In the matter of Petrolink Pty Ltd; Smith v Boné

Federal Court of Australia|2014-09-22|Before: Wigney J

The interlocutory process filed by the Applicant Michael John Morris Smith on 18 December 2013 be dismissed.
If the parties are able to agree on the appropriate costs order, consent orders reflecting that agreement are to be forwarded to the Associate to Wigney J within 14 days of this order.
If the parties are unable to agree on the appropriate costs order, the parties are to file and serve written submissions (not exceeding five pages in length) in relation to costs, together with an indication whether an oral hearing is requested, within 21 days of this order. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1691/2011

REASONS FOR JUDGMENT 1 Mr Barry Boné is a businessman. He previously operated a business, through a company called Petrolink Pty Ltd (Petrolink), which involved the repair of petrol bowsers and the removal and the replacement of underground fuel tanks. Mr Boné was the sole director of Petrolink and he and his wife were its sole shareholders. Mr Boné also operates a business, through a company named Valvelink Pty Ltd (Valvelink), which previously supplied services to Petrolink. Mr Boné is also the sole director of Valvelink and he and his wife are its sole shareholders. 2 Unfortunately for Mr Boné and Petrolink, in September 2011 the Deputy Commissioner of Taxation applied for, and in due course obtained, an order that Petrolink be wound up in insolvency. Mr Michael Smith was appointed liquidator. Shortly thereafter, Mr Smith applied for and obtained the Court's leave to appoint himself administrator of Petrolink. The effect of this appointment was that, as administrator, Mr Smith obtained control of the affairs of Petrolink and his powers as liquidator were suspended. Petrolink continued to trade under the administration of Mr Smith. 3 Unfortunately for everyone, within a fairly short period of time things turned nasty. Exactly when and how they turned nasty is a point of contention in these proceedings. The facts will be addressed in some detail later in these reasons. Suffice it to say here that Mr Boné became aggrieved as a result of some of Mr Smith's actions as administrator. He became particularly aggrieved about the manner and circumstances in which Mr Smith obtained approval for his remuneration both as administrator and as liquidator for the brief period before his appointment as administrator. 4 Things got worse when, in March 2012, the administration came to an end, Petrolink was placed back into liquidation and Mr Smith became liquidator again. They got worse still when Mr Smith, as liquidator of Petrolink, caused proceedings to be commenced against Valvelink and then Mr Boné for unfair preference payments and insolvent trading respectively. 5 Matters came to a head when, in June 2013, Mr Boné filed an interlocutory process in the original winding up proceedings (Mr Boné's application). Mr Boné's application named Mr Smith as respondent and sought orders that the remuneration of Mr Smith approved at meetings of the creditors in February and March 2012 be reduced. Mr Boné's application was subsequently amended in November 2013 to include relief challenging the validity of the resolutions passed at these meetings approving Mr Smith's remuneration. In December 2013, Mr Boné amended his application again to include an order that Mr Smith be removed as liquidator of Petrolink. 6 Mr Smith now seeks orders, by interlocutory process filed 18 December 2013, that Mr Boné's application be summarily dismissed in whole or in part. He claims that Mr Boné's application is an abuse of process because Mr Boné's predominant purpose in commencing and carrying on the proceedings is to intimidate or improperly influence Mr Smith in his capacity as liquidator of Petrolink so as to cause him to discontinue the proceedings against Valvelink and Mr Boné. 7 The primary issue in this application is whether Mr Smith has proved to the requisite standard that Mr Boné had this predominant purpose.

Relevant law 8 Mr Smith's interlocutory process and points of claim refer to s 31A of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), which provides for summary judgment where a party has no reasonable prospect of successfully prosecuting the proceeding. At the hearing of the application, however, Mr Smith made it clear that he did not contend that Mr Boné's application had no reasonable prospects of success. He conceded that Mr Boné's application was not devoid of merit or so unarguable that it was an abuse of process. He confirmed that he relied solely on the contention that Mr Boné's application was an abuse of process because it was commenced and prosecuted for the predominant purpose of intimidating or influencing Mr Smith from properly performing his duties and responsibilities as liquidator. Section 31A of the Federal Court Act is accordingly inapplicable to his case. 9 Rather, Mr Smith relies on rule 26.01 of the Federal Court Rules 2011 and the Court's inherent powers to control its processes. 10 Rule 26.01 relevantly provides as follows: A party may apply to the Court for an order that judgment be given against another party because: … (d) the proceeding is an abuse of process of the Court; … 11 Irrespective of rule 26.01, the Court has an implied incidental power to prevent abuse of its processes. That power extends to prevent misuse by litigants of the Court's processes to the detriment of others and to the protection of its own processes from interference: Lehman Brothers Australia Ltd v Wingecarribee Shire Council (2009) 176 FCR 120 at [41]. 12 The relevant principles in relation to abuse of process are not in dispute between the parties. There is an abuse of process when the predominant purpose of bringing proceedings is not to prosecute them to a conclusion, but to use them as a means of obtaining some advantage for which they are not designed, or some collateral advantage beyond that which the law offers: Williams v Spautz (1992) 174 CLR 509 (Williams v Spautz) at 526-527, 529. 13 The onus of satisfying the Court that a proceeding is an abuse of process is a "heavy one" and the power to grant relief which would prevent a court from exercising its jurisdiction is one to be exercised only in the most exceptional cases: Williams v Spautz at 529. 14 In Williams v Spautz Brennan J drew a distinction between an improper purpose which will amount to an abuse of process and an ulterior motive which will not. His Honour said (at 535): There is no impropriety of purpose (whatever may be said of motive) when a plaintiff commences or maintains a proceeding desiring to obtain a result within the scope of the remedy, even though the plaintiff has an ulterior purpose - or motive - which will be fulfilled in consequence of obtaining the legal remedy which the proceeding is intended to produce. To amount to an abuse process, the commencement or maintenance of the proceeding must be for a purpose which does not include - at least to any substantial extent - the obtaining of relief within the scope of the remedy. 15 A similar point was made by Bridge LJ in Goldsmith v Sperrings Ltd [1977] 1 WLR 478 (Goldsmith v Sperrings) at 503: What if a litigant with a genuine cause of action, which he would wish to pursue in any event, can be shown also to have an ulterior purpose in view as a desired byproduct of the litigation? Can he on that ground be debarred from proceeding? I very much doubt it. 16 An allegation of abuse of process is a serious allegation. Whilst the standard of proof is the civil standard of balance of probabilities, by dint of s 140(2) of the Evidence Act 1995 (Cth) (Evidence Act), in deciding whether that standard has been satisfied, the Court must take into account the nature of the cause of action, the nature of the subject matter of the proceeding and the gravity of the matters alleged. The Court must accordingly be mindful of the forensic context in forming an opinion as to its satisfaction about matters in evidence: Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 (CEPU v ACCC) at [30]. Ordinarily, the more serious the allegations or consequences, the more the Court will require clear, cogent or strict proof: CEPU v ACCC at [30]; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 450; Ashby v Slipper (2014) 219 FCR 322 at [64]-[66] (Ashby). Where serious allegations are made, inexact proofs, indefinite testimony or indirect inferences are not sufficient: Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Ashby at [70]-[71]. 17 In a circumstantial case involving allegations of abuse of process, an inference must not be drawn where it is but "a choice among rival conjectures". Rather there must be "evidence supporting some positive inference … which arises as an affirmative conclusion from the circumstances proved in evidence": Ashby at [71] quoting from Jones v Dunkel (1959) 101 CLR 298 (Jones v Dunkel) at 304. The circumstances must do more than give rise to conflicting inferences of equal degrees of probability: CEPU v ACCC at [38]; Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 5; Holloway v McFeeters (1956) 94 CLR 470 at 480-481; Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 198 FCR 297 at [31].

Mr Smith's case 18 Mr Smith concedes that there is no direct evidence that Mr Boné had the predominant purpose of intimidating or improperly influencing Mr Smith so as to cause him to discontinue the proceedings against Mr Boné and Valvelink. Mr Smith contends, however, that the fact that Mr Boné had this predominant purpose can be inferred from the circumstances admitted in the pleadings and otherwise proved in evidence. 19 The evidence relied on by Mr Smith is essentially documentary and not in dispute. Mr Smith submits that the alleged predominant purpose of Mr Boné can be inferred from two matters, either alone or in combination. The first is said to be the factual context in which Mr Boné filed his application, together with the changed factual context in which he continued to prosecute it. Mr Smith points in particular to the chronology of events, as between Mr Smith and Mr Boné, including the delay between the occurrence of the events the subject of Mr Boné's application and the commencement of the proceedings and the fact that Mr Boné commenced the proceedings shortly after Mr Smith commenced proceedings for insolvent trading against Mr Boné. Mr Smith also relies on inferences that are said to flow from Mr Boné's refusal to accept what Mr Smith says was a bona fide offer to resolve or settle Mr Boné's complaint concerning Mr Smith's remuneration, together with the fact that Mr Smith's offer simply prompted Mr Boné to amend his application to seek an order removing Mr Smith as liquidator. 20 The second matter relied on by Mr Smith is the content of two letters written by Mr Boné's lawyers to Mr Smith's lawyers on 19 August 2013 and 10 October 2013. 21 These letters, in Mr Smith's submission, amount to little more than threats designed to intimidate and bully Mr Smith into discontinuing the proceedings against Valvelink and Mr Boné. The content of these letters is dealt with in detail later in these reasons. 22 Before turning to a detailed consideration of the facts and evidence it is necessary to deal with three issues in relation to Mr Smith's case. The first relates to the way Mr Smith's case is pleaded and particularised. The other two issues involve rulings on evidence. 23 The pleading issue arises from two submissions made by Mr Boné in relation to the scope of Mr Smith's pleaded case. First, in written submissions filed prior to the hearing, Mr Boné complained that until the filing of Mr Smith's written submissions, he understood that Mr Smith's case rested entirely on the content of the letters of 19 August 2013 and 10 October 2013. Second, in submissions made at the hearing, Mr Boné contended that Mr Smith's pleaded case of collateral or improper purpose was directed solely at Mr Boné's purpose in filing amended points of claim and a (second further) amended interlocutory process on 17 December 2013. It was said that, as pleaded, Mr Smith did not contend that Mr Boné had the alleged improper purpose when Mr Boné's application was first filed in June 2013. 24 Neither submission has any merit. 25 A fair reading of Mr Smith's points of claim and the evidence filed in support does not suggest that his case was limited to the correspondence of August and October 2013. In any event, Mr Boné was aware of the scope of Mr Smith's case well prior to the hearing and was not in any way prejudiced in his defence of Mr Smith's application. 26 As for the submission that Mr Smith's case, having regard to the terms of his points of claim, is or should be limited to alleging an improper purpose on the part of Mr Boné as at the time of filing the amended process and pleadings on 17 December 2013, it may be accepted that Mr Smith's points of claim are somewhat ambiguous and infelicitously worded. The critical paragraph alleging abuse of process, paragraph 42, refers only to the second further amended interlocutory process and alleges that "[a]t all times and since it was filed on 17 December 2013" it was "brought and … maintained" for the impugned purpose. 27 When read in the context of the points of claim as a whole, however, it is tolerably clear that Mr Smith's case is not limited to alleging improper purpose as at 17 December 2013. In particular, paragraph 42 makes it clear that the amended process is attacked by Mr Smith in so far as it "continued to claim" the relief claimed by Mr Boné in respect of Mr Smith's remuneration. That relief was claimed when Mr Boné's application was first filed on 27 June 2013 (see paragraph 28 of the points of claim). Paragraph 42 also refers to "threats" made to Mr Smith, which must be a reference to the 19 August 2013 and 10 October 2013 letters (see paragraphs 31 and 36 of the points of claim). This suggests that Mr Smith alleged that Mr Boné had the improper purpose well before 17 December 2013. 28 In any event, it again must have been tolerably clear from at least the time Mr Smith filed his written submissions prior to the hearing that Mr Smith alleged that Mr Boné had an improper purpose from the outset. Mr Boné was not prejudiced in any way by the ambiguous wording of the points of claim. That is demonstrated by the fact Mr Boné filed affidavit evidence from his solicitor that clearly addressed critical events or circumstances that occurred or existed prior to 17 December 2013. Written "closing" submissions handed up on Mr Boné's behalf at the hearing also address the broader case articulated in Mr Smith's written submissions. 29 It follows that Mr Smith's case should not be approached on the narrow basis suggested by Mr Boné. Mr Smith's case is not limited to the August and October 2013 letters and is not restricted to Mr Boné's purpose for filing the amended process and pleadings on 17 December 2013. 30 The two evidentiary points that need to be addressed relate to privilege claims made and pressed by Mr Boné in respect of two categories of documents. First, and critically, Mr Boné claimed that the 19 August 2013 and 10 October 2013 letters, together with some associated correspondence, should be excluded from evidence because they are evidence of settlement negotiations within s 131(1) of the Evidence Act. Section 131(1) of the Evidence Act provides that evidence of communications or a document made or prepared in connection with an attempt to negotiate a settlement of a dispute between the parties is not to be adduced. 31 Mr Smith submitted that the letters are not excluded by s 131(1) because they were not genuine attempts to settle the dispute. Additionally or alternatively, he submitted that the admissibility of the correspondence should be resolved in accordance with the procedure explained by Hodgson JA in Van Der Lee v New South Wales [2002] NSWCA 286 (Van Der Lee). In that case, Hodgson JA (with whom Mason P and Santow JA agreed) said (at [62]): … I think s.11(2) does have the effect that, when evidence is tendered that could be evidence of an abuse of process, albeit evidence of without prejudice settlement negotiations, the Court may receive that evidence on voir dire; and then, if that evidence does either by itself or in combination with other evidence establish an abuse of process, the Court may rule the evidence admissible and make appropriate orders to deal with that abuse of process. In my opinion, the powers of a court with respect to abuse of process include its powers to receive evidence, and in my opinion the authorities relied on by the claimants show that, at common law, communications evidencing abuse of process will not be protected by without prejudice privilege. I do not think that s.131 provides otherwise, either expressly or by necessary intendment, particularly if s.132(2)(k) does not apply in cases of abuse of process. 32 Section 11(2) of the Evidence Act, provides, in effect, that the powers of a court with respect to abuse of process in a proceeding are not affected by the Evidence Act. 33 At the hearing, Mr Boné agreed that it would be appropriate for the Court to adopt the Van Der Lee procedure. The relevant documents were accordingly tendered on the voir dire. The parties agreed that the Court could appropriately consider the documents and rule on their admissibility in the final judgment. 34 It should be noted that, in addition to s 11(2) of the Evidence Act, s 131(2)(k) of the Evidence Act provides that s 131(1) does not apply when one of the persons in dispute knew or ought reasonably to have known that the communication was made "in furtherance of a deliberate abuse of power". Section 131(4) provides that, for the purposes of s 131(2)(k), if the abuse of power is a fact in issue and there are reasonable grounds for finding that a communication was made in furtherance of the abuse of power, "the court may find that the communication was so made". The balance of authority is that the reference to "power" in s 131(2)(k) includes a power to make an application to a court: Van Der Lee at [68] (Santow JA) and [24] (Mason P); Ryder v Frohlich [2006] NSWSC 1324 at [11]; Re Mulsanne Resources Pty Ltd (in liq) [2013] NSWSC 358 (Mulsanne Resources) at [5]. 35 It follows that, if there are reasonable grounds for finding that the relevant correspondence here was made in furtherance of the alleged abuse of power, the letters can be admitted despite s 131(1) of the Act. 36 The content and terms of the relevant letters, when read in the context of the evidence as a whole, provide reasonable grounds for finding that the correspondence was made in furtherance of the alleged abuse of process. The basis for that finding will become more apparent when the content of the letters and the circumstances in which they were prepared is addressed later in these reasons. The letters are accordingly not excluded by s 131(1) of the Evidence Act and are admitted in evidence. 37 It should perhaps be noted that the content of the letters is such that it is also doubtful that they could be considered to be connected to any genuine attempt by Mr Boné to settle the dispute between Mr Boné and Mr Smith. That is so despite the evidence of Mr Boné's solicitor concerning his understanding or belief about the purpose of the letters. That evidence is considered further below. Given the finding that has been made in relation to the operation of s 11(2) and s 131(2)(k) however, is not necessary to decide whether the letters would otherwise have fallen outside the scope of s 131(1). 38 It does not follow from the admission of the letters into evidence pursuant to either s 11(2) and s 131(2)(k) that the alleged abuse of process has been made out. As appears to have been accepted by the Court of Appeal in Van Der Lee, the exception in s 131(2)(k) can apply, and s 11(2) can operate to allow the admission of evidence that would otherwise be excluded by s 131(1) even if, ultimately, the abuse of process is not made out. It would be a curious result indeed if evidence that did tend to prove an abuse of process was nevertheless excluded because, ultimately, on the whole of the evidence, the abuse of process could not be made out. 39 The second evidentiary point is similar. It involves a claim of client legal privilege by Mr Boné under s 118 or s 119 of the Evidence Act in respect of documents produced by him in answer to a notice to produce. The claim was supported by an affidavit sworn by an employee of Mr Boné's solicitor which, despite being of somewhat dubious admissibility, was not objected to or otherwise challenged by Mr Smith. Mr Smith's primary submission in relation to the privilege claim is that, by operation of either s 11(2) or s 125 of the Evidence Act, evidence of documents or communications that would otherwise be covered by client legal privilege can be adduced if there are reasonable grounds for finding that the communications or documents were made or created in furtherance of a deliberate abuse of power. The principles and procedures that apply where settlement negotiation privilege is claimed and abuse of process is alleged have been held to apply in relation to client legal privilege: Kang v Kwan [2001] NSWSC 698; Georgeski v Owners Corporation SP49833 [2004] NSWSC 945; Mulsanne Resources at [6]. 40 The parties again agreed that the appropriate procedure was for the allegedly privileged documents to be tendered on the voir dire. They could then be inspected by the Court to ascertain if they are privileged and, if so, whether s 11(2) or s 125 operate to allow the documents to be adduced in evidence notwithstanding the privilege claim. 41 An inspection of the relevant documents reveals two things. First, on their face the documents would appear to attract litigation privilege under s 119. Second, there are no reasonable grounds to find that the communications or documents otherwise covered by the privilege were made or prepared in furtherance of the alleged abuse of power. Section 11(2) and s 125 of the Evidence Act accordingly do not apply and the documents cannot be admitted into evidence. Mr Boné's objection to their inspection and tender is made good.

Mr Boné's case 42 Mr Boné does not deny or dispute the primary facts pleaded by Mr Smith or proved by the documentary evidence. He contends, however, that the primary facts and evidence do not support the inference that he had the predominant purpose alleged by Mr Smith. 43 He also relies on two additional matters. First, he relies on Mr Smith's concession that Mr Boné's application is at least arguable. Indeed, he submits that the documentary evidence establishes that he has a strong case against Mr Smith. 44 Second, he relies on the unchallenged evidence of his solicitor, Mr Butterfield, concerning key aspects of the factual context in which Mr Boné commenced and continued to prosecute his application, including the preparation of the August and October 2013 correspondence. That evidence will be addressed in context later in these reasons. Suffice it to say at this stage that Mr Boné's submission is that the evidence of Mr Butterfield explains away important planks in Mr Smith's circumstantial case.

The primary facts in detail 45 As already made clear, the primary facts are essentially not in dispute. The key issue is whether, having regard to the principles considered earlier, they support the inference of improper purpose alleged by Mr Smith. Mr Boné concedes that if it can be inferred that he had that predominant purpose, it could be concluded that his application was an abuse of process. In order to determine whether the disputed inference is properly available, it is necessary to consider the facts in some more detail. 46 On 30 September 2011, the Deputy Commissioner of Taxation filed winding up proceedings against Petrolink in this Court. The Court ordered the winding up of Petrolink on 7 December 2011. Mr Smith was appointed Official Liquidator. Mr Smith is a Chartered Accountant, a Registered and Official Liquidator and a partner of the firm Smith Hancock, Chartered Accountants. 47 On 22 December 2011, Mr Smith sought and obtained the Court's leave under s 436B of the Corporations Act 2001 (Cth) (Corporations Act) to appoint himself administrator of Petrolink. Notice of Mr Smith's appointment as administrator was provided to Petrolink's creditors. By reason of s 537A and s 437C of the Corporations Act, the effect of Mr Smith's appointment as administrator was that he obtained control of Petrolink's affairs and his functions and powers as Official Liquidator of Petrolink were suspended. 48 Mr Smith convened a first meeting of creditors pursuant to s 436E of the Corporations Act on 6 January 2012. On 31 January 2012, Mr Smith sent creditors a "proposal report" and a notice of the second meeting of creditors to be held on 8 February 2012. The report contained information about, amongst other things, the financial affairs of Petrolink, the options or alternatives available to the creditors and Mr Smith's recommendations. 49 Relevantly, the report also contained information about the remuneration that Mr Smith claimed he was entitled to as administrator and liquidator (for the period prior to Mr Smith's appointment as administrator, namely 7 December 2011 to 21 December 2011). Mr Smith anticipated he would be entitled to remuneration for the conduct of the administration up to 8 February 2012 (the date of the second meeting) of approximately $97,721. He said he was entitled to $53,068 in respect of his remuneration as liquidator for the two week period in December. A detailed report which described how these amounts were arrived at was enclosed with the report. The notice of meeting included an agenda which included as an item the fixing of the remuneration of Mr Smith as administrator. 50 The second meeting of the creditors was held on 8 February 2012. At the meeting three resolutions were moved by a representative of the Australian Taxation Office (ATO) and seconded by Mr Smith as Chairman. Two were declared carried and one was declared not carried. 51 The first resolution that was carried was a resolution to adjourn the meeting to a date to be fixed, but not exceeding 45 business days. The purpose of the adjournment was said to be to allow Mr Boné, as director of Petrolink, time to consider putting forward a proposal for a deed of company arrangement. 52 The second resolution that was carried was a resolution that "the remuneration of the Administrator, his partner and staff for the period 22 December 2011 to 7 February 2012 (inclusive) be approved in the amount of $74,549.50 (excluding GST) as set out in the Remuneration Report and that the Administrator or Liquidator be authorised to pay the approved remuneration". The minutes record that the resolution was moved by a representative of the ATO and seconded by the Chairperson (Mr Smith) representing A1 Concrete Services Pty Ltd. Mr Smith presumably held a proxy for this creditor. The minutes also record that the resolution was declared carried with the Chairperson abstaining from exercising general proxies in his favour. As will be seen, Mr Boné's application challenges the validity of this resolution. 53 The resolution that was not carried was a resolution that "the remuneration of the Official Liquidator, his partner and staff for the period 7 December 2011 to 21 December 2011 be approved in the amount of $53,068 (excluding any GST payable thereon) as set out in the Remuneration Report and that the Administrator or Liquidator be authorised to pay the approved remuneration". 54 The minutes of the meeting record that there was discussion at the meeting concerning Mr Smith's remuneration. Perhaps not surprisingly, at least one creditor is recorded as having expressed disquiet, if not indignation, at the amount of the total remuneration paid or payable to Mr Smith. The creditor is recorded as having requested that a full schedule of the charges be provided. 55 On 20 March 2012, Mr Smith provided a supplementary report to the creditors. Amongst other things, the report noted that Petrolink had ceased trading and that Mr Boné had not submitted a proposal for a deed of company arrangement. Mr Smith recommended that the creditors should resolve to end the administration. The effect of such a resolution would be that Mr Smith's powers as Official Liquidator would be restored and the liquidation process would continue. 56 The report also included further information concerning Mr Smith's remuneration. Mr Smith foreshadowed that, as the creditors did not fix his remuneration as liquidator for the period of 7 December 2011 to 21 December 2011, he would now apply to the Court for an order approving his remuneration. He anticipated that the amount of remuneration for the conduct of the administration from 9 February 2012 to 29 March 2012 (the date of the next creditors meeting) would be $56,748. He also submitted for the creditors' approval details of his claim for remuneration for acting as Official Liquidator for the period from 30 March 2012 in the initial sum of $20,000. A formal notice of the meeting of creditors to be held on 29 March 2012 was attached to the report. 57 By letter dated 29 March 2012, an employee of Petrolink, Ms Carsten Hendriksen, sent Mr Smith three proxy forms, signed by former employees including Mr Boné (together with three unsigned or incomplete proxy forms) who were said to be creditors of Petrolink. Each gave Mr Smith a special proxy to vote in favour of the postponement of the meeting to 5 April 2012. 58 The reconvened meeting of the creditors went ahead on 29 March 2012. It would appear that the only attendees at the meeting were Mr Smith and a representative of the ATO, who attended by telephone. The minutes record that four resolutions were moved, seconded and declared a carried. 59 First, it was resolved that the administration should end. 60 Second, it was resolved that "the remuneration of the Administrator, his partner and staff for the period 9 February 2012 to 29 March 2012 (inclusive) be approved in the amount of $57,542 (excluding GST) as set out in the Remuneration Report and that the Official Liquidator be authorised to pay the approved remuneration". This resolution was moved by a representative of the ATO and seconded by Mr Smith holding a proxy for J Blackwood & Son Pty Ltd. The minutes record that this resolution was declared carried with Mr Smith abstaining from exercising general proxies in his favour 61 Third, it was resolved that "the initial remuneration of the Official Liquidator, his partner and staff for the period from 29 March 2012 be calculated on a time basis at the hourly rates set by Smith Hancock from time to time and be approved in the amount of $20,000 (excluding any GST payable thereon) as set out in the Remuneration Report and that the Liquidator be authorised to make periodic payments on account of such accruing remuneration". This resolution was moved, seconded and declared carried by the same parties and in the same manner as the other resolutions. 62 The fourth resolution is irrelevant for present purposes. 63 As will be seen, Mr Boné's application again disputes the validity of the two remuneration resolutions declared carried at this meeting. 64 On 7 June 2012, Mr Smith filed an interlocutory application with the Court seeking orders that his remuneration as Official Liquidator for the period 7 December to 21 December 2012 be approved in the amount of $53,068. Mr Smith received no objections to this application. The Court in due course approved Mr Smith's remuneration as liquidator for this period in the amount of $47,450. 65 On 13 July 2012, Mr Smith, in his capacity as liquidator of Petrolink, wrote to Mr Boné, in his capacity as director of Valvelink. In the letter, Mr Smith advised that he had ascertained that in the six months prior to the winding up of Petrolink, Petrolink's indebtedness to Valvelink had been reduced by cash payments of $73,180.57. Mr Smith expressed the opinion that in the circumstances Valvelink had received an unfair preference of $73,180.57 within the meaning of s 588FA of the Corporations Act. The letter indicated that if Mr Boné did not dispute this contention, Valvelink should pay $73,180.57 to Mr Smith as liquidator of Petrolink. 66 No such payment was made. It is readily apparent that Valvelink disputed and continues to dispute Mr Smith's claim that it received an unfair preference. Matters came to a head in that respect when, on 16 November 2012, Mr Smith filed an application in this Court seeking an order that Valvelink pay the sum of $95,065.41 to Petrolink as an unfair preference. These proceedings were, and continue to be, defended by Valvelink. 67 On 22 January 2013, Mr Smith sent a report to the creditors of Petrolink. It provided information in relation to the progress of the liquidation. It referred to Mr Smith's investigations and the recovery of various amounts, including amounts received in settlement of various demands or claims that had been made in relation to preference payments. Specific reference was made to the Valvelink preference proceedings. Mr Smith's report stated: At this stage, subject to the outcome of litigation mentioned above [the Valvelink preference proceedings], I anticipate that a dividend may become available for priority unsecured creditors. Sufficient funds to be realised to allow a dividend to ordinary unsecured creditors of the Company will be dependent upon the recoveries in the liquidation. 68 The report also dealt with Mr Smith's remuneration. It indicated that at the forthcoming meeting of creditors he would be seeking approval for his remuneration for the period 30 March 2012 to 31 December 2012 in the sum of $120,923 as well as approval of his remuneration for the period 1 January 2013 to the conclusion of the liquidation in the sum of $30,000. 69 As foreshadowed in the report, there was a meeting of the creditors on 7 February 2013. It would appear from the minutes that the meeting was a fairly torrid affair. Mr Boné raised questions about the minutes of the meeting that occurred on 29 March 2012. In relation to Mr Smith's remuneration, one of the creditors, Ms Tajsic, queried the amount of the remuneration that had already been paid to Mr Smith. Mr Smith called for a mover and seconder for the proposed resolution to approve his remuneration for the period 30 March 2012 to 31 December 2012 in the sum of $120,923. None was apparently forthcoming. The representative from the ATO noted that the fees for the liquidator were at the "upper end" of what was expected and proposed a "compromise" amount of $95,000. Mr Smith agreed with this proposal and the resolution was accordingly put to the meeting. It was nevertheless not carried. 70 Mr Boné also apparently raised a series of complaints at this meeting. He stated that he believed that the preference claim against Valvelink was not valid and that any funds recovered would be paid to Mr Smith without benefit to the creditors. Mr Boné proposed a resolution that Mr Smith "cease all further legal attempts to recover money from Valvelink or any other entity". This resolution was not put to the meeting because the ATO representative moved a motion, seconded by Mr Boné, that the meeting be adjourned to allow the creditors time to consider Mr Boné's proposed resolution. That adjournment resolution was carried. 71 The meeting was reconvened on 27 February 2013. Prior to the meeting, Mr Smith issued a supplementary report to the creditors. In the report he expressed the view that Mr Boné's proposed resolution was not in the best interest of creditors. He stated that Mr Boné's resolution was "entirely self-interested" because Mr Boné was both a director and a shareholder of Valvelink and therefore stood to benefit from the discontinuation of the proceedings. 72 The reconvened meeting appears to have been even more hostile than the previous meetings. Mr Boné's resolution was moved and seconded and a poll was called by Mr Smith. The minutes of the meeting record that as "the poll failed to achieve a majority in number and value, the Chairperson exercised a casting vote against the resolution". 73 Mr Boné appears to have raised an objection to the poll result. Mr Smith noted the objection. The result of the poll as recorded in the minutes was sixteen creditors voted in favour of the resolution and only two voted against it. The two creditors who voted against it were the ATO and Transtank Pty Limited. Both these creditors were owed large amounts. The value of their votes accordingly exceeded the value of the votes of the other creditors. Mr Smith held a proxy for Transtank Pty Limited. Mr Boné held proxies for all but one of the other creditors. 74 A number of creditors raised additional questions or queries. Relevantly, Mr Boné proposed a motion that the meeting of creditors held on 29 March 2012 be declared null and void and that the fees paid as a result of the remuneration approvals be returned to the company's bank account. Mr Smith stated in response that "any disputes of this nature should be taken up via an application in the Federal Court". 75 The following day, Mr Smith served a notice of intention to apply to the Court for the determination of his remuneration for the period 30 March 2012 to 31 December 2012 in the sum of $120,923. Perhaps not surprisingly, this time Mr Smith's application was the subject of objection. Under cover of a letter dated 14 March 2013, which was stated to be from the "creditors committee", Mr Smith was served with 17 objections. Each objection was identical in form. Each listed a litany of complaints about Mr Smith's actions as administrator and liquidator. The complaints included, relevantly, a complaint about the 29 March 2012 meeting. 76 Ultimately, Mr Smith did apply to the Court for approval of his remuneration in the sum of a $120,923. That application was filed on 26 March 2013. Of the 17 objectors only Mr Boné appeared in opposition to the application. Ultimately the Court assessed Mr Smith's remuneration for the period at $104,814.50. 77 In the meantime, the level of dispute between Mr Boné and Mr Smith intensified. On 20 March 2013, Mr Boné caused Valvelink to commence ill-fated Supreme Court proceedings seeking orders that Petrolink discontinue the Valvelink preference proceedings. These proceedings were ultimately discontinued by consent in May 2013. 78 Importantly, it appears that on 5 April 2013 Mr Boné consulted with his solicitor, Mr Butterfield of Marsdens Law Group. Mr Butterfield had been acting for Mr Boné and Valvelink since February 2013. His unchallenged affidavit evidence is that his consultation with Mr Boné on 5 April 2013 followed the filing of Mr Smith's application for the approval of his remuneration for the period March 2012 to December 2012. Somehow in that context Mr Butterfield apparently gave advice to Mr Boné concerning the possibility that he might be able to seek a review of Mr Smith's remuneration that had been the subject of apparent approval at the February and March 2012 creditors meetings. On or about 8 April 2013, Mr Boné instructed Mr Butterfield to seek a review of the remuneration approved at the March 2012 meeting. Instructions in relation to a review of the remuneration approved at the February 2012 meeting were provided at a later date. 79 Following this, Mr Butterfield briefed counsel and on 6 May 2013 Mr Boné served Mr Smith with a notice of intention to apply for a review of the remuneration approved at the March 2012 creditors meeting. That notice was apparently defective. A compliant notice was subsequently prepared and served. 80 Mr Butterfield's evidence in relation to his dealings with Mr Boné in April and May 2013 is significant. One plank in Mr Smith's circumstantial case is the apparent delay between the creditors meetings in February and March 2012 and the commencement of proceedings challenging the resolutions passed at those meetings. Mr Butterfield's evidence serves to explain that delay, or at the very least effectively weakens any adverse inferences that might otherwise flow from it. Prior to receiving advice from Mr Butterfield, Mr Boné may not have been aware that he was able to challenge the remuneration resolutions. 81 The evidence also effectively nullifies a second plank in Mr Smith's circumstantial case flowing from the relevant chronology of events. Mr Smith submits that an adverse inference should be drawn from the fact that Mr Boné's application was filed shortly after Mr Boné became aware of the fact that Mr Smith, on behalf of Petrolink, would or might commence proceedings against him for insolvent trading. Mr Boné was first notified, via Mr Butterfield, that Mr Smith intended to commence proceedings against him for insolvent trading on 15 May 2013. On Mr Butterfield's evidence that was after he had received instructions from Mr Boné to commence proceedings challenging the March 2012 remuneration resolution. It follows that Mr Boné had decided to challenge the remuneration approved at the March 2012 meeting before he became aware that Mr Smith intended to pursue him for insolvent trading. In these circumstances it is difficult to see how it can be inferred that Mr Boné's application was motivated by the threat of the insolvent trading proceedings. 82 The insolvent trading proceedings against Mr Boné were eventually commenced on 13 June 2013. The amount claimed against Mr Boné was $844,491.43. The Valvelink preference proceedings were in due course consolidated with the insolvent trading proceedings. 83 Mr Boné's application was filed on 27 June 2013. The orders sought by Mr Boné in the interlocutory process in its original form included orders that the amount of remuneration approved at the February and March 2012 meetings be reduced and Mr Smith repay Petrolink any amount ordered to be reduced. 84 That brings us to the correspondence that, on any view, is central to Mr Smith's case of abuse of process. 85 On 19 August 2013, Mr Butterfield wrote to Mr Smith's lawyers. The letter should be set out in its entirety. Re: ACN 002 864 002 Pty Limited (formerly known as Petrolink Pty Ltd) ("Petrolink") We refer to the above matter. As you are aware our clients, Barry BonÉ and Valvelink Pty Ltd, have been investigating your client's conduct during the liquidation of Petrolink. They are in possession of material which they view supports serious claims against your client in connection with his conduct in the administration and liquidation of Petrolink. To that end they met with ASIC and discussed a number of matters arising from their investigation, and your client's previous history reported in Court documents. They feel they have a basis to have your client removed as liquidator and suspended as a result of his conduct. Our client is however prepared to not commence any claims against your client and end all current claims provided that by 5:00 pm, 21 August 2013, your client: 1. Ceases all claims against Barry BonÉ and Valvelink Pty Ltd; 2. Provides an open letter confirming no further claims will be taken against Barry BonÉ, Valvelink Pty Ltd or any related entity; 3. Agrees to pay all our client's costs to date; and 4. Finalises the winding up of Petrolink by 31 August 2013. If an agreement on 1-4, above, is not provided in writing by 5:00 pm, 21 August 2013, our client will commence proceedings against your client without further correspondence. We await your reply. 86 A number of points can be made about this letter. First, the subject heading in the letter simply refers to Petrolink. It does not refer at all to Mr Boné's interlocutory process. It does not refer to Mr Boné's complaints about Mr Smith's remuneration. Nor does it specifically refer to either the preference claim against Valvelink or the insolvent trading claim against Mr Boné. 87 Second, the letter opens with the words "[w]e refer to the above matter". No reference is made to any earlier correspondence. This is of some significance given Mr Butterfield's evidence in relation to the letter that will be considered later. 88 Third, whilst the letter appears to allege serious misconduct on the part of Mr Smith, it provides no particulars whatsoever of the alleged "serious claims". 89 Fourth, the letter includes a threat to commence proceedings if Mr Smith does not agree to demands which effectively amount to a complete capitulation on the part of Mr Smith. It provides no basis or explanation for why Mr Smith should discontinue the claims against Mr Boné and Valvelink. It gives no hint of any possibility of compromise or scope for negotiation between Mr Boné and Mr Smith. It does not demand that Mr Smith refund all or part of the remuneration received by him as a result of the approvals at the February and March 2012 meetings. 90 On its face, it is difficult to see how this letter could possibly be seen as a genuine or bona fide attempt to negotiate a settlement of any dispute between Mr Smith and Mr Boné. It certainly did not involve any attempt to settle Mr Boné's application. 91 The following day, Mr Smith's lawyers replied to the 19 August 2013 letter in the following terms: We refer to your letter of 19 August 2013. Your letter makes serious allegations against our client Mr Smith without any particulars or details of the conduct you allege. If you consider there are matters which cast doubt upon Mr Smith's ability to continue as liquidator of Petrolink then you should properly detail them so that we might obtain instructions. Your suggestion that Mr Smith should withdraw claims against your clients, which claims are brought in the interests of Petrolink and its creditors, in order to avoid your clients suing him is improper. 92 Mr Butterfield then replied by letter dated 21 August 2013. That letter stated as follows: We refer to the above matter and to your letter of 20 August 2013. Despite not wanting to enter into further correspondence on the issue we feel compelled to highlight to you the final paragraph of your 20 August letter where you state your client is acting "in the interests of Petrolink and its creditors". In circumstances where the creditors (having regard to the facts before them) voted overwhelmingly in favour of not continuing or commencing any further legal action it strains credulity to say your client is acting in their interests. Our clients' position is unchanged and we await your reply by 5pm. 93 It should be noted that despite what appears to have been a reasonable request for particulars by Mr Smith's lawyers, in his letter of 21 August 2013 Mr Butterfield provides no particulars of any serious allegations against Mr Smith. Nor does his letter provide any details of any matters that might cast doubt on Mr Smith's ability to continue as liquidator of Petrolink. Nor, again, is there any hint of negotiation or compromise. The allegation that the creditors voted overwhelmingly in favour of not continuing or commencing any further legal action also appears to have been incorrect. The poll results for that resolution indicate that, at least by value, the resolution was defeated. So much so was pointed out by Mr Smith's lawyers in their reply to this letter. 94 Nothing of particular significance happened in the month following this exchange of correspondence. Despite Mr Boné's threat to commence proceedings against Mr Smith if he did not capitulate to his demands, no such proceedings were commenced. 95 On 10 October 2013, however, Mr Butterfield wrote again to Mr Smith's lawyers. Again, the contents of this letter should be set out in full: We refer to the above matter and to previous correspondence, in particular our letter of 19 August 2013. As you are aware there are several actions, both present and pending, against your client in his role as Liquidator of Petrolink. We are informed that the creditors are of the opinion that your client has not acted in their's or Petrolink's best interests. Specifically, the creditors are of the view that your client has failed to take an active role in the course of the liquidation and administration, has failed to properly instruct staff of adequate experience and has in general not performed at a satisfactory level in completing the liquidation. Our client and other concerned creditors have received confirmation from ASIC that they are currently carrying out an investigation into a series of complaints formally lodged against your client's conduct. The matter regarding the liquidator's excessive remuneration is also progressing and we advise that we intend to conduct a thorough inspection of the fees claimed as part of the review sought by the Court. We note also that your client has yet to disclose any request for remuneration for the 2013 financial year. We are informed that a number or creditors will be objecting to any further remuneration being approved. We note also that your client has rejected or refused a number of requests to call meetings to form a Committee of Inspection. We fail to see the basis upon which your client is entitled to make such refusals of requests from creditors and contributories of Petrolink. We are informed that the creditors intend to approach the Court for the appropriate orders and that as soon Court approves the application to form a Committee of Inspection it is the intention of the Committee to immediately apply for your client's removal from the Liquidation. On that basis, we offer your client the opportunity to resign from the Liquidation immediately and hand the matter to an alternative Liquidator of our choosing. Given your client's previous record we suggest that your client should consider this offer very carefully. We ask for a response by 5:00 pm, Friday 11 October 2013. 96 A number of points can again be made in relation to this letter. First, whilst it contains some broad allegations relating to Mr Smith's conduct as liquidator, once again the allegations are devoid of any meaningful particulars. Second, specific reference is made to Mr Boné's application relating to Mr Smith's alleged "excessive remuneration". Nothing whatsoever is said in the letter, however, to suggest any attempt to negotiate a settlement of that dispute. It is not, for example, suggested that Mr Smith refund any of the remuneration previously received by him. Third, the statement that Mr Smith had "rejected or refused a number of requests to call meetings to form a Committee of Inspection" was wrong. In late August 2013, there had been an exchange of correspondence between Mr Boné and Mr Smith relating to the convening of a meeting of creditors. It is unnecessary to detail the content of that correspondence here. Suffice it to say that Mr Smith's responses could not accurately be characterised as a refusal or rejection of the proposal. 97 Again, it is difficult to see how this letter could, on its face, possibly be accurately characterised as an attempt to negotiate a settlement of any dispute between Mr Boné and Mr Smith, let alone the dispute concerning Mr Smith's remuneration. Rather, it appears to amount to nothing more than a thinly veiled threat that if Mr Smith does not resign as liquidator, Mr Boné would continue to pursue the unspecified complaints he had supposedly lodged with the regulator. 98 The conclusions or inferences that appear to flow from the terms of the August and October 2013 letters must, however, be considered in light of Mr Butterfield's unchallenged affidavit evidence concerning the correspondence. In his affidavit, Mr Butterfield says that the 19 August 2013 letter was a response to a letter from Mr Smith's lawyers dated 7 June 2013. In that letter, Mr Smith's lawyers specifically refer to the preference proceedings against Valvelink and the (then) proposed insolvent trading proceedings against Mr Boné. The final paragraph of the 7 June 2013 letter states as follows: In light of comments made by Rares J at the last directions hearing, we invite your client to make any reasonable offer to settle the foreshadowed insolvent trading claim and/or the existing preference action before the next directions hearing. 99 It is readily apparent that the invitation to Mr Boné to make a settlement offer specifically related to the preference and insolvent trading proceedings. 100 With the greatest respect to Mr Butterfield, it is difficult to see how the 19 August 2013 letter could possibly be seen to be a response to this invitation in the 7 June 2013 letter. The 19 August 2013 letter does not refer to the 7 June 2013 letter. Nor does it refer to the preference and insolvent trading actions, other than in the context of a general demand that all claims against Mr Boné and Valvelink "cease" and that Mr Smith pay their costs. It is difficult to see how that could seriously be seen to be a "reasonable offer to settle" those disputes. Nevertheless, Mr Butterfield was not cross-examined and his evidence in relation to the correspondence was not challenged in any way. 101 In relation to the communications generally, in his affidavit Mr Butterfield asserts that each of the relevant letters was a "communication made in connection with an attempt to negotiate a settlement of the various disputes". For the reasons already given, it is difficult to see how the letters could possibly be so characterised. Nevertheless, again, no objection was taken to Mr Butterfield's assertions in this respect and he was not cross-examined. 102 For the reasons already given, it is unnecessary to decide whether or not these letters were in fact communications made in connection with an attempt to negotiate a settlement of any dispute between Mr Boné and Mr Smith. The letters are in any event admissible having regard to the operation of s 11(2) and s 131(2)(k) of the Evidence Act. 103 Whatever Mr Butterfield's beliefs and intentions were in relation to these letters, it is not difficult to see why Mr Smith and his lawyers viewed them as an improper attempt to threaten and intimidate Mr Smith into discontinuing the actions against Mr Boné and Valvelink. There is no hint of any willingness to compromise or negotiate. It is difficult to see how the vague and unparticularised allegations of serious misconduct had anything whatsoever to do with the resolution of the litigation that was on foot. All the more so since there was an apparent unwillingness or inability on the part of Mr Boné and his lawyers to provide any meaningful detail or support for the serious allegations. 104 In his affidavit Mr Butterfield refers to the fact that at all times he was acting for Mr Boné he was aware of his professional and ethical obligations under The Revised Professional Conduct and Practice Rules 1995 made by the Counsel of the Law Society of New South Wales. He says, and it must be accepted, that at all times he attempted to discharge faithfully his professional obligations as he understood them. 105 Nevertheless, whatever Mr Butterfield may have thought or believed about these letters, it is difficult to conclude otherwise than that they were, in terms, manifestly unhelpful, if not inappropriate, in all the circumstances. It is obvious from Mr Butterfield's evidence that he sent these letters on the basis of instructions from Mr Boné. The threatening and intimidatory tone of the letters, the reference to serious, but otherwise unspecified or unparticularised, allegations of misconduct and complaints to the regulator and the unreasonable demands contained in the letters provide some support for Mr Smith's allegation that Mr Boné was endeavouring to improperly intimidate Mr Smith into discontinuing the actions against himself and Valvelink. They accordingly provide some support for Mr Smith's case of abuse of process. 106 Following the somewhat unhelpful correspondence from Mr Boné's lawyers, Mr Boné filed an amended interlocutory process and points of claim. The effect of the amendments was to allege, for the first time, that the February and March 2012 resolutions in relation to Mr Smith's remunerations were invalid and that Mr Smith's remuneration had not been validly determined. The amended interlocutory process and points of claim included an order that Mr Smith refund the amounts "improperly received" by him as remuneration. 107 The amended points of claim provided some articulation of the basis of Mr Boné's contentions that the resolutions approving Mr Smith's remuneration were invalid. In circumstances where Mr Smith concedes that Mr Boné's case is arguable, it is unnecessary and perhaps undesirable to give any detailed consideration to the merits of Mr Boné's application. It is sufficient to simply note that Mr Boné's claim rests on the allegation that Mr Smith relied on proxies to vote for his remuneration that he was not entitled to rely on. It is also contended that there was no quorum of creditors able to vote in relation to the resolution at the March 2012 meeting. Reliance too is placed on a claim that Mr Smith's remuneration was not properly supported by documents such as time sheets. 108 In apparent response to the amended process and pleadings, Mr Smith's lawyers wrote to Mr Boné's lawyers on 4 December 2013. In that letter Mr Smith made an offer which was apparently intended to resolve Mr Boné's challenge to his remuneration. The offer was in the following terms: Our client does not accept that the previous approvals are defective in any respect. However, it is clear that determination of those claims will involve disputed issues of fact, quite apart from any which is raised by the "reasonableness" claim in paragraph 39 of the pleading. Further, this is in circumstances where even if the Applicant's claims in respect of the two approvals is correct, that would not produce the outcome that Mr Smith was not entitled to recover remuneration from the Company for work done during the periods covered by the prior approvals. The liquidator has a statutory entitlement to reasonable remuneration. Determination of the legal and factual issues raised by paragraphs 2 - 38 of the Points of Claim would only mean that Mr Smith's claim for remuneration would have to proceed, once again, for determination - in all probability before a Registrar of the Court. Our client is prepared to submit now to an order that the remuneration approved at those two meetings be referred for determination by a Registrar of the Court pursuant to Corporations Rules 9.2A and 9.4A. The power to conduct those reviews is expressly given to a Registrar of the Court and given that there would be no need, in the course of such a review, to consider events and circumstances surrounding the conduct of the meetings which led to the previous approvals, there would seem to be no good reason why a review of the remuneration claims should not be determined by a Registrar in accordance with the ordinary practices of the Court. There is, for instance, no reason why, if an appropriate case for such is made out by the Applicant, the Registrar would not conduct that review in open Court and with evidence and cross-examination of witnesses. 109 By letter dated 10 December 2013 Mr Boné's lawyers rejected this offer and made a counter-offer of sorts. Since part of Mr Smith's circumstantial case relies on the rejection of Mr Smith's offer, the terms of the rejection and the counter-offer should be set out in full: We refer to your letter dated 4 December 2013 offering to submit to an order that the remuneration approved at the creditors' meetings held on 8 February 2012 and 29 March 2012 be referred for determination by a Registrar of the Court pursuant to Corporations Rules 9.2A and 9.4A. As you would be aware from the Further Amended Interlocutory Process and Points of Claim our client contends that the resolutions approving Mr Smith's remuneration as administrator, that were purportedly passed at the meetings of creditors held on 8 February 2012 and 29 March 2012, were invalid. If this proves to be the case there will be a finding that Mr Smith drew remuneration without appropriate creditor approval, in breach of section 449E(1) of the Corporations Act 2001, and in not repaying the remuneration into the administration account of ACN 002 864 002 Pty Ltd, he may also be in breach of Clause 14.3 of the IPAA Code of Professional Practice. In these circumstances, as Middleton J confirmed in Australian Securities and Investments Commission v Andrew Leonard Dunner [2013] FCA 872 ("Dunner"), it is appropriate for the court to make orders for the repayment by Mr Smith of the unapproved remuneration. As Middleton J held at [237], such an order was appropriate "regardless of whether [he was] satisfied that the work was in fact done by [the liquidator] in respect of the external administrations in question". It is then for the administrator/liquidator to make an application to the Court (pursuant to section 449E(1)(c)) "for justification of an entitlement to recoup remuneration where appropriate", the costs of which must be met by the administrator/liquidator as they are "responsible for the failure to properly draw the remuneration in question in the first instance, and thus must bear the costs of putting things right." We note that there is presently no application by your client for the Court to approve your client's remuneration pursuant to section 449E(1)(c), in contradistinction to the "cautious" approach pursued by the joint administrators in orda, in the matter of Stockford Limited (Subject to Deed of Company Arrangement) [2004] FCA 1682. In light of the process adopted by the Court in Dunner and in ASIC v Edge (2007) 211 FLR 137; [2007] VSC 170, and in light of your client's apparent desire, by agreeing to submit now to a review of the remuneration by a Registrar, to avoid "the events and circumstances surrounding the conduct of the meetings which led to the previous approvals" being considered by a Court, the appropriate course would be for your client to consent to Orders 1 - 3, 5 - 7 and 10 of the Further Interlocutory Process and to apply for leave to make an application for approval of his remuneration under section 449E(1)(c). If you client consents to those orders prior to the directions hearing on Thursday 12 December 2013 our client will not oppose the granting of such leave and directions could be made on that day for the hearing of your client's application. (Footnotes omitted) 110 The effect of Mr Boné's proposal was that Mr Smith should refund all the money received by him in respect of the disputed remuneration and then apply to the Court for approval of his remuneration under the provisions of the Corporations Act. This course was said to be justified by reference to orders made in Australian Securities and Investments Commission v Dunner [2013] FCA 872 (Dunner). Dunner, however, involved quite different facts and circumstances. It concerned proceedings commenced by ASIC alleging misconduct on the part of a liquidator. The liquidator had paid himself remuneration without any attempt at seeking the creditor's approval. The fact that different orders were made in the different circumstances in Dunner does not appear, at least at first blush, to necessarily warrant an outright rejection of what otherwise seemed to be a practical approach to resolving the dispute concerning Mr Smith's remuneration. Nor did the somewhat technical argument that the review proposed by Mr Smith could not proceed in circumstances where Mr Boné challenged the validity of the resolutions. 111 As for Mr Boné's counter-proposal, on one view it might appear to be somewhat unreasonable in the circumstances to insist that Mr Smith repay all the relevant remuneration he had received and require him to then seek approval from the Court. Mr Smith was undoubtedly entitled to some remuneration. Previous applications by Mr Smith for court approval had largely been successful. It could scarcely be suggested that Mr Smith would be unlikely to refund any amount not approved on review. 112 Also problematic, in so far as Mr Boné's counter-proposal was concerned, was the fact that Mr Boné was insisting that Mr Smith consent to an order that included the contentious allegation that he had "improperly" received the remuneration. In this respect, at least, Mr Boné's counter-offer was not particularly helpful and was unlikely to produce a negotiated compromise. 113 That said, it is difficult to sheet home to Mr Boné any adverse inference that might otherwise flow from the approach taken to Mr Smith's compromise proposal. It is clear from Mr Butterfield's evidence that he was involved in advising Mr Boné about the response. It is likely that Mr Butterfield drafted the letter. The approach taken was perhaps somewhat technical and "hard-ball", but it was not entirely without merit. It is perhaps also not surprising, given what had occurred between the parties up to this point of time, that Mr Boné would instruct Mr Butterfield to take a somewhat hard-line approach. That does not mean that the response was the product of an improper purpose on the part of Mr Boné. 114 The final event in the chronology relied on by Mr Smith is the filing by Mr Boné of the second further amended interlocutory process in December 2013. The effect of this amendment was to add an additional prayer for relief, being an order that Mr Smith be removed as liquidator. Mr Smith's submission is that this is further evidence of Mr Boné's improper purpose. The timing of the amendment suggests, so it is submitted, that this amendment was designed to defeat Mr Smith's practical proposal and offer to resolve the dispute concerning his remuneration. The dispute was no longer limited to a dispute about Mr Smith's remuneration.

Is the inference of improper purpose clearly available? 115 There are undoubtedly some facts and circumstances concerning the commencement and prosecution of Mr Boné's application that tend to suggest an improper motive lay behind many of Mr Boné's actions. When some of his actions are looked at in isolation, it is perhaps not surprising that Mr Smith formed the view that Mr Boné was predominantly motivated by a desire, for reasons of self-interest, to stop Mr Smith from pursuing him and Valvelink for alleged unfair preference payments and insolvent trading respectively. Most troubling is the terms and timing of the correspondence of August and October 2013. At first blush the chronology also appears to support Mr Smith's case. 116 When all the relevant evidence is closely considered, however, it cannot clearly or safely be concluded that the predominant purpose of Mr Boné's application was as alleged by Mr Smith. Whilst this is perhaps an inference that may be open on the evidence, there are competing inferences which are equally available and perhaps more likely to represent the true state of affairs. 117 In particular, whilst it might safely be inferred that some of Mr Boné's conduct was motivated by a desire, if not determination, to stop Mr Smith from pursuing him and Valvelink in the insolvency of Petrolink, it does not follow that this was Mr Boné's predominant purpose in commencing and prosecuting the proceedings. There is evidence that supports the inference that Mr Boné was genuinely aggrieved and discontent with the level of Mr Smith's remuneration and the manner in which it had been purportedly approved. There are clear indications that Mr Boné genuinely wished to pursue Mr Smith in relation to this matter. The fact that in pursuing Mr Smith in relation to this matter Mr Boné had in mind, as a desired by-product of the action, that Mr Smith might ultimately be pushed into discontinuing the actions against him and Valvelink, does not mean that the bringing and prosecution of the application was an abuse of process. 118 Perhaps the biggest hurdle for Mr Smith's case is his concession, which appears to have been properly made, that Mr Boné's action in relation to the remuneration resolutions is at least arguable. It appears to be a safe inference from Mr Butterfield's evidence that Mr Boné had received advice from both his solicitor and counsel in relation to the availability of this action. Coupled with the evidence that supports the inference that Mr Boné was genuinely aggrieved by the level of Mr Smith's remuneration, it is but a short step to infer or conclude that Mr Boné's purpose in commencing and maintaining the proceedings was, to a substantial extent, obtaining the relief sought. In short, he wanted Mr Smith's remuneration to be reduced or at least properly determined or reviewed by the Court and had received advice that this action was reasonably open to him. Once that is accepted as a reasonable inference, that is effectively the end of the matter. 119 When closely analysed against the whole of the evidence, other key aspects of Mr Smith's circumstantial case also fall away. 120 For the reasons already given, any inference that might otherwise flow from the timing of the commencement of the proceedings falls away when regard is had to the whole of the evidence, including the evidence of Mr Butterfield. It is true, as Mr Smith points out, that Mr Boné's application was made over 14 months after the remuneration resolutions were purportedly passed at the creditors meeting. It is also true that they were commenced a mere two weeks after Mr Smith instituted the insolvent trading action against Mr Boné. 121 It is equally clear, however, that Mr Boné had been complaining about Mr Smith's remuneration for some time well before that. Questions had also been raised about the February and March 2012 meetings by February 2013, if not before. Things came to a head in February and March 2013 when Mr Smith sought further approvals for what, on any view, appeared to be fairly large fees. It was in this context that Mr Boné consulted Mr Butterfield and apparently obtained advice in relation to the 2012 remuneration resolutions. Mr Boné then instructed Mr Butterfield to commence the proceedings seeking a review or reduction of Mr Smith's remuneration. This was before he became aware that Mr Smith intended to pursue him for insolvent trading. Mr Butterfield's evidence explains both the delay and timing of Mr Boné's application. 122 In the face of Mr Butterfield's evidence, Mr Smith relies on the fact that at the 7 February 2013 meeting, Mr Boné proposed a resolution to have Mr Smith discontinue the Valvelink proceedings. This was before Mr Boné instructed Mr Butterfield to commence the proceedings. A fair reading of the 7 February 2013 and 27 February 2013 meeting minutes reveals, however, that Mr Boné and other creditors questioned whether, having regard to the level of Mr Smith's fees, the action would give rise to any benefit to anyone other than Mr Smith. Such was the level of concern amongst the creditors that the ATO representative proposed that the 7 February 2013 meeting be adjourned to allow other creditors to properly consider Mr Boné's proposed resolution. Whilst Mr Boné's resolution was ultimately defeated, all but two of other the creditors (albeit two of the largest) voted in favour of it. Whilst Mr Boné obviously stood to directly or indirectly benefit from the discontinuation of the Valvelink proceedings, it does not necessarily follow that the resolution was vexatious. There appears to have been a genuine concern that the Valvelink action was not in the best interests of the creditors. This concern was linked to the size of Mr Smith's remuneration - the very subject matter of Mr Boné's application. 123 The other key plank in Mr Smith's circumstantial case, the rejection of his December 2013 offer to have his remuneration determined by a Registrar, also falls away when closely analysed against the whole of the evidence. One difficulty already referred to is the fact that Mr Boné was by this stage represented by an experienced solicitor and counsel. Even if it be correct that Mr Boné's rejection of what was said to be a practical way to resolve the dispute was somehow unreasonable or overly technical, it is open to infer that this was the product or subject of advice from Mr Boné's lawyers. That advice would appear to have been not entirely without merit. 124 In any event, in all the circumstances, it is an extremely large leap to infer an improper purpose from a supposedly unreasonable rejection of a settlement proposal. It is equally open to infer that, by this stage at least, relations between Mr Boné and Mr Smith had degenerated to the level that Mr Boné wanted his contentions and grievances concerning Mr Smith's conduct validated by court order. A mere review of his remuneration would not suffice. 125 Finally, there is the correspondence. It is unnecessary to rehearse the observations that have already been made in relation to the August and October 2013 letters. On almost any view they were unhelpful, if not inappropriate or even improper. They were certainly not likely to be productive of compromise or resolution of the litigation then on foot or in prospect. But do they support the inference alleged by Mr Smith? When closely analysed in context they do not. Whilst they may support an inference that by August and October 2013 Mr Boné was prepared to attempt to pressure and intimidate Mr Smith into discontinuing the preference and insolvent trading litigation, it does not follow that this was the motivation for commencing the proceedings challenging Mr Smith's remuneration. Those proceedings were commenced some months before this correspondence. 126 Nor does it follow that Mr Boné's continuation of the proceedings was predominantly for this purpose. Rather, Mr Boné's circumstances can perhaps be likened to the scenario considered by Bridge LJ in Goldsmith v Sperrings. Mr Boné believed he had a genuine cause of action concerning Mr Smith's remuneration. He may have had an ulterior purpose in pursuing that cause of action, namely, that as a by-product of the litigation Mr Smith may ultimately discontinue the preference and insolvent trading actions or cease to be a liquidator. But his substantial purpose in bringing and prosecuting his application was to obtain the relief sought in the application. In such circumstances, the pursuit of the litigation is not an abuse of process. Mr Boné should not be prevented from proceeding with it. 127 Finally, it should be noted that Mr Smith submitted that because Mr Boné did not give evidence about his purpose, it should be inferred that his evidence would not have assisted his position: Jones v Dunkel. Mr Smith quite properly conceded, however, that this alone would not justify any adverse finding as to Mr Boné's predominant purpose. Such an inference cannot be used to fill gaps in a circumstantial case or make up a deficiency in the evidence: Jones v Dunkel at 308, 312. A Jones v Dunkel inference is not available where, as here, it turns out that there was ultimately nothing for Mr Boné to explain or contradict. 128 It follows that the evidence does not support the inference to the requisite standard that Mr Boné's predominant purpose in bringing and prosecuting his application was not for the purpose of prosecuting that application to a conclusion, but was for the predominant purpose of using it as a means of obtaining the collateral advantage of the discontinuation of the preference and insolvent trading proceedings. Mr Smith has not discharged the heavy onus of establishing an abuse of process. His interlocutory process must accordingly be dismissed. 129 In relation to costs, Mr Boné indicated in his submissions that if Mr Smith's application was dismissed he intended to seek a special costs order. At the conclusion of the hearing the parties were advised that they would be heard further in relation to costs. In these circumstances, the following orders or directions are appropriate to deal with the question of costs.

If the parties are able to agree on the appropriate costs order, consent orders reflecting that agreement are to be forwarded to my Associate within 14 days of this order.
If the parties are unable to agree on the appropriate costs order, the parties are to file and serve written submissions (not exceeding five pages in length) in relation to costs, together with an indication whether an oral hearing is requested, within 21 days of this order. I certify that the preceding one hundred and twenty-nine (129) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney.

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