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[2025] NSWSC 230
General information, not legal advice.
Supreme Court of NSW
2025-03-19
Nixon J
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: In the matter of Love D&V XOXO Pty Ltd (Receiver and Manager Appointed) and D & V Vlahos Pty Ltd (Receiver and Manager Appointed) – Desmond Wei Liang Teng in his capacity as Receiver and Manager of Love D&V XOXO Pty Ltd (Receiver and Manager Appointed) and D & V Vlahos Pty Ltd (Receiver and Manager Appointed) v Vlahos; Vlahos v Vlahos; Vlahos v Vlahos [2025] NSWSC 230
Hearing dates: 4-6 and 10 February 2025
Date of orders: 19 March 2025
Decision date: 19 March 2025
Jurisdiction: Equity - Corporations List
Before: Nixon J
Decision: See [315] – [320]
Catchwords: CORPORATIONS – Receivers and managers – Powers – Court-appointed receiver sought advice and directions regarding various proposed adjustments to director loan accounts – where the parties affected by those directions were represented at the hearing – directions given
LIMITATION OF ACTIONS – Debt – Acknowledgement – loan repayable on demand – debt acknowledged in financial statements of company – whether acknowledgement was “made to” the creditor within the meaning of s 54 of the Limitation Act 1969 (NSW)
CONTRACTS – Debt – loan agreement – where amount of advance was paid by one director into company bank account and then paid from that account to another director – whether the money was borrowed from the director who made the payment or from the company – whether repayments had been agreed to be made and had been made by means of various adjustments to director loan accounts.
COSTS – where application for winding up resolved by consent orders for appointment of receiver – whether costs should be awarded against plaintiff – whether costs previously awarded against plaintiff should be payable forthwith
Legislation Cited: Australian Consumer Law (Cth), ss 236, 237
Corporations Act 2001 (Cth), ss 286, 424, 462, 599, 1305, sch 2 s 90-15
Limitation Act 1969 (NSW), s 54
Supreme Court Act 1970 (NSW), ss 23, 67
Trustee Act 1925 (NSW), s 63
Uniform Civil Procedure Rules 2005 (NSW), r 42.7
Cases Cited: Application of Macedonian Orthodox Community Church St Petka Inc [2023] NSWSC 918
Australian Karting Association Ltd v Karting (New South Wales) Incorporated [2022] NSWCA 188
Australian Medico Legal Group Pty Ltd v Claireleigh Mosman Pty Ltd [2017] NSWCA 218
Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd [2002] NSWSC 576
Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142
ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24
Field v Shoalhaven Transport Pty Ltd [1970] 3 NSWR 96
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22
Garnac Grain Co Inc v HMF Faure and Fairclough Ltd [1968] AC 1130
Grain Technology of Australia Ltd v Rosewood Research Pty Ltd (No 2) [2019] NSWSC 1744
Hashman v Australian Medico-Legal Group Pty Limited; Claireleigh Mosman Pty Limited v Australian Medico-Legal Group Pty Limited [2016] NSWSC 1773
Hipworth v Mahar (1952) 87 CLR 335; [1952] HCA 43
In re Compania de Electricidad de la Provincia de Buenos Aires Ltd [1980] 1 Ch 146
Jeffreys v Sheer [2025] NSWCA 31
Kation Pty Ltd v Lamru Pty Ltd [2011] NSWSC 219
Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42
Mariconte v Batiste (2000) 48 NSWLR 724; [2000] NSWSC 288
Ogilive v Adams [1981] VR 1041
OLI 1 Pty Ltd (in liq) v OLG 1 Pty Ltd (No 2) [2022] NSWSC 1199
Onassis v Vergottis [1968] 2 Lloyd’s Rep. 403
Pavlovic v Universal Music Australia Pty Ltd (No 2) [2016] NSWCA 31
Re Anglican Development Fund Diocese of Bathurst [2015] NSWSC 440
Re Broens Pty Ltd (in liq) [2018] NSWSC 1747
Re G B Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674
Re Magic Aust Pty Ltd (in liq) (1992) 7 ACSR 742
Re Metal Storm Ltd (subject to Deed of Company Arrangement) [2015] NSWSC 1698
Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6
Re Plutus Payroll Australia Pty Ltd (in liq) (2019) 139 ACSR 536; [2019] NSWSC 1171
Re Quintis (Australia) Pty Ltd (No 2) (Receivers and Managers Appointed) (Administrators Appointed) [2024] WASC 278
Strike Australia Pty Ltd v Data Base Corporate Pty Ltd [2019] NSWCA 205
The Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535; [1981] HCA 71
Tomanovic v Argyle HQ Pty Ltd; Tomanovic v Global Mortgage Equity Corp Pty Ltd [2010] NSWSC 152
Young v Queensland Trustees Ltd (1956) 99 CLR 560; [1956] HCA 51
Category: Principal judgment
Parties: Proceedings 2023/316575
Desmond Wei Liang Teng in his capacity as Receiver and Manager of Love D&V XOXO Pty Ltd (Receiver and Manager Appointed) and D & V Vlahos Pty Ltd (Receiver and Manager Appointed) (Plaintiff)
Danielle Vlahos (First Defendant)
Vicki Vlahos (Second Defendant)
Proceedings 2023/325408
Danielle Vlahos (Plaintiff)
Vicki Vlahos (Defendant)
Proceedings 2024/37235
Vicki Vlahos (Plaintiff)
Danielle Vlahos (Defendant)
Representation: Counsel:
DR Stack (Plaintiff)
SE Gray (First Defendant)
MW Young SC (Second Defendant)
Solicitors:
Amberlake Lawyers (Plaintiff)
W Advisers (First Defendant)
Finn Roache Lawyers (Second Defendant)
File Number(s): 2023/316575
2023/325408
2024/37235
These three related proceedings arise following the breakdown of the relationship between the two directors and equal shareholders of Love D & V XOXO Pty Ltd (the Company), Ms Danielle Vlahos and Ms Vicki Vlahos. For convenience only, and without intending any disrespect, I will refer to each by her first name.
Danielle and Vicki are first cousins. They established the Company, which operated a retail business in women’s fashion, primarily through the brands “Portia and Scarlett” and “The Dollhouse XOXO”. The Company distributed and sold those items in Australia and the United States.
Danielle and Vicki are also the directors and equal shareholders of D & V Vlahos Pty Ltd (the Trustee), which was incorporated for the purpose of acting as trustee for the D & V Vlahos Unit Trust (the Trust). The Trust owned real property. The units in the Trust were held equally by entities associated with Danielle and Vicki.
On 6 October 2023, Vicki filed an Originating Process seeking, amongst other things, orders that each of the Company and the Trustee be wound up on the just and equitable ground pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) (the Company/Trust Proceeding).
On 26 October 2023, this Court made orders appointing Mr Desmond Teng as Receiver and Manager of the Company and also as Receiver and Manager of the Trustee in its own right and as trustee of the Trust.
Since the appointment of the Receiver, the assets of the Company and the Trust have been sold. Following the payment of those liabilities of the Company and the Trust which are not subject to dispute, surplus funds are being held in the bank accounts of the Company and the Trust. Neither the Company nor the Trust is presently trading and neither is expected to have future income.
Aside from the cash held at bank:
the main remaining assets of the Company are the outstanding loan balances which are owing by each of Danielle, Vicki, and by the Trust to the Company; and
the main remaining asset of the Trust is the outstanding loan balance owing by Vicki to the Trustee.
The main task remaining in order for the Receiver to take steps to bring the receivership to an end is to reconcile and quantify the loan accounts of Danielle and Vicki (the Loan Accounts) and to recover the outstanding balances of those loans. The Receiver has been unable to resolve those matters with Danielle and Vicki and, against that background, the Receiver filed an interlocutory application in the Company/Trust Proceeding seeking the Court’s directions on the appropriateness of the course which he intends to take with respect to a number of the matters in dispute (the ). The form of this application upon which the Receiver moved for relief at the hearing was the Further Amended Interlocutory Process dated 5 February 2025.
The Company was incorporated on 9 March 2010. At all times since then, Danielle and Vicki have been the only directors of, and equal beneficial shareholders in, the Company.
Danielle and Vicki were responsible for the day-to-day operation of the Company’s business, with the assistance of various employees.
From the commencement of its operations, the Company used the MYOB accounting system. It was common ground that up until some time in 2017, Danielle, who has accounting qualifications, was responsible for maintaining the financial records of the Company, including the maintenance of its MYOB records.
Danielle deposed that, when she acted as the Company’s bookkeeper, she maintained the MYOB records on a computer designated for that purpose (the Old MYOB). The Old MYOB did not sync with the cloud and was not backed up anywhere.
In around November 2017, Mr Peng (Jason) Wang commenced employment as the Company’s chief financial officer (CFO) and assumed responsibility for maintaining the books and records of the Company.
After Mr Wang took on this role, he created a new MYOB file (the New MYOB), and took, as the opening balances of the New MYOB, the closing balances of the Old MYOB as at 30 September 2017. Mr Wang assumed responsibility for maintaining the New MYOB.
In around July 2019, Mr Leo Chen was employed by the Company as a Financial Controller. From that time, he assisted Mr Wang in maintaining the New MYOB.
On 22 January 2016, the Trustee was incorporated. At all times since then, Danielle and Vicki have been the only two directors of, and equal beneficial shareholders in, the Trustee.
On the same date, the Trust was established by a Unit Trust Deed. The Units in the Trust are held equally by Danielle Vlahos Holdings Pty Ltd as Trustee for the Danielle Vlahos Family Trust and Adonis & Zach Holdings Pty Ltd as Trustee for the Adonis & Zach Family Trust (which is Vicki’s family trust).
Danielle is the director and sole shareholder of Daneille Vlahos Holdings; and Vicki is the director and sole shareholder of Adonis & Zach Holdings.
At various times, the Trust owned real property located at:
6 Monash Road, Gladesville, NSW (the Gladesville Property);
436 Forest Road, Bexley, NSW (the Bexley Property); and
10/11-21 Underwood Road, Homebush, NSW.
The books and records of the Trust were kept using the Xero accounting system.
From time to time, the moneys of the Company and the Trust were used by Danielle and Vicki for their personal benefit.
For example, as set out below (when dealing with the Receiver’s Application), it is common ground that:
each of Danielle and Vicki used the Company’s American Express Credit Card and PayPal Account to conduct transactions for their personal benefit; and
various payments were made by the Company and the Trust to each of Danielle and Vicki for their personal benefit.
On the Receiver’s appointment, the New MYOB, which was reconciled up to 30 September 2023, recorded:
Loans to Shareholders (being the Loan Accounts), with a total net outstanding balance of around $5.420m; and
Loans to Shareholders’ Associates (being the Trust), with a total net outstanding balance of around $2.036m.
On the Receiver’s appointment, the Trust’s Xero file, which was reconciled up to 30 June 2023, recorded:
a loan owing by the Trust to Danielle, with a total net outstanding balance of $63,800;
a loan owing by the Trust to Vicki, with a total net outstanding balance of $170,804.31; and
a loan owing by the Trust to the Company, with a total net outstanding balance of around $1.411m.
Significant work has been undertaken by the Receiver in relation to these loan balances and various transactions involving the Company, the Trust, Danielle and/or Vicki. As a result of these investigations, the Receiver has concluded that a number of adjustments should be made to those loan balances. As outlined below, when dealing with the Receiver’s Application, a number of those adjustments are agreed by Danielle and Vicki, but others remain in dispute.
Each of the parties gave evidence and was cross-examined. There was no challenge to the credit of the Receiver or Ms Elizabeth Vlahos, or to any aspect of their evidence. However, each of Danielle and Vicki advanced credit submissions in relation to the other.
Danielle submitted that Vicki “did not provide her evidence in a truthful manner”, including being willing to “put forward versions of events that she believed suited her interests”. Vicki submitted that Danielle is “someone who is prepared to tell lies, and big lies, when it comes to trying to improve her position”.
It is plain that the previously close relationship between Danielle and Vicki, which was described as being like a relationship between sisters, has irretrievably broken down. Their mutual animosity and mutual distrust for each other were evident not only from their evidence in this proceeding, but from numerous exchanges of acrimonious messages tendered at the hearing.
In circumstances where each has a firmly held and strongly negative view of the character and conduct of the other, it is necessary to approach the evidence of each regarding statements made by the other, and regarding the actions and motivations of the other, with some caution.
I do not mean to suggest that either Danielle or Vicki consciously embellished or altered their evidence to suit their case. Rather, there is a real risk that the present entrenched conflict between them may have coloured their recollection of events. That risk is increased in circumstances where each of Danielle and Vicki has given evidence of events and conversations stretching back over many years.
In Jeffreys v Sheer [2025] NSWCA 31 at [36], Adamson JA (with whom Mitchelmore JA and Basten AJA agreed) quoted with approval the following observations by Lord Pearce in Onassis v Vergottis [1968] 2 Lloyd’s Rep. 403 at 431:
“‘Credibility’ involves wider problems than mere ‘demeanour’ which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be... Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.”
The Court is to reason to its conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31] per Gleeson CJ, Gummow and Kirby JJ. This does not eliminate the established principles about witness credibility, but it tends to reduce the occasions where those principles are seen as critical: ibid.
While oral testimony needs to be carefully assessed in light of the objective contemporaneous evidence, particularly when given by a party to litigation many years after the events, such testimony can provide important context for understanding particular documents and their significance. In ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [28], Bell P (with whom Bathurst CJ and Leeming JA agreed) observed as follows:
“Documents and events have to be understood in their context, and evidence of context will often be furnished by witnesses in their oral evidence. Documents, moreover, will not always present a complete picture of events. Indeed it would be rare that they do. Nor do contemporaneous documents necessarily or invariably convey or record the background or context in which events took place. That background or context will be familiar to the actors at the time of those events but may not always emerge from documents.”
The Receiver’s Application sought advice or directions from the Court on three alternative bases, namely:
the power to give advice pursuant to section 424 of the Corporations Ac**t;
the power to give advice to a trustee pursuant to section 63 of the Trustee Act 1925 (NSW); and
the inherent or implied jurisdiction of this Court to give advice and directions to court-appointed receivers.
There was no dispute between the parties concerning the relevant legal principles, which were helpfully summarised in the Receiver’s submissions.
Section 424(1) of the Corporations Act empowers a receiver, as a controller of a company’s property, to apply to the Court for directions in relation to any matter arising in connection with the receiver’s powers or the performance of their functions.
The principles governing such applications are well established and were recently summarised in Re Quintis (Australia) Pty Ltd (No 2) (Receivers and Managers Appointed) (Administrators Appointed) [2024] WASC 278 at [94] to [96] (Strik J). It is unnecessary to repeat or summarise those principles here, for the reasons which follow.
Section 424(2) of the Corporations Act provides that s 424(1) “applies only if the receiver was appointed under a power contained in an instrument”.
In Re Anglican Development Fund Diocese of Bathurst [2015] NSWSC 440 at [11], Brereton J observed that s 424(2) appears to have the effect of excluding a receiver appointed by the Court from obtaining directions under s 424(1).
As noted above, the Receiver was appointed by orders of this Court made in the Company/Trust Proceeding on 26 October 2023.
A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument.
In Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 at [58], Gummow ACJ, Kirby, Hayne and Heydon JJ observed that the only limit on the jurisdiction afforded under s 63 is that “the applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument”.
The principles relating to applications under this provision were helpfully summarised by Meek J in Application of Macedonian Orthodox Community Church St Petka Inc [2023] NSWSC 918 at [48]-[50]. Again, it is unnecessary to repeat or summarise those principles here, for reasons which follow.
The difficulty that arises with respect to the Receiver’s reliance on s 63 of the Trustee Act is that the Receiver was not appointed by the Court as trustee of the Trust. Where a receiver is not a trustee, he or she is unable to resort to s 63 to obtain judicial advice: Re Anglican Development Fund at [11].
In submissions, the Receiver referred to the fact that he is in control of the Trust assets and, without more, cannot deal with those assets in a manner inconsistent with the terms of the Trust Deed, and submitted that he is, “in that sense”, a trustee of the Trust.
Generally speaking, the defined term “trustee” in the Trustee Act refers to “a trustee as known to the law” and does not extend to a fiduciary not within that category: Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd [2002] NSWSC 576 at [10] per Barrett J. In the case of a court-appointed receiver, the Court’s general equitable jurisdiction is, as discussed below, a “clearer source of power” for the Court to give “opinion, advice or direction”: ibid at [11], cited in Re Anglican Development Fund at [13].
The orders made by the Court on 26 October 2023 which appointed the Receiver expressly granted liberty to the Receiver to make an application in relation to “the distribution of any surplus”.
Further, and in any event, this Court has power to give judicial advice and directions to a court-appointed receiver arising as an incident of the statutory power to appoint a receiver under ss 23 and 67 of the Supreme Court Act 1970 (NSW): Mariconte v Batiste (2000) 48 NSWLR 724; [2000] NSWSC 288 at [74] to [76] per Austin J, cited with approval in Re Anglican Development Fund at [12], and Grain Technology of Australia Ltd v Rosewood Research Pty Ltd (No 2) [2019] NSWSC 1744 at [12] per Parker J. This power extends to giving directions that provide guidance to a receiver on matters of law and on the propriety or reasonableness of the contemplated exercise of power: Mariconte at [76].
There are limits on this jurisdiction. As Brereton J observed in Re Anglican Development Fund at [14], the Court cannot “authorise departures from the strict legal position, nor … alter legal rights”. Further, as Black J observed in Re Metal Storm Ltd (subject to Deed of Company Arrangement) [2015] NSWSC 1698, at [6]:
“… the Court will not generally give directions as to a matter which relates to the making and implementation of a business or commercial decision, if no particular legal issue is raised, but may do so where legal issues or a challenge to the proprietary of the decision is raised. For example, there are several cases where the Courts have given directions to liquidators, in respect of decisions made in the compromise of litigation, where those decisions either involved legal issues, or would be open to third party challenge.”
Several of the directions sought by the Receiver require, to varying degrees, the determination of the rights and liabilities of Danielle, Vicki and/or the Trust. The Receiver submitted that, in respect of such issues, the rationale underlying the Court’s approach with respect to proof of debt procedures and the power provided under s 90-15 of Sch 2 to the Corporations Act is applicable.
The Court can give directions concerning issues arising in determining proofs of debt in “an appropriate case”: Re Plutus Payroll Australia Pty Ltd (in liq) (2019) 139 ACSR 536; [2019] NSWSC 1171 at [5] (Black J).
In Re Magic Aust Pty Ltd (in liq) (1992) 7 ACSR 742 at 745, McLelland J held that a direction in respect of the admission of a proof of debt would normally be “inappropriate” as it would not be determinative of the validity of the creditor’s claim or preclude a subsequent appeal from the liquidator’s determination. However, as his Honour observed in the earlier decision of Re G B Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 at 679 (emphasis added, citations omitted):
“… there are instances where a court has, in proceedings commenced as a liquidator's application for directions, gone on to make orders declaratory of substantive rights, clearly intended to be of binding effect on the parties to the proceedings, and where necessary has made representative orders for this purpose … The procedures of the court are sufficiently flexible to enable proceedings commenced as an application for directions to be changed into proceedings for the determination of substantive rights, and this is sometimes a convenient course in order to avoid the need to commence further proceedings involving additional cost and delay … However it is important that the distinction between the two kinds of proceedings be not lost sight of or blurred, and such a fundamental change should not be permitted unless the court is satisfied that those affected either consent to that course …, or will not suffer injustice in consequence of the alteration to the status of the proceedings.”
In respect of the present application, the Receiver noted the following matters:
the directions sought are necessary for determining the final distribution which should be made to Danielle and Vicki;
the facts underlying the directions sought are known to, and contested by, Danielle and Vicki;
Danielle and Vicki are parties to the Receiver’s Application, have filed and served substantial evidence, and were represented by counsel at the hearing, who made written and oral submissions in respect of the issues arising on the application; and
the Court is already determining other substantive issues disputed by Danielle and Vicki, which are relevant to the determinations required of the Receiver. (In particular, for reasons that will be explained below, there are issues arising in respect of Danielle’s Loan Claim and Vicki’s Loan Claim regarding whether adjustments should be made to the Loan Accounts as a result of certain payments made via the Company’s bank accounts.)
Significantly, neither Danielle nor Vicki disputed that the Court had power to give directions to the Receiver or that it was appropriate for the Court to give directions in relation to the various issues raised by the Receiver’s Application. Instead, the dispute between the parties concerned what directions should be given in relation to those issues.
Having regard to the matters outlined above, I am satisfied both that the Court has power to give, and should give, directions to the Receiver in relation to the issues raised in the Receiver’s Application. Such directions will enable the receivership to be concluded, and the surplus funds to be distributed, which is in the interests of all concerned.
Prayer 1 of the Receiver’s Application concerns the allocation of charges made to the Company’s American Express (Amex) account. The Receiver seeks a direction as to whether he would be justified in proceeding on the basis that transactions on the Company’s Amex credit cards were:
as to the amount of $52,895.81, for the personal benefit of Danielle;
as to the amount of $140,567.55, for the personal benefit of Vicki; and
as to the remainder, business expenses of the Company.
Danielle has admitted that expenses of $52,895.81 charged to the Amex account were for her personal benefit, and Vicki has admitted that expenses of $140,567.55 charged to that account were for her personal benefit.
Danielle indicated, in opening submissions, that she did not have any issue with the Receiver’s proposed approach in relation to the Amex account.
Vicki had raised an issue, in her evidence, that two further expenses charged to the Amex account should properly be treated as having been for Danielle’s personal benefit. The first was a charge of $27,881.67 for the purchase of Rolex watches; and the second comprised two purchases of jewellery on 5 October 2022 totalling $14,858.70. In cross-examination, the Receiver identified that the first of these charges had already been allocated to Danielle and was included in the figure for her personal expenses which is set out above; and that the second had not been charged to Danielle because Danielle said that she and Vicki made these purchases together and that they were a shared benefit.
Despite Vicki having raised this issue regarding the quantum of Danielle’s expenditure on the Amex card, Senior Counsel for Vicki confirmed, in closing submissions, that “Direction 1 is agreed”.
Accordingly, I will give a direction that the Receiver would be justified in proceeding in the manner outlined in prayer 1 of the Receiver’s Application.
Prayer 2 of the Receiver’s Application concerns transactions on the Company’s PayPal account. The Receiver sought a direction as to whether he would be justified in proceeding on the basis that transactions on this account were:
as to the amount of $30,667.76, for the personal benefit of Danielle;
as to the amount of $76,242.49, for the personal benefit of Vicki; and
as to the remainder, business expenses of the Company.
A number of issues were raised by Danielle and Vicki in relation to the proposed figures for their personal expenses.
First, Vicki submitted that the figure for her personal expenses should be reduced by $13,135.79 because that sum, which was legitimately charged to the PayPal account for what was described as the “Louise Wollman transaction”, was incorrectly added to her Loan Account. Vicki stated in opening written submissions that, subject to this reduction, she consented to the direction sought in respect of her personal expenses. The Receiver accepted this reduction and Danielle did not dispute that it should be made.
Despite this concession, Senior Counsel for Vicki sought to cross-examine Danielle in respect of a further proposed reduction in Vicki’s expenditure, which had been raised in Vicki’s affidavit evidence. In particular, Vicki had deposed that certain wigs purchased from Freedom Couture, using the Company’s PayPal account, which were treated as Vicki’s personal expenses had in fact been purchased by Danielle. Senior Counsel for Vicki accepted that he did not indicate in opening address that he was abandoning the concession made in opening written submissions that, subject to the Louise Wollman reduction, Vicki consented to the proposed direction regarding the amount of her personal expenditure on the Company’s PayPal account (which included the Freedom Couture expenditure). Further, Counsel for Danielle indicated that he had refrained from cross-examining Vicki about the purchases from Freedom Couture because that concession had been made. In those circumstances, I determined that Vicki was bound by the concession that had been made in opening.
Secondly, Danielle contended that the figure for Vicki’s personal expenses in respect of PayPal transactions should be increased by $22,841.59 for goods purchased from wayfair.com. Wayfair is an online store selling homeware goods within the United States. In cross-examination, Vicki accepted that two purchases totalling $4,902.88, for which receipts were available, were made for her personal benefit. However, she explained that, in the absence of receipts for the other items, she could not identify whether or not they were for her personal benefit, stating that: “there could’ve also been purchases for the Los Angeles warehouse and office”.
In closing submissions, Danielle submitted that: “The Receiver is justified in proceeding on the basis that these two transactions on the Company’s PayPal account [totalling $4,902.88] are Vicki’s personal expenses.” Similarly, in closing submissions, Vicki accepted that the amount of $4,902.88 should be added to the total of the PayPal transactions which were her personal benefit.
Prayer 3 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in proceeding on the basis that the sum of $1,300,028 which was paid by the Company to account number xx93 was for Vicki’s personal benefit.
Vicki accepts that the relevant payment was for her personal benefit. Accordingly, this direction will be made.
Prayer 4 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in proceeding on the basis that the sum of $840,000 which was paid by the Company to account number xx93 was for Danielle’s personal benefit.
Danielle accepts that the relevant payment was for her personal benefit. Accordingly, this direction will also be made.
Prayer 5 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in proceeding on the basis that the MYOB account balances of the Company as at 30 September 2017 are correct.
Danielle contended that such a direction should be made. Vicki contended that the balances of the Loan Accounts shown in MYOB should be adjusted so that, as at 30 September 2017, each of Danielle and Vicki was indebted to the Company in the same amount (namely, $462,493).
The Receiver indicated that he could not express an opinion on the accuracy of the balances of the Loan Accounts shown in MYOB as at 30 September 2017 or on the appropriateness of the adjustment proposed by Vicki, without undertaking a time-consuming and very costly review of all expenses incurred by the Company prior to 30 September 2017. Both Danielle and Vicki agreed that no such review should be undertaken.
When the Company moved from the Old MYOB to the New MYOB, it took the closing balances from the Old MYOB as at 30 September 2017 as the opening balances for the New MYOB (see paragraphs [14]-[17] above). Accordingly, the issue raised by this prayer of the Receiver’s Application is whether the closing balances of the Loan Accounts as at 30 September 2017 in the Old MYOB, which were adopted as the opening balances of the Loan Accounts in the New MYOB, should be adjusted by equalising the balances, in circumstances where no review of the pre-30 September 2017 transactions has been, or will be, undertaken.
Although various issues were raised by Vicki in contending that the balances of the Loan Accounts as at 30 September 2017 should be equally apportioned between her and Danielle, those issues fall into three main categories.
First, Vicki referred to evidence which was said to establish that there were “frequent reconciliation meetings … at which the credits and debits in the loan accounts of [Vicki and Danielle] were carefully weighed up and any shortfall in personal benefit to one rather than the other was quickly equalised by the making of a payment or payments to Vicki and/or Danielle”. Vicki submitted that: “It is thus inherently unlikely that there was any substantial difference as between the loan accounts as at 30 September 2017”.
There were some documents showing that such a reconciliation was undertaken on a number of occasions. However, in cross-examination, Danielle gave evidence that although there had been occasions when she and Vicki “were trying to streamline things” and undertook such a reconciliation process, this was not a regular exercise.
Further, the submission that it is “inherently unlikely” that there would be any substantial difference between the balances of the respective Loan Accounts of Danielle and Vicki as at 30 September 2017 fails to take account of Vicki’s own evidence that a number of the amounts added to her Loan Account in the period from 1 July 2017 to 30 September 2017 (which resulted in the disparity between the respective balances of Vicki’s and Danielle’s Loan Accounts as at 30 September 2017), were transactions which were properly attributable to Vicki.
“Vicki it's quite clear is not as good with accounts as Danielle, … and her cross-examination by Mr Gray revealed a number of accounting errors that she's made”
Thirdly, Vicki submitted that the Old MYOB should not be accepted as reliable in circumstances where Danielle was the only person who maintained the Old MYOB.
As noted above, it is common ground that up until some time in 2017, Danielle was responsible for maintaining the accounts of the Company, including maintaining the Old MYOB. However, following the appointment of Mr Wang as CFO, Danielle ceased to have this role.
Significantly, in the period when Mr Wang and Mr Chen were responsible for the Company’s financial records, work was undertaken by the Company, with the assistance of external accountants (Mr Yong and Ms Sun), in respect of the Company’s financial statements and the Loan Accounts including, relevantly, for the 2018 financial year (being the period in which the Company had moved from the Old MYOB to the New MYOB). The circumstances in which this work was undertaken are outlined below.
On 1 October 2020, the Australian Taxation Office (ATO) advised the Company that it had commenced a review of the Company and its group for the 2017 to 2020 income years.
On 23 November 2021, the ATO provided the Company with various information requests. A particular area of focus was the Loan Accounts for each of the financial years ending 30 June 2017 (FY17), 30 June 2018 (FY18), 30 June 2019 (FY19) and 30 June 2020 (FY20).
The information requested in relation to the Loan Accounts was as follows:
“For each loan, provide:
(i) a breakdown of the borrower/s of the loans each year
(ii) a copy of the loan agreement/s (if available) in relation to the loan/s
(iii) the rate of interest charged on the loan/s if not clearly shown on the loan agreement/s
(iv) the amount of minimum yearly repayments made by the borrower/s
(v) the general ledger detailing the movements in the balance of each loan
(vi) details of any debts owed by directors which have been forgiven by Love D & V XOXO Pty Ltd during the review period (i.e. the borrower, the amount forgiven, the date forgiven) and the tax consequences.”
As at the date that this request was made, the Company had not produced financial statements for, relevantly, FY18.
The external accountants were retained to deal with the ATO’s information request. It can be inferred that the Company and its internal and external accountants would likely have taken steps to ensure that the information given to the ATO in relation to these matters (including, specifically, in relation to the balances of the Director Loan Accounts) was accurate.
Subsequently, the Company prepared financial statements for FY18, which were signed by each of Danielle and Vicki on 14 March 2022. In signing those accounts, each of Danielle and Vicki declared that the FY18 financial statements presented fairly the Company’s financial position and performance.
The FY18 financial statements were also accompanied by a compilation report signed by Mr Yong on behalf of the Company’s external accountants. This report included a statement that: “We have applied our expertise in accounting and financial reporting to compile these financial statements in accordance with the basis of accounting described in Note 1 to the financial statements.”
The balances of the Loan Accounts as at 30 June 2018 were shown in the FY18 financial statements as being, for Vicki, $825,956 and, for Danielle, $362,008.
Each of Danielle and Vicki also signed a Division 7A Loan Facility Agreement with the Company which was dated 30 June 2018 and which adopted the same balances for their loans as set out in the FY18 financial statements.
It must have been apparent to Vicki, when she signed these documents, that there was a significant disparity between the balances of the respective Loan Accounts of Danielle and Vicki, with the balance of her Loan Account being more than twice the balance of Danielle’s Loan Account as at 30 June 2018. Nonetheless, she approved the FY18 financial statements and signed the Division 7A Loan Facility Agreement. Those matters are inconsistent with any understanding or explanation on Vicki’s part that, by reason of regular reconciliations being undertaken, the balances of the Loan Accounts were approximately equal in FY18 (including at 30 September 2017).
Vicki gave evidence in cross-examination that the reason she signed the FY18 financial statements, despite the differences between the balances of her and Danielle’s respective Loan Accounts, was that she was advised by her external accountant, Mr Yong, that the Loan Accounts were “treated as one amount, and they can be divided up between the directors at any time”.
I do not accept this evidence, having regard to the following matters.
Vicki stated that she had this advice “in writing from Bill Yong”, but no such communication was produced. Nor was there any contemporaneous document referring to any such advice having been given at around the time that Vicki signed the FY18 financial statements. That was despite Vicki claiming that Mr Yong said this to her “hundreds and hundreds of times” and that she received this advice “pretty much every time I ever spoke to Bill Yong, from the second I engaged him”.
“…neither the Receiver nor Danielle put forward any proper evidence to substantiate the accounts they're relying on. Mr Gray repeatedly and very cleverly constantly refers in his submissions to Vicki didn't call the accountants. But Vicki is not the person seeking to uphold these accounts that the Receiver and Danielle are seeking that the Court make orders in relation to. It is the Receiver and Danielle who are seeking to do that. They do not call the accountants who prepare these accounts. They do not explain how the accounts were prepared”
I do not accept Vicki’s submission that it was for Danielle to call accounting evidence to prove the accuracy of the balances of the Loan Accounts in the Company’s books and records.
Section 286 of the Corporations Act requires a company to keep written financial records that correctly record and explain its transactions and financial position and performance, and that would enable true and fair financial statements to be prepared and audited. Section 1305(1) of the Corporations Act provides that a book kept by a body corporate under a requirement of the Act “is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book”. In Australian Karting Association Ltd v Karting (New South Wales) Incorporated [2022] NSWCA 188 at [129], Gleeson JA (with whom Meagher JA and Simpson AJA agreed) said that:
“Section 1305 has the effect that the statement of a matter in a book kept by a company is sufficient to prove that matter in civil proceedings, unless other evidence convinces the court to the contrary on the balance of probabilities …”
Having regard to the evidence summarised above, I am not satisfied that Vicki has established, on the balance of probabilities, that the closing balances of the Loan Accounts in the Old MYOB as at 30 September 2017 (which were adopted as the opening balances of those accounts in the New MYOB) were inaccurate.
For those reasons, the Receiver would be justified in proceeding on the basis that the MYOB account balances of the Company as at 30 September 2017 are correct. I will give a direction to this effect.
Prayer 6 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in proceeding on the basis that the payment of $26,414.85 which was made by the Company to Mr Sasan Tehrani on 28 January 2021 was for Vicki’s personal benefit.
Mr Tehrani is, and was at the time of this payment, Vicki’s partner. Vicki did not dispute that she gave the direction for this payment to be made to Mr Tehrani. In those circumstances, the Receiver would be justified in treating the payment as for Vicki’s personal benefit unless it was established that the payment was made for a purpose connected with the Company’s business.
The sum of $26,414.85 was the AUD equivalent of US$20,000 at the time of this payment. Vicki deposed in her October 2024 affidavit that this sum was paid to a United States company, VAS LLC, in respect of three invoices totalling US$19,800 (the VAS Invoices), with the balance representing the reimbursement of a sum of US$200 which VAS had paid to a cleaner in cash.
VAS is the owner of a residential property in Los Angeles (the VAS Property). Each of Vicki and Mr Tehrani owns 50% of the shares in VAS.
The VAS Invoices are stated to be in respect of location hire and the provision of accommodation services at the VAS Property in January 2021. Each bears a January 2021 date. Vicki deposed that the additional amount of US$200 was paid to “a cleaner hired to clean up following a photoshoot, which was not included in the VAS LLC Invoices”.
Vicki deposed that the reason why she caused the Company to pay the amount of US$20,000 into Mr Tehrani’s bank account in January 2021 was “because, at the time, VAS LLC did not have a bank account”.
An immediate difficulty with Vicki’s evidence is that the VAS Invoices were only issued in March 2022, when they were attached to an email sent from VAS to the Company. Therefore, the January 2021 payment could not have been a payment in respect of those invoices.
Putting aside the VAS Invoices, there is no contemporaneous document which refers to any agreement between the Company and VAS to pay for location hire or accommodation services in January 2021, or which refers to any liability of the Company to make any payment to VAS for such services. Danielle denied that there was any discussion or agreement that VAS would be paid for such services.
Further, there is no documentary evidence that, at the time the payment was made, the Company treated the payment to Mr Tehrani as a payment made to VAS (whether in respect of any services provided by VAS to the Company in January 2021 or otherwise).
In those circumstances, I am not satisfied that there is a sufficient basis to conclude that the payment made to Mr Tehrani in January 2021 was a business expense of the Company. It follows that the Receiver would be justified in treating that payment as a payment made for Vicki’s personal benefit.
Prayer 7 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in rejecting the amount of $146,300 claimed by Vicki in relation to accommodation services.
As framed, this prayer of the Receiver’s Application seeks a direction as to whether Vicki has a claim in respect of accommodation services in respect of a particular amount. In closing submissions, Vicki accepted that she does not have any such claim. Instead, if any person has a claim for such services, it is VAS (being the owner of the relevant accommodation, namely, the VAS Property). Further, Vicki accepted that insofar as VAS has a claim, then the amount of its claim is not $146,300. That is because, in her evidence and in closing submissions, Vicki accepted that there were a number of errors in the quantification of the accommodation claim.
The Receiver submitted that the Court should nonetheless, to the extent possible, provide some guidance on how the Receiver should respond to any claim by VAS for such services.
There are a number of difficulties with this proposal.
First, VAS is not a party to the proceedings. Vicki did not proffer, on behalf of VAS, any undertaking to be bound by any determination made in respect of the Receiver’s Application. Accordingly, any findings in this proceeding, based on the evidence currently before the Court regarding the issue of the VAS accommodation, could not be binding on VAS in respect of any claim that it might make in the future.
Secondly, it is not known what the quantum of such a claim would be. Any such claim is unlikely to be for the same amount as the claim referred to in prayer 7, given that Vicki, who is a part-owner of VAS, has acknowledged that there are errors in the calculation of the amount claimed (and Danielle has pointed to further obvious errors beyond those which have been acknowledged by Vicki, including that amounts were billed in respect of various persons who, having regard to other documentary evidence, were in an entirely different location at the relevant time).
Thirdly, if VAS were to make a claim in a different (unknown) amount, any such claim would need to be assessed having regard to the material provided in support of that claim. Comments about the adequacy of evidence currently before the Court in respect of a different claim are therefore of limited utility. Plainly, any such claim would need to be assessed having regard to:
whether there is any objective evidence of an agreement for the provision of accommodation services by VAS, including any agreement regarding the amount which the Company would pay for such services (which is plainly a critical element of any such agreement); and
whether there is any objective evidence that Company staff stayed at the VAS property for Company business on the specific nights in respect of which a charge has been raised.
Prayer 8 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in proceeding on the basis that the payments made by the Company to VAS totalling $53,757 were for Vicki’s personal benefit.
This prayer concerns payments which were received by VAS between 20 April 2022 and 6 February 2023. In her October 2024 affidavit, Vicki accepted that these payments were properly payable to the Company (describing them as “Company receivables”); explained that were paid to VAS “because [the Company] did not have a US account”; and acknowledged that these payments “are required to be accounted for to [the Company]”.
Despite those concessions, Vicki stated in her closing written submissions that the proposed direction is opposed, on the basis that “the monies in question have already been accounted for elsewhere in the Company accounts” and, therefore, “to account for them a second time would be double-dipping and should not be permitted”.
In her affidavit, Vicki stated that the payments “were recorded in the Company’s internal reconciliations and in Indigo8 (the Company’s Enterprise Resource Planning or ‘ERP’ system), but not in the MYOB records” (emphasis added).
For present purposes, it is the MYOB records that matter. Specifically, the Receiver is seeking a direction that he is justified in treating the relevant payments as having been made for Vicki’s personal benefit, so that he can make appropriate adjustments to the balance of Vicki’s Loan Account in MYOB.
Accordingly, in circumstances where Vicki accepts that the relevant transactions must be accounted for to the Company and have not been recorded in MYOB, it is appropriate that the direction sought by the Receiver be given.
Prayer 9 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in rejecting the $67,830 claimed by Vicki in relation to overtime charges.
Vicki accepted that this direction should be made, as she does not press her claim for overtime.
Prayer 10 of the Further Amended Interlocutory Process seeks a direction as to whether the Receiver would be justified in rejecting the $57,734.03 claimed by Vicki in relation to alleged business expenses on her personal credit cards.
Vicki accepted that the Receiver was justified in reducing her claim in relation to business expenses on her credit cards from $57,734.03 to $44,481.51, but contended that the Receiver should allow the balance of that claim.
The proposed figure of $44,481.51 is comprised of:
an amount of $6,019.37, representing purchases of goods and services which have been charged to Vicki’s personal credit card; and
an amount of $38,462.14, representing purchases of goods and services which have been charged to a credit card issued to VAS.
Vicki claimed that each of the relevant transactions charged to those cards represented a business expense of the Company.
There are three main problems with this claim.
First, the proper claimant in respect of any amounts paid using VAS’s credit card is VAS, not Vicki. (Again, there was no undertaking proffered by Vicki on behalf of VAS that VAS would be bound by any determination of this issue in the current proceedings.)
Secondly, so far as the claim in respect of Vicki’s credit card is concerned, Vicki has not produced invoices corresponding to any of the payments alleged to have been made by Vicki on behalf of the Company.
Thirdly, it is not apparent from the narratives in the credit card statements that each of the relevant payments made using Vicki’s credit card was a business expense. For example, a number of the purchases appear to relate to surf wear, while others relate to hotels and restaurants. A charge for a hotel or restaurant in the United States might represent either a business expense or a personal expense. That is particularly so in circumstances where there was unchallenged evidence from Danielle that, in addition to spending time in the United States for the purposes of the Company’s business, Vicki spent time in the United States with her partner, Mr Tehrani, who is located there.
As Danielle submitted, Vicki has been on notice since around March 2024 that the Receiver wanted to see documents in support of the claimed business expenses, but has failed to provide the material necessary to substantiate her claim. She has produced only a handful of receipts and those receipts do not, with the exception of a couple of items arising on the VAS credit card (rather than Vicki’s credit card), correspond to any of the items which comprise her claim.
For the reasons given above, I am satisfied that the Receiver would be justified in rejecting the $57,734.03 claimed by Vicki in relation to alleged business expenses on her personal credit cards.
Prayer 11 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in rejecting the sum of $173,876 claimed by Vicki for an underpayment of wages and superannuation.
In her oral evidence, Danielle conceded that she and Vicki had agreed that Vicki would be paid $3,200 per week and Danielle would be paid $2,900 per week, but said that “we ultimately did not stick to” this arrangement.
There was documentary evidence that the Company, in 2019, made credits to the Loan Accounts of Vicki and Danielle with the narrative “wages” which equated to $3,200 per week for Vicki and $2,900 per week for Danielle.
However, according to the payroll registers of the Company for each of the financial years from FY18 through to the financial year ending 30 June 2024, Danielle and Vicki were paid the same amount – and neither of them was paid either $2,900 per week or $3,200 per week, whether gross or net. Tax appears to have been calculated and withheld on the basis of the figures in those payroll advices.
Those matters appear to support Danielle’s evidence that, whatever may have been orally agreed at an earlier point in time, she and Vicki “ultimately did not stick to” any such arrangement, and chose to deal with wages on a different basis.
There was no evidence explaining the relationship, or exploring the extent of the discrepancy, between the “wages” entries in the Loan Accounts of Danielle and Vicki, and the information in the payroll registers, or addressing any taxation implications of such material or of any proposed adjustment.
Further, Vicki acknowledged in her closing written submissions that “the sum of $173,876 is probably not the correct amount for Vicki to claim”. That submission necessarily followed from Vicki’s concession in her October 2024 affidavit that: “I have not calculated the adjustment that needs to be made to the MYOB records to reflect the agreement documented in the reconciliations [namely, for the differential wages of $3,200 per week and $2,900 per week]”. Vicki did not, in any of her subsequent affidavits, provide any such calculation, let alone set out the basis for any such calculation.
Vicki’s closing submissions proposed that: “Given that Vicki is less certain about her figures on this as compared to other claims, it might be thought appropriate to discount this claim by 20% to a figure of $139,100”.
Vicki did not offer any explanation as to why 20% was an appropriate measure of the degree of uncertainty attaching to the amount claimed by her.
In circumstances where it is conceded by Vicki that the calculations necessary to quantify her claim have not been undertaken, I do not consider that the issue can be dealt with simply by applying an arbitrary level of discount to an admittedly erroneous figure.
Prayer 12 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in rejecting Vicki’s claim for unpaid annual leave in the amount of $216,345.
There are two main difficulties with Vicki’s claim.
First, the calculation of her claim is based upon the proposition that Vicki’s salary, throughout the period from July 2011 to December 2023 was $3,200 per week. For the reasons set out above, I am not satisfied that this proposition has been established.
Secondly, the calculation of Vicki’s claim is based on the proposition that, across a twelve-and-a-half year period, Vicki took a total of only four weeks of leave. I accept Vicki’s evidence to the effect that she was hard-working and dedicated to her business. However, even by the standards of such a person, to take only four weeks of leave across a period of more than twelve years (equating to an average of only 1 to 2 days per year) would be extraordinary. Further, in cross-examination, it emerged that Vicki had not included some periods of extended leave for elective cosmetic surgeries, on the basis that she regarded these as “sick leave”.
There were no formal records of leave against which Vicki’s claim could be assessed. Danielle gave evidence that it was not uncommon for them both to take time off work as and when it suited them.
In Vicki’s closing written submissions, there was an acknowledgement of “the possibility of over-claiming” by her. Accordingly, Vicki proposed that the Court might “consider it appropriate to discount Vicki’s claim by 10%”. There were no submissions to explain how this 10% figure was arrived at, or why it would be an appropriate level of discount to account for the risk of over-claiming.
For those reasons, I consider that the Receiver would be justified in rejecting Vicki’s claim for unpaid annual leave.
Prayer 13 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in treating a payment of $400,000 which was made by Danielle to the Company’s ANZ bank account ending 3209 as being applied in reduction of Danielle’s Loan Account, resulting in a respective increase to Vicki’s Loan Account.
At first blush, the proposition that a payment which was made by Danielle to the Company should be applied to reduce Danielle’s, rather than Vicki’s, debt to the Company appears to be straightforward. However, Danielle gave evidence that this particular payment by her was applied to reduce Vicki’s Loan Account, as a means of repaying the sum of $400,000 to Vicki in respect of a loan which she had made to Danielle, and that therefore no adjustment should be made.
I deal with this issue at paragraphs [278]-[297] below, when addressing Vicki’s Loan Claim. For reasons there set out, I have concluded that:
the Receiver would not be justified in reallocating this $400,000 payment from Vicki’s Loan Account to Danielle’s Loan Account; and
instead, the Receiver would be justified in increasing the balance of Danielle’s Loan Account by an amount of $122,382.91 and decreasing the balance of Vicki’s Loan Account by the same amount.
Further, for reasons set out at paragraphs [298]-[314] below, when addressing Danielle’s Loan Claim, I have concluded that the Receiver would be justified in increasing the balance of Danielle’s Loan Account by $170,000.00 and decreasing the balance of Vicki’s Loan Account by the same amount.
Accordingly, I will give a direction that the Receiver would be justified in:
increasing the balance of Danielle’s Loan Account by the amount of $292,382.91 (being $122,382.91 plus $170,000.00); and
decreasing the balance of Vicki’s Loan Account by the same amount
Prayer 14 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in proceeding on the basis that an amount of $123,328.48, representing one half of the moneys paid by the Company in connection with District Court of NSW Proceedings commenced by Ms Deborah Elomar and DH Castle Hill Pty Ltd (the Elomar Proceedings), be treated as for Vicki’s personal benefit.
On 24 March 2022, the Elomar Proceedings were commenced against the Company and Vicki. The relief claimed against each of the defendants included damages pursuant to s 236 of the Australian Consumer Law (ACL) or alternatively an order for compensation pursuant to s 237 of the ACL. These claims for relief were based upon two sets of representations which were pleaded as having been made to Ms Elomar by Vicki both on her own behalf and on behalf of the Company, and which were alleged to have been misleading or deceptive.
ESY Lawyers were retained to act for both the Company and Vicki in the Elomar Proceedings. The Costs Disclosure and Costs Agreement dated 11 April 2022 identified each of the Company and Vicki as the “Client”.
All invoices issued by ESY Lawyers were paid by the Company.
On 16 May 2022, the Company filed a cross-claim against Ms Elomar and DH Castle Hill, alleging breach of a licence agreement relating to the use of the Company’s intellectual property and a licence to occupy premises.
On 29 January 2024, the parties to the Elomar Proceedings entered into a Deed of Settlement and Release. Clause 2.1 of this deed provided as follows (emphasis added):
“In full and final settlement of the Proceedings and Cross-Proceedings, [the Company] and [Vicki] are to jointly and severally pay [Ms] Elomar and DH Castle Hill the sum of $140,000 (the Settlement Sum).”
The Company paid the Settlement Sum in the amount of $140,000.
In total, by way of the Settlement Sum and the payments made to ESY Lawyers, the Company paid the amount of $246,656.96 in respect of the Elomar Proceedings.
Against that background, the Receiver sought a direction as to whether he would be justified in treating half of that amount (being $123,328.48) as having been paid for Vicki’s personal benefit, and adding this amount to the balance of her Loan Account.
Danielle supported the proposed allocation of this amount to Vicki. Danielle denied that there was any agreement between herself and Vicki that the Company would pay Vicki’s share of liabilities in the Elomar Proceedings.
Vicki disputed the proposed allocation of half of the amounts paid in the Elomar Proceedings to her Loan Account. She gave evidence that:
the alleged representations in the Elomar Proceedings concerned a profit and loss statement which Vicki emailed to Ms Elomar on 12 April 2017. At this time, Danielle was in charge of the Company’s accounts, and was responsible for the preparation of this document, which Vicki forwarded to Ms Elomar;
in about May 2022, Danielle and Vicki had a conversation in which they agreed that the Company would pay the legal fees owing to ESY Lawyers in relation to the Elomar Proceedings; and
“Danielle and I had multiple discussions about the Elomar case and agreed that [the Company] was liable for the result of the proceedings”.
Vicki submitted that, by reason of these matters, she was entitled to indemnity from the Company in respect of any liability in the Elomar Proceedings.
Vicki was not, in cross-examination, challenged on her evidence in relation to the Elomar Proceedings which is set out above. It is common ground that Danielle, who has accounting qualifications, was responsible for the Company’s financial records as at April 2017, and that Vicki did not have any accounting expertise. It is therefore likely that Danielle prepared the profit and loss document which was the basis of the allegations in the Elomar Proceeding. In those circumstances, it is also likely that there was an agreement between Vicki and Danielle that the Company would cover the costs of the Elomar Proceedings and that the Company “was liable for the result of the proceedings”. This is also borne out by the fact that the Company did in fact pay ESY Lawyers’ invoices and the Settlement Sum, without any apparent objection from Danielle.
For those reasons, the Receiver would not be justified in allocating half of the Settlement Sum and legal costs paid in the Elomar Proceedings to the balance of Vicki’s Loan Account.
Prayer 15 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in proceeding on the basis that the sum of $66,623.97 paid by the Company for stamp duty pertaining to the transfer of the Gladesville Property be treated as for Vicki’s personal benefit.
On 30 March 2023, the Company paid an amount of $66,623.97 to Lawbridge Lawyers, in respect of stamp duty on the transfer of the Gladesville Property from Vicki to her ex-husband. This amount was allocated to Vicki’s Loan Account.
Vicki had previously contended that this amount should be deducted from her Loan Account. However, at the hearing, she accepted that the direction set out above should be made.
Accordingly, I will make a direction to this effect.
Prayer 16 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in causing the Company to issue an interim dividend to the shareholders of the Company in the amount $2,000,000 such that each shareholder receives $1,000,000.
In opening submissions, the Receiver noted that he had, on 9 and 10 October 2024, already paid a dividend of $1m to each of Danielle and Vicki, and accordingly, this prayer was no longer pressed.
Prayers 17-19 of the Receiver’s Application seek directions as to whether the Receiver would be justified in rejecting Vicki’s claims that each of the following payments which was made by Vicki to the Company should be treated as a loan by Vicki to the Trust rather than as a loan by Vicki to the Company:
three payments totalling $540,390.63, which were made by Vicki to the Company on 2 and 8 March 2023;
a payment of $314,797.29, which was made by Vicki to the Company on 18 May 2023; and
a payment of $100,000, which was made by Vicki to the Company on 26 February 2020.
These claims had been raised in Vicki’s affidavit of 16 October 2024. In his affidavit of 19 November 2024, the Receiver set out his basis for concluding that these payments, each of which was made to the Company, were appropriately recorded in the Company’s accounts, such that no further adjustment was required.
In closing submissions, Vicki stated that she no longer pressed her contentions in relation to these payments and was content that the amounts in question be accounted to her via the Company (as the Receiver proposed) rather than through the Trust (as Vicki had previously contended). Accordingly, Vicki consented to the proposed directions.
In those circumstances, I will make directions confirming that the Receiver would be justified in proceeding in the manner set out in prayers 17-19 of the Receiver’s Application.
Prayers 20 and 21 of the Receiver’s Application seek directions as to whether the Receiver would be justified in rejecting Vicki’s claims that each of the following payments by the Company to Danielle should be treated as a loan by the Trust to Danielle rather than as a loan by the Company to Danielle:
a payment of $340,064 which was made by the Company to Danielle on about 31 May 2023; and
a payment of $125,360.05 which was made by the Company to Danielle on about 31 May 2023.
There was no dispute that each of the sums in question was paid to Danielle by the Company on around the dates specified, and that each has been added to the balance of Danielle’s Loan Account.
The basis on which Vicki contended that each of these payments should be treated as loans made by the Trust (rather than by the Company) to Danielle was as follows.
On 31 May 2023, Danielle sent an email to Mr Wang, Mr Chen and Vicki, stating as follows:
“I have transferred out my share of [the Bexley Property] and [the Gladesville Property]. Total being $125,360.05 and $340,064 for Bexley and Gladesville respectively from bank account 882”.
Each of the Bexley Property and the Gladesville Property was held by the Trust, not by the Company (see paragraph [22] above).
On 12 July 2023, Mr Chen sent an email to the Company’s external accountant, Mr Yong, stating that Danielle had requested that these two amounts be recorded in the Trust’s financial records.
Danielle submitted that her 31 May 2023 email (set out above) does not reflect how the relevant transactions were in fact structured. In particular:
the payments in question were made by the Company, not the Trust; and
the money in the Company’s accounts, which was used to fund these payments, did not represent the proceeds of sale of the Gladesville and Bexley Properties. (In particular, as explained below, the Trust received only $1 on the sale of the Gladesville Property, and therefore a payment of $340,064 could not present a share of the proceeds from the Trustee’s sale of that property).
Further, in his affidavit of 19 November 2024, the Receiver expressed the view, based on his review of the financial records of the Company and the Trust, that these withdrawals have been accurately recorded in the Company’s MYOB. There was no challenge to this view in cross-examination.
Having regard to those matters, I am satisfied that the Receiver is justified in rejecting Vicki’s claim that the payments should be treated as loans made by the Trust to Danielle, rather than as loans made by the Company.
Prayer 22 of the Receiver’s Application seeks a direction as to whether the Receiver would be justified in rejecting Vicki’s claim that, in relation to the transfer of the Gladesville Property by the Trust to Vicki’s ex-husband, Vicki should be liable to pay the Trust the sum of $1,350,000, in accordance with the valuation prepared by Citywide Valuers on 15 March 2023 (the Citywide Valuation), rather than $1,500,000, in accordance with the valuation prepared by Cushman & Wakefield in May 2024 (the C&W Valuation).
In order to satisfy Vicki’s obligations to her ex-husband, Vicki procured, with Danielle’s agreement, that the Gladesville Property, which was held by the Trust, be transferred to her ex-husband for consideration of $1 on 28 March 2023 (the Transfer).
It was common ground that Vicki needed to account to the Trust for the value of the Gladesville Property. The dispute between the parties concerned the value of the Gladesville Property as at the time it was transferred to Vicki’s ex-husband.
The Receiver proposed proceeding on the basis that the value of the Gladesville Property as at 28 March 2023 was $1,500,000, being the estimate of market value as at that date which was given in the C&W Valuation. As the Receiver noted, the C&W Valuation was adopted by the Trust for the purpose of preparing its financial statements and tax returns for the financial year ending 30 June 2023, which were signed by Vicki and Danielle and which formed the basis for the determination of the taxable capital gain in respect of the Gladesville Property.
Vicki contended that the value which should be adopted as at 28 March 2023 is that which appears in the Citywide Valuation, which gave a market value of $1,350,000 as at 15 March 2023.
Danielle contended that neither of these valuations should be used, and that a value of $1,600,000 should be adopted. The basis for this submission was as follows:
Vicki indicated in her oral evidence that, at the relevant time, she had an obligation of $1.6m to her ex-husband;
in order to meet this obligation, Vicki transferred the Gladesville Property to her ex-husband; and
when Danielle emailed Vicki shortly after the Transfer asking “what price did you sell gladesville for off contract”, Vicki responded “1.6”, adding that the “valuation came in lower so CGT for company is reduced”.
Danielle submitted that Vicki should “account for the benefit she received – namely the transfer of the [Gladesville] Property to meet an obligation of $1.6 million”.
I do not accept this submission. The issue is not what benefit Vicki received by the Transfer, but by what extent were the Trust’s assets depleted as the result of the Transfer.
Finally, by prayer 23 of the Receiver’s Application, the Receiver sought an order that his costs of the application be paid from the assets of the Company and the Trust on an indemnity basis.
Following the hearing, I made a consent order to this effect. The form of consent order included a note that Danielle and Vicki have reserved their positions as to whether any other costs orders should be made as to which, if either, of them should ultimately bear the Receiver’s costs with respect to the Receiver’s Application, including by way of the provision of indemnity to the Company or the Trust for such costs or some other costs orders.
Accordingly, I will make directions that, within two weeks of the delivery of these reasons, Danielle and Vicki exchange any proposed form of costs order in relation to the Receiver’s Application and any supporting submissions, indicating whether, and if so why, a hearing is requested to deal with any dispute as to costs.
The second application which arises for determination in the Company/Trust Proceeding is Danielle’s application for an order under s 599 of the Corporations Act, reversing:
the Receiver’s decision that the Trust is indebted to Ms Elizabeth Vlahos in the amount of $80,000; and
the Receiver’s decision to pay this claim in full in priority to other unsecured creditors.
For convenience, and without intending any disrespect, I will refer to Ms Elizabeth Vlahos by her first name.
As noted above, Elizabeth is Vicki’s mother. She gave evidence that she had helped raise Danielle, who had lived in her house from a young age and was “like a daughter to me”.
There is no dispute that, on 7 December 2017, Elizabeth advanced $80,000 to the Trust, by paying this sum directly into the Trust’s bank account (Elizabeth’s Loan).
Danielle contended that Elizabeth’s Loan was repayable on demand, and therefore any claim by Elizabeth was statute-barred by around December 2023, some eight months before Elizabeth first requested repayment (on 15 August 2024).
There was no written agreement relating to Elizabeth’s Loan. Instead, Elizabeth agreed to make the loan in a conversation with Vicki. The contention that Elizabeth’s Loan was repayable on demand was supported by the evidence of both Elizabeth and Vicki regarding the terms of this conversation. Elizabeth deposed that, at the time she agreed to lend these funds, she said to Vicki that: “I will only lend that amount on the condition that it will be immediately repaid when I want it”. Similarly, Vicki deposed that Elizabeth agreed to lend the money “on the condition that it would be repaid to [her] upon her request”.
In Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 566; [1956] HCA 51, the High Court (Dixon CJ, McTiernan and Taylor JJ) held that: "A loan of money payable on request creates an immediate debt.” Accordingly, where a loan is repayable on demand, the lender's cause of action arises immediately on the receipt of the money by the borrower, so that the lender's cause of action becomes statute barred at the expiry of six years after the receipt of the money: Ogilive v Adams [1981] VR 1041 at 1043 (Fullagar J).
Senior Counsel for Elizabeth did not dispute that Elizabeth’s Loan was repayable on demand, but contended that the Trust had made a number of “confirmations” of the debt, in the form of acknowledgements in the financial statements of the Trust of the existence and amount of the debt. In particular, the Trust’s financial statements for each of the financial years from FY18 to FY22 included, in non-current liabilities, an entry for “Loan – Elizabeth Vlahos” in the amount of $80,000.
“In order for there to be confirmation of a cause of action, four matters must be established: first, the confirmation of a cause of action must occur after the limitation period commences to run but ‘before the expiration of the limitation period’ for that cause of action (s 54(1)); secondly, the person must acknowledge the cause of action to the person having the cause of action (s 54(2)(a)(i)); thirdly, the acknowledgement ‘must be in writing and signed by the maker’ (s 54(4)); and, fourthly there is only confirmation if ‘the confirmation is made to the person or to a person through whom the person claims’ (s 54(5)).
A reference in a balance sheet to a debt can constitute a confirmation of that debt: The Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535; [1981] HCA 71.
Accordingly, so far as the first three of the four requirements set out in OLI 1 are concerned, the financial statements of the Trust which contained a reference to Elizabeth’s Loan were: (1) issued after the limitation period began to run but before the expiry of that period; (2) amounted to an acknowledgement of the Trust’s liability to Elizabeth in respect of Elizabeth’s Loan; and (3) were in writing and, in a number of instances, signed by the directors of the Trustee.
The focus of the dispute was therefore on whether the fourth requirement was satisfied, namely, whether any of these confirmations was “made to” Elizabeth, within the meaning of s 54(5).
There is no evidence that Elizabeth personally received a copy of the Trust’s balance sheet for any of the relevant financial years.
However, as Leeming JA explained in Australian Medico Legal Group Pty Ltd v Claireleigh Mosman Pty Ltd [2017] NSWCA 218 at [17]-[20] (Basten JA agreeing), “no narrow approach is to be taken to determining whether an acknowledgement is made to the creditor”.
For example, in Hipworth v Mahar (1952) 87 CLR 335 at 344; [1952] HCA 43, Dixon CJ, Webb and Fullagar JJ held that an acknowledgement of debts in a bankrupt’s statement of affairs was “fairly and properly regarded as a statement made to each and every creditor”, and referred to the importance of “a just and fair construction of the statute”. In The Stage Club at 566, Wilson J (with whom Murphy J agreed) referred to the decision in Hipworth and observed that “this is an area where flexibility in approach is evident”.
In Australi**an Medico Legal Group at first instance, Brereton J referred to authority to the effect that a company’s balance sheet is taken to be implicitly addressed to all creditors whose debts are referred to in them (In re Compania de Electricidad de la Provincia de Buenos Aires Ltd [1980] 1 Ch 146 at 193 (Slade J)), and observed that, accordingly, the inclusion of a particular debt in a company’s balance sheet will “constitute an effective acknowledgment of the debt of any creditor who can establish by appropriate (extrinsic) evidence that it has received from whatever source a copy of the balance sheet”: Hashman v Australian Medico-Legal Group Pty Limited; Claireleigh Mosman Pty Limited v Australian Medico-Legal Group Pty Limited [2016] NSWSC 1773 at [23]-[26].
“It is sufficient to observe that, given the broad approach to the provision, even if it is necessary to find an objectively manifested intention that the acknowledgement be made to Mr Hashman in his capacity as controller of Claireleigh, such an intention is present. Any other conclusion would be artificial, and would sit ill with the finding that Mr Hashman was Claireleigh’s alter ego. Indeed, although it was not put in this fashion, I cannot see how one could construe either the balance sheet or the email as having been sent to Mr Hashman solely in his capacity as shareholder. Once it be assumed that the lender was Claireleigh, how could one impute an intention to the effect that the documents were not to be regarded as an acknowledgement of indebtedness made to Mr Hashman as controlling mind of Claireleigh?”
In The Stage Club, it was held that the provision of a balance sheet to a member of the club’s board who was acting in the interests of a creditor (Millers) amounted to provision to him both in his capacity as a shareholder and in his capacity as an agent of Millers.
Senior Counsel for Elizabeth submitted that “an agent of Elizabeth Vlahos, for the purpose of Elizabeth Vlahos to know what was happening to her loan, was Vicki Vlahos”. He contended that, because Vicki received and signed the accounts, those accounts amount to “a confirmation signed off [by the directors of the Trustee] that went at least to an agent of Elizabeth Vlahos [namely, Vicki] and that confirms the debt”.
In general, no formality is necessary for the appointment of an agent to act on behalf of his or her principal*: Field v Shoalhaven Transport Pty Ltd* [1970] 3 NSWR 96 at 103 per Asprey JA. It is only necessary that the principal and agent consent to that relationship: Garnac Grain Co Inc v HMF Faure and Fairclough Ltd [1968] AC 1130 at 1137.
The existence of an agency agreement may be inferred from the circumstances of the particular case. In Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142 at 150, Jordan CJ observed that:
“Evidence that a person is purporting to do acts on behalf of a principal in some capacity in such circumstances that the knowledge and approval of the principal may fairly be inferred is evidence that the principal has authorised him to act in the particular capacity. If there is evidence justifying such an inference, it justifies the further inference that the person has authority to do such acts as would be done, as a matter of ordinary business practice, by a person acting in such a capacity.”
In the present case, there was no evidence of any discussion to the effect that Vicki would act on behalf of Elizabeth in respect of Elizabeth’s Loan, or that Vicki would keep Elizabeth updated in respect of matters relating to Elizabeth’s Loan or relating to the financial position of the Trust. Nor was there any identification in submissions of the basis on which any such inferences to that effect might be made.
Instead, the substance of the evidence given by Vicki and Elizabeth regarding their interactions in relation to Elizabeth’s Loan was that: (1) Vicki told Elizabeth that she was requesting the Loan because “the Trust needed funding assistance so that it could continue to trade and acquire assets”; (2) Elizabeth said that she was willing “to help out”; (3) when Elizabeth said that she wanted the money to be repayable on request, Vicki replied that this “won’t be a problem, we will just need time to repay you”; and (4) Elizabeth made a number of enquiries to Vicki regarding “when am I getting the money back” but was not worried because “there was no problems with Vicki and Danielle”.
To adopt the language of the passage from Jordan CJ’s reasons set out above, there was no evidence that Vicki was, in relation to the affairs of the Trust, “purporting to do acts on behalf of [Elizabeth] in some capacity”, and therefore no basis for inferring that she was performing such acts with “the knowledge and approval of [Elizabeth]” or that Elizabeth had “authorised [Vicki] to act in the particular capacity”.
Ultimately, the primary basis of the submission that there was a relationship of agency between Vicki and Elizabeth was their mother-daughter relationship, with the argument being put in the following terms: “what’s more likely when you’ve got your mother putting in $80,000, that you’re going to be acting in the role of some hostile third party, or that you’re going to be looking at her interests, what’s more likely?”
However, the issue is not whether Vicki was a “hostile third party”. Instead, the issue is whether there is a basis for inferring that Vicki was “an agent of Elizabeth Vlahos, for the purpose of Elizabeth Vlahos to know what was happening to her loan”. I am not satisfied that such an agency relationship can be inferred from the fact of the mother-daughter relationship, particularly where, in conversations with her mother about the Loan, Vicki was acting as a director of the Trustee and in the interests of the Trust. Further, it is difficult to see a basis to infer that Vicki and Elizabeth consented to Vicki acting as Elizabeth’s agent “for the purpose of Elizabeth Vlahos to know what was happening to her loan” where there is no evidence that Vicki did, in fact, keep Elizabeth appraised of “what was happening to her loan”.
It follows that the confirmations of the Trust’s liability to Elizabeth which were contained in the Trust’s financial statements were not “made to” Elizabeth, within the meaning of s 54(5) of the ; and therefore none of those confirmations had the effect of extending the limitation period which otherwise applied to Elizabeth’s Loan. Accordingly, Elizabeth’s claim for recovery of her Loan was statute barred by around 7 December 2023, some eight months before she first made a demand for its repayment.
The third application which arises for determination in the Company/Trust Proceeding is Danielle’s application for the following orders in respect of costs:
first, orders that Vicki pay Danielle’s costs on the ordinary basis, for the period from the commencement of the Company/Trust Proceeding (on 6 October 2023) through to the making of the orders appointing the Receiver (on 26 October 2023), and that such costs be payable forthwith; and
secondly, an order that Danielle’s costs of an Interlocutory Process dated 26 April 2024 (which Vicki has been ordered to pay) be payable forthwith.
The relevant background may be briefly stated.
On Friday, 6 October 2023, Vicki made an urgent ex parte application and obtained leave to file in Court the Originating Process, which sought orders that the Company and the Trustee to be wound up on the just and equitable ground and orders for the appointment of a liquidator. At the time the proceeding was commenced, Danielle was overseas, conducting business for the Company.
On Monday, 9 October 2023, an affidavit of Danielle’s solicitor was filed and served, which relevantly stated that Danielle was concerned that placing the Company and the Trustee into liquidation would damage the value of their assets, and that Danielle “wishes to consider whether a less drastic measure, such as the parties voluntarily appointing an administrator, a receiver, or an agent or (in the case of the [Trust]) a replacement trustee, could resolve the deadlock with less damage to the value of the companies’ assets”.
Between 12 and 16 October 2023, the solicitors for Vicki and Danielle exchanged correspondence in which Danielle’s solicitors proposed alternatives to winding up and appointing a liquidator, including appointing an administrator.
On 24 October 2023, submissions were filed on behalf of Danielle which opposed the winding up of the companies and proposed the appointment of a receiver.
On 25 October 2023, Vicki agreed to appoint a receiver to the companies rather than a liquidator.
On 26 October 2023, consent orders were agreed, other than as to the identity of the receiver who was to be appointed. Following an argument on this remaining issue before Williams J, orders were made appointing the Receiver.
In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625; [1997] HCA 6, McHugh J stated that:
“In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. … When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. …
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. … But such cases are likely to be rare.
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.”
Danielle submitted that, in the present case, Vicki acted unreasonably in commencing the Company/Trust Proceeding (in particular, because Vicki brought an application for the winding up of the companies without first exploring other options) and that the Court “can be almost certain that [Danielle] would have succeeded if the hearing on the merits had proceeded”.
I am not satisfied as to those matters. In circumstances where the Company was founded on a partnership between Danielle and Vicki and that partnership had irretrievably broken down, with the loss of mutual trust and confidence, there was a reasonable basis for the making of an application seeking orders that the company be wound up on the just and equitable ground. If this application had gone to a contested hearing, it would have been necessary to consider whether some other less drastic remedy was available and appropriate: Tomanovic v Argyle HQ Pty Ltd*; Tomanovic v Global Mortgage Equity Corp Pty Ltd* [2010] NSWSC 152 at [44]-[46] (Austin J). This can be a complex factual enquiry. In the absence of performing a detailed review of the evidence which would have been before the Court on 26 October 2023, I am not satisfied that it is “almost certain” as to how that issue would have been determined on a contested hearing.
Further, although the correspondence between the parties had referred to alternatives to a winding up order (such as the appointment of a voluntary administrator), Danielle only put forward a firm proposal for the appointment of a receiver in her submissions of 24 October 2023, and Vicki agreed to this proposal on the following day, with orders then being made by consent. I do not consider that this amounts to a last-minute capitulation by Vicki to a proposal which she had unreasonably failed to accept at an earlier point in time, such as to provide a basis for ordering costs against her.
Accordingly, I have determined that there should be no order as to the costs of the proceeding up to 26 October 2023.
On 11 June 2024, Black J ordered that Vicki pay Danielle’s costs of an Interlocutory Process dated 26 April 2024. Danielle seeks an order that those costs be paid forthwith.
Unless the Court otherwise orders, the costs of an interlocutory application are not payable until the end of the proceeding: Uniform Civil Procedure Rules 2005 (NSW), r 42.7(2).
The principles governing the exercise of the Court’s power to order that costs be payable forthwith were summarised by the Court of Appeal in Pavlovic v Universal Music Australia Pty Ltd (No 2) [2016] NSWCA 31 at [14]-[17] (Bathurst CJ, Beazley P, Meagher JA):
“The circumstances in which it is appropriate that a court orders costs of an interlocutory judgment to be payable forthwith were discussed by Barrett J in Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; 55 NSWLR 1, at [11]-[13]. …
… Barrett J identified three factors relevant to the determination of whether such an order should be made, namely:
‘(1) That the interlocutory decision represents “the determination of a separately identifiable matter or may be viewed as the completion of a discrete aspect” of the case (at [11]);
(2) That some conduct of the unsuccessful party may be seen as being unreasonable (at [12]); and
(3) That there is still some considerable distance to go in the litigation so that it may be appropriate that the successful party obtain the fruits of its costs order now (at [13]):’ …
UCPR, r 42.7(2) confers a general discretion on the Court to make ‘some other order’ than the rule otherwise prescribes. As is the case with any judicial discretion where no criteria for its exercise are specified in the conferring legislation, its proper exercise depends upon a consideration of all the circumstances of the case having regard to the interests of justice. It is uncontroversial that such discretions are to be ‘exercised judicially, according to rules of reason and justice, and not arbitrarily or capriciously or according to private opinion’: …
In Bevillesta v D Tannous McColl JA, Allsop P and Handley AJA agreeing, stated, at [37], that beyond factors such as those described by Barrett J in Fiduciary v Morningstar, in making a determination under UCPR, r 42.7, regard must also be had to the ‘dictates of justice’, as required by the Civil Procedure Act, s 58.
… Whilst it is not necessarily apparent to us that s 58 applies to an application under UCPR, r 42.7, there is no doubt, as we have said, that in exercising a discretion otherwise unconfined by the conferring statute, the Court is required to take into account all relevant circumstances and determine the matter having regard to the interests of justice.”
At the hearing before me, Danielle relied on her written submissions in support of her application for an order that costs be payable forthwith, and did not otherwise address that application.
Those written submissions, which were dated 25 September 2024, focussed primarily on Danielle’s impecuniosity. In particular, Danielle sought an order that the costs of the April 2024 application be payable forthwith on the basis that she was facing “significant cashflow difficulties and financial pressures”, such that “further delay without payment will prejudice Danielle’s capacity to protect her interests in the proceedings”.
After those submissions were filed, the Receiver paid an interim dividend of $1m to Danielle in early October 2024. Danielle did not give any evidence or advance any submissions as to whether, and if so why, she continued to face, following the receipt of this sum, the “significant cashflow difficulties” which she had referred to in her September 2024 submissions.
Further, as matters transpired, Danielle did not appear to face any significant impairment in her capacity to protect her interests in these proceedings (such as had been feared when she filed her submissions in September 2024). She prepared multiple affidavits for the purposes of the proceedings, filed detailed written submissions and was represented by solicitors and counsel at the hearing in February 2025.
In those circumstances, I am not satisfied that a basis has been established to order that the costs order previously made by Black J in favour of Danielle be payable forthwith.
By a Statement of Claim filed on 30 January 2024 in proceeding 2024/37235, Vicki seeks repayment of an amount of $645,000 which she loaned to Danielle, together with interest and costs.
It was common ground that in June 2020, Vicki advanced the sum of $645,000 to Danielle; and that it was a term of their loan agreement that Danielle would repay this sum to Vicki upon the sale of a certain property owned by Danielle (which subsequently occurred in June 2021).
The dispute between the parties concerned whether, and to what extent, that loan amount had been repaid.
Although Vicki pleaded that no amount of the principal had been repaid, she conceded, in written submissions, that an amount of $36,389.41 had been repaid by Danielle directly into Vicki’s bank account in December 2021. Vicki contended that the balance of $608,610.59 remain unpaid.
In response, Danielle contended that the entire balance of the loan had been repaid, pursuant to arrangements which she had agreed with Vicki.
First, Danielle deposed that, in September 2020, Vicki asked for repayment of the loan so that she could use the funds to buy a property in Los Angeles; Danielle indicated that she could repay $400,000 at that time; and Vicki said: “pay it through the company because I don’t want Isaac [Vicki’s ex-husband] to see the money in my personal account”.
In cross-examination, it was put to Danielle that there was no such conversation, but she maintained her evidence.
Danielle’s account is supported by the following matters.
First, on 23 September 2020, Danielle made a payment of $400,000 from her personal bank account to the Company’s ANZ bank account.
Secondly, although the payment by Danielle to the Company appears to have initially been treated as a reduction in Danielle’s Loan Account, this entry was reversed and instead the payment was treated as a reduction in Vicki’s Loan Account. (That is, the substance of the transaction was that Vicki received a benefit of $400,000 as a result of the payment made to the Company by Danielle.)
Thirdly, Vicki acknowledged in cross-examination that, following this payment by Danielle to the Company, Vicki made a number of withdrawals from the Company which totalled around $387,000.
Fourthly, in subsequent communications, Vicki acknowledged that Danielle had repaid $400,000 to Vicki by this means. In particular, in around March 2021, Vicki and Danielle had an exchange of messages in relation to the loan, which included the following messages from Vicki:
“I lent 645
And have 400 back”
Having regard to those matters, I am satisfied that there was an arrangement between Danielle and Vicki in September 2020 to the effect that Danielle would repay $400,000 of the loan amount to Vicki by making a payment of that amount via the Company; and that Danielle performed this arrangement by making a payment of $400,000 to the Company, which was credited to Vicki’s Loan Account, and was thereby able to be (and was) withdrawn by Vicki.
It follows that:
Vicki’s claim in respect of her loan to Danielle must take account of this $400,000 repayment by Danielle; and
the Receiver would not be justified in treating the $400,000 payment by Danielle to the Company’s ANZ bank account ending 3209 as being applied in reduction of Danielle’s Loan Account, resulting in a respective increase to Vicki’s Loan Account (Receiver’s Application, Prayer 13 (see paragraph [179] above)). Such an adjustment would be inconsistent with the arrangement which was reached between Danielle and Vicki, and would fail to take account of the fact that the payment which was made by Danielle to the Company was intended to be, and was, made for the benefit of Vicki.
Secondly, insofar as the balance of the loan is concerned, Danielle gave evidence that she and Vicki agreed that Vicki could use surplus funds in the Company’s Joint Saver Account to assist her to purchase the property in Los Angeles and that 50% of those funds would be attributed to Danielle’s Loan Account (with the amounts attributed to Danielle being treated as part repayments of Vicki’s loan). Danielle contended that three withdrawals were made from the Joint Saver Account as a result of this agreement.
On 1 December 2020, an amount of $247,000 was transferred from the Joint Saver Account to another account held by the Company; and between 2 and 11 December 2020, Vicki withdrew $244,765.83 from that other account. Vicki acknowledged these transactions in her 14 November 2024 affidavit, but noted that the entire balance withdrawn by her was debited to her Loan Account. (In closing submissions, Danielle said that 50% of this amount should have been debited to Danielle’s Loan Account, but conceded that this had not occurred.)
On 6 September 2021, an amount of $120,000 was withdrawn from the Joint Saver Account and was paid into another account held by the Company. Danielle contended that this payment was withdrawn “by Vicki or at her direction”. However, Vicki gave unchallenged evidence that these funds were used on 7 September 2021 to pay the “BEAR” factory, which was one of the Company’s suppliers.
On 1 December 2021, an amount of $244,028 was transferred from the Joint Saver Account to Vicki’s personal account. One half of this payment ($122,014) has been allocated to Vicki’s Loan Account and the other half to Danielle’s Loan Account.
“Vicki took from saver $247,000.00
Vicki took danielle part $123,500.00”
This appears to be a reference to the sum of $247,000 which was transferred from the Joint Saver Account in December 2020 and was withdrawn by Vicki. The statement “Vicki took danielle part” (followed by a figure representing one half of this sum) appears to acknowledge that, although Vicki received the whole of this sum, the arrangement was that one half of the sum was to be allocated to Danielle. (It should be noted that this spreadsheet was prepared prior to the transfer, on 1 December 2021, of a further $244,028 from the Joint Saver Account to Vicki’s personal account.)
“Danielle was in terrible circumstances and needed Money I gave her $645,000 she paid me back 2 years later with company money.”
This message acknowledges both that Danielle had repaid the full amount of the loan, and she had done so “with company money” – that is, by Vicki withdrawing money from the Company.
Having regard to those matters, I am satisfied that there was an arrangement between Danielle and Vicki that half of the sum which Vicki withdrew from the Joint Saver Account ($488,793.83) would be debited to Danielle’s Loan Account ($244,396.91), with Vicki’s loan to Danielle thereby being repaid by this amount.
When the amount repaid by this means ($244,396.91) is added to the amount of the other repayments made by Danielle ($400,000.00 in September 2020 and $36,389.41 in December 2021), the result is that by December 2021, Danielle had repaid to Vicki the amount of $680,786.32. The difference between this figure and the amount advanced is likely due to interest, which had been agreed to be payable at the rate of 3.73% per annum.
It follows that the entries made in the Company’s records did not properly reflect the substance of the arrangement which had been agreed between Danielle and Vicki pursuant to which the relevant withdrawals were made by Vicki. In particular, Danielle’s Loan Account was debited with 50% of the value of only one of the two withdrawals made from the Joint Saver Account, with the total amount of the other withdrawal (the amount of $244,765.83 in December 2020) being debited to Vicki’s Loan Account. Danielle acknowledged that an adjustment should accordingly be made to their respective Loan Accounts.
For those reasons, I will dismiss Vicki’s claim for repayment of the $645,000 loan, and I will give a direction to the Receiver that he would be justified in increasing the balance of Danielle’s Loan Account by $122,382.91 and decreasing the balance of Vicki’s Loan Account by the same amount.
I will give the parties an opportunity to be heard on the costs of Vicki’s Loan Claim, in light of these reasons.
By Amended Statement of Claim filed on 11 December 2023 in proceeding 2023/325408, Danielle seeks repayment of an amount of $170,000 which she loaned to Vicki, together with interest and costs.
It is common ground that in around January 2023 Vicki requested that Danielle provide her with the amount of $170,000 in order to fund a payment which Vicki was obliged to make to her ex-husband; that, in response to this request, Danielle transferred the sum of $170,000 to the Company, which was immediately transferred by the Company to Vicki’s solicitors; and that Vicki has not repaid that amount.
While Danielle contended that the money was loaned by Danielle to Vicki, Vicki contended that the money was loaned by Danielle to the Company, which in turn loaned the same sum to Vicki.
The books of the Company are consistent with the position adopted by Vicki: the payment by Danielle to the Company in January 2023 has been recorded in the Company’s books as a credit to Danielle’s Loan Account; and the payment by the Company to Vicki’s lawyers has been recorded in the Company’s books as a debit to Vicki’s Loan Account.
These entries were not made by Danielle. Further, there is no evidence that they were made on the instructions of either Danielle or Vicki. It is apparent, as set out below, that Vicki was unaware of these entries, and Danielle has consistently maintained that they are incorrect, on the basis that they did not reflect the substance of the agreement between her and Vicki.
Danielle gave unchallenged evidence that on 20 January 2023, Vicki called Danielle “to ask me to lend her $170,000, and promise**d to repay me from her American bank account with Chase Bank on the next business day in the United States following the loan” (emphasis added).
Danielle deposed that:
she gave an instruction to the Company’s Financial Controller, Mr Chen, to transfer the amount of $170,000 from her personal account (in respect of which Mr Chen had authority) to the bank account of Vicki’s solicitors;
this instruction could not be carried out, as the transaction exceeded the daily withdrawal limit;
because Vicki needed the funds urgently, Danielle asked Mr Chen to pay the sum of $170,000 from Danielle’s bank account to Vicki’s solicitors via the Company’s bank account. The daily transaction limit did not apply to transfers from Danielle’s ANZ account to the Company’s ANZ trading account, because those two accounts were linked.
Danielle exhibited to her affidavit a number of messages from Vicki to Danielle at the time that the transfer was made, in which Vicki sought details of the account held by Danielle into which repayment should be made:
“Send me bsb and account and I’ll transfer back on Tuesday”
“I will need swift etc”
“And send me full details where to transfer”
…
“And send me all Danielle’s details with Swift on Monday”
Those messages demonstrate an understanding on Vicki’s part that she was obliged to repay the moneys to Danielle, rather than to the Company.
Further, Danielle referred to the following evidence in support of her submission that the substance of the agreement was that the loan was made by her, and repayable to her.
On 11 May 2023, emails were exchanged between Danielle and Vicki. Danielle asked Vicki to “advise when and how I will be paid back … $170,000 personally owed to me”. Vicki responded that “the loan to me” was “on the same terms as I gave a loan to you”; stated that if a proposed sale of the business to Allure proceeded, “I would pay you back from those funds as soon as they are in hand”; and complained that “you agreed that I could have time to pay”.
On 12 May 2023, Vicki sent another message to Danielle stating “You promised to help me out by lending me money” and “you must commit to what you promised”.
On 7 June 2023, Vicki sent an email to Danielle which, relevantly, stated: “I agree that you [are] owed $170,000 – a personal loan from you to me”.
Vicki prepared a spreadsheet which included a line referring to the loan in the following terms (emphasis added):
“vicki owes danielle $170,000.00 This is personal nothing to do with company”
In cross-examination, when taken to a number of the documents set out above, Vicki acknowledged that she intended “to pay back Danielle for the loan”, explaining that “I thought I owed it to her”. However, Vicki said that this was “cause I didn’t know she double-dipped it”. Vicki explained that the reference to “double-dipping” was a reference to the fact that the amount of $170,000 had been credited to Danielle’s Loan Account and debited to Vicki’s Loan Account.
Having regard to the evidence set out above, I am satisfied that the agreement between Danielle and Vicki was that Danielle would loan the amount of $170,000 to Vicki, and that Vicki would repay this sum to her. This agreement was performed by a transfer via the Company’s accounts because of the practical difficulties involved in transferring the funds directly from Danielle’s account on an urgent basis. However, the method by which the moneys were advanced does not alter the substance of the loan agreement.
Similarly, the fact that entries were made in the respective Loan Accounts of Danielle and Vicki, which reflected the movement of the funds from Danielle to the Company and then from the Company to Vicki, does not alter the substance of the agreement between Danielle and Vicki. Those entries do not appear to have been made on the basis of any instructions from Danielle or Vicki as to the terms of their agreement.
Danielle accepted that she is not entitled to “double-dip”. She submitted that the appropriate course is that, consistently with the agreement between her and Vicki, Vicki’s only liability in respect of the amount of $170,000 which was paid for her benefit is a liability owed to Danielle, and not a liability owed to the Company. Accordingly, Danielle acknowledged that, if her contentions in respect of her loan claim were accepted, then the balance of Danielle’s Loan Account should be increased by $170,000, and the balance of Vicki’s Loan Account should be decreased by the same amount.
For the reasons given above, Danielle has established that she is entitled to repayment of the amount of $170,000 from Vicki. She is also entitled to pre-judgment interest from 24 January 2023. That is because the payment was made on Saturday 21 January 2023 (which was Friday 20 January 2023 in Los Angeles) and Vicki promised, as a term of the loan agreement, to repay the advance on the following business day, being Monday, 23 January 2023 (which was Tuesday, 24 January 2023 in Sydney). I will direct the parties to bring in short minutes of order to give effect to these reasons for judgment which include a calculation of interest.
I will also give a direction in the Company/Trust Proceeding that, for the reasons given above (and to address the issue of “double-dipping”), the Receiver would be justified in increasing the balance of Danielle’s Loan Account by $170,000.00 and the balance of Vicki’s Loan Account by the same amount.
For the reasons set out above, I make the following orders.
In respect of the Receiver’s Further Amended Interlocutory Process filed on 5 February 2025 in proceeding 2023/316575, the Court:
Directs that the Receiver would be justified in proceeding on the basis that the transactions on the Company’s American Express credit card account:
(a) were, as the amount of $52,895.81, for the personal benefit of the First Respondent; (b) were, as to the amount of $140,567.55, for the personal benefit of Second Respondent; and (c) were, as to the remainder, business expenses of the Company.
(a) were, as to the amount of $30,857.76, for the personal benefit of First Respondent; (b) were, as to the amount of $68,009.58, for the personal benefit of Second Respondent; and (c) were, as to the remainder, business expenses of the Company.
(a) would not be justified in treating the $400,000 payment by the First Respondent to the Company’s ANZ bank account ending 3209 as being applied in reduction of the First Respondent’s director loan account, resulting in a respective increase to the Second Respondent’s loan account; but (b) would be justified in increasing the First Respondent’s loan account by $292,382.91 and decreasing the Second Respondent’s loan account by $292,382.91.
Directs that the Receiver would not be justified in proceeding on the basis that the sum of $123,328.48 in connection with District Court of NSW Proceedings commenced by Ms Deborah Elomar and DH Castle Hill Pty Ltd be treated as for the Second Respondent’s personal benefit.
Directs that the Receiver would be justified in proceeding on the basis that the sum of $66,623.97 paid by the Company for stamp duty pertaining to the transfer of the Gladesville Property be treated as for the Second Respondent’s personal benefit.
Directs that the Receiver would be justified in rejecting the claim by the Second Respondent that the three payments made by her to the Company, which total $540,390.63 on 2 and 8 March 2023, should be treated as a loan from the Second Respondent to the Trust rather than as a loan from her to the Company.
Directs that the Receiver would be justified in rejecting the claim made by the Second Respondent that the payment made by her to the Company of $314,797.29 on 18 May 2023, should be treated as a loan from the Second Respondent to the Trust rather than as a loan from her to the Company.
Directs that the Receiver would be justified in rejecting the claim by the Second Respondent that the payment made by her to the Company of $100,000 on 26 February 2020, should be treated as a loan from the Second Respondent to the Trust rather than as a loan from her to the Company.
Directs that the Receiver would be justified in rejecting the claim by the Second Respondent that the payment made by the Company to the First Respondent of $340,064 on about 31 May 2023, should be treated as a loan of that sum by the Trust to the First Respondent rather than as a loan from the Company to the First Respondent.
Directs that the Receiver would be justified in rejecting the claim by the Second Respondent that the payment made by the Company to the First Respondent of $125,360.05 on about 31 May 2023, should be treated as a loan of that sum by the Trust to the First Respondent rather than as a loan from the Company to the First Respondent.
Directs that the Receiver would be justified in proceeding on the basis that the Second Respondent should be liable to pay the Trust the sum of $1,425,000 in relation to the transfer of the property located at 6 Monash Road, Gladesville, New South Wales.
Directs that the First Respondent and Second Respondent exchange, and provide to the Associate to Nixon J, any proposed form of costs order in relation to the Receiver’s Further Amended Interlocutory Process and any supporting submissions (limited to 5 pages), by 5.00pm on 2 April 2025, indicating whether, and if so why, a hearing is requested to deal with costs.
In respect of Danielle’s Interlocutory Process filed on 12 October 2024 in proceeding 2023/316575 (the Danielle / Elizabeth Application), the Court:
**********
(2021) 388 ALR 128
(2003) 214 CLR 118
(1952) 87 CLR 335
(2008) 237 CLR 66
(2000) 48 NSWLR 724
(1991) 24 NSWLR 674
(1997) 186 CLR 622
(1981) 150 CLR 535
(1956) 99 CLR 560
Two other applications in the Company/Trust Proceeding were heard at the same time as the Receiver’s Application, namely:
an Interlocutory Process filed by Danielle on 24 October 2024, seeking orders under section 599 of the Corporations Act reversing the Receiver’s decision that the Trustee is indebted to Vicki’s mother, Ms Elizabeth Vlahos, in the amount of $80,000 and the Receiver’s decision that this claim should be paid in priority to other unsecured creditors of the Trust (the Danielle/Elizabeth Application); and
an Interlocutory Process filed by Danielle on 2 September 2024, seeking orders in respect of the costs of previous applications by Vicki in the Company/Trust Proceeding (the Danielle’s Costs Application).
Two further proceedings were heard at the same time as these three applications in the Company/Trust Proceeding. Each was commenced in the District Court of NSW (and subsequently transferred to this Court), and each concerned a loan between Danielle and Vicki, which was claimed to be outstanding.
First, by an Amended Statement of Claim filed on 11 December 2023, Danielle claimed the amount of $170,000 plus interest in respect of a loan which she had provided to Vicki (Danielle’s Loan Claim).
Secondly, by a Statement of Claim filed on 30 January 2024, Vicki claimed the amount of $645,000 plus interest in respect of a loan which she had provided to Danielle (Vicki’s Loan Claim).
I set out briefly below the background against which these various disputes arise, before dealing with each of them in turn.
Given Vicki’s evidence set out above, I do not consider that, in the absence of receipts for the other items, there is a sufficient basis to conclude that the remainder of the Wayfair expenses were for Vicki’s personal benefit.
Thirdly, Vicki contended that transactions on the Company’s PayPal account in respect of Apple services, iTunes and App store charges, totalling $59,666.40, were for Danielle’s personal benefit.
There was limited evidence in relation to these charges. There was a schedule setting out the individual amounts which comprised this total figure. It ran to almost 200 pages and around 2,000 individual line items, some of which were for amounts of $0.99 or $1.49. This schedule did not include any details of what products or services were purchased. The same email address appeared alongside each purchase in the Schedule, but there was no evidence regarding any emails to or from that email address in relation to any of the purchases.
Vicki’s evidence regarding this issue was in broad and conclusory terms. In her affidavit of 17 January 2025, Vicki deposed that: “On the PayPal ledgers, Danielle has failed to allocate her iTunes spending, which was for her benefit, totalling $59,666.40 for the period 2021 to 2023”. I am unable to give this statement any significant weight, in circumstances where Vicki did not provide any basis in her affidavit for her conclusory statement that any, let alone all, of this spending was for Danielle’s personal benefit.
In cross-examination, Danielle gave evidence that Vicki also used the iTunes account; said that she had “looked through the transactions” and “can’t identify at, at all what they’re for”; rejected the proposition that the “great majority of them” were hers; and explained that at the relevant time, she was using various Apps for the Company’s purposes, including for social media, upon which the Company’s fashion business was “heavily” focused.
In closing submissions, Vicki moved away from the suggestion that all of the iTunes expenditure should be attributed to Danielle, and instead submitted that, in light of Danielle’s evidence, “the amount of $59,666.40 … be halved, with 50% ($29,833.20) being considered personal expenditure of Danielle and the remaining half considered as business expenses of Love”. However, Vicki did not identify any basis in the evidence, and in my view, there is no basis in the evidence, to conclude that this proposed percentage allocation is appropriate.
Having regard to those matters, I do not consider that there is any sufficient basis for the Receiver to conclude that any particular portion of the iTunes and App store expenditure represents expenditure for the personal benefit of either Danielle or Vicki.
Fourthly, Vicki stated in her 17 January 2025 affidavit that four specific transactions on the PayPal account should be allocated to Danielle.
Danielle accepted that one of these transactions, being a purchase of $190.00 from JD Sports Fashion, was for her personal benefit.
In respect of the other three transactions, which were disputed, Vicki’s affidavit evidence did not rise higher than a conclusory statement that each of these transactions was “for [Danielle’s] personal benefit”. Vicki did not identify the basis for this statement.
I am not satisfied, on the basis of this evidence, that these three transactions were for Danielle’s personal benefit.
Fifthly, in her 17 January 2025 affidavit, Vicki proposed that various PayPal transactions for the purchase of games from Nintendo, Epic Games and Sony, totalling $4,121.57, which had been allocated to Vicki should be shared equally with Danielle on the basis that she “observed Danielle’s children playing games purchased from these providers”. She did not explain on what basis she was able to conclude, when she saw Danielle’s children playing a particular game, that the version being played was one purchased on the Company account, rather than another version of the same game purchased by other means. In any case, Vicki did not, in her closing written or oral submissions in relation to Prayer 2, advance any contention that an adjustment should be made in respect of the amount for games purchases. Instead, the only adjustments proposed by Vicki in closing submissions are those which have already been addressed above.
For those reasons, I will make a direction in terms of Prayer 2 of the Receiver’s Application save that:
the amount specified in that prayer for Danielle’s personal expenses ($30,667.76) will be increased by $190.00 (in respect of the admitted purchase from JD Sports), resulting in a revised figure of $30,857.76; and
the amount specified in that prayer for Vicki’s personal expenses ($76,242.49) will be decreased by $13,135.79 (in respect of the admitted adjustment described above) and increased by $4,902.88 (in respect of the admitted purchases from Wayfair), resulting in a revised figure of $68,009.58.
Secondly, Vicki raised various issues regarding the accuracy of the Old MYOB records. For example, she submitted that the Old MYOB “omits cheques totalling $106,000 drawn on [the Company’s] bank account for Danielle’s benefit”, and that the Old MYOB “does not include payments made by Vicki on her credit card and from her personal funds for [the Company’s] benefit, totalling $94,633.90”.
As regards the purportedly omitted cheques of $102,375 and $3,625 (totalling $106,000), Danielle referred to evidence that the amount of $102,375 was in fact debited to her Director Loan Account balance in the Old MYOB. As regards the payments made by Vicki on her personal credit card, Danielle’s counsel pointed out that Vicki did not give evidence that she has not been reimbursed for the expenses in question. In that regard, Danielle’s counsel referred to the statements for the relevant credit card account, which showed numerous deposits being made into Vicki’s credit card account at around the same time as the transactions in question.
There were various other points raised by Vicki in her affidavit evidence concerning the accuracy of the Old MYOB. It is unnecessary to address each of them. Vicki does not have any accounting qualifications and did not lead evidence from any person with accounting qualifications, including, for example, from Mr Wang (who was the Company’s CFO and who is currently an employee of Vicki’s business). In closing submissions, Vicki’s counsel acknowledged that:
Vicki did not, in any of the eight affidavits which she prepared and filed for the purposes of these proceedings, refer to such advice from Mr Yong as having been given at around the time she signed the FY18 financial statements. The first time she referred to such advice was in cross-examination, when taken to the terms of her declaration in respect of the FY18 financial statements and the loan balances in those accounts.
Vicki did refer in one of her affidavits to an email from Mr Yong on 23 May 2023 in which Mr Yong advised, in relation to the completion of the Company’s tax return for the financial year ending 30 June 2022 (FY22) that the “ATO is only interested in the total amount owed by all directors to [the Company]. The internal matter of sorting out the correct amounts between by each the party [sic] can take place any time”. This email was sent more than 14 months after the FY18 financial statements were signed. It is likely that Vicki mistakenly recalled this advice as having been given prior to her signing the FY18 financial statements.
As shown by the terms of the ATO’s request which is set out above, Vicki was informed that the ATO specifically wanted to know, in respect of the Loan Accounts, the “breakdown of the borrower/s of the loans each year” (including FY18) and “the movements in the balance of each loan”. Given the terms of those requests, it is unlikely that either Vicki or Mr Yong understood, at the time that the work necessary to respond to these requests was undertaken (including the preparation by Mr Yong of the FY18 financial statements), that the ATO was not interested in a “breakdown” of the Loan Accounts or in “the balance of each loan”. Instead, Vicki and Mr Yong likely appreciated the importance of ensuring that the information being provided to the ATO regarding the Loan Accounts – including regarding the breakdown between the loan balances and the precise balance of each account – was accurate.
As noted above, it is common ground that the balances of the Loan Accounts as at 30 June 2018 were the result of adopting the closing balances of those accounts in the Old MYOB as at 30 September 2017 as the opening balances of those accounts in the New MYOB, and applying transactions through to 30 June 2018.
Accordingly, by acknowledging that the balances of the Loan Accounts were correct as at 30 June 2018, Vicki was, in effect, acknowledging that the closing balances of those accounts in the Old MYOB as at 30 September 2017 were correct.
Finally, Vicki contended that Danielle had failed to call evidence to prove the accuracy of the Company’s accounts, submitting as follows:
In the absence of such material being available, no further guidance can presently be given on whether any amount should be allowed for any such claim by VAS, let alone the quantum of such amount.
For those reasons, I do not consider that the Court should give any direction beyond that which is sought in prayer 7 of the Receiver’s Application, namely, that the Receiver would be justified in rejecting the amount of $146,300 claimed by Vicki in relation to accommodation services.
Further, I accept Danielle’s submission that Vicki has had ample opportunity to provide a calculation of the amount claimed by her, and to put forward support for such calculation, but has not done so.
In those circumstances, I am satisfied that the Receiver would be justified in rejecting the $173,876 claimed by Vicki for an underpayment of wages and superannuation. Further, there is no sufficient basis on the evidence before the Court for the Receiver to substitute any other figure in respect of that claim.
Accordingly, the proper focus is on the value of the Gladesville Property, not the value of the obligations which were discharged by the transfer of that Property to Vicki’s ex-husband.
As regards the value of the Gladesville Property, there are two valuations, and the question becomes whether there is some basis for preferring one over the other. In considering that issue, it is important to keep in mind that valuation is an art, not a science, and involves subjective judgment: Strike Australia Pty Ltd v Data Base Corporate Pty Ltd [2019] NSWCA 205 at [9]-[12] per Bell P .
Vicki advanced two reasons why the Citywide Valuation should be preferred.
First, the Citywide Valuation was closer in time to the Transfer. Vicki submitted that the C&W Valuation, although it is intended to be an historical valuation of the Gladesville Property, is “more likely to be contaminated by changes in perception of the value of the property [a]rising from the passage of time and changes in the market”. This amounts to little more than speculation.
Secondly, Vicki submitted that the fact that the Gladesville Property sold, on 24 July 2024, for $1,250,000 “strongly suggests that $1,350,000 was the more accurate valuation, not $1,500,000”. However, as Counsel for Danielle pointed out, a particular sale at one point in time cannot be taken as evidence of the value of the property at a different point in time in circumstances where there is no evidence of the terms of the sale, the urgency of the sale, or any change in the state of the Gladesville Property in the intervening period.
Having regard to the matters set out above, I am not satisfied that there is a sufficient basis on the material before the Court for preferring one of the two valuations over the other. In those circumstances, I consider that the Receiver would be justified in having regard to each of the Citywide Valuation and the C&W Valuation, and adopting the midpoint of those valuations as the value of the Gladesville Property (namely, $1,425,000).
Section 54(1) of the Limitation Act 1969 (NSW) provides that where, after a limitation period commences to run but before it expires, a person against whom that cause of action lies “confirms” the cause of action, “the time during which the limitation period runs before the date of the confirmation does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation”.
In short, the provision of such a confirmation “postpones the reckoning of the limitation period”: Kation Pty Ltd v Lamru Pty Ltd [2011] NSWSC 219 at [11] (White J).
In OLI 1 Pty Ltd (in liq) v OLG 1 Pty Ltd (No 2) [2022] NSWSC 1199 at [191], Chen J observed as follows:
On appeal in Australian Medico Legal Group, it was common ground that if a loan had been made by a shareholder of the company (Mr Hashman), then the provision of the financial statements to him would have amounted to a confirmation “made to” him for the purposes of s 54(5). However, the issue which arose for determination was whether the provision of the financial statements to Mr Hashman was sufficient to amount to a confirmation in respect of a loan by a company which he controlled (Claireleigh). Leeming JA said (at [24]) that:
For those reasons, Danielle has established a basis for setting aside the Receiver’s decision that the Trust is indebted to Elizabeth in the amount of $80,000.
Given Danielle’s success on the application, she is entitled to costs. I will give the parties an opportunity to be heard on the appropriate form of costs order, in the event that there is any disagreement between them.
Having regard to the evidence set out above, the second of these three payments can be put to one side. I am not satisfied that it was, or was intended to be, a payment for the benefit of Vicki.
As regards the other two payments, which total $488,793.83, Vicki accepted that those amounts were paid to her, but submitted that they should properly be regarded as withdrawals of Company funds by Vicki, which were properly debited to her Loan Account, rather than as withdrawals made pursuant to some arrangement whereby 50% of those payments would be debited to Danielle’s Loan Account as a means of repaying, to that extent, Vicki’s loan to Danielle. Accordingly, although Vicki acknowledged that 50% of the third payment had been debited to Danielle’s Loan Account, she deposed in her affidavit of 14 November 2024 that this was an error.
In contrast, Danielle contended that the third payment was properly accounted for, but the first was not, on the basis that 50% of each of those payments to Vicki should have been allocated to Danielle’s Loan Account in accordance with the agreement between them that Danielle would repay Vicki’s loan by this means.
I accept Danielle’s evidence that such an arrangement was put in place. Danielle was not, in cross-examination, challenged on her evidence that she and Vicki came to an agreement to this effect. The existence of such an agreement is supported by the following matters.
On 5 March 2021, there was an exchange of messages between Vicki and Danielle regarding the loan. Vicki asked “how much has been paid back”. Danielle indicated that she had “paid back one payment” and “Then you took the saver money”. The latter message was likely a reference to the money which Vicki had withdrawn from the Joint Saver Account in December 2020. In these messages, Danielle indicated that she could not remember how much had been paid by these means, but told Vicki that “jason knows” (that is, the figures were known to the Company’s CFO, Mr Wang, suggesting that the relevant payments had been made via the Company’s accounts).
On the same day, Vicki sent Danielle a spreadsheet, which set out the loan principal of $645,000 on 15 June 2020; an amount of $400,000 paid on 23 September 2020 (being the date that Danielle paid that sum to the Company); and a further amount of $247,000 paid on 1 December 2020 (being the date on which this sum was withdrawn from the Joint Saver Account). A figure of $123,500 – which is half of $247,000 – appears below.
On 10 March 2021, Mr Wang prepared a spreadsheet entitled “loan”. Danielle gave unchallenged evidence that this was prepared at a meeting between her, Vicki and Mr Wang. This spreadsheet recorded that Danielle had already repaid $400,000 (being the sum which she had paid to the Company), and recorded that, following this payment, “danielle owes vicki $245,000”. The spreadsheet then includes the following entries:
I will give the parties an opportunity to be heard on the costs of Danielle’s Loan Claim, having regard to the conclusions set out above.
Orders that the Receiver’s decision to pay the claim of Elizabeth Vlahos in full in priority to other unsecured creditors be set aside.
Directs that the parties exchange by 5.00pm on 2 April 2025, and provide to the Associate to Nixon J, submissions in respect of costs of this application (limited to 3 pages), indicating whether, and if so why, a hearing is requested to deal with costs.
In respect of Danielle’s Interlocutory Process filed on 2 September 2024 in proceeding 2023/316575 (Danielle’s Costs Application), the Court orders that:
The Interlocutory Process filed on 2 September 2024 be dismissed.
The Applicant pay the Respondent’s costs of the motion.
In proceeding 2024/37235 (Vicki’s Loan Claim), the Court:
Orders that the proceeding be dismissed.
Directs that the parties exchange by 5.00pm on 2 April 2025, and provide to the Associate to Nixon J, submissions in respect of costs of this application (limited to 3 pages), indicating whether, and if so why, a hearing is requested to deal with costs.
In proceeding 2023/325408 (Danielle’s Loan Claim), the Court:
Directs that the parties bring in short minutes of order by 5.00pm on 2 April 2025 to give effect to these reasons for judgment.
Directs that, if the parties are unable to agree short minutes of order to give effect to these reasons for judgment (including as to interest and costs), the parties exchange by 5.00pm on 2 April 2025, and provide to the Associate to Nixon J, their proposed form of orders and any submissions in support (limited to 3 pages), indicating whether, and if so why, a hearing is requested to deal with costs.