Harris v Harris

Court of Appeal (NSW)|2021-11-29|Before: Basten JA, Gleeson JA, Brereton JA, Adam P, Black J

Background

The background circumstances relevant to the application to vacate the hearing were as follows.
The loans made by Sirrah to William and HHC, [8] and the fact that the loans had not been repaid, [9] were admitted on the pleadings in verified defences filed on 25 February 2019 and 18 February 2020. Specifically, the appellants admitted that the loan balance owing as at 30 September 2019 by HHC was $11,044,660.24. The amount of $11,044,660.24 included $6,556,623.16 which William caused Sirrah to pay to HHC in the period 2 March 2018 to 24 September 2019. The defence in each case was verified by William for himself and as a director of HHC.

The primary judge's reasons

In dismissing the application to vacate the hearing, the primary judge gave the following reasons.
First, with respect to the appellants' asserted "inability" to access documents, the appellants did not act with due dispatch and with the degree of expedition which might be expected of them. [15] Specifically, his Honour found that:

William had full and free access to Sirrah's records from the commencement of the proceedings in December 2017 to the appointment of the provisional liquidator on 14 October 2019; [16]
the appellants delayed seeking records between August and November 2020; [17]
William was provided with relevant documents on a hard-drive in November 2020 and there was an "extraordinary lack of expedition" in William not examining those documents until January 2021; [18]
there was delay attributable to the deferral of Mr Saccaro's inspection in February 2021; [19]
from at least 12 February 2021, William and HHC had access to documentation comprising Sirrah's accounting files, but made no serious attempt to access that material; [20]
records were available on a hard-drive given to William in February 2021 and that William and his advisers chose not to access those documents; [21]
William and his advisers had not devoted any significant time to review the relevant documents; [22] and
the submission by the defendants' counsel as to "unsuccessful attempts" by the defendants to obtain records to use in the preparation of evidence, was not supported by the evidence. [23]

Second, his Honour found that there was an inconsistency in William's evidence as to the circumstances of verifying the amended defence, and that there was no complexity in the amendments which William verified. [24]
Third, as to other sources of information available to the defendants, his Honour found that HHC's financial records were not under the control of Sirrah's provisional liquidator. [25]
Fourth, as to the possibility that the loans admitted in the defence were in fact investments by Sirrah, his Honour observed: [30] … When WH led evidence in admissible form, in the last of his affidavits, that amounted to no more than a suggestion that there were references to Scooti and TSH as "subsidiaries" or "investments" of HHC, which was not inconsistent with a characterisation of the transactions as loans, nor supported by the shareholdings in Scooti and TSH as notified to the Australian Securities & Investments Commission, which do not record the issue of further shares to reflect any investment in those companies, by HHC or Sirrah, beyond the initial issue of shares. [31] In any event, Mr Fernon went no further in submissions than to identify the possibility that, at some time in the future, an application might be made to withdraw the admissions and develop an affirmative defence as follows: "If the documents sought support the contentions of [WH], then the Second-Fourth Defendants may be able to assert that the monies paid to Scooti and TSH or to HHC for those companies were paid pursuant to a resulting trust in favour of Sirrah and not pursuant to a loan arrangement." (Emphasis in original.)
Fifth, as to prejudice were the hearing to be vacated, his Honour found that there was no certainty that the appellants could pay the costs "thrown away" in addition to any award of damages. [26]

Additional evidence on appeal

It is necessary to address one preliminary matter. The appellants sought to rely upon additional evidence on appeal concerning matters occurring after the judgment. [27] The appellants' solicitor, Mr Farshad Amirbeaggi, deposed in an affidavit dated 26 November 2021 as to requests made in emails dated 16 and 17 November 2021 to the liquidator's solicitors for "urgent" access to the documents which had been produced to the appellants informally at the hearing on 23 March 2021. The respondents objected to the admission of this affidavit on appeal as irrelevant. The Court indicated that it would rule on the application in its judgment, having regard to the argument advanced by the appellants as to the relevance of this evidence.
Senior counsel for the appellants submitted that the affidavit showed prejudice to the appellants because of the judge's refusal to vacate the hearing. That is incorrect. As counsel conceded, it can be inferred from the affidavit that the appellants had taken no steps prior to early November 2021 to access the USB drive containing the documents which had been produced at the commencement of the hearing on 23 March 2021. Moreover, the issue of access to documents two weeks prior to the hearing of the appeal has no connection to the asserted prejudice to the appellants in relation to a decision to refuse an application to vacate the hearing seven months earlier. The motion for leave to rely upon fresh evidence on appeal should be dismissed.

Consideration

The primary judge's decision to vacate the hearing was discretionary. To succeed on their submission that the judge erred in refusing to vacate the hearing, the appellants must establish error in one of the ways described in House v The King. [28] It is well-established that particular caution must be exercised by appellate courts when asked to intervene in matters of practice or procedure. [29]
The appellants submitted that the primary judge erred by failing to take into account, or give sufficient weight to, the material facts referred to below. However, matters of weight are irrelevant to the question of whether the exercise of a discretion miscarried within the principles referred to in House v The King unless the outcome is unreasonable or plainly unjust. In Durham v Durham, [30] Tobias JA (Campbell and Young JJA agreeing) said at [72]: Provided the permissible bounds to an exercise of discretion are not exceeded, giving more or less weight to matters of fact cannot give rise to appellable error in the exercise of a discretion. Within that range, the weight that the judge gives to the various matters entering into his decision is a matter for the judge, not for the appellate court, unless the outcome is unreasonable or plainly unjust.
The first matter which the appellants say the primary judge failed to take into account is the circumstances that necessitated the application to vacate the hearing being made late. The appellants say that the informal late production of documents in answer to the subpoena disadvantaged the appellants by depriving them of the opportunity to review the documents before the hearing commenced such that, with the aid of them, fresh applications to withdraw the admissions could be considered.
The premise of this submission is flawed. The appellants were not deprived of the opportunity to review the documents. The appellants had belatedly sought documents on subpoena in circumstances where his Honour found that the appellants had not acted with due dispatch and with the degree of expedition which might be expected of them. Those findings are not challenged on appeal.
It bears repeating that having foreshadowed a further application to withdraw admissions on 17 August 2020, the appellants (a) delayed seeking documents from the provisional liquidator until November 2020, (b) delayed inspecting the USB drive containing the Sirrah Quickbooks/Reckon accounts provided in November 2020 until January 2021, (c) did not devote any significant time to reviewing the hard-drive of the Sirrah server made available to Mr Saccaro at the provisional liquidator's office on 11 February 2021, nor to inspection of Sirrah's server at the provisional liquidator's office on 24 February and 1 March 2021, and (e) did not issue a subpoena until 5 March 2021, and then failed to constructively engage in narrowing the scope of the subpoena which was too wide in terms of its date range and categories of documents sought, a matter properly conceded by senior counsel for the appellants in this Court.
Next, the appellants say that the primary judge erred in taking into account that the appellants had access to Sirrah's documents before the appointment of the provisional liquidator on 14 October 2019. Contrary to the appellants' submission, this was a relevant consideration in circumstances where William ought reasonably to have anticipated a challenge to the substantial payments to HHC in excess of $6.5 million which he authorised between March 2018 and September 2019, given that he had sworn in his June 2018 affidavit that the only activity of Sirrah after the finalisation of the sale of the business was holding and distributing the proceeds of that sale. The weight to be given to this consideration was a matter for the primary judge and the appellants have not shown that the outcome in terms of refusing to vacate the hearing is unreasonable or plainly unjust.
Next, there is no substance in the appellants' complaint that his Honour's reference to an "absence of any evidence of any substantial further investigation" by William or his advisers between August 2020 and the commencement of the hearing [31] ignored the various steps and interlocutory applications made by the appellants "geared towards obtaining relevant records and investigating the alleged loans". His Honour did not ignore those steps and interlocutory applications, which were chronicled in his judgment. The finding that no "substantial further investigation" had been made of the alleged loans by the appellants was well-open, given his Honour's accurate description of the appellants' position at the time they sought to vacate the hearing: the appellants had identified "no more than a hope that, if wider access to records of Sirrah and HHC may be obtained, … then something might turn up to assist [William] in that respect". [32]
Turning to the appellants' challenge to several factual findings in their statement under UCPR, r 51.36(2), the first concerned the finding that William was provided with "relevant" documents on a hard-drive in November 2020. [33] The appellants contended that this finding was not available because the only documents produced on the hard-drive in November 2020 were "Quickbooks" records and "Reckon" accounts. No oral submission was made in support of this challenge. This is not surprising.
Plainly, as a record of Sirrah's transactions and financial position, the Quickbooks/Reckon documents were relevant to the characterisation of payments made by Sirrah to William and HHC. That these documents did not apparently support the appellants' characterisation of the payments as investments by Sirrah, rather than loans, did not render the documents irrelevant.
The two other findings challenged by the appellants are related and can be dealt with together. One is the finding that records were available on a hard disk "given" to William in February 2021 and that William and his advisers chose not to access those records. [34] This misstated the finding; the finding was that William had "access" to the records stored on a hard-drive. The other is the finding that from at least 12 February 2021 the appellants had access to documentation comprising Sirrah's accounting files but made no serious attempt to exercise that access. [35]
In oral argument, counsel for the appellants accepted that the challenge to these findings was "a fine line", given that there was "obviously access". The appellants say that the findings concerning access to documents was an oversimplification of the access provided, given the difficulties faced by the appellants in inspecting 31,500 documents in a form not connected to the server and in a form not previously seen or understood by William and Mr Saccaro. However, his Honour took both of these matters into account. [36]
As to the volume of documents on the hard-drive, this reflected the unconfined scope of the appellants' request for access to documents on Sirrah's server. As to the form of the documents, counsel for the appellants accepted that the decision was made by the appellants not to inspect the documents in the form that they were provided, and his Honour correctly took this into account in finding that a deliberate forensic choice was made by the appellants not to access and review documents as and when they were available in the hope that they would later become available in a more convenient form. Accepting, as his Honour did, that the documents were in a form that the appellants and their advisers regarded as difficult to access, there was no error in finding that the appellants made no serious attempt to access the documents from 12 February 2021.
The appellants did not identify any actual prejudice caused by the dismissal of their application to vacate the hearing. Before his Honour, and again in this Court, the appellants did not positively contend that any of the payments made by Sirrah to HHC between March 2018 and September 2019 were investments and not loans. The appellants' case is no higher than, if they had been afforded access to Sirrah's documents in a more convenient form, inspection might have revealed documents consistent with characterising some of the payments to HHC as investments, not loans, which in turn might have justified the withdrawal of HHC's admissions as to the loan balances. The assertion of "prejudice" is entirely speculative. In my view, there was no error in the primary judge's discretionary decision to dismiss the application to vacate the hearing.
Further, and in any event, the appellants have not demonstrated that a substantial wrong or miscarriage has been occasioned by the dismissal of the application to vacate the hearing, assuming contrary to the above conclusion, that the primary judge's exercise of discretion miscarried. The appellants are in no better position now to seek to withdraw the admissions by HHC as to the loan balances than they were at the time of the application to vacate the hearing in March 2021.
For reasons unexplained, the appellants have not accessed the documents from Sirrah's server contained on the USB drive that were provided at the commencement of the hearing in March 2021 over 7 months ago. Counsel for the appellants submitted that an inference should be drawn from the email correspondence annexed to Mr Amirbeaggi's affidavit that the appellants recently attempted to access those documents but were "locked out" from access. Aside from the difficulty of the absence of evidence from which such an inference might be drawn, the asserted explanation is beside the point.
A late attempt by the appellants to access such documents does not explain the failure to access the documents between March 2021 and October 2021 with a view to seeking leave to adduce additional evidence on appeal in support of the submission that a miscarriage has been occasioned because of the "possibility" that documents on Sirrah's server might have provided the basis for a further application to withdraw admissions. There is no justification for ordering a new hearing, as submitted by the appellants' counsel, for the purpose of affording the appellants an opportunity of "trying to find some basis [on which] these investments were made on behalf of Sirrah".

B. Claim for management fees

The appellants submitted that the findings by the primary judge that William breached his duties to Sirrah by causing Sirrah to pay management fees to HHC from 2007 to 1 December 2016 which were "above market rate", [37] and by causing Sirrah to enter into the 2016 service agreement and paying management fees under that agreement which were "above market rate", [38] were outside the pleadings. This submission directs attention to the pleadings and the case run at hearing.

The pleadings

The claim in respect of management fees covered two periods: the first from 2007 to 1 December 2016 when no service agreement was in operation, and the second since 1 December 2016, when the 2016 service agreement was operative.
As to the first period, the pleading alleged in par [33(c)]: By causing Sirrah to make substantial payments to HHC totalling at least $3,020,867 over the period 2007 to 1 December 2016 in circumstances where: … (c) the total payment substantially exceeded the remuneration to Harris Health Care pursuant to the 1997 service agreement, William preferred his own interests, or alternatively, the interests of HHC to the detriment of Sirrah, and thereby breached his statutory and fiduciary duties owed to Sirrah.
The particulars given of the alleged breach of duty included that William: … (d) caused detriment to Sirrah by causing it to make overpayments amounting to at least $1,585,961 in breach of s 182(1)(b) of the [Corporations Act]; (e) acted in a position of conflict given his personal interest and the interests of HHC in respect of such payments at Sirrah's expense in breach of his fiduciary duty to avoid a position of conflict of interest or duty; and/or (f) used his position as a director or officer of Sirrah to prefer his own interests and gain an advantage for HHC and himself at Sirrah's expense in breach of his fiduciary duty owed to Sirrah to not profit from his position.
In their defence, the appellants contended for an entitlement to "reasonable remuneration" on the basis of an implied contract or quantum meruit, or "reasonable remuneration" by way of an allowance, for the period after the expiry of the 1997 service agreement and before the 2016 service agreement..
At hearing, the respondents accepted that the claim for management fees paid prior to 17 December 2011 was statute barred. The claim for the period 1 January 2012 to 1 December 2016 was $1,601,519.83, being the difference between the amounts actually paid by Sirrah to HHC in that period and the CPI adjusted fee under the 1997 service agreement between Sirrah and HHC, which had expired and had not been replaced by any other agreement.
As to the second period, the pleading alleged in par [40] that the "Service Fee was, and is, excessive in circumstances where": a. the management services provided by Harris Health Care did not substantially change from the management services provided under the 1997 Service Agreement; … d. under the 2016 Services Agreement, Harris Health Care did not assume any liabilities on behalf of Sirrah that were payable by Sirrah in the ordinary course of Sirrah's businesses.
Paragraph [41] of the pleading alleged: By causing Sirrah to enter into the 2016 Service agreement and make monthly payments pursuant to the that Agreement in circumstances where: … (c) the total payment substantially exceeded the remuneration to Harris Health Care pursuant to the 1997 service agreement"; and/or … William preferred his own interests, or alternatively, the interests of HHC to the detriment of Sirrah, and thereby breached his statutory and fiduciary duties owed to Sirrah
The particulars given of this alleged breach of duty in pars (e) and (f), included the same particulars as given under par [33] of the amended statement of claim (see [55] above).
The claim in respect of management fees since 1 December 2016 was particularised as: (1) $679,246.38 for the period 1 December 2016 to 15 December 2017, being the difference between the amount paid for management fees pursuant to the 2016 Service Agreement and the amount alleged to constitute reasonable payments; and (2) $1,540,000 for the period after the sale of Sirrah's business on 15 December 2017, being the total amount of all management fees paid to HHC pursuant to the 2016 Agreement.
In their defence, the appellants contended that Sirrah was required to make monthly payments pursuant to the 2016 service agreement during the term of that agreement.

The opening and evidence at hearing

With respect to the management fees paid to HHC prior to the sale of the business, the respondents' written opening relied upon an expert report of Ms Zoe Lockyer dated 16 October 2020 on the issue of the "quantification of reasonable remuneration payable in an arms' length arrangement". For the period since 15 December 2017, the respondents contended that all management fees paid to HHC should be repaid in full. The appellants did not object at the hearing to the written opening as being outside the pleadings.
In support of their defence that they were entitled to "reasonable remuneration", the appellants relied upon William's evidence that he had worked hard and that the scale of the business of Cabrini had increased over the years up to the sale of the business. They also relied upon evidence from Mr Greg Anderson, a director of a boutique consulting and advisory business that assists health, aged care and disability organisations, who said that in or around 2016, his firm researched the market in relation to management fees and gave advice to William as to the market rates that would be appropriate for Sirrah to pay to William's management company, HHC. [39]
The primary judge found that William had not established any significant increase in the scope of his or HHC's responsibilities up until the Cabrini business was sold in December 2016, still less one that would justify the very significant increase in the amount of management fees paid, especially in the 2014-2015 and 2016-2017 financial years. [40]
The primary judge also found that Mr Anderson's evidence was of little weight as it was based on a document dated December 2019 but in fact contained information from an earlier document first prepared in 2016. Further, the document did not constitute advice as to the market rates that would be appropriate for Sirrah to pay to HHC but appeared to be a proposal for Mr Anderson's firm to provide services. [41]
After observing that Ms Lockyer did not incorrectly assume the continuation of the 1997 service agreement, which she rightly recognised had ceased to have effect from 2002, his Honour found: [42] Rather, she concluded that the remuneration that would have been paid under that Agreement, had it continued, reflected appropriate remuneration for the services provided by HHC, having regard to the comparison with ASX listed companies of similar size and other companies providing such services in the health sector. Mr Fernon did not seek to cross-examine Ms Lockyer and no evidence of any substance was led to contradict her report, beyond WH's generalised assertions that he had worked hard and the scale of the Cabrini business had increased during the relevant period; and it did not seem to me that there was ultimately any real challenge to Ms Lockyer's evidence that the amounts paid to HHC, during the period that no agreement was in place from 2002 to 2016, and after the 2016 Service Agreement was introduced, were excessive.

Primary judge's rejection of the pleading point

The primary judge rejected the appellants' contention that the claim in respect of the management fees (for the period prior to 1 December 2016) was outside the pleading in par [33(c)], as an "unduly technical reading of the pleading". [43] He found that the substance of the respondents' pleaded case advanced "the proposition that the payment substantially exceeded the remuneration payable to HHC pursuant to the 1997 service agreement in support of the somewhat wider contention that the payments made were unreasonable in amount", [44] giving three reasons:

the issue was raised by the amended defence which pleaded that from the expiry of the 1997 service agreement to 30 November 2016, William and HHC were entitled to reasonable remuneration for the services provided to Sirrah;
it was addressed in Ms Lockyer's evidence; and
it was addressed in William's evidence, which sought to establish that he had worked hard and took on significant additional responsibilities in order to justify the amounts paid by Sirrah to HHC in the period. [45]

Turning to the period 1 December 2016 to 15 December 2017, the primary judge again rejected the pleading point taken by the appellants, finding that it gave too little weight to the issue raised in par [40] of the amended statement of claim that the service fee payable under the 2016 service agreement was "excessive" in the pleaded circumstances (see [58] above). [46]

Consideration

The function of pleadings is "to state with sufficient clarity the case that must be met"; this reflects "the basic requirement of procedural fairness that a party should have an opportunity of meeting the case against him or her". [47]
However, pleadings are not an end in themselves, instead they are a means to the ultimate attainment of justice between the parties to litigation. [48] Thus, a case may be decided on a basis different from that disclosed by the pleadings where the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. [49]
As to what is sufficient to inform the other party of the case it has to meet, in Thomson v STX Pan Ocean Co Ltd [50] at [13], Greenwood, McKerracher and Reeves JJ said: … courts do not, at least in the current era, take an unduly technical or restrictive approach to pleadings such that, among other things, a party is strictly bound to the literal meaning of the case it has pleaded. The introduction of case management has, in part, been responsible for this change in approach.
Their Honours cited the decision of Martin CJ in Barclay Mowlem Construction Ltd v Dampier Port Authority [51] including at [6]-[8], where Martin CJ said that contemporary case management techniques including preparation and exchange of witness statements and hearing bundles: [6] … leave very little opportunity for surprise or ambush at hearing and, it is my view, that pleadings today can be approached in that context and therefore in a rather more robust manner, than was historically the case; confident in the knowledge that other systems of pre-hearing case management will exist and be implemented to aid in defining the issues and appraising the parties to the proceedings of the case that has to be met. [7] In my view, it follows that provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and appraising the parties of the case that has to be met, the Court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the Court to be spent extensively debating the application of technical pleadings rules that evolved in and derive from a very different case management environment. [8] Most pleadings in complex cases, and this is a complex case, can be criticised from the perspective of technical pleading rules that evolved in a very different case management environment. In my view, the advent of contemporary case management techniques and the pre-hearing directions, to which I have referred, should result in the Court adopting an approach to pleading disputes to the effect that only where the criticisms of a pleading significantly impact upon the proper preparation of the case and its presentation at hearing should those criticisms be seriously entertained.
Viewed in these terms, the question is whether the appellants knew the nature of the case they had to meet. The appellants submitted that the "issue put in play" on the pleadings was whether the 1997 service agreement was the only contract entitling William or HHC to payment for the management services provided to Sirrah. It follows, so the appellants say, that the premise upon which the primary judge read the pleadings as a "wider contention" to that pleaded was not available. There are two difficulties with this submission. One is that it does not fairly reflect the pleadings. The other is that it ignores the way the case was run at hearing.
Addressing the period prior to 1 December 2016, the pleadings stated with sufficient clarity that the respondents' case was that Sirrah had paid HHC management fees in excess of the appropriate yardstick for the remuneration for the services which had been provided (being the fees calculated by reference to the 1997 service agreement, as CPI adjusted). Although the respondents did not expressly plead that the management fees in this first period were "excessive" or exceeded the market rate for the provision of the management services provided by HHC to Sirrah, the issue of "reasonable remuneration" was raised by the appellants' defence and evidence adduced in support of that defence which pleaded that either or both appellants were entitled to "reasonable remuneration". As no reply was filed to the defence, there was an implied joinder of issue. [52]
As to the period from 1 December 2016, being the date of the 2016 service agreement, the pleadings were clear and the parties joined issue on whether the management fees paid under the 2016 service agreement were "excessive" in circumstances where the respondents alleged that (a) the management services provided by HHC did not substantially change from the services provided under the 1997 service agreement, (b) the total fees paid to HHC substantially exceeded the remuneration payable to HHC pursuant to the 1997 service agreement as CPI adjusted, and (c) no services were required to be provided after the sale of Sirrah's business on 15 December 2017.
To the extent that there was any lack of clarity in the pleadings as to the issue raised in the first period prior to 1 December 2016, that could not be said of the pleadings for the period after 1 December 2016. Moreover, the Lockyer report was sufficient to put the appellants on notice that the respondents were making a claim in respect of both periods that the management fees paid to HHC were not reasonable insofar as the amounts paid to HHC were substantially in excess of the yardstick of reasonable management fees being the amounts calculated by reference to the 1997 service agreement, as CPI adjusted, which Ms Lockyer said accorded with the market.
That the appellants understood that this was the case they had to meet is evident from three matters. First, the appellants served lay and expert evidence in response to the Lockyer report, contending that the 1997 service agreement was not relevant. The appellants contended that the services provided by HHC in the period January 2012 to 1 December 2016 were at an increased level to that under the 1997 service agreement, that the level of fees under the 2016 service agreement was more reflective of reasonable remuneration for those services, and Mr Anderson had given expert advice in 2016 as to the reasonableness of the management fees payable under the 2016 service agreement.
Second, there was the absence of any objection by the appellants at trial to the respondents' written opening.
Third, when raising the pleading objection for the first time in oral closing submissions, the appellants' response to the respondents' reliance on the 1997 service agreement as CPI adjusted as the yardstick of reasonable remuneration was that the earlier service agreement was not relevant because it was, in effect, out-of-date and not reflective of reasonable remuneration in the period from 2012.
No pleading point arises in relation to the period since 15 December 2017. In respect of this period, the appellants relied upon a different argument (which his Honour rejected). Assuming, as the appellants contended, that the 2016 service agreement created an unconditional obligation on Sirrah to pay HHC for the services "even if they were not provided or were not provided in respect of the operation of the business", his Honour found that all of the management fees paid since 15 December 2017 were excessive on the basis that William's conduct in causing Sirrah to enter into the 2016 service agreement amounted to a breach of his duties of care and diligence as a director, and occurred in circumstances where he faced a material conflict of interest. There is no challenge to this finding.
There is no substance in the pleading point.

Costs

The appeal has failed and there is no reason why costs should not follow the event. [53] The appellants should pay the costs of the first and second respondents.
A separate issue arises as to whether a costs order should also be made in favour of the third respondent, Sirrah, which was separately represented by counsel on the hearing of the appeal.
Counsel for the liquidator submitted that separate representation on the appeal was justified because the liquidator, in his previous capacity as provisional liquidator, had the main carriage of opposition to the application to vacate the hearing where there was a controversy about access to documents held by the provisional liquidator.
It does not follow that there was a need for Sirrah to be separately represented on the appeal, especially as the first and second respondents had filed detailed submissions, which sought to uphold the decision of the primary judge to dismiss the application to vacate the hearing. The submissions filed by the liquidator's solicitors on behalf of Sirrah largely duplicated the submissions of the other respondents. In the circumstances, there should be no order as to costs of the appeal in favour of Sirrah.

Conclusion and Orders

I propose the following orders: 1. Appeal dismissed. 2. Appellants to pay the first and second respondents' costs.
BRERETON JA: I agree with Gleeson JA.

Endnotes

In the matter of Sirrah Pty Ltd [2017] NSWSC 1683.
In the matter of Sirrah Pty Ltd [2018] NSWSC 1802.
In the matter of Sirrah Pty Ltd (in prov liq) [2021] NSWSC 413.
Principal judgment at [155], [170].
In the matter of Sirrah Pty Ltd (in prov liq) [2021] NSWSC 492.
Being $11,044,660.24 (as at 30 September 2019) less $1,199,287.00 (as at 30 June 2017).
Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.53.
Par 45, amended statement of claim.
Par 46, amended statement of claim.
Principal judgment at [67].
Reproduced in principal judgment at [7].
Principal judgment at [8].
Principal judgment at [14].
In the matter of Sirrah Pty Ltd [2021] NSWSC 140.
Principal judgment at [34], [41].
Principal judgment at [15].
Principal judgment at [15].
Principal judgment at [15].
Principal judgment at [14].
Principal judgment at [14].
Principal judgment at [20].
Principal judgment at [34].
Principal judgment at [29].
Principal judgment at [22], [28].
Principal judgment at [26].
Principal judgment at [43].
Supreme Court Act 1970 (NSW), s 75A(7), (9).
(1936) 55 CLR 499 at 504-505; [1936] HCA 40.
In re the Will of F B Gilbert (dec) (1946) 46 SR (NSW) 318 at 323; Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177; [1981] HCA 39; Newton v Ellis [2012] NSWCA 106 at [17] (Macfarlan JA, Beazley and Whealy JJA agreeing); Whall v Stamp [2019] NSWCA 163 at [99] (Payne JA, Basten and Leeming JJA agreeing).
(2011) 80 NSWLR 335; [2011] NSWCA 62; see also: Link 2 Pty Ltd v Ezystay Systems Pty Ltd [2016] NSWCA 317 at [204] (Ward JA, Bathurst CJ and Leeming JA agreeing).
Principal judgment at [28].
Principal judgment at [32].
Principal judgment at [26]-[27].
Principal judgment at [29], [34].
Principal judgment at [14].
Principal judgment at [14] and [27].
Principal judgment at [96].
Principal judgment at [101].
Principal judgment at [69].
Principal judgment at [88].
Principal judgment at [70].
Principal judgment at [90].
Principal judgment at [91].
Principal judgment at [91].
Principal judgment at [92].
Principal judgment at [100].
Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 (Mason CJ and Gaudron J); [1990] HCA 11; Dare v Pulham (1982) 148 CLR 658 at 664-665; [1982] HCA 70.
Banque Commerciale at 293 (Dawson J) citing Isaacs and Rich JJ in Gould v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490 at 517; [1916] HCA 81. See also Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356; [2010] FCAFC 133 at [52].
Banque Commerciale at 287 (Mason CJ and Gaudron J).
[2012] FCAFC 15.
[2006] WASC 281; (2006) 33 WAR 82.
UCPR, r 14.27(2).
UCPR, r 42.1. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 December 2021

Solicitors: Yates Beaggi Lawyers (Appellants) Lloyd & Lloyd Solicitors (First and second respondents) Watson Mangioni Lawyers (Third respondent) File Number(s): 2021/161015 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: In the matter of Sirrah Pty Ltd (in prov liq) [2021] NSWSC 413 In the matter of Sirrah Pty Ltd (in prov liq) [2021] NSWSC 492 Date of Decision: 7 May 2021 Before: Black J File Number(s): 2017/383731

HEADNOTE [This headnote is not to be read as part of the judgment] In the proceedings below, the first and second respondents brought derivative proceedings with leave of the court on behalf of Sirrah Pty Ltd against two directors (William Harris and Michelle Harris) and Harris Health Care Pty Ltd (HHC) in respect of management fees paid by Sirrah to HHC, money alleged to have been loaned by Sirrah to each of William and HHC, and amounts paid by Sirrah to HHC as "reimbursement" of expenses purportedly paid by HHC on behalf of Sirrah. The claim against Michelle was dismissed at the hearing. The day prior to the commencement of the hearing, the appellants filed an application to vacate the hearing. The basis of the application was to afford them an opportunity to inspect certain documents to assist them in establishing defences to the claims, including a possible application to withdraw admissions concerning the loans alleged to have been made by Sirrah to HHC and William. The provisional liquidator of Sirrah informally produced documents to the appellants at the beginning of the trial in response to a subpoena. The application to vacate the hearing was dismissed by the primary judge (Black J), who found that William had access to Sirrah's records up to the appointment of the provisional liquidator on 14 October 2019, the appellants delayed seeking records between August and November 2020, relevant documents were provided to William on a hard-drive in November 2020 but were not examined until January 2021, and the appellants had access to Sirrah's accounting files from at least 12 February 2021 but made no serious attempt to access the material. As to the derivative proceedings, his Honour concluded that William had breached his fiduciary duties to Sirrah and that HHC was liable as an accessory, except for the loans made to William. The appeal by William and HHC raised two issues: whether the primary judge erred in the exercise of his discretion by dismissing the application to vacate the hearing below; and whether the primary judge erred in making findings and granting relief in relation to the claim to recover management fees paid to HHC, as the claim was outside the pleadings. Held, dismissing the appeal (per Gleeson JA, Basten and Brereton JJA agreeing): As to issue 1 As the primary judge's decision to vacate the hearing was discretionary, it was necessary for the appellants to establish error in one of the ways described in House v The King: [36]. The appellants were not deprived of the opportunity to review the documents; rather, they had belatedly sought documents from the provisional liquidator in circumstances where they had not acted with due dispatch and with the degree of expedition which might be expected of them: [39]. In re the Will of F B Gilbert (dec) (1946) 46 SR (NSW) 318; Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170; [1981] HCA 39; Newton v Ellis [2012] NSWCA 106; Whall v Stamp [2019] NSWCA 163; Durham v Durham (2011) 80 NSWLR 335; [2011] NSWCA 62 referred to. None of the appellants' challenges to the primary judge's factual findings were made out. His Honour took into account that the documents were provided in a form that the appellants regarded as difficult to access. There was no error in the finding that the appellants made no serious attempt to access the documents from 12 February 2021: [46]-[47]. Nor did the appellants identify any actual prejudice caused by the dismissal of the application to vacate the hearing; the appellants' case was no higher than, if they had been afforded access to the documents in a more convenient form, inspection might have revealed documents consistent with characterising some of the payments as investments, as opposed to loans, which in turn might have justified an application to withdraw HHC's admissions as to the loan balances: [48]. As to issue 2 The pleadings stated with sufficient clarity that the respondents' case was that Sirrah had paid HHC management fees in excess of the appropriate yardstick for the reasonable remuneration for the services which had been provided by HHC: [75]-[76]. Further, the issue of reasonable remuneration was raised in the appellants' defence and evidence adduced in support of that defence: [75]. The appellants were on notice of the case they had to meet. The respondents' expert report and written opening was sufficient to put the appellants on notice that the respondents were making a claim that the management fees paid to HHC were not reasonable. The appellants served lay and expert evidence in response to the respondents' expert report and did not object to the respondents' written opening at trial: [77]-[81]. Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 279 [1990] HCA 11; Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70; Gould v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490; [1916] HCA 81; Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356; [2010] FCAFC 133; Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15; Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 referred to.

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