008] NSWSC 1015 at [75] (White J, as his Honour then was).
Melbase Corporation Pty Ltd v Segenhoe Pty Ltd [1995] FCA 279 at [55]; 13 ACLC 823 (Lindgren J).
Melbase Corporation Pty Ltd v Segenhoe Pty Ltd at [53]; followed in Exception Holdings Pty Ltd v Albarran (No 2) [2005] NSWSC 981 at [28] (Young CJ in Eq) and in Cuthbertson & Richards Sawmills Pty Ltd v Thomas [1998] SCACT 58; 28 ACSR 310 at [42] (Einfeld J).
For example, see Sandell v Porter (1966) 115 CLR 666 at [670]; [1966] HCA 28 (Barwick CJ).
Chan v First Strategic Development Corporation Ltd (in liq) [2015] QCA 28 at [44] (Morrison JA); cited with approval in Treloar Constructions Pty Ltd v McMillan [2017] NSWCA 72 at [83]; 120 ACSR 130 (Beazley P, Gleeson JA and Emmett AJA).
Subject to time limits about which there is no controversy here.
Which includes "a body corporate that is related to" Atlas - s 9 of the Corporations Act - and thus includes Kebzay and Sweenham.
Section 588FE(4).
Section 588FE(3).
Section 588FE(6A).
See [980] above.
[2012] NSWCA 180; 90 ACSR 62.
At [3].
It not being an issue that tracing is available in cases where there has been a breach of fiduciary duty: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22.
K Mason, J W Carter, G J Tolhurst, Mason & Carter's Restitution Law in Australia (3rd ed, 2016, LexisNexis Butterworths) at [303]; J D Heydon, M J Leeming, P G Turner, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths) at [5-045].
See [1119] above.
R P Austin, H A J Ford AM and I M Ramsay, Company Directors: Principles of Law and Corporate Governance (2005, LexisNexis Butterworths) at [14.12]; In the matter of Rossfield Group Operations Pty Ltd & Morton Holdings Pty Ltd [1981] Qd R 372; (1980) 5 ACLR 237 at 377 (Connolly J); Yore Contractors Pty Ltd v Holcon Pty Ltd (1990) 2 ACSR 663 at 670 (Cole J); Bernard Elsey Pty Ltd v Federal Commissioner of Taxation (1969) 121 CLR 119 at [121]; [1969] HCA 46 at [4] (Windeyer J); Ishac v David Securities Pty Ltd (No 6) (1992) 7 ACSR 199 at [200] (Young J); Linter Group Ltd v Goldberg (1992) 7 ACSR 580 at [634] (Southwell J).
[1948] Ch 465.
For example, Darvall v North Sydney Brick & Tile Co Ltd (1989) 16 NSWLR 260 at 293 Kirby P); Beach Petroleum NL v Johnson (1993) 43 FCR 1; [1993] FCA 392 at 570-1 (Von Doussa J) ZBB (Australia) Ltd v Allen (1991) ACSR 495 at 506-7 (Waddell CJ in Eq).
Beach Petroleum NL v Johnson at [22.21].
Weaver v Harburn at [114] (McLure P, Buss and Murphy JJA agreeing).
(2009) 257 ALR 740; [2009] NSWSC 662 at [21].
(2018) 53 WAR 234; [2018] WASCA 119 at [187]-[188] (Murphy and Mitchell JJA and Allanson J).
Weaver v Harburn at [114].
Section 588FDA(1)(a)(i)(ii).
Section 588FDA(1)(b).
Section 588FDA(1)(c).
See fn 157 above.
See [22], [1198], [1238] and [1240] above.

Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd

At a glance

Court

Decision date

Before

Source

Judgment (187 paragraphs)

Parties

Legislation Cited (7)

Cases Cited (94)

Cited By (3)