GREGORY JAY PARKER and PURCOM NO 34 PTY LIMITED (IN LIQUIDATION) (ACN 006 794 672) v ROBERT FREDERICK LEE TUCKER, RICHARD JAMES TUCKER, PURCOM NO 34 ADMIN PTY LIMITED

Federal Court of Australia|2010-03-24|Before: Gordon J

Parker, In the matter of Purcom No 34 Pty Limited (In Liq) [2010] FCA 263

Citation: Parker, In the matter of Purcom No 34 Pty Limited (In Liq) [2010] FCA 263

Parties: GREGORY JAY PARKER and PURCOM NO 34 PTY LIMITED (IN LIQUIDATION) (ACN 006 794 672) v ROBERT FREDERICK LEE TUCKER, RICHARD JAMES TUCKER, PURCOM NO 34 ADMIN PTY LIMITED (ACN 134 158 508) (RECEIVER AND MANAGER APPOINTED), ANDREW ZISSIMOU, PRAHRAN TYRE CENTRE PTY LIMITED (ACN 138 747 225), GERARD CONLON and JUNE DANKS

File number: VID 636 of 2009

Date of judgment: 24 March 2010

Catchwords: CORPORATIONS - directors' duties - whether a scheme existed to divert assets away from one corporation to another - whether a director of the recipient of the assets knowingly participated and assisted in the scheme - receipt of "trust" property - whether transactions were uncommercial transactions

Legislation: Corporations Act 2001 (Cth)

Cases cited: Bell Group Ltd (in Liq) & Ors v Westpac Banking Corporations & Ors (No 9) (2009) 225 FLR 1 Bofinger v Kingsway Group Limited (2009) 239 CLR 269 Chew v R (1992) 173 CLR 626 Hamilton v Whitehead (1988) 166 CLR 121 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 Michael Wilson & Partners Limited v Nicholls [2009] NSWSC 1033 News Ltd v Australian Rugby League Ltd (1996) 64 FCR 410 Parker, In the Matter of Purcom No 34 Pty Limited (In Liq) (ACN 006 794 672) (2009) 262 ALR 85 Parker, In the matter of Purcom No 34 Pty Limited (in liquidation) (ACN 006 794 672) (28 August 2009) Parker, In the matter of Purcom No 34 Pty Limited (in liquidation) (ACN 006 794 672) (No 2) (2 September 2009) Permanent Building Society (in liq) v Wheeler (1984) 11 WAR 187 Purcom No 34 Limited (Receiver Appointed) [2009] FCA 383 Re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler(2002) 168 FLR 253 Tesco Supermarkets Ltd v Nattrass [1972] AC 153 Visnic v Sywak (2009) 257 ALR 517 Warman International Limited v Dwyer (1995) 182 CLR 544

HAJ Ford, RP Austin and IM Ramsay, Ford's Principles of Corporations Law (14th ed, 2009)

Date of hearing: 1 - 3 March 2010

Counsel for the Plaintiffs: S Wells

Solicitor for the Plaintiffs: Farrar Lawyers

First Defendant: No appearance

Second Defendant: Appearance in person on 1 March 2010 No appearance on 2 and 3 March 2010

Third Defendant: No appearance

Third Defendant (Receiver and Manager Appointed) No appearance

Counsel for the Fourth and Fifth Defendants: M Stirling

Solicitor for the Fourth and Fifth Defendants: Neil Ogge Lawyers

Sixth Defendant: No appearance

Seventh Defendant: No appearance

IN THE MATTER OF PURCOM NO 34 PTY LIMITED (IN LIQUIDATION) (ACN 006 794 672) BETWEEN: GREGORY JAY PARKER

PURCOM NO 34 PTY LIMITED (IN LIQUIDATION) (ACN 006 794 672)

PURCOM NO 34 ADMIN PTY LIMITED (ACN 134 158 508) (RECEIVER AND MANAGER APPOINTED)

By 4:00pm on 29 March 2010, the Plaintiffs serve a copy of these reasons for decision on the First, Second, Third and Seventh Defendants.
By 4:00pm on 8 April 2010, the Plaintiffs file and serve on each of the First, Second, Third and Seventh Defendants any additional material on which they intend to rely and an outline of submissions identifying the orders they propose to seek to give effect to these reasons for decision.
The matter be listed for further hearing limited to the question of relief at 10:15am on 15 April 2010.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

IN THE MATTER OF PURCOM NO 34 PTY LIMITED (IN LIQUIDATION) (ACN 006 794 672) BETWEEN: GREGORY JAY PARKER

PURCOM NO 34 PTY LIMITED (IN LIQUIDATION) (ACN 006 794 672)

PURCOM NO 34 ADMIN PTY LIMITED (ACN 134 158 508) (RECEIVER AND MANAGER APPOINTED)

A. INTRODUCTION 1 The second plaintiff, Purcom No 34 Pty Ltd (ACN 006 794 672) (Purcom), entered into a franchise agreement with JAX Quickfit Franchising Systems Pty Ltd (ACN 112 050 058) (JAX Quickfit) on 10 April 2006 which entitled Purcom, on certain terms and conditions, to operate a JAX Quickfit outlet selling motor vehicle tyres at 386 High Street, Prahran (the Site) (the Franchise Agreement). The sole director of Purcom was Robert Tucker, the first defendant (Tucker Senior). 2 By August 2008, Tucker Senior had a list of complaints about the franchise and with JAX Quickfit. He consulted one firm of solicitors who wrote a letter of complaint on behalf of Purcom to JAX Quickfit. He then consulted a second solicitor and prepared a "Prahran Action Report" which set out his clear intention - to get out of the Franchise Agreement but still to be able to carry on a tyre outlet. As a result of subsequent steps, including some of those listed in the Prahran Action Report, JAX Quickfit appointed a receiver to Purcom and then successfully applied to the Federal Court for the appointment of a provisional liquidator to Purcom. In March 2009, the third defendant, Purcom No 34 Admin Pty Ltd (ACN 134 158 508) (Admin), purchased the stock and assets of Purcom's business conducted at the Site. At the time of the sale, the sole director of Admin was Richard Tucker, the second defendant and the son of Tucker Senior (Richard Tucker). Subsequently, the Plaintiffs successfully applied for the appointment of a receiver to Admin. 3 The present proceedings are brought by Gregory John Parker (the liquidator of Purcom) (Parker) and Purcom. What the Plaintiffs ultimately seek is that the purported sale by Purcom to Admin be unravelled so that Purcom, so far as possible, is put back in the position it was before Tucker Senior started implementing his Prahran Action Report. 4 The trial of this action commenced on 1 March 2010. The proceeding was listed for three days. Tucker Senior did not appear. Richard Tucker appeared on the first day and then, after Court on that day, sent an email to the Court saying that he had to attend university for the next two days and would attend after university on day three. He did not reappear. Admin did not appear and the receiver for Admin informed the Court that he would abide by any order of the Court. The fourth defendant, Andrew Zissimou (Zissimou) and the fifth defendant, Prahran Tyre Centre Pty Limited (ACN 138 747 225) (PTC) were represented by Counsel and solicitors. After lunch on day three, the Plaintiffs settled their claims against Zissimou and PTC. Gerard Conlon, the sixth defendant, did not appear. The Plaintiffs had settled their claim against him on 11 December 2009. The seventh defendant, June Danks (Danks), also did not appear. Instead, a letter from her solicitors was tendered in evidence which stated, in part: 1. [Danks] does not agree to a reinstatement of the old lease. 2. [Danks] will agree to assign the lease she has with [Admin] (subject to the Administrator's consent) (sic) to [Purcom] noting that the liquidator will remain liable for all obligations under the lease including the payment of rent, outgoings and liabilities in addition to providing a personal guarantee. 3. Should the liquidator wish to sell the business as a going concern, [Danks] is willing to consider entering into a lease with a buyer acceptable to and on terms acceptable to [Danks]. 5 These reasons for decision are structured as follows: Content Para Nos B Facts [6]-[63] C Claim against Tucker Senior [64]-[75] D Claim against Richard Tucker [76]-[85] E Claim against Admin [86]-[89] F Corporations Act Claims [90]-[94] G Conclusion [95]

B. FACTS 6 On 16 December 2005, Purcom executed a Contract of Sale of Business to purchase the tyre shop business known as "Quick Fit Tyre Service" conducted at the Site for $230,000.00 plus a maximum amount of $60,000.00 for stock. The vendor was Morris & O'Neill Group Pty Ltd. Tucker Senior was the sole director of Purcom. Tucker Senior and his wife, Lynette Tucker, were the shareholders of Purcom. In addition to purchasing the business, on 9 April 2006, Purcom entered into a Deed of Variation and Transfer of Lease for the Site. The lessor was Danks. 7 One day later, on 10 April 2006, Purcom entered into the Franchise Agreement. In addition to the Franchise Agreement and in consideration of JAX Quickfit advancing what were defined as the "Secured Moneys", Purcom granted JAX Quickfit a charge over the undertaking of Purcom and all of its property, rights and other assets (both present and future) (the Charge). 8 Under the Franchise Agreement, Purcom was licensed to use the systems and trade marks developed by JAX Quickfit in operation of a JAX Quickfit outlet (defined as the "Franchised Business") only at the Site: cll 1.1 and 2.2 of the Franchise Agreement. Subject to some matters presently not relevant, Purcom had the exclusive right to operate the Franchised Business only at the Site within a defined territory: cl 2.2 of the Franchise Agreement. JAX Quickfit was not entitled to operate or entitled to licence another to operate a Franchised Business in that territory or to canvass sales in that territory. Purcom was not entitled to canvass sales outside of the territory: cl 1.2 of the Franchise Agreement. Consistent with those clauses, the Franchise Agreement expressly stated Purcom "acknowledge[d] that [JAX Quickfit] may grant franchises to other franchisees at any place outside the territory": cl 1.2B of the Franchise Agreement. 9 The licence was for a term of 10 years and Purcom had an option to renew the franchise for an additional term of 10 years: cll 1.3, 1.4 and Schedule of the Franchise Agreement. Except in limited circumstances not presently relevant, Purcom was prohibited from assigning, subletting or in any way transferring the lease of the Site: cl 3.4 of the Franchise Agreement. 10 In December 2006, Zissimou commenced employment with Purcom as general manager at the Site. 11 By August 2008, Tucker Senior had a list of complaints about the franchise and with JAX Quickfit. He retained Mason Sier Turnbull, solicitors, (MST) to give him advice. Tucker Senior prepared a report for MST which set out his "main grievances" with the JAX Quickfit organisation and what he described as their "lack of performance over the past 27 months, since [he] purchased the business". The last sentence of the report stated "[a]s discussed it is my desire to attempt to terminate my Franchise [A]greement". 12 MST's initial advice was that some of the matters raised by Tucker Senior as grievances would not be covered by a Franchise Agreement. Unperturbed, Tucker Senior responded: I appreciate that there are a number of grievances that are not covered … in the agreement. What I aim to do is have a letter by yourself on [s]olicitors letterhead noting all my grievances and informing JAXQuickfit I do not want to remain a Franchisee. I will then use the letter as a bench mark for me to work on into the future. I am sure they will not willingly let me out of the agreement. However, they will certainly be well aware they have a very unhappy Franchisee who wants to leave. I will make sure that desire is communicated to all the other Franchisees. Ideally I would like the letter completed by the end of next week, as I am going overseas on 15th September and plan for JAXQuickfit to receive the letter around the time of my departure. … 13 MST were formally retained by Purcom on 9 September 2008. By 11 September 2008, MST had prepared a letter of advice for Purcom together with a draft letter to JAX Quickfit. After listing the grievances identified by Tucker Senior, MST concluded the letter of advice stating: Please note that the Franchise Agreement does not provide for termination by the Franchisee on default by the Franchisor. Further, after reviewing the Franchise Agreement in light of your grievances, I advise that most of the Franchisor's conduct does not constitute a breach of the Franchise Agreement. Your current option is to send my letter to the Franchisor, draft of which is enclosed. There are also dispute resolution procedures within the Franchise Agreement and as provided by the Franchising Code of Conduct that you may be able to use in relation to some of your issues. 14 By 16 September 2008, the letter to JAX Quickfit still had not been sent. The advice from MST was blunt: I cannot make a statement that you want to terminate your [F]ranchise [A]greement, as (since I do not believe most of the issues raised constitute the Franchisor's breach of the Franchise Agreement), it would amount to repudiation of your Franchise Agreement and you would be the one in breach. I can suggest that you are willing to surrender your Franchise Agreement. Alternatively, I can suggest mediation (as you would be required to go through the proper dispute resolution process under the Franchising Code of Conduct). I cannot make idle threats of termination without prejudicing your rights. Please let me know your instructions as to which one you would prefer. 15 Tucker Senior responded - "I guess the surrender path is the way to go". However, the response was not without qualification. Tucker Senior wanted MST "to keep in mind [he] also want[ed] to keep trading in the industry afterwards in [his] own right". MST's response on 18 September 2008 was again blunt: You also have to keep in mind that you have restraint provisions under your Franchise Agreement which prevent you from running a similar business for 24 months from termination in your territory or territory of any other franchisee. Unless these are waived by the Franchisor as part of your surrender, you will not be able to run a similar business for 24 months. The restraint provisions were in cl 10.11 of the Franchise Agreement. 16 Ultimately on 18 September 2008, MST wrote to JAX Quickfit listing five concerns of Tucker Senior. The letter concluded: I am instructed that my client, in an attempt to amicably resolve this matter, will consider surrendering the Franchise Agreement and his franchise on the condition that his obligations under clause 10.11 of the Franchise Agreement are waived as part of the surrender. The evidence did not disclose whether there was a response from JAX Quickfit. I infer that JAX Quickfit's response to the proposal was negative because, less than two months later, Tucker Senior consulted another solicitor, Conlon. 17 Of central importance to the events that then unfolded is a document entitled "Prahran Action Report" which Conlon said in a liquidator's examination was provided to him by Tucker Senior in about November 2008. At the liquidator's examination, Tucker Senior denied preparing the Prahran Action Report. Similar denials were made by Richard Tucker, Zissimou and Conlon. That report provided: 1. Lease of Premises & Ownership Change · Register Purcom No. 34 P/L - Admin, Richard James Lee Tucker as Sole Director · Register Business Name - "Prahran Tyre & Service Centre" to be held by Purcom Admin or Julia Elizabeth Tucker? · Sign new lease agreement by Purcom Admin · Check registered address for both Purcom Companies and Directors? · Determine best ownership structure to protect interest of Julia / AZ / Tucker Family i.e. Unit Trust Structure? · Rearrange ownership of assets currently in name of Purcom No. 34 P/L i.e. Cars, Cash Deposits and Tyre Fitting equipment · Open necessary new Bank Accounts in name of Purcom Admin · Change insurance cover into Purcom Admin 2. Suppliers · Michelin - open direct account, check neon sign to remain? · Pirelli - open direct account · Bridgestone - open direct account · Tyremarketers - open direct account · Continental - continue as is · Tyremax - continue as is · THI - continue as is · Tyrecorp - continue as is · Falken - continue as is · All suppliers to be contacted to have account name changed to Prahran Tyre? Either under Purcom No 34 or Purcom Admin? 3. Signage · Book date for covers on power lines at front of building - 5 working days notice required · Accept quote for new external signage and set installation date, contact Right On Target for possible additional suppliers · Paint external blue paint work to Reflex blue colour shade · Paint show room and change reception desk 4. Computer · Order Costar system for front office and/or back office accounting system versus MYOB usage · Purchase suitable new computer tower to suit Costar system · Arrange Costart (sic) training of our staff · Download all current accounting information onto Costar 5. Advertising · Create new artwork and logo for leaflet mail drop to be undertaken at time of change, contact Right On Target · Repaint and change signage on ute · Place Yellow and White pages advertising and listing at appropriate time 6. Stationery · Design new company logo and type style - Contact Right On Target · Print new letterheads, business cards, invoice, statement, car window stickers, and care service stickers, Check Costar for stationary printing on plain paper production i.e. invoice and statements 7. Website · Develop new website - Check AZ Cousin & Right On Target · Select best search engine to place website in prominent locations on net · Obtain a new email address 8. Other · Select and order new uniforms with different look to the current design - based on black pant/ black tops with bold front & full back panel signage - Check Right On target? · Change telephone on hold audio message · Change Fleet business details · Sort out rebates payment from current suppliers · Replace JQF Tyre maintenance book with our own benefit card with similar/ better benefits · Replace front counter 18 Exactly when the Prahran Action Report was provided to Conlon is not clear. Tucker Senior had a two hour meeting with Conlon on 11 November 2008. Conlon was not called to give evidence and, as noted above, Tucker Senior did not appear at the trial. Conlon's file note of the meeting was in evidence and recorded the meeting as follows: … [I]t was decided to attempt to surrender the lease and get a new lease simultaneously in the name of the new company. [Richard Tucker] will be able to devote time to the business because he is presently finding it difficult to obtain a job in events organising. [Tucker Senior] was told that in accordance with the [F]ranchise [A]greement he would not be able to … work for the new company and he should avoid involvement in the new business. The manager is Andrew Zissimou who will continue to manage the new business. [Conlon] questioned whether the restraint in the [F]ranchise [A]greement is reasonable because it binds [Tucker Senior] to not being able to be involved in the business for a period of two years after the termination of the lease and if the franchise is not terminated, he could be effectively unable to work in the industry for another 10 years. [Tucker Senior] was aware that in all probability the franchisor will see to pursue damages from him on the basis of the breach of the franchise agreement by the present business for which he is a guarantor. 19 I do not accept that Tucker Senior had no hand in the preparation of the Prahran Action Report. I conclude that Tucker Senior prepared the Prahran Action Report and gave that report to Conlon. 20 As the summary of advice demonstrates, Tucker Senior was under no misapprehension that the steps he wished to take were wrong and would result in litigation. One week later, Tucker Senior's plans had hit a hurdle. On 21 November 2008, he spoke by telephone with Conlon. Tucker Senior told Conlon that he was not able to have his son, Richard Tucker, attend to sign the "company documentation" as Richard Tucker was concerned about: · Possible bankruptcy arising from action taken by the franchisor. · The possibility of an injunction being granted. 21 Tucker Senior told Conlon he had to have a word with his son and that it may be necessary for Conlon to be involved in those talks. Tucker Senior also told Conlon he had attempted to contact Danks but had been unsuccessful. 22 The reference to "company documentation" (see [20] above) on 21 November 2008 was a reference to the first step in the Prahran Action Report - to register a new company -Admin. On 2 December 2008, the incorporation fee for Admin was paid, the fee recorded on Conlon's law firm's account ledger for Tucker Senior. On 3 December 2008, Tucker Senior met with Danks' son, Peter Danks, and discussed proposed variations to the lease for the Site including an extension to the term of the lease, an increase in the rent and that the tenant would change to a company owned and controlled by Richard Tucker but with Tucker Senior remaining a guarantor. Tucker Senior asked Peter Danks to indicate whether Danks agreed to the proposed changes and for them to "formalise it as soon as practical". An email drafted by Peter Danks addressed to Danks stated that if it was "all OK", he would confirm with Tucker Senior. 23 On 13 January 2009, the sole director and shareholder of Admin was Richard Tucker. Richard Tucker's concerns had apparently been resolved. 24 Tucker Senior tried other means to rid himself of the franchise. Zissimou gave evidence, which I accept, that in January or February 2009, Tucker Senior asked him whether he would be interested in purchasing the business and Zissimou said no. 25 On 15 January 2009, Conlon gave the following instructions to a person in his firm "as per the clients (sic) wishes": [Tucker Senior] no longer wishes to be in a franchise relationship with the franchisor under which he is operating. He cannot, however, get out of the franchise agreement he is currently in. [Tucker Senior] thus plans to retire from his job altogether. His son will then take over the lease and start a whole new business. The new business will have a new colour scheme and a new name, etc. [Conlon] has set up a company called [Admin] (whereas the old company was Purcom No.34 Pty Ltd) which will be used to run the new business. The new company is a single shareholder and director (the clients (sic) son). The single share will be held for a unit trust called the Prahran Tyre & Service Centre Unit Trust. [Tucker Senior] will be the sole unit holder. We need: · Business name application for Prahran Tyre & Service Centre. · Unit Trust by which [Tucker Senior] is the sole unit holder. · Declaration of trust from [Tucker Senior]'s son. 26 On 21 January 2009, the Prahran Tyre & Service Centre Unit Trust (the Trust) was created by Deed of Trust between Tucker Senior and Admin. Admin was the trustee. The sole unit holder was Tucker Senior. The same day, Richard Tucker as sole director and shareholder of Admin, executed a declaration of trust to the effect that his entire shareholding in Admin was held on trust for the benefit of the Trust. 27 The next day, 22 January 2009, the business name "Prahran Tyre Centre" was registered. Its registered address was the Site and Admin was listed as its owner. The Business Names Extract recorded that the name was registered on 22 January 2009 for a business which was to commence on 2 March 2009. 28 By 12 February 2009, steps to effect the transfer were still not completed and Conlon's law firm was still negotiating with Danks on the basis of "the retirement from the business" of Tucker Senior. The steps were ultimately effected and Danks' costs were paid, the fee recorded on Mr Conlon's law firm's account ledger for Tucker Senior. In addition to finalising the lease arrangements for Admin, Tucker Senior entered into a Service Agreement between Admin and Havealook Marketing Group Pty Ltd for the creation and hosting of a website with the domain name www.prahrantyres.com.au. Tucker Senior signed the Service Agreement for and on behalf of Admin. 29 At about the same time as his father was dealing with the landlord and creation of a website for Admin (in mid to late February 2009), Richard Tucker telephoned a Mr Andrew Jones, a promotional goods on-seller who conducts a business known as "Promotional Innovation Group". Tucker Senior, who had known Mr Jones for about 15 years, had provided his son with Mr Jones' name. Richard Tucker told Mr Jones he was "after some uniforms and such". About three days later, Mr Jones attended the Site and met Tucker Senior and Richard Tucker. Mr Jones' evidence was that after receiving the telephone call from Richard Tucker he produced a logo for the new business which he took to the Site and handed to Richard Tucker. He did not charge for the logo. Mr Jones did invoice "Prahran Tyre Centre" for shirts and pants embroidered with the "PTC logo". Mr Jones gave evidence that in late February 2009 he delivered the clothing and some business cards to Zissimou at the Site in exchange for an envelope containing cash. Consistent with instructions from Richard Tucker, there were business cards for Zissimou and also cards for the PTC which otherwise bore no name. No business cards were produced for Richard Tucker. 30 On 24 February 2009, Tucker Senior met again with Conlon. Tucker Senior told his lawyer that he was "ready to proceed with the changeover on 6 March" but could not understand the delay in the preparation of the paperwork. 31 By 28 February 2009, the paperwork appears to have been completed, at least in part, when an "Agreement for the Sale of Stock" was signed by Tucker Senior on behalf of Purcom and by Richard Tucker on behalf of Admin (the Stock Agreement). The sale price for the stock "set out in the schedule attached" was $41,514.60. The copy of the agreement in evidence did not contain a schedule. Admin agreed to pay for the stock by five instalments payable every two months until 1 January 2010. The first instalment of $7,500.00 was due on 1 May 2009. 32 On 2 March 2009, a Monday, Tucker Senior further consulted Conlon. He spoke by telephone with Conlon and told him of a meeting he had held with JAX Quickfit about the establishment of a new franchise. Conlon's advice was that if the new premises were not in the territory specified in the Franchise Agreement, there was nothing that could be done. Tucker Senior told Conlon the matter had caused him considerable strain and that he was visiting the doctor for treatment. Despite the strain, at 6:31pm that evening, Tucker Senior sent to Conlon two letters that he proposed to send to JAX Quickfit. The first letter, a letter of complaint about the establishment of another franchise so close to the Site, he proposed to send the next evening, Tuesday. Tucker Senior told Conlon he proposed to send the second letter, the substance of which follows, at the close of business on the Friday (being the day of the changeover). Following recent events, I have been forced into making an important business decision. At close of business today, being Friday 6th March 2009, my JAX Quickfit Prahran franchise will cease to operate out of the premises located at 386 High Street Prahran. It is my intention, to relocate my Franchise to another site within my Franchise territory, with a minimum distance of 5-7 kilomet[re]s from the new opened Company store. I am currently undertaking this task and have sort (sic) assistance from local commercial Real Estate agents. 33 The next day, 3 March 2009, Conlon telephoned Tucker Senior and approved the correspondence but made two suggestions: the second letter should include advice regarding his health and he should engage a real estate agent to write to him confirming they are looking for an appropriate site for him to relocate the franchise. 34 On 6 March 2009, Tucker Senior on behalf of Purcom sent a letter to JAX Quickfit in the form of the draft (see [32] above) with the added paragraph that "I have been advised to take it easy in the short term, as I am receiving Medical attention for the high level of Tress (sic) I am currently experiencing". On the same day, the existing lease was surrendered and a new lease of the Site to Admin, guaranteed by Tucker Senior and Richard Tucker, was executed. 35 Over the long weekend of 7, 8 and 9 March 2009, the changeover of the Site occurred. Tucker Senior was busy. Despite usually working each Saturday until 1:00pm, Zissimou was given the day off. Zissimou's evidence, which I accept, was that when he arrived at work at 7:45am on Tuesday, 10 March 2009, he found that the Site had been repainted and that business had changed its name from JAX Quickfit to "Prahran Tyre Centre". 36 In addition to work on the physical Site, Tucker Senior also dealt with a supplier. On Sunday 8 March 2009, Tucker Senior sent a completed credit application, signed by Richard Tucker as the director of Admin, to Pirelli. The cover sheet, on the letterhead of PTC, was signed by Tucker Senior and stated, in part, "Please note I have added my personal guarantee". 37 On Monday, 9 March 2009, the Chief Executive Officer of JAX Quickfit responded in writing to Tucker Senior's letter of 6 March 2009 (see [34] above). The substantive paragraphs read: Of concern, in the second paragraph of your letter you have indicated that the franchise will cease to operate out of your current premises as of close of business last Friday. I sincerely hope that you have not in fact closed the business as this constitutes a breach of the Franchise Agreement. If your reason for ceasing to operate the business is your health which you allude to in the final paragraph of your letter there is scope for appointment by the franchisor of a replacement to operate the business during your absence. I am however somewhat confused in that you also indicate your intention to relocate the franchise to another site within your franchise territory and you say you have approached some local real estate agents to assist you in finding another location. Robert, you do not have an entitlement to unilaterally decide to relocate. Relocation is covered by clause 2.2 of the Franchise Agreement, to which I specifically refer you. In my view none of the circumstances referred to in sub-paragraphs (a), (b), (c) or (d) of clause 2.2 apply. Further, as you are aware, we (and I am referring here to the franchisor) have invested considerably in the current site by way of redecoration, signage, fitting out and marketing and there exists no justification for virtually throwing this investment out the window. Similarly, the cost of relocation simply could not be justified. In short, you do not have the franchisor's approval to relocate and if you have in fact closed the doors and such closure persists then you will be considered to be in breach of your Franchise Agreement thereby justifying termination of the Franchise Agreement by the franchisor. I am prepared to fly to Melbourne to meet with you and discuss your concerns. I am aware that it is public holiday in Victoria today. Ryan Deal will be in attendance at your outlet when you open for business tomorrow. (Emphasis in the original). 38 The next day, Tuesday 10 March 2009, access to stock from tyre suppliers for the Site was the focus of Tucker Senior and JAX Quickfit. By 8:04am, JAX Quickfit had emailed Bridgestone, a tyre supplier, requesting an immediate stop on stock being supplied to the Site. Tucker Senior sent a facsimile to Tyres4U, another tyre supplier, advising them of the change in trading name to "Prahran Tyre Centre". When contacted by a representative of Tyres4U, Tucker Senior confirmed with the representative that despite the change in trading name, there was no change in the ABN or ownership of the business and that the change in name occurred on Saturday 7 March 2009. Only the last part of that information was accurate (the change in name occurred on Saturday 7 March 2009), the rest was not. 39 On 11 March 2009, JAX Quickfit served a Notice of Termination of Franchise Agreement on Purcom and served a statutory demand on Purcom seeking a total of $145,962.22. The amounts claimed in the demand were described as "amounts owing to [JAX Quickfit] pursuant to the Franchise Agreement". On the same day, Tucker Senior consulted Conlon about the possible action that could be taken by JAX Quickfit and how best he could protect his interests.

40 On 12 March 2009, events came to a head. While Tucker Senior was providing his personal guarantee in support of an application for a credit account with a major tyre supplier and making the payment of the first month's rent through his solicitor's trust account, JAX Quickfit appointed Peter Ngan (Ngan) as receiver to Purcom pursuant to the Charge. 41 Ngan was called to give evidence at the trial of this proceeding. Ngan's evidence, which I accept, was that on 13 March 2009, the day after his appointment, he tried to telephone a mobile number of Tucker Senior which had been provided to him by JAX Quickfit but the number was disconnected. Ngan then telephoned the number at the foot of a copy of a letter from Purcom to JAX Quickfit and the phone was answered by Zissimou. Ngan recorded his recollection of the conversation in an affidavit filed with the Federal Court on 20 March 2009 (one week after the conversation) (the Ngan 20 March Affidavit) in the following terms: Ngan: Andrew, my name is Peter Ngan. I have been appointed as the Receiver of Purcom No.34 by JAX Quickfit. Zissimou: The business here has nothing to do with Purcom. Ngan: You have some property and stock that belongs to Purcom at those premises. Is Robert Tucker there? Zissimou: No, he's not. We've got nothing to do with Purcom. All I can do is let Robert Tucker know that you rang. Ngan: There is stock and property belonging to Purcom at your premises which I am entitled to as Receiver. Zissimou: I will pass on to Robert Tucker that you called. Ngan gave Zissimou his direct line and mobile telephone number. Two hours later Tucker Senior had not called. Ngan telephoned Zissimou again and asked Zissimou if he had got hold of Tucker Senior. Zissimou replied saying that he had been asked to pass on Tucker Senior's solicitor's number but he could not find it. He told Ngan he would call back in 15 minutes. Ngan telephoned a third time and Zissimou gave him Conlon's name and number. The contents of these conversations were put to Zissimou at the liquidator's examination. Zissimou agreed that the exchanges took place as recorded by Ngan. 42 On 16 March 2009, Ngan attended the Site. He spoke with Zissimou, who told him that there were no assets of Purcom at the Site, that the new business owned all the assets and the new owner put in new stock, plant and equipment. When asked directly by Ngan where the stock, plant and equipment that belonged to Purcom was located, Zissimou said "I've got no idea". Ngan's recollection of this conversation was also recorded in the Ngan 20 March Affidavit, and when put to Zissimou at the liquidator's examination, he agreed the contents were an accurate record of the conversation. At the trial, Zissimou gave evidence that his responses were on instructions from Richard Tucker. On the same day, 16 March 2009, Conlon (Tucker Senior's solicitor) received a letter from Danks' solicitor requesting an indemnity from Tucker Senior for the lease obligations for the Site. 43 On 18 March 2009, Zissimou was appointed a director of Admin. At about the same time, 98 fully paid A class shares of $1 per share in Admin were issued to Zissimou to be held by him non beneficially. I accept Zissimou's evidence that he was unaware that he had been issued shares in Admin. The changes in directors and shareholders were notified to ASIC on 19 March 2009. 44 On 20 March 2009, the receiver of Purcom commenced proceedings in the name of Purcom seeking to wind up Purcom pursuant to s 459P(1) of the Corporations Act 2001 (Cth) (the Act) and, pursuant to s 472(2) of the Act, the appointment of a provisional liquidator to Purcom. On 20 March 2009, Emmett J appointed Parker provisionally as liquidator of Purcom: Purcom No 34 Limited (Receiver Appointed) [2009] FCA 383. 45 Tucker Senior appeared unperturbed by these events. The next day, he sent a facsimile to his solicitor attaching handwritten changes to a document entitled "Agreement for the Sale of Equipment" bearing the date 1 March 2009 (the Sale Agreement). The Sale Agreement was between Purcom and Admin and provided for the sale of all equipment owned by Purcom including but not limited to: 1. two tyre fitting machines for $2,500.00; 2. two hoists for $1,000.00; 3. two wheel balancing machines for $800.00; 4. a Ford utility vehicle for $5,000.00; 5. the remaining tools, shelving and equipment for $3,000.00. The total sale price was $12,800.00 payable by Admin to Purcom by seven instalments, being six quarterly instalments of $1,000.00 and the final instalment of $6,800.00 on or before 1 December 2010. Tucker Senior executed the agreement for Purcom. Richard Tucker executed the agreement for Admin. Richard Tucker was described as the "sole director". At 1 March 2009, he was the sole director. On 21 March 2009, he was not (see [43] above). Further, at 1 March 2009, Purcom was not in provisional liquidation. On 21 March 2009, it was (see [44] above). 46 Although the Sale Agreement was dated 1 March 2009, it is clear that the terms of the Sale Agreement were still unresolved on 21 March 2009. The description of the items of equipment and the allocation of the price between the items of equipment were amended by Tucker Senior on 21 March 2009. Although the Sale Agreement bears the date 1 March 2009, it was backdated. It incorporates critical amendments proposed by Tucker Senior on 21 March 2009. 47 On 26 March 2009, Tyres4U, a tyre supplier, was looking for payment of outstanding accounts. A representative of Tyres4U telephoned the Site and spoke to Zissimou. Zissimou told the representative that Tucker Senior was no longer involved in the business, that Admin was forced into liquidation by JAX Quickfit two days earlier with no official notice and a new company had been formed to carry on the business. The statements made by Zissimou were in part incomplete and, in part, inaccurate. After sending a copy of the outstanding account to Zissimou, on 27 March 2009 Tucker Senior telephoned Tyres4U and "explain[ed] about recent events re closure of [the] old business". What Tucker Senior said was not disclosed. For present purposes, it is sufficient to note that Tucker Senior was still involved. 48 Tyre suppliers were still chasing payment of outstanding accounts for Purcom. On 2 April 2009, a representative of Tyrecorp telephoned Zissimou about an outstanding account. Zissimou told the representative that Tucker Senior was no longer at the Site, that JAX Quickfit had gone in and placed Admin straight into liquidation, "no discussion, no nothing" and had frozen Tucker Senior's funds. Zissimou also told the representative that he had taken over the new business "which was nothing to do with JAX". Tyrecorp's transcript of the telephone conversation was put to Zissimou in cross examination. He did not deny having the conversation but denied making the statements recorded by Tyrecorp. I have concluded that Tyrecorp's contemporaneous record accurately states the substance of the conversation. I reject Zissimou's evidence in relation to this matter. 49 On 9 April 2009, Tucker Senior completed a Report as to Affairs for Purcom. It was incomplete and inaccurate. The only listed asset was cash at bank of approximately $3,000.00. The only listed liabilities were unsecured creditors of $185,000.00 (JAX of $145,000.00 and suppliers of $40,000.00) and contingent assets of $3,000.00. 50 On 14 April 2009, Tucker Senior sent a facsimile to Angelo Mavrodis, an accountant, in which he stated that sales of $1,973.00 on 19 March 2009 and sales of $2,694.00 on 21 March 2009 "did not appear in the [Admin] A/C for sales made by that company". The facsimile then set out a reconciliation prepared by Tucker Senior. The reconciliation deducted the sales figures from a "1st payment" of $7,500.00. For present purposes, it is unnecessary to decide where Tucker Senior obtained the sales information of Admin, a company which supposedly was not connected to him. Not only did Tucker Senior have information about Admin, but he was directing the manner in which that company would use its funds and meet its obligations under the Stock Agreement. 51 On 24 April 2009, Parker was appointed official liquidator of Purcom and the company was wound up. On 29 April 2009, Zissimou ceased to be a director of Admin and the next day, on 30 April 2009, the 98 A class shares were transferred from Zissimou to Richard Tucker and then from Richard Tucker to Tucker Senior's daughter. 52 In early May 2009, Suzanne Reynolds, a book keeper, sent an email to prahrantyres@bigpond.com.au addressed to Tucker Senior requesting him to email a supplier to authorise the release of "Rob Tucker copy bill 2353" by that supplier to Ms Reynolds. The email chain includes an email from prahrantyres@bigpond.com.au to the supplier to that effect signed off by Tucker Senior. The email address was for the business of Admin conducted at the Site. 53 During July and August 2009, liquidator's examinations were conducted in the Victorian Registry of the Federal Court. Tucker Senior was first examined on 16 July 2009. The examination was adjourned until 3 August 2009. Tucker Senior and Conlon were then examined on 3 and 4 August 2009. Tucker Senior's wife was examined on 4 August 2009. Zissimou and the accountant, Mavrodis, were examined on 5 August 2009. 54 The next day, Thursday 6 August 2009, Richard Tucker contacted Zissimou. Zissimou gave evidence of this contact in his affidavit of 9 December 2009. He swore that he did not recall if it was a telephone call or a discussion at the Site. Zissimou said that Richard Tucker asked him if he would like to buy the business. In response to a question from Zissimou about price, Richard Tucker said $50,000.00 and that Zissimou would not have to pay all of it in one lump sum. Instead, Richard Tucker proposed that Zissimou pay about $35,000.00 up front and the balance off over time. In cross examination, Zissimou indicated he was more inclined to accept the offer from Richard Tucker than the previous offer from Tucker Senior (see [24] above) because the new offer did not involve a "lump sum payment" and was a "fair price". 55 Events moved quickly. The next day, PTC was incorporated. Zissimou was the sole director and shareholder. On the same day, a Contract of Sale of Business was executed by Zissimou on behalf of PTC as purchaser and Richard Tucker on behalf of Admin as vendor (the 7 August Sale Agreement). The date of sale was 7 August 2009. Settlement Date was 12 August 2009. The maximum stock value was $40,000.00 and the sale price was $50,000.00. A deposit of $1,000.00 was paid. The assets included in the sale price were "plant, equipment, fittings and other assets" and goodwill. The lease details were not completed. On 12 August 2009, $9,000.00 was paid to Admin by or on behalf of PTC. 56 On Friday 14 August 2009, Parker's solicitors sent a letter of demand to Zissimou seeking undertakings that he would not seek to purchase the assets and undertaking of Admin without their prior consent. Zissimou received the letter on 14 August 2009. On Tuesday 18 August 2009, PTC made two payments to Admin totalling $25,000.00 (one of $10,000.00 and another of $15,000.00). On the same day, Zissimou sent a letter to Parker's solicitors declining to give the undertakings sought and stating "[m]y company has already bought the business at a fair price". On 24 August 2009, Parker's solicitors wrote to Zissimou requesting information in connection with the purported transfer of business from Admin to PTC. 57 On 28 August 2009, the liquidator's examination of Richard Tucker and a further examination of Zissimou were conducted. Later that day, on application by Parker and Purcom, the Federal Court made Orders, inter alia, restraining PTC from taking any steps to transfer any of its assets or business undertaking in connection with the business known as "Prahran Tyre Centre" to any person or entity, other than in the ordinary course of business: Parker, In the matter of Purcom No 34 Pty Limited (in liquidation) (ACN 006 794 672) (28 August 2009). The hearing of the interlocutory process was adjourned to 2 September 2009. 58 On 29 August 2009, Nicholas Moss, a legal practitioner, attended the Site to effect service of the proceedings (including the Orders of 28 August 2009) on Zissimou. He arrived at the Site at approximately 12:30pm and parked his car in a side street of High Street, Prahran. The front of the building on the Site includes two garage doors. Both doors were open. Moss observed Tucker Senior on the Site. Moss recognised Tucker Senior because Moss was in Court when Tucker Senior was examined at the liquidator's examination of 16 July 2009. Moss observed Tucker Senior appearing to serve a customer. Moss waited until Tucker Senior had finished and then approached him. Moss asked to see Zissimou. Tucker Senior responded that Zissimou was not in and would not be there at any time over the weekend. Moss asked if Zissimou would be at the Site on Monday. Tucker Senior responded that he would not be in on Monday but may be later in the week. 59 Moss then had the following conversation with Tucker Senior: Moss: "You're Robert Tucker". Tucker Senior: "No I'm not." Moss: "Yes you are. I recognise you from Court." Tucker Senior: "I'm sorry, I was confused. You said Robert Tucker, I am Richard Tucker." Moss: "No, you're Robert Tucker. Richard Tucker is your son." 60 Moss then served the documents on Tucker Senior. After asking Moss questions about the proceedings, Tucker Senior stated that he did not work at PTC and was just there "helping out". Moss was cross examined by Counsel for Zissimou at the hearing. His evidence concerning identification of Tucker Senior was not the subject of cross examination. I find that Tucker Senior was not only at the Site on 29 August 2009 but was in fact working for PTC. 61 On 2 September 2009, the interlocutory process was heard. Tucker Senior appeared in person. Zissimou and PTC were represented by solicitors. The remaining defendants did not appear. Orders were made for the appointment of a receiver and manager to Admin and ancillary orders, the extension of the injunction against PTC and other preservation orders: Parker, In the matter of Purcom No 34 Pty Limited (in liquidation) (ACN 006 794 672) (No 2) (2 September 2009). The interlocutory process was further adjourned to Monday 7 September 2009. On that date, orders by consent of the Plaintiffs and PTC were made including a declaration that the 7 August Sale Agreement (see [55] above) was void ab initio. The substance of the orders was that Zissimou and PTC gave up any right to the business conducted at the Site and agreed to take all steps reasonably necessary to effect the re-transfer of any assets transferred under the 7 August Sale Agreement currently in their possession to the receiver and manager of Admin. 62 On 19 November 2009, Ngan, in his capacity as the receiver of Purcom, applied to the Court for approval to enter, and an order approving entry, into a Supply Deed with JAX Quickfit. The Court granted Ngan the approval subject to Ngan serving the Orders on Tucker Senior and Admin: Parker, In the Matter of Purcom No 34 Pty Limited (In Liq) (ACN 006 794 672) (2009) 262 ALR 85. On 25 November 2009, service on Tucker Senior and Admin was effected. 63 After these events, Tucker Senior took some steps to assist in establishing a new tyre outlet in Malvern Road, Prahran. Initially that business was called PTC. That business is now called "Tyres N More" and, as of 15 January 2010, is conducted by Zissimou pursuant to a franchise agreement with an unrelated third party.

(1) DESCRIPTION OF CLAIM 64 The Plaintiffs submitted that from about August 2008 Tucker Senior embarked on a scheme designed to divert Purcom's assets and business undertaking away from Purcom to Admin. The Plaintiffs referred to and relied upon numerous facts and matters as evidence of the implementation of that scheme. 65 In my view, Tucker Senior did embark on a scheme designed to divert Purcom's assets and business undertaking away from Purcom to Admin and the steps taken to give effect to that scheme are evidenced by the facts and matters in paragraphs [6]-[63] above. 66 As a result of that conduct: 1. Purcom was divested of the lease of the Site for no consideration: see [11] to [34] above; 2. Purcom was divested of all its stock, equipment and business undertaking for a price which was substantially less than the price it paid for the business and at a price less than it was subsequently sold by Admin to PTC: see [31] to [35] above; 3. Purcom was left with no assets, its income earning capacity from its business was reduced to zero, it was left with significant liabilities and was placed into liquidation: see [44] to [51] above; 4. JAX Quickfit terminated the Franchise Agreement and Purcom not only lost the benefit of its rights under that agreement but became exposed to greater losses under the agreement and the Charge: see [7]-[8] and [37]-[39] above. 67 What are the legal and equitable consequences of that conduct?

Directors' duties and fiduciary duties 68 The Plaintiffs submitted that Tucker Senior, as the (sole) director of Purcom, owed statutory duties to Purcom under ss 180-182 of the Act as well as fiduciary duties and that by reason of Tucker Senior's conduct, these duties were breached. Those duties included: 1. a duty to exercise his powers and discharge his duties with the degree of care and diligence that a reasonable person would exercise if they were a director of Purcom and occupied the office held by and had the responsibilities within Purcom of Tucker Senior: s 180(1) of the Act; 2. a duty to exercise his powers and discharge his duties in good faith in the best interests of Purcom and for a proper purpose: s 181(1) of the Act; 3. a duty to not improperly use his position to gain advantage for himself or someone else or cause detriment to Purcom: s 182(1) of the Act. 69 In addition, as a director of Purcom, Tucker Senior was in a fiduciary relationship with Purcom (Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 96 and News Ltd v Australian Rugby League Ltd (1996) 64 FCR 410). Accordingly, Tucker Senior owed fiduciary duties to Purcom: 1. to account for any benefit or gain he obtained in circumstances where there was conflict between his fiduciary duty and personal interest in the pursuit or possible receipt of such a benefit or gain; 2. to account for any benefit or gain he obtained or received by use or by reason of his position or opportunity or knowledge resulting from it; 3. to keep confidential information and knowledge he obtained in the course of him exercising his responsibilities relating to the operation of the franchise; 4. to act in the best interests of Purcom.

Section 180 of the Act 70 In Re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler (2002) 168 FLR 253, Santow J set out a series of summary propositions and principles applicable to the duty of care and diligence as enacted in s 180 of the Act. So far as is relevant to the issues in this case, his Honour stated at [372]: (1) directors owe a duty of care and skill at common law and in equity: Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187; 14 ACSR 109 Daniels (formerly practising as Deloitte Haskins & Sells) v Anderson (1995) 37 NSWLR 438; 16 ACSR 607; (2) however, the equitable duty to exercise reasonable care and skill is not properly classified as a fiduciary duty: Permanent Building Society (in liq), above, per Ipp J (at ACSR 158); (3) the statutory duty of care and diligence, s 180, is framed in similar terms to its predecessor s 232(4). It has been said of the latter that the duties imposed upon directors by it are essentially the same as the duties of directors under the common law: Sheahan v Verco (2001) 79 SASR 109 ; 37 ACSR 117 per Mullighan J (at ACSR 134); Daniels (formerly practising as Deloitte Haskins & Sells) v Anderson (1995) 37 NSWLR 438 ; 16 ACSR 607 per Powell JA at NSWLR 603; see also Lockhart J in Australian Innovation Ltd v Petrovsky (1996) 21 ACSR 218 at 222; (4) in determining whether a director has exercised reasonable care and diligence one must ask what an ordinary person, with the knowledge and experience of the defendant might be expected to have done in the circumstances if he or she was acting on their own behalf: Permanent Building Society v Wheeler, above, per Ipp J (at ACSR 159); Australian Securities Commission v Gallagher (1993) 11 WAR 105; 10 ACSR 43; (5) … (6) … the standard of reasonable care is generally said to be that of an ordinary prudent person (Re City Equitable Fire Insurance Co Ltd [1925] Ch 407 per Romer J) … (7) in determining whether a director has breached the statutory standard of care and diligence (s 180(1)), the court will have regard to the company's circumstances and the director's position and responsibilities within the company: see also explanatory memorandum to the CLERP Bill 1999 (para 6.75); … (14) where there is a transaction involving the potential for conflict between interest and duty, as here arose, the duty of care and diligence falls to be exercised in a context requiring special vigilance, calling for scrupulous concern on the part of those officers who become aware of that transaction to ensure that any necessary corporate approvals are obtained and safeguards put in place. …; 71 I have concluded that Tucker Senior did breach s 180 of the Act in that he did not exercise his powers and discharge his duties with the degree of care and diligence that a reasonable person would exercise if they were a director of Purcom and occupied the office held by and had the responsibilities within Purcom of Tucker Senior. If a reasonable person was a director of Purcom and had the responsibilities within Purcom of Tucker Senior, they would not have taken the steps that resulted in the circumstances summarised in [66] above.

Sections 181 and 182 of the Act 72 Section 181 of the Act is concerned with self-dealing. In HIH 168 FLR 253, after noting that some of the principles in so far as dealing with impropriety, or lack of good faith, are common to ss 181 and 182, Santow J (at [735]) summarised the principles applicable to s 181 of the Act in the following terms: (1) a director (as a fiduciary) is under an obligation not to promote his personal interest by making or pursuing a gain in circumstances where there is a conflict or a real or substantial possibility of a conflict between his personal interests and those of the company: Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; 55 ALR 417 per Mason J at CLR 103. This is both at general law and by statute (s 181 and as applicable ss 182 and 183). Such promotion would not be to act in good faith in the best interests of the corporation, or for proper purposes: s 181. If the director has improperly used his position or information to gain such advantage ss 182 and 183 respectively are breached; (2) in order to assess whether or not there is a real sensible possibility of conflict one must adopt the position of the reasonable person looking at the relevant facts and circumstances of the particular case: Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721 per Lord Upjohn (at AC 124); Queensland Mines Ltd v Hudson (1978) 18 ALR 1; 3 ACLR 176; (3) nonetheless, a director may act with a personal interest even though the director has not freed his or her mind of that personal interest when acting provided that this personal interest was not the actuating motive rather than some bona fide concern for the benefit of the company as a whole or for fairness as between members: Mills v Mills (1938) 60 CLR 150 per Latham CJ (at 164-65); … 73 Where no reasonable board could consider a decision to be within the interests of the company, the making of the decision will be a breach of duty: HAJ Ford, RP Austin and IM Ramsay, Ford's Principles of Corporations Law (14th ed, 2009) at [8.060]; see also HIH 168 FLR 253 at [739]. Whether a director has acted for a proper purpose, namely for the benefit of the company, is to be objectively determined (Permanent Building Society (in liq) v Wheeler (1984) 11 WAR 187 at 137 per Ipp J; see also HAJ Ford, RP Austin and IM Ramsay, Ford's Principles of Corporations Law (14th ed, 2009) at [8.200]). Applying those principles to the conduct of Tucker Senior, I have concluded that Tucker Senior failed to act in good faith. His decisions were for an improper purpose. His decisions were not for the benefit of Purcom but himself. The conduct was deliberate and calculated to achieve one objective - to benefit himself to the detriment of Purcom. 74 To establish liability under s 182(1) of the Act, it is sufficient to establish that the conduct of the director was carried out in order to gain an advantage; it is not necessary to establish that advantage was actually achieved (Chew v R (1992) 173 CLR 626 at 633). I have concluded that the conduct of Tucker Senior (see [71] to [72] above) breached ss 181 and 182 of the Act. The conduct was carried out in order to gain an advantage for himself - to end the Franchise Agreement and, at the same time, to enable him to carry on a tyre outlet through another entity using the assets and undertakings of Purcom.

75 As noted by Santow J in HIH 168 FLR 253, at least in relation to s 180 of the Act, the duties imposed upon directors by it are essentially the same as the duties of directors under the general law. Accordingly, for the same reasons, I have concluded that Tucker Senior breached his fiduciary duties to Purcom and is liable to pay equitable compensation to Purcom so as to restore Purcom to the position it was in prior to the breaches and to make good any loss occasioned by his wrongful conduct. The determination of that compensation (and any question of whether it would be open to Purcom to elect instead to seek relief by way of account of profits) are matters to be decided separately: Warman International Limited v Dwyer (1995) 182 CLR 544 at 556 (as to available remedies), at 559-562 and 569-70 (as to election) and at 565 (as to the basis for an account of profits); see also Bofinger v Kingsway Group Limited (2009) 239 CLR 269 at [1]; Michael Wilson & Partners Limited v Nicholls [2009] NSWSC 1033 at [365] - [373] and Visnic v Sywak (2009) 257 ALR 517 at [4], [16] - [26].

D. CLAIM AGAINST RICHARD TUCKER 76 The Plaintiffs' pleaded claim against Richard Tucker is that he "knowingly participated and assisted in" Tucker Senior's scheme and the resulting breaches of duty by his father. 77 In support of the Plaintiffs' claim against Richard Tucker, the Plaintiffs referred to the decision of Owen J in Bell Group Ltd (in Liq) & Ors v Westpac Banking Corporations & Ors (No 9) (2009) 225 FLR 1 at [4627]- [4838] and the authorities there cited and, in particular, at [4748]: The resulting law, as I apprehend it, is that for a third party to be held liable for knowing receipt: (a) there must be a "trust"; (b) the trustee must have misapplied "trust property"; (c) the third party must have received trust property; (d) at the time of receiving the trust property, the third party must have known of the trust and of the misapplication of the trust property; and (e) the third party will have taken to have "known" in the relevant sense if the third party: (i) has actual knowledge of the trust and the misapplication of trust property; or (ii) has deliberately shut his or her eyes to those things; or (iii) has abstained in a calculated way from making such enquiries as an honest and reasonable person would make, about the trust and the application of the trust property; or (iv) knows of facts which to an honest and reasonable person would indicate the existence of the trusts and the fact of misapplication. 78 On the facts in this case, the reference to "trust property" would include "where a director of a company deals with assets of the company that constitutes a breach of a fiduciary duty that the director owes to the company": Bell 225 FLR 1 at [4750] and [4776]ff. 79 Richard Tucker is 25 years old. As noted above, he appeared only on the first day of the trial. When asked if he wished to give viva voce evidence or lead any other evidence, he said no. Initially, Richard Tucker informed the Court by email that he would attend Court on the third day after classes had concluded at 2:30pm. He did not. Mr Farrar, the Plaintiffs' solicitor, gave viva voce evidence that he telephoned Richard Tucker after 3:00pm on 3 March 2009 (the third day of trial) and the following exchange took place: I asked Richard Tucker whether he had received my telephone message left earlier today. He said that he had not. I asked him whether he was intending to attend and appear at court today. He said that he was not and that he had classes on this afternoon and he would be unable to attend. I asked him whether he had received my email of last night with respect to whether he was seeking to rely upon his affidavit, which was filed in September 2009. He said that he was. I said in those circumstances that my counsel, Mr Wells, would require him to be available for cross examination. He said that he was not available to attend today. I said that that position was not acceptable and he was required to attend in the event that he wished to rely upon the affidavit. He said that he is busy with classes today and would not be in attendance. 80 I have read Richard Tucker's affidavit. He denies that he knowingly participated and assisted his father in the scheme pleaded by the Plaintiffs. In the circumstances, I have accepted the affidavit into evidence but because of the form and content of the affidavit and, further, because Richard Tucker did not make himself available for cross examination, unless the contents of the affidavit were independently corroborated by documentary evidence tendered at trial, I have not accepted the truthfulness of the contents of it. 81 The question for the Court is whether the matters listed in [77] above were established. 82 First, I have concluded that Richard Tucker received property (namely the assets of Purcom) which was subject to relevant fiduciary obligations: Bell 225 FLR 1 at [4754] and the authorities there cited. The fiduciary obligations were the obligations owed by Tucker Senior to Purcom: see [69] above. To adopt the terms used by Owen J (recognising the considerable caution required in using terms like "trust" and "trustee" in this context) there was a "trust" and the "trustee" of that trust (Tucker Senior) had misapplied the "trust property", the assets of Purcom. By way of caution on the use of the word "trust", see Visnic v Sywak (2009) 257 ALR 517 at [48]. Richard Tucker received that property. 83 The next issue is whether, at the time of receiving the assets of Purcom, Richard Tucker knew of the relevant obligations and of the misapplication of the assets of Purcom. As noted earlier, Richard Tucker will be taken to have "known" in the relevant sense if he: (i) has actual knowledge of the obligations and the misapplication of the property; or (ii) has deliberately shut his or her eyes to those things; or (iii) has abstained in a calculated way from making such enquiries as an honest and reasonable person would make, about the obligations and the misapplication of the property; or (v) knows of facts which to an honest and reasonable person would indicate the existence of the obligations and the fact of misapplication. 84 The Plaintiffs submitted that at the time of receiving the assets of Purcom, Richard Tucker knew of the obligations and of the misapplication of the assets of Purcom and that his knowledge was to be inferred from a number of facts and matters including: 1. on 13 January 2009, he was appointed the sole director and shareholder of Admin, despite the concerns he had apparently previously expressed as recorded in Conlon's 21 November 2008 file note: see [20] and [23] above; 2. on 21 January 2009, as sole director and shareholder of Admin, he executed a declaration of trust of his entire shareholding in Admin for the benefit of the Trust, a trust created on the same day (see [26] above). Richard Tucker's evidence was that when he signed these documents "[he] did not examine or read in any detail documents presented for (sic) me to sign by … Conlon and [Richard Tucker] assumed that any documents [he] signed were documents necessary to create [his] ownership in [Admin] for the commencement of a completely new tyre business operation"; 3. in late February / early March 2009, Richard Tucker ordered business cards for the business to be conducted by Admin and, despite being the sole director and shareholder, did not order a business card with his name on it: see [29] above; 4. by no later than 28 February 2009, on behalf of Admin he executed the Stock Agreement to purchase Purcom's stock for $41,514.60, the price to be paid by instalments: see [31] above; 5. on 21 March 2009, on behalf of Admin he executed the backdated Sale Agreement for Admin to purchase Purcom's assets and business for $12,800.00, the price to be paid by instalments: see [45]-[46] above; 6. on 30 April 2009 (six days after the appointment of an official liquidator to Purcom and the day after Zissimou resigned as a director of Admin), he accepted a transfer of Admin shares from Zissimou and then transferred those shares to his sister: see [51] above; 7. on 6 August 2009 (two days after the liquidator's examination of his father and mother and the day after the liquidator's examination of Mavrodis, his accountant, and Zissimou), he contacted Zissimou and offered to sell Admin's business to him: see [54] above. The next day, the sale was effected: see [55] above. 85 Having regard to those facts and matters, I conclude that Richard Tucker had actual knowledge of his father's obligations and that the application of the property by his father was a misapplication of that property. At the very least, Richard Tucker deliberately shut his eyes to those things. As a result, Richard Tucker is liable to make equitable compensation to Purcom to restore Purcom to the position it was in prior to the breaches of fiduciary duties by his father and to make good any loss occasioned by his own and his father's wrongful conduct.

E. CLAIM AGAINST ADMIN 86 Richard Tucker's conduct (see [84] above) was performed in his capacity as the sole director and shareholder in Admin. He was Admin's directing mind and will. In Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at 170 (cited with approval by the High Court in Hamilton v Whitehead (1988) 166 CLR 121 at 127), Lord Reid said: I must start by considering the nature of the personality which by a fiction the law attributes to a corporation. A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these: it must act through living persons, though not always one or the same person. Then the person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company. It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company's servant or agent. In that case any liability of the company can only be a statutory or vicarious liability. (Emphasis added). 87 As noted earlier, at all times that Richard Tucker knowingly participated and assisted in Tucker Senior's scheme and the resulting breaches of duty by his father, he was the sole director of Admin. Therefore, Richard Tucker's involvement in Tucker Senior's scheme can be considered actions of Admin with the result that Admin knowingly participated and assisted in Tucker Senior's scheme and the resulting breaches of duty by him: see also s 79 of the Act. Richard Tucker is equally liable for the conduct because, as noted by the High Court in Whitehead 166 CLR 121 at 127, the Act "would be seriously undermined if the hands and brains of a company were not answerable personally for breaches of the [Act] which they themselves have perpetrated". What then is the result of Admin's contravening conduct? 88 Again, Owen J dealt with this issue in Bell 225 FLR 1 (at [4799]ff) in the following terms: [4799] … Greater Pacific Investments Pty Ltd (In Liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 illustrates what I believe to be the correct approach to the problem. McLelland JA (with whom Priestley and Meagher JJA agreed) said, at 153: In general, where there is a contract for the sale of property by A to B made in breach of fiduciary duty owed to A by B (or by C in whose breach B knowingly participated) pursuant to which the legal title to the property has been transferred from A to B, the transaction is in equity voidable at the instance of A, who may (if necessary) obtain an order for rescission setting it aside. Unless and until A effectively avoids the transaction and (if necessary) obtains an order for rescission, B's property rights as a result of the transaction remain unaffected. However if A does effectively avoid the transaction and (if necessary) obtain an order for rescission, the parties will be treated in equity as if the transaction had never been effected; in other words, equity will treat B as if he had held the property in trust for A, that is, as a constructive trustee ab initio. A constructive trust arises in such circumstances as a consequence of the effective avoidance or rescission of the transaction. Where, for whatever reason, the transaction has not been and cannot be effectively avoided and rescission is unavailable, it remains effective and no constructive trust can arise ... … [4801] This is not an easy area of the law and, in many respects, it remains in a state of flux. A case in which, for example, a director steals money from a company and pays it across to a third party, who receives it with the requisite notice, would raise few problems. The money remains property of the company and is trust property in the hands of the director. But if the misfeasance by the director in dealing with company property under her or his control is no more than a breach of fiduciary duty, the conceptual basis under which that property comes to be regarded as trust property is more difficult to discern. [4802] One way of looking at it is to say that company property with which a director deals in breach of fiduciary duty is property to which a fiduciary obligation attaches (which is the language used in Farah Constructions [166]). If the third party receives it with the requisite knowledge the conscience of the third party is sufficiently affected to justify the intervention of equity. The previous sentence is a paraphrase of In re Montagu's Settlement, at 285. In those circumstances, equity might be disposed to treat property received under those circumstances either as a species analogous to trust property or as property coming within a broadened understanding of the concept referred to by Lord Selborne. The justification for broadening the concept lies in the more recent authorities that have extended the principle to include some classes of non-trustee fiduciaries. Under this view, it is not necessary to rely on the doctrine of the constructive trust in order to characterise the property transferred away in breach of a fiduciary duty as trust property. This is not to say that, in such cases, the constructive trust is irrelevant. The intervention of the court will still be necessary to seal and fashion the remedy. 89 In the present case, property of Purcom was dealt with by Tucker Senior in breach of his fiduciary duty. Admin received that property with the requisite knowledge so as to justify the intervention of equity. The precise form that intervention should take will be a matter for submission at the further hearing of the matter.

F. UNCOMMERCIAL TRANSACTION CLAIMS AS AGAINST PURCOM AND ADMIN 90 The Plaintiffs further submitted that the following transactions were uncommercial transactions within the meaning of s 588FB of the Act. They submitted that it follows that they were insolvent transactions within the meaning of s 588FC of the Act because they were uncommercial transactions and Purcom became insolvent because of, or because of matters including, entering into the transactions. Further, the Plaintiffs submitted they were unreasonable director related transactions within the meaning of s 588FDA of the Act: The relevant transactions were: 1. the lease of the Site by Danks to Admin: see [34] above; 2. the Stock Agreement: see [31] above; 3. the Sale Agreement: see [45] above. 91 During the course of final submissions, the Plaintiffs abandoned these claims in relation to the lease because of the attitude of Danks (see [4] above). The claims involving the other two agreements were pursued. 92 In my view, each of the Stock Agreement and the Sale Agreement was an insolvent transaction. Each was uncommercial within the meaning of s 588FB of the Act. A reasonable person in Purcom's circumstances would not have entered into either agreement. The detriment to Purcom of entering into each agreement was large, if not extreme - the sale of assets and stock in breach of its obligations under the Franchise Agreement with all of the resulting legal consequences for Purcom including these proceedings. On the other hand, Admin obtained the necessary means by which it immediately could operate a tyre outlet. In exchange, Purcom accepted to receive an amount, payable by instalments, which was substantially less than it had originally paid for the business. Only a limited amount of the purchase price was to be paid up front. Moreover, the sale was between related parties - an entity owned and controlled by a father (Purcom) and an entity owned and controlled by the son (Admin). 93 Each of those uncommercial transactions is an insolvent transaction within the meaning of s 588FC of the Act because Purcom became insolvent because of, or because of matters including, entering into each transaction: see [31] to [45] above. As a result, each of those transactions is voidable under s 588FE of the Act because it was entered into during the six months ending on the relation back day. Again, what orders the Court should make under s 588FF of the Act will be a matter for submission at the further hearing of the matter. 94 In light of the views I have formed about the application of ss 588FB, 588FC and 588FE of the Act to the Stock Agreement and the Sale Agreement, it is unnecessary for me to consider the further contention that those transactions were unreasonable director related transactions within the meaning of s 588FDA of the Act.

G. CONCLUSION 95 In light of the findings I have made, it will be necessary for the matter to be relisted for further hearing to hear submissions on the appropriate form of relief. I will direct the Plaintiffs by 4:00pm on 8 April 2010 to file and serve on each of the First, Second, Third and Seventh Defendants any additional material upon which they intend to rely together with an outline of submissions identifying the orders they propose to seek to give effect to these reasons for decision. The matter will then be listed for further hearing limited to the question of relief at 10:15am on 15 April 2010.

I certify that the preceding ninety-five (95) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.

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