I shall return to this undertaking when dealing with the liquidator's submissions founded upon it.
33 I return to the chronological narrative. On 17 September 2001 Mr Mead, pursuant to the leave that had been granted to him by Einstein J to act on behalf of Hypec, applied in the common law proceedings to Sully J to set aside the default judgment and for leave to file a defence and cross-claims. On the same day, the liquidator wrote to Mr Dominello indicating that further investigations of the state of accounts between Hypec and BL supported Mrs Mead's contentions so that if he was now asked to determine whether Hypec should apply to set aside the default judgment, he "would firmly say 'no' ". The following day, the liquidator swore and filed an affidavit in the common law proceedings in which, in effect, he requested the court to defer Mr Mead's application on behalf of Hypec to set aside the default judgment. On 19 September 2001, counsel for the liquidator sought leave to appear before Sully J to support that request. Senior counsel for Mr Mead opposed it. Sully J refused leave.
34 In reasons for judgment delivered on 25 September 2001, Sully J granted the orders Mr Mead had sought: BL & GY International Co Limited v Hypec Electronics Pty Ltd (in liq) & Ors [2001] NSWSC 841.
35 On 25 and 26 October 2001, Cohen J of the Family Court heard Mr Mead's application referred to in [13] and [22] above. According to the primary judge, Mr Mead sought the right to sell sufficient of the matrimonial property to enable him to pay $537,000 for past legal costs incurred by him in the common law and Family Court proceedings and to fund future costs in those proceedings. So far as the common law proceedings were concerned, a total of approximately $343,000 had already been expended and future costs were then estimated at a little under $84,000.
36 In a judgment delivered on 2 November 2001, Cohen J refused to provide Mr Mead access to any property for the purpose of securing future estimated Family Court costs. His Honour decided that funding should only be provided for approximately one half of the legal costs already accrued and quantified in respect of both the Family Court proceedings and the common law proceedings together with the whole of the estimated future costs of the common law proceedings. He then arrived at a figure of $375,000. His Honour therefore ordered that the injunctions continued by Rose J should be discharged to the extent necessary to permit the sale of such of the four properties as was necessary to raise a net amount of $375,000 which sum was to be paid to Mr Dominello to be held by him on trust in a controlled monies account firstly, to meet Mr Mead's future costs in the common law proceedings and, secondly, to apply the balance to Mr Mead's indebtedness for past costs incurred in both the Family Court proceedings and the common law proceedings.
37 On 5 November 2001, the hearing of the common law proceedings commenced before Mathews AJ. Although the matter had been set down for five days, the hearing in fact extended over 15 days, the last of which was 26 November 2001. Because of this extended hearing time, Mr Mead's costs of that hearing significantly exceeded the amount of $84,000 estimated before Cohen J. The total costs had not been assessed at the time of the hearing before the primary judge but there was evidence of an estimate of approximately $900,000. Mr Dominello estimated the costs would exceed those which had been assumed by Cohen J in his judgment by $650,000-$700,000. Although the primary judge considered that a more correct figure would be approximately $557,000, it was still well in excess of the $84,000 estimated before Cohen J as required to meet Mr Mead's future costs of the common law proceedings and on the basis of which that judge had fixed the figure of $375,000.
38 On 4 December 2001, the liquidator lodged caveats against the title to seven parcels of real estate held in the joint names of Mr and Mrs Mead and which included three of the four properties. On 11 February 2002, he lodged a caveat against the title of the fourth property. However, as a consequence of an agreement between the liquidator and Mr Mead, two of the four properties were sold. Those sales were completed in January and February 2002 and the net proceeds paid into court in accordance with the orders of Hamilton J: see [5] above. At the time of the hearing before the primary judge, the other two properties remained unsold although one was, by agreement with the liquidator, sold prior to the hearing of the appeal and the net proceeds paid into court. A total of $332,980.98 had been paid into court in respect of the sale of two of the four properties. This left a shortfall of $42,019.02 in respect of which the third property was sold to enable, I assume, the $375,000 the subject of Cohen J's orders to be satisfied. We were informed during the course of the hearing that given the costs actually incurred by Mr Mead as a consequence of the unanticipated extended hearing of the common law proceedings, an application had been made to the Family Court to vary the orders of Cohen J to permit the sale of the third and fourth properties and the use of the whole of the net proceeds thereof by Mr Mead for the purpose of meeting the costs incurred by him in the common law proceedings. That application has been adjourned pending the outcome of this appeal. It should, however, be noted that prior to the hearing of the common law proceedings commencing, BL paid into court the sum of $115,000 as security for the costs of Hypec and Mr Mead.
39 On 14 February 2002, Mathews AJ delivered her judgment in the common law proceedings: BL & GY International Co Limited v Hypec Electronics Pty Limited [2002] NSWSC 38. She dismissed BL's claim against Hypec and Mr Mead, set aside the default judgment which BL had obtained against Mrs Mead and in lieu entered judgment for Mrs Mead on BL's claim. However, she dismissed Hypec's cross-claims against BL, Mrs Mead and Ms Yang.
40 The essential basis upon which Mathews AJ rejected BL's claim against Hypec was that she found that Mrs Mead and her sisters, and particularly Ms Yang, had falsified BL's records to support that claim. She dismissed the cross claim because she was not persuaded that Mr Mead's attempt to recreate the accounts between BL and Hypec from customs and shipping documents was either accurate or complete.
41 Although not directly interested in the common law proceedings in that they were being conducted on behalf of Hypec by Mr Mead, nevertheless an employee of the liquidator and Mr Conolly, his solicitor, were present throughout the hearing. Further, Mr Hodgson, an employee of the liquidator, was called by BL as a witness in the proceedings. According to the primary judge, he gave evidence of finding directors' loans of $2.861 million recorded in a trial balance of 30 June 1998 and of seeking to determine the true state of the directors' loan account in Hypec's books. He explained how further work had led him to the conclusion that the true state of that account should have shown it as being $4,907,725.64. The following exchange then took place:
"Q. Now at this stage, are you satisfied that that is the balance of the indebtedness or is it your opinion that further investigation may reveal further amounts which need to be added to the directors' loan account as monies owing to the company?
A. Yeah, further investigation may well do that, yes."
42 On 30 May 2002, the Commissioner of Taxation issued amended assessments of income tax to Hypec relating to the financial years ending 30 June 1989 to 30 June 1994 inclusive. Those amended assessments created a tax debt in the order of $1.4 million. It was common ground that, given the dismissal by Mathews AJ of BL's claim against Hypec, the Commissioner of Taxation is Hypec's only creditor of any substance. It is thus apparent that if sufficient of the assets were sold to enable the directors' loan account to be repaid to Hypec, the taxation debt would be repaid and the company would be solvent. It would also follow that as contributories, Mr and Mrs Mead would be entitled to share equally the surplus assets or funds of the company on any final distribution in the liquidation.
43 On 28 June 2002, Mathews AJ delivered judgment on an application by Mr Mead for indemnity costs in the common law proceedings: BL & GY International Co Ltd v Hypec Electronics Pty Ltd [2002] NSWSC 575. Her Honour ordered BL and Ms Yang to pay the costs of Mr Mead on an indemnity basis being the costs incurred for himself and for his conduct of the proceedings in the name of Hypec in respect of the entire proceedings including reserved costs. Ms Yang unsuccessfully appealed against this decision. The primary judge considered (at [101]) that there could be no assurance that Mr Mead will be able to recover those costs. He found that BL and Ms Yang could not be "a sure and readily available source of funds from which to pay the costs" of the common law proceedings.