International Swimwear Logistics Ltd v Australian Swimwear Company Pty Ltd [2011] NSWSC 488 | Case summary

International Swimwear Logistics Ltd v Australian Swimwear Company Pty Ltd [2011] NSWSC 488 | Case summary | Zoe

Judgment (3 paragraphs)

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ted & ors [2005] NSWSC 832 Re Obie Pty Ltd (in liq) (No 4) (1984) 8 ACLR 967; (1984) 2 ACLC 663 Re Spedley Securities Ltd (in Liq) (1991) 4 ACSR 555 Richardson v Mellish (1824) 2 Bing 229 Sandhurst Trustees Ltd v Harvey (2004) 88 SASR 519 Snowy Hydro v Metroll Victoria & Ors [2007] VSC 188 Stevens v Keogh (1946) 72 CLR 1 Street & 7 ors v Luna Park Sydney Pty Limited & 3 ors [2007] NSWSC 697 Sycotex Pty Ltd v Baseler (1994) 122 ALR 531 Tepko Pty Ltd v Water Board (2001) 206 CLR 1 The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 70 ACSR 1; [2008] WASC 239 Thompson v White and Another; ACDC v Thompson (No 3) [2005] NSWSC1257 West Mercia Safetywear Ltd (in liq) v Dodd [1988] BCLC 250 Wilkinson v Osborne (1915) 21 CLR 89; 22 ALR 57 Winkworth v Edward Barron Development Co Ltd [1987] 1 All ER 114 Texts Cited: Ford's Principles of Corporations Law Tomasic, "Commercial Morality and Public Policy as Principles of Corporate Insolvency Law" in Cranston (ed) Making Commercial Law: Essays in Honour of Roy Goode (1997) Category: Procedural and other rulings Parties: International Swimwear Logistics Ltd (First Plaintiff) The Australian Swimwear Company (Asia) Ltd (Second Plaintiff) Robert Bright (Third Plaintiff) The Australian Swimwear Company Pty Ltd (First Defendant) Stephen Philpott (Second Defendant) Natasha Sassoon (Third Defendant) Bond-Eye Holdings Pty Ltd (Fourth Defendant) Bond Eye Australia Pty Ltd (Fifth Defendant) Representation: Counsel C Stomo (Plaintiffs) C Harris SC with L Gor (Second to Fifth Defendants) Solicitors Comino Prassas (Plaintiffs) Colin Biggers & Paisley (Second to Fifth Defendants) Brown Wright Stein (Special Purpose Liquidator) File Number(s): 10132068

[2]

Judgment 1HER HONOUR: Before me for hearing on 12 May 2011 was an application by notice of motion filed by the 2nd to 5nd defendants (to whom I will refer as the Philpott/Sassoon parties) seeking an order that the matter proceed by way of separate determination of preliminary questions and seeking a stay, pending the determination of those questions, of the operation of the orders I made in November last year (on the application of the plaintiffs) for the appointment of a special purpose liquidator (SPL) to the first defendant (Australian Swimwear Company Pty Ltd (in liq)) (ASC). (In the Notice of Motion, application was made for a further order, for security for costs, but that was not listed before me for hearing on 12 May). 2Senior Counsel for the Philpott/Sassoon parties, Mr Harris SC, handed up during the course of the hearing signed undertakings from each of the 2nd and 3rd defendants (Mr Stephen Philpott and Ms Natasha Sassoon) to the effect that if the Court were prepared to make orders for the separate determination of the questions as requested and for the stay of the orders in relation to the SPL, then they would direct the receivers (who they had appointed to ASC pursuant to a charge granted in their favour) to pay the debts of the company's unsecured creditors (other than the plaintiffs) out of any further collection of the debts owing to the company and the ongoing carriage of its business and then to retain any balance in a controlled account pending the conclusion of the proceedings. The evidence of Mr Philpott is that (other than the plaintiffs, to the extent that they are creditors) the only unsecured creditors who have not been paid out to date are the Australian Tax Office, the NZ Inland Revenue and two entities recently claiming to be creditors (the substance of whose claims has not yet, I am told, been assessed). The effect of those undertakings, therefore, is to leave the present disputes squarely between the parties to the present proceedings. Background to the present application 3Some of the background to the present application is set out in the reasons I published last year when appointing the SPL. Briefly, the underlying dispute is between Mr Robert Bright (and companies associated with him - International Swimwear Logistics Ltd and Australian Swimwear (Asia) Co Ltd, both incorporated in Hong Kong; the latter apparently being misnamed in the originating process in these proceedings) on the one hand and Mr Philpott and Ms Sassoon (and the companies associated with them, being the balance of the Philpott/Sassoon parties). This is relevant when considering the exercise of discretion in relation to the stay application, since it is apparent that the investigation of the SPL has operated to cause the dispute between the three individuals (and their companies) to be broadened into a litigious battle on two fronts creating the very real potential for duplicated costs and a multiplicity of proceedings involving many of the same factual issues. 4The dispute between the parties centres on the arrangements pursuant to which ASC (a company controlled by Mr Philpott and Ms Sassoon) came to distribute swimwear under the labels "Moontide" and "Bond Eye" (the former being a label that had previously been distributed by various of the Bright interests and the latter being a label distributed by various of the Philpott/Sassoon parties). What seems not to be in dispute is that for a period from about 2008 a company owned and controlled by Mr Philpott/Ms Sassoon (Moontide Pacific Pty Ltd, since deregistered) distributed both the Moontide and Bond Eye labels and that after Moontide was deregistered the distribution of both labels was carried out by ASC. 5In 2009, ASC granted a charge in favour of Mr Philpott/Ms Sassoon to secure loans said to have been made by them to the company. In April 2010, Mr Philpott/Ms Sassoon appointed a voluntary administrator to ASC (Mr Struthers) and at the same time appointed a receiver and manager to ASC (Mr Hancock) pursuant to the charge. This followed a period in which there had been disputes with Mr Bright over the operation of the company and its financial arrangements. The company was then placed in liquidation and Mr Struthers appointed as liquidator. 6Prior to the entry into administration of ASC, the Bond Eye trademark was assigned, first, to Mr Philpott in November 2009 and then to a company now known as Bond Eye Holdings Pty Ltd (the fourth defendant). The distribution of the Bond Eye label is now conducted by Bond Eye Australia Pty Ltd (the fifth defendant). This series of events has led to the action taken by the Bright interests in the present proceedings. 7According to Mr Struthers' report to creditors of 27 May 2010, the reason the company went into liquidation was the withdrawal of support by the secured creditors (Mr Philpott and Ms Sassoon). 8When the matter was before me late last year, ISL and ASC Asia claimed to be the largest unsecured creditors of the company (with debts claimed of approximately $562,000 of the total creditors of $632,000) and their complaint then was that they would be e only creditors not paid out in full; in other words their complaint was as to their financial interest (not a private pursuit of the public interest in enforcing the conduct of directors). 9The claims by the plaintiffs are premised on the making of two agreements between Mr Bright on the one hand and Mr Philpott/Ms Sassoon on the other in 2008: first, an oral agreement (pleaded in paragraph [15] of the Second Amended Statement of Claim) in February 2008 under which it is said that Mr Philpott/Ms Sassoon agreed to distribute swimwear produced under the plaintiffs' label (Moontide) through a joint company (Moontide Pacific) and, secondly, a subsequent oral agreement (pleaded in paragraph [18] of the Second Amended Statement of Claim) in August 2008 for a joint venture for the distribution of both the Moontide label and the Bond Eye label on a worldwide basis. 10It is alleged that the August 2008 joint venture agreement gave rise to fiduciary duties owing by Mr Philpott/Ms Sassoon to Mr Bright (those being said to be a duty to perform the contractual agreement or to cause the company, ASC, to perform its contractual obligations to ISL/ASC Asia). (It seems to be alleged [21] that ASC was itself a party to the joint venture agreement that came into existence as a result of the August 2008 conversation between Mr Bright and Mr Philpott.) 11It is further asserted that promises and representations were made to the effect of the statements said to comprise the above agreements and that, if they did not constitute a contract, then they were representations in trade and commerce and misleading in breach of s 41 of the Fair Trading Act 1989 (NSW) so as to give rise to a claim for damages under that Act. 12Mr Philpott/Ms Sassoon deny the February 2008 agreement, deny the August 2008 joint venture agreement and deny that the alleged representations were made. 13The Second Amended Statement of Claim pleads that ASC was to be the vehicle for the operation of the joint venture agreement and that Mr Philpott/Ms Sassoon failed to carry out their agreement with Mr Bright to appoint him as a director of ASC. (in effect what the plaintiff say is that Mr Philpott/Ms Sassoon ran the company as their own and breached their fiduciary duties to Mr Bright arising out of the joint venture agreement. (Mr Stomo also says that Mr Philpott/Ms Sassoon (presumably in their capacity as directors of ASC) owed (and breached) fiduciary duties (or duties akin to fiduciary duties) owed to ISL/ASC Asia as creditors of ASC), although the pleading itself (paragraph [25]) is framed as a claim for use of "their fiduciary position for their own profit, benefit and gain by exploiting their position and opportunities while acting in a fiduciary relationship to the joint-venture partners", seemingly focussing on a duty owed to the co-venturers and not creditors of the company. 14Serious allegations are made against Mr Philpott/Ms Sassoon of engaging in a "course of fraudulent design" against the joint venture partners (those being Mr Bright and, it seems, ASC). 15ASC Asia claims to be owed a considerable sum of money under invoices rendered to ASC for the supply of swimwear. There is a dispute as to whether ASC has any (and, if so, what) liability under those invoices and as to whether Mr Philpott/Ms Sassoon have any personal liability in relation thereto. 16Relief is also sought against Mr Philpott/Ms Sassoon on the basis that they acquired assets which were on trust for the joint venturers and knowingly assisted their corporate entities (Bond Eye Holdings and Bond Eye Australia) to acquire assets that they knew or ought to have known were the property of the joint venture. 17Apart from declaratory relief, orders are sought against Mr Philpott/Ms Sassoon for an account of profits, an order is sought for a full 'accounting' of the two companies (Moontide Pacific and ASC) and judgment is sought for the first plaintiff (ISL) against the defendants in the sum of $110,000 (money said to have been advanced to Moontide Pacific to set up for the sale of Moontide products in Australia and New Zealand and which it is alleged in paragraph [18(1)] of the Second Amended Statement of Claim was agreed under the joint venture agreement to be assumed by the joint venture company, ASC). 18Mr Bright does not claim to be a creditor of the defendants. His claim, as articulated by Counsel for the plaintiffs (Mr Stomo) at T 43, is for restitutionary relief, including restitution of the value of the business that it is said was transferred from ASC in breach of the fiduciary obligations of its directors. In paragraph [22(b)] of the Second Amended Statement of Claim it is alleged that Mr Philpott/Ms Sassoon have a fiduciary duty not to act in their capacity as directors in a manner contrary to the joint venture agreement and hence it appears to be said that there was a personal obligation on the part of Mr Philpott/Ms Sassoon personally to pay sums said to be owing by ASC. 19By way of example, the alleged breaches by Mr Philpott/Ms Sassoon of their fiduciary obligations arising out of the joint venture agreement are pleaded as including the failure to make payment of invoices rendered to ASC by ASC Asia (paragraph [24(c)(iv)]) and the failure to make payment to ISL for or towards the reduction of the $110,000 Moontide Pacific loan (paragraph [24(c)(xi)]). The plaintiffs claim that both the Moontide loan and the amounts the subject of the ASC Asia invoices are recoverable from Mr Philpott/Ms Sassoon personally (as damages for breach of fiduciary duty or damages for misrepresentation). 20While any fiduciary duty arising from the joint venture is one that would presumably be owed to their co-venturer (Mr Bright), in submissions by Mr Stomo it seemed to be alleged that Mr Philpott/Ms Sassoon also owed duties to ISL/ASC Asia in their capacity as creditors of ASC. (In that regard, I note that a fiduciary duty of directors not to act contrary to the interests of creditors was considered in The Bell Group Ltd (in liq) v Westpac (2008) 225 FLR 1 at [4418] and [4435]-[4450] and in Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557 at [162] (per Giles JA with whom Ipp and Basten JJA agreed), it there being said that such a duty is only a duty to consider the interests of creditors as part of the duty to act in the company's best interests, and not a duty not to act contrary to the interests of creditors.) 21In November last year an application was made by the plaintiffs on an interlocutory basis to restrain the receiver appointed to ASC from distributing moneys or making payments out of the company. That application was resisted by the receiver and was unsuccessful (and on the ordinary view doomed to failure because of the refusal of the plaintiffs to proffer the usual undertaking as to damages, having regard to the fact that it is only in the most exceptional circumstances that an undertaking for damages should not be required before granting interim injunctive relief - see Osborn J in Snowy Hydro v Metroll Victoria & Ors [2007] VSC 188 and the dicta of Heydon J in the transcript of proceedings in the High Court on 29 July 2005 in Combet & Anor v Commonwealth of Australia & Ors [2005] HCATrans 459). However, the plaintiffs were successful at that time in seeking the appointment of a special purpose liquidator (the SPL) to investigate certain matters in relation to the conduct of Mr Philpott/Ms Sassoon as directors of ASC. 22Relevantly, that application was brought on the basis that the plaintiffs maintained that they were unsecured creditors of ASC and that they were the only creditors at risk of not being paid out of the assets of the company. Their interest in the SPL's investigation was, therefore, a financial interest in the potential for the company to recover funds in order to enable their debts to be met. Mr Harris, who did not appear on the application before me last year, maintained on the present application that the plaintiffs did not have the standing as creditors to make that application, in circumstances where their debts had not been proved (contrasting the position in Lo v Neilsen [2007] NSWSC 407 , on which reliance had been placed for the appointment of the SPL, where the applicant seeking the appointment of SPL was a judgment creditor of the company). (Mr Stomo, in response, refers to the statement of affairs prepared by Mr Philpott that discloses an amount due to ASC Asia, referred to in the statement of affairs as an unsecured loan with no terms, and says that while the amount is in dispute there is an admission that a debt is owing to ASC Asia. The companies have been admitted for voting purposes as creditors of the company.) 23Since the appointment of the SPL, various steps have been taken by him to investigate the affairs of the company (and disputes have arisen as to the extent of his powers). Mr Stomo referred to the SPL's conduct of the investigations as 'aggressive'. He has served notices to produce on various entities, seeking the books and records not only of ASC but also of Bond Eye Holdings and Bond Eye Australia (the plaintiffs' acknowledged competitors) and on the accountants and the former solicitors of the Philpott/Sassoon parties and/or of the company. The SPL has complained of difficulties in securing cooperation with his requests for information but it is noted by Mr Harris that, at least in relation to the books and records of Bond Eye Australia and Bond Eye Holdings sought from the companies' accountants, what the Philpott/Sassoon parties have maintained is that this should be at the expense of the SPL, to which it is said that the SPL has not responded. (Similarly it is said that the SPL has not responded to requests by the former solicitors for confirmation as to payment of their expenses.) The SPL has also sought information and documents from the receivers and managers. 24Perhaps more relevantly, in the context of the stay application, the SPL has made enquiries as to a number of matters that seem at first blush to go beyond that necessary for the tasks he was appointed to investigate (by way of example, Mr Harris referred me to questions 6, 10, 11, 16, 17, 19, 22, 23, 25, 26, 45, 56, 68, 86, 88, 89, and 93 of the Directors' Questionnaire, a document seemingly issued as a pro forma document in a general purpose liquidation). 25To the extent that the SPL's solicitors have asserted their client's entitlement to the books and records of ASC pursuant to ss 474 and 477 Corporations Act 2001 (Cth), issues may well arise for consideration as to the division of powers between the SPL and the existing (general purpose) liquidator (and Mr Harris foreshadowed the possible need for further court applications in order to clarify the extent of the SPL's powers and the respective roles of the SPL and the general purpose liquidator). 26Thus it is said that the Philpott/Sassoon parties are being put in the position of being compelled to provide documents and information at a significant cost to them (to date $23,212.40) in addition to the costs of the present proceedings in which the same issues or many of the same issues will fall for investigation. (Mr Harris notes that there has been no adverse determination by the Court against them and that the SPL's report itself makes clear that his concerns are preliminary and without the benefit of legal advice.) 27A report to creditors was published in April this year, in which the SPL identified possible causes of action against Mr Philpott/Ms Sassoon (including for insolvent trading and potential criminal offences) and indicated the investigations he proposed to pursue (namely, to pursue recovery of outstanding information responses from directors and to obtain legal advice in relation to the charge granted to Mr Philpott/Ms Sassoon, noting that he is yet to verify the amounts claimed as loans but that charges can only secure moneys properly owed to the chargee). Mr Dean-Willcocks (the SPL) stated the opinion that there are reasonable prospects that the company was insolvent when the charge was granted in 2009 and has formed the view that the charges and the assignment of the trademarks were uncommercial transactions or insolvent or unreasonable director related transactions and that there is a potential insolvent trading claim adverted to by the SPL over the period from August 2009/April 2010. The SPL's costs to date (for which the plaintiffs are liable under the orders I made last year) are in the order of $25,000. (For their part, Mr Philpott/Ms Sassoon have deposed to the costs and time incurred to date by them in responding to the SPL's enquiries and it is said that this has been to the disruption of their business. Ms Sassoon has also deposed to the stress suffered as a result of the proceedings. Mr Harris submits that further substantial work will be necessary to meet the SPL's ongoing requests.) 28Concern was raised as to the apparent dissemination of the SPL's report of 13 April 2011 more broadly within the business community (to at least one entity not a creditor of ASC) and as to the damage to their reputation that was likely to cause. Mr Harris further notes that when concerns over confidentiality were raised with the SPL, his response (through his solicitor's letter of 4 April 2011) was that information would not be provided to the plaintiffs but to the creditors (though at least two of the former count themselves as creditors of the company). 29The Philpott/Sassoon interests do not seek any findings as to the conduct by the SPL of the investigations that he was authorised to carry out, but Mr Harris does maintain that there is a bona fide dispute on the part of his clients as to the extent of the SPL's powers noting the concern that has been raised as to the maintenance of confidential information and the manner in which the SPL's report (raising serious questions as to their conduct) has apparently been issued to parties other than creditors causing potential damage to their reputation in which seems to be conceded is a small competitive market in Australia). 30As to the role of the SPL, I was taken to the correspondence in which disputes were raised as to the extent of his powers and as to the ambit of the investigation (as evidenced from questionnaires issued by him) apparently being undertaken by the SPL. Apart from the disruption said to have been caused to the defendants' business and costs, the main issue raised by Mr Harris was as to the overlap or potential overlap between the investigation of issues in the present proceedings and the investigation being undertaken by the SPL. It is submitted (but not accepted by Mr Stomo) that if the plaintiffs are successful in the present proceedings then they will recover all losses and damages and will not be a creditor of ASC since will have recovered from Mr Philpott and Ms Sassoon personally. (Hence it is said to be inimical to the plaintiffs' interests that Mr Philpott/Ms Sassoon should be forced to incur additional costs in the SPL investigations and be deprived of funds that would otherwise be available to meet any judgment debt in the present proceedings.) Mr Harris does, however, concede that the corollary would also be true (namely that if the SPL investigations produce a recovery of funds by the company out of which the plaintiffs' debts are met in full, then there may be no loss recoverable in the current proceedings). 31Mr Stomo submits that this ignores the separate nature of the claims by Mr Bright in restitution and the claims in debt against ASC sought to be pursued through the SPL. 32This brings me to the applications presently before me: (i) for the separate determination of preliminary questions (or alternatively for the expedition of the hearing); and (ii) for a stay of the operation of the SPL pending the determination of those questions. 33I reserved my judgment on those applications but in the interim stayed the further performance by the SPL of the tasks the subject of the orders I made last year (in order to preserve the status quo pending my determination of this application). I now publish my reasons on those applications. (i) Separate determination 34Under Rule 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) (and s 62(2) of the Civil Procedure Act 2005 (NSW), the court has power to make orders for the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings. 35In Idoport Pty Limited & anor v National Australia Bank Limited & 8 ors (15) [2000] NSWSC 1215 at [7], Einstein J summarised the applicable principles when considering an application for the separate determination of an issue. In so doing, his Honour noted that the power of the court in this regard is a discretionary power which must be exercised judicially but cannot otherwise be fettered; that the court is enjoined to give effect to the overriding purpose of the relevant court rules (there the Supreme Court Rules 1970 (NSW) ), namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings; and that the court begins with the proposition that it is ordinarily appropriate that all issues in the proceedings should be disposed of at the one time and thus that it is for the party who wishes to have a question separately determined to show that it is desirable for this to occur. 36The principles enunciated by Einstein J in relation to the former Pt 31 r 2 of the Supreme Court Rules are equally applicable to the court's exercise of discretion under its successor (rule 28.2 of the Uniform Civil Procedure Rules ) ( Pioneer Park Pty Limited (in liquidation) v ANZ Banking Group Limited & ors [2005] NSWSC 832; Matrix Film Investment 1 Pty Limited & ors v Alameda Films llc and Warner Brothers Entertainment and Pictures Inc [2007] NSWSC 523). 37Einstein J, in Idoport , said [at 7]: Without being exhaustive, the separate determination of an issue may prove to be an appropriate procedure in at least the following sets of circumstances: (a) Where the resolution of that separate issue will have the effect of resolving the entirety of the litigious controversies or of substantially narrowing the field of litigious controversy: CBS Productions Pty Limited v O'Neill [1985] 1 NSWLR 601 at 606 per Kirby P, Dunstan & Simmie & Co Pty Limited [1978] VR 670 at 671 per Young CJ and Jenkinson J; (b) Where the resolution of that separate issue carries with it a strong prospect that the parties will thereafter be able to resolve their disputes themselves and thus avoid further litigation: Tallglen v Pay TV Holdings Pty Limited (1996) 22 ACSR 130 at 141-142 per Giles CJ in Comm D; (c) Where there is a clear demarcation between that issue and all other issues in the case, including issues going to the credit of witnesses: CBS Productions Pty Limited v O'Neill (supra at 606 per Kirby P), Tallglen v Pay TV Holdings Pty Limited (supra at 142 at Giles CJ in Comm D), Rajski v Carson (1988) 15 NSWLR 84 at 88 per Kirby P and Hope JA. 38Einstein J also set out the circumstances in which he considered that, conversely, the separate determination of an issue would rarely be an appropriate procedure. Those included where there are intertwined issues of fact or law (such that the determination of the separate question would not have any substantial effect on the width of the field of litigious controversy or the prospect of the settlement of the balance of the litigation); where there is a commonality of witnesses and issues of credit; and where there is a possibility that the resolution of the separate issue will not finally determine the issue but merely result in an appeal from that decision in relation to that separate issue creating a multiplicity of proceedings, interruptions to the court and undesirable fragmentation of the proceedings. 39A cautionary note was sounded in Idoport when his Honour said: The experience of courts suggests that the separation of proceedings often does not result in the quicker and cheaper resolution of proceedings as anticipated, but often has the reverse effect, merely causing added delay and expense to the resolution of the litigation. Thus, before an issue is to be separately determined, it must be possible to clearly see that it will facilitate the quicker and cheaper resolution of the proceedings, (citing Tallglen v Pay TV Holdings Pty Limited, Parramatta Stadium Trust v Civil and Civic Pty Ltd (unreported, Supreme Court of NSW, 27 August 1996, per Hunter J) and Century Medical v THLD [2000] NSWSC 5; (unreported, Supreme Court of NSW, 3 February 2000, per Rolfe J). (my emphasis) 40It has nevertheless been recognised that if the early resolution of the question of liability has the prospect of achieving "economies in time and expense in the resolution of the proceedings" then this would be both appropriate and desirable (see Flore v NSW Department of Education and Training [2006] NSWSC 1227 at [32] and Street & 7 ors v Luna Park Sydney Pty Limited & 3 ors [2007] NSWSC 697 at [6]). 41The separate questions which Mr Harris seeks to have determined in advance of other issues in the proceedings address the foundation on which the plaintiffs' claims (other than a fiduciary duty owed to creditors) are based, namely:

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DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 May 2011

Did Mr Bright, Mr Philpott and Ms Sassoon enter into the February 2008 oral agreement (pleaded in paragraph [15] of the Second Amended Statement of Claim)?
Did Mr Bright, Mr Philpott and Ms Sassoon enter into the August 2008 oral agreement (the joint venture agreement pleaded in paragraph [18] of the Second Amended Statement of Claim)?
Did Mr Philpott and Ms Sassoon make to Mr Bright the promises pleaded in sub-paragraphs [18(a)-(q)] as alleged in paragraph [27] of the Second Amended Statement of Claim)?
Did Mr Philpott and Ms Sassoon make to Mr Bright the promises pleaded in sub-paragraphs [18(r)-(s)] as alleged in paragraph [27] of the Second Amended Statement of Claim)? 42It is submitted by Mr Harris (and a review of the pleadings largely supports the conclusion) that the claims by the plaintiffs (for breach of contract, breach of fiduciary duty and misleading and deceptive conduct) are predicated on the alleged oral agreements in February and August 2008. (The one exception is that, to the extent that Mr Stomo seemed to suggest in submissions that the fiduciary obligation said to have been breached by the individual defendants was one owed to creditors of the company, this would not seem to be based in the alleged contractual arrangements, although the basis for the debts claimed by ISL/ASC Asia seems to be sourced from the alleged joint venture agreement. That said, the duty as pleaded seems to be a duty owed to the co-venturers [22], though the declaration sought in prayer 3 is that a fiduciary duty was owed to Mr Bright and to ASC.) 43In his written submissions, Mr Stomo accepts that the claim by the plaintiffs is based on an oral arrangement whereby it is alleged that there was a joint venture and that this joint venture gave rise to fiduciary duties (and that representations were made and promises given in relation to the joint venture that were misleading and deceptive and in reliance on which monies were paid over by the plaintiffs). 44Mr Harris notes that the Second Amended Statement of Claim pleads that it was pursuant to the August 2008 joint venture agreement that Mr Bright caused ASC Asia to render invoices to ASC for swimwear during the period from August 2008 to December 2009 in the sum of HK$743,689.61 and A$452,158.09 (Second Amended Statement of Claim [20(g]) and that it was pursuant to this agreement that Moontide was deregistered and ISL's $110,000 loan was assumed by ASC (Second Amended Statement of Claim [18(1)]). Mr Harris submits that the gravamen of the complaint made in the present proceedings is therefore that Mr Philpott/Ms Sassoon breached the terms of the joint venture agreement by causing charges to be created in their favour for loans made by them to the company (Second Amended Statement of Claim [24(b)(i)]) and in favour of Bibby Financial Services Pty Ltd (a factoring company) (Second Amended Statement of Claim [24(b)(ii) and (iii)]); and by the transfer of the Bond Eye trade mark from ASC first to Mr Philpott and then to the fourth defendant (Bond Eye Holdings) (Second Amended Statement of Claim [24(b)(iv)-(vi)]); by the creation of the fifth defendant (Bond Eye Australia) for the purpose of trading the Bond Eye label (Second Amended Statement of Claim [24(b)(vii)(ix)]); the appointment of receivers and managers to ASC and placing the company in liquidation (Second Amended Statement of Claim [24(b)(viii)]); by their failure to make payments to ASC Asia for stock delivered to ASC (Second Amended Statement of Claim [24(c)(iv)]); and failure to repay the ISL loan to Moontide Pacific which was said to have been 'absorbed' by ASC (Second Amended Statement of Claim [24(c)(xi)]). 45Insofar as the pleading also seems to seek relief by way of declarations of the acquisition of assets held on trust for the joint venture and of knowing assistance by Mr Philpott/Ms Sassoon in the acquisition of assets by the fourth and fifth defendants (the two Bond Eye companies), this is said to be a claim under the respective limbs of Barnes v Addy (1874) LR 9 Ch App 244; (1874) 43 LJ Ch 513). It is said that this remains grounded in the alleged joint venture agreement because it is this which gives rise to the alleged breaches of fiduciary duty in contravention to the joint venture agreement (noting that substantively the same breaches are alleged and cross referenced to paragraph [24] of the Second Amended Statement of Claim. Similarly, it is said that the claim for breach of an alleged duty of good faith (Second Amended Statement of Claim [26]), also springs from the alleged joint venture agreement. 46The alternative misleading and deceptive conduct and representation claims are based on the alleged promises said to constitute the joint venture agreement (Second Amended Statement of Claim [27]; [18(r)-(s)] AND [28]); the alleged breach being the failure to honour the promises the subject of the joint venture agreement (Second Amended Statement of Claim [31]) and the reliance being said to be the ISL loan to Moontide Pacific 'absorbed' into ASC and the sale of swimwear invoiced by ASC Asia to ASC (Second Amended Statement of Claim [32]). 47However, Mr Harris submits that the pleaded case also requires the determination of two further substantial issues: the question of performance of the alleged contract and liability for breach (which it is said will require evidence and potentially expert evidence as to ASC Asia's manufacture and delivery of garments to ASC over the period of August 2008 and December 2009 so as to ground a debt claimed by it of some $450,000) and the circumstances in which Moontide Pacific was created, traded and deregistered, including the circumstances in which ASC assumed the Moontide Pacific loan and how and why this became the liability of Mr Philpott/Ms Sassoon (which it is said may require the evidence of witnesses in New Zealand). It is said that these will be wide ranging factual inquiries (and may be unnecessary depending on the findings as to the alleged agreements/representations). 48Mr Harris submits that, if confined to the questions in the Notice of Motion, on the plaintiffs' claims there will only be 3 witnesses in relation to the making of the alleged oral agreements/representations (and in essence there seems to be no dispute as to the confined nature of the oral evidence on these issues, Mr Stomo suggesting at most that there may be a further witness going to the question of the agreements), but that issues going beyond those questions in relation to the performance of the agreement, its breach and the loss suffered would require evidence as to the background of Moontide Pacific itself (including potential witnesses from New Zealand). Concern is raised as to the extent of discovery if issues of performance and loss/damage are required to be explored. 49Mr Stomo has articulated a series of issues that he says will be relevant to a determination of the claims made by the plaintiffs in the Second Amended Statement of Claim (as set out in paragraph [4] of his written submissions). In essence, they turn on the formation of the alleged joint venture, whether the actions of the parties were consistent with or pursuant to such a joint venture, whether fiduciary duties were owed in relation to the joint venture (and, if so, what they were and were they breached by Mr Philpott/Ms Sassoon); and what reliance was placed by ISL on the representations "of the joint venture agreement", together with the calculation of loss and damage or other relief. Included in that list of issues (at [4(j)]) is whether a duty was owed "akin to fiduciary duty to other creditors of ASC at the time or just prior to appointing an administrator and subsequent be [sic] putting the company into liquidation" and the extent of that duty. 50Mr Stomo submits that, in order to determine the contractual issues, an examination of pre- and post August 2008 conduct, including the relationship of the parties with the (now deregistered) company Moontide Pacific will be necessary and that the plaintiffs should not be confined by the proposed questions (referring to what was said as to the admissibility of pre- and post contractual conduct in Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 by Heydon JA, as his Honour then was, at [24] - [25]). Mr Stomo says that the plaintiffs wish to rely on pre-contractual conduct in relation to the factual matrix surrounding the conversations in question and on post-contractual conduct in relation to evidence of performance from which the making of the contract might be inferred (taking issue with the suggestion that evidence as to 'performance' of the contract goes only to the question of quantum). I did not read the questions as framed by Mr Harris as limiting Mr Stomo from so doing - if the question is as to whether an agreement is concluded and pre or post contractual conduct is relevant in determining that issue then nothing in the proposed questions precludes that. It seems to me that where there has been confusion is as to whether the conduct relied upon as 'performance' of the contract could be taken into account if the questions were to be drafted in the manner proposed, having regard to the suggestion in Ms Walkers' affidavit that questions of performance of the contract not be addressed. 51As to the pre-contractual conduct (and the suggestion by Ms Walker that there would be a need for evidence from witnesses in New Zealand), Mr Stomo says (at T 38.24), as I understand it, that while the genesis of the parties' arrangement in relation to the distribution of the Moontide label is relevant on pleadings, the creation of the Moontide label is irrelevant and hence there would be no need for such evidence in any event. 52It is said by Mr Stomo that the determination as to the credit of the witnesses that will arise in relation to the relevant conversations in 2008 is something that will have a bearing on some or all of the other issues in the case (such as the fiduciary duty which is claimed, that he says will depend "on the circumstances surrounding the particular relationship and the context in which relief is sought") and therefore there cannot be a separation of issues in relation to the conversation and issues in relation to the fiduciary duty. 53Mr Stomo is also concerned that the questions as posited seem to quarantine (to a later hearing) issues relating to causation/reliance in relation to the Fair Trading Act claims. It is submitted that the conduct of the parties over the course of the relationship will be a determining factor in that regard. 54At one stage it seemed to be contended by Mr Stomo that the correctness of invoices issued by ISL or by ASC Asia, and their compliance with the alleged joint venture agreement, were issues relevant to both the formation of the contract and liability (and hence there would be a commonality of witnesses on this issue which would make separation of quantum undesirable). However, as I understand it, on the question of the formation of any agreement or its terms what Mr Stomo seeks to rely on is that the various invoices that were issued as contemplated by the alleged agreement. I do not see that questions as to whether any goods were supplied in relation to those invoices, or were retained by ASC, or were of proper quality (all of which appear to be in issue on the question of quantum) go to the question whether the contract was formed as alleged or as to the liability for breach of any obligations owed by Mr Philpott/Ms Sassoon under or arising out of the alleged contract. 55As to the allegations said to be based on Barnes v Addy , I accept that questions of knowledge and the relationship between the parties would arise. I accept that this would involve a commonality of witnesses on the defendants' side and, given that it is likely that there will be issues of credit which will need to be determined, it is inappropriate for the separation of the hearing of questions going to the contractual and misleading and deceptive conduct claims from the fiduciary claims. 56Therefore, the nub of Mr Stomo's objection to the proposal for separate determination was that he regarded the questions as formulated in the Notice of Motion as too narrow. The plaintiffs' concern was that there was an intention by the Philpott/Sassoon interests to limit the investigation simply to the conversations that had taken place in February/August 2008 and to go no further, quarantining issues as to performance insofar as they related to the formation of the alleged contract or its terms and leaving to be addressed at a later hearing issues as to the alleged fiduciary duty and reliance. Pausing there, as adverted to earlier, I do not read the questions as framed in the notice of motion as being quite so limited in that I consider that they would permit an exploration of the factual issues as to whether the alleged agreements were reached and/or the promises and representations made. However, I accept that the questions do not encompass all the issues that will arise in relation to liability. 57I accept that the separate determination of the four questions posed by Mr Harris will not have the effect of resolving the entirety of the litigious controversies in these proceedings (not least because they leave open the questions whether, if either of the alleged agreements was found to have been made, it was breached by Mr Philpott/Ms Sassoon and whether the alleged joint venture agreement gave rise to any fiduciary obligations (over and above the contractual obligations), which were breached by them and, on the misleading and deceptive conduct claim, whether there had been reliance on the representations alleged by reason of which damage had been suffered. Nor do the four questions posed for consideration by Mr Harris address the question of the knowledge arising for a claim under one or other of the limbs in Barnes v Addy . Mr Stomo stressed that the liability issues to be determined need to address the question of the alleged fiduciary duty to comply with one's contractual obligations under joint venture agreement. 58However, if not so limited, but there was a separation of issues was as between issues of liability and quantum, then while this would also not determine the whole of the matters in dispute between the parties; it seems to me that it would substantially narrow the field of litigious controversy. Indeed, ultimately Mr Stomo indicated (T 28 and T 36.1) that the plaintiffs would not object to a division of the hearing along those lines. (Such a division is already contemplated in the order sought for referral to an Associate Justice of questions in relation to the accounting sought by the plaintiffs.) It seems to me that there is merit in such an approach. It should not give rise to intertwined issues of fact and law; nor should there be the same overlap between witnesses on critical issues as would occur under the formulation of the questions proposed in the Notice of Motion. 59I note that Mr Stomo ultimately withdrew the submission that had earlier been made for the plaintiffs that there could be the possibility of inconsistent credit findings on various issues if the trial were to be split between liability and damages - T 35.16 - and expressed support for the notion of separating the issue of quantum on the basis that this would involve an arithmetical calculation on the ASC Asia invoices (the sum of $110,000 advanced to Moontide Pacific being an admitted sum) and the only other issue on quantum being said to be the quality of the material in the swimwear supplied and that was the subject of the invoices.) He confirmed that, notwithstanding the caution expressed by the High Court in Tepko Pty Ltd v Water Board (2001) 206 CLR 1 at [168], the plaintiffs did not object in principle to the separation of those issues. 60Turning to the other factors raised for consideration in Idoport , Mr Harris submits that there are real savings to be had with respect to both judicial resources and the parties' resources in the matter being determined by way of the proposed separate questions: in that the likely witnesses will be reduced to three (or at most, on Mr Stomo's estimate, 4), obviating the need for witnesses going to the question of 'performance/breach' (namely, customers, agents and former staff of ASC) and the need for expert evidence which goes to quantum of loss (other than perhaps evidence Mr Stomo foreshadowed as to the issue of management fees); the volume of documents, if confined as suggested is said to be likely to be reduced by about at least 50%; and there may be less need to have recourse to the books and records of ASC, Bond Eye Holdings and Bond Eye Australia (thus it is suggested that the need for electronic discovery may be avoided). (It is said that this meets the requirements of s 56 of the Civil Procedure Act , namely the just quick and cheap resolution of real issues in the case (as against the situation where the costs may approach or exceed the monetary amount presently claimed - though this does not take into account restitutionary claims). I accept that there is a likelihood that the matter can be dealt with more expeditiously and cost-efficiently if the issues of performance or breach that go to the issue of quantum (and not the seemingly more limited evidence of performance on which Mr Stomo wishes to rely in relation to the issues of liability) are deferred until a later hearing if necessary. 61It is further said by Mr Harris that the separate determination of questions relating to liability would remove the risk of the plaintiffs accessing commercially sensitive documents of Bond Eye Holdings and Bond Eye Australia. While Mr Stomo does not accept that this is a relevant criterion (in part it would seem because of the criticisms levelled at the conduct of the individual defendants in setting up these new corporate entities), it is a factor that suggests that the separation of liability from quantum may minimise the scope for interlocutory disputes in the context of discovery (as to confidentiality and the like). 62As to the parties' costs, Mr Harris notes that providing for the separate determination of the proposed question would reduce the funds which Mr Philpott/Ms Sassoon are required to divert away from the businesses of Bond Eye Holdings and Bond Eye Australia for the purpose of resisting these proceedings (a relevant consideration where the Philpott/Sassoon parties may ultimately be vindicated and without a costs order which makes them whole). Again, Mr Stomo does not accept that this is a valid point to take into account (and says that the Philpott/Sassoon parties are in a predicament of their own making). Whether or not that is the case, it is not in my mind the determining factor on the present application. 63The defendants' solicitor, Ms Leanne Walker, has deposed that if the issue in relation to the alleged agreements were to be resolved then she considers that there would be reasonable prospects that the parties might be able to reach a settlement of the entire dispute. As to the suggestion that a separate determination of either kind will enable the parties to resolve their disputes without further litigation, I am not confident that this will be the case, given the apparent lack of trust between the parties and the stance that has been adopted by the plaintiffs on the present stay application (of pressing what was sought by them last year on the basis of their pecuniary position now in the name of the public interest). Mr Stomo's clients certainly seem to be unconcerned by the spectre of "twofold" litigation, to use Mr Stomo's words, and unmoved by the costs concerns raised by Mr Harris. 64Mr Stomo suggests that, conversely, what is more likely to promote a resolution of the disputes is if the SPL is permitted to continue his tasks (a submission that I assume was not intended to suggest, and do not read as suggesting, that the pursuit of the appointment of the SPL last year was in order to put pressure on the Philpott/Sassoon interests to settle Mr Bright's claims, which might have been thought to raise questions of abuse of process and the seeking of an impermissible forensic advantage). Rather, Mr Stomo's submission in this regard seems to be that, given the different remedies that would flow from findings on the fiduciary duty allegations, it cannot be assumed that a determination of the questions posed by Mr Harris will assist in a settlement. (Reference was made in that regard to the possibility of a tracing remedy as well as an enquiry into the benefits obtained by the new corporate entities set up by Mr Philpott/Ms Sassoon shortly prior to placing ASC into administration and then liquidation. An enquiry as to the losses suffered by ISL as a result of the alleged misleading and deceptive conduct was also raised.) 65I do not place weight on the separation of the issues in the initial hearing as enhancing the prospect of settlement nor, however, do I consider that it will detract therefrom, so I regard this as a neutral factor. 66As to the question of demarcation of issues, while there seems to me to be a clear demarcation between issues of liability and those of quantum (the latter initially being sought to be referred out to an Associate Justice to determine), I am concerned that there is not such a clear line between the issues raised by the four questions as posed by Mr Harris and other issues in the proceedings. Those questions would not in my view be characterised as discrete issues capable of determination without requiring any determination as to credit that might give rise to the spectre of inconsistent rulings down the track when questions of breach of any agreement so found, or of reliance on any representation so found, might arise. 67The crux of Mr Stomo's objection to the separate questions, as noted above, was his concern that questions of pre-and post contractual conduct in relation to the allegations that the respective agreements were entered into in 2008 should be explored in at the same time as the issues in relation to the alleged agreements/representations and that also to be determined at that time should be the allegations that the contracts gave rise to fiduciary duties; that the agreements (and the fiduciary duties were breached); and that the corporate entities participated in or took the benefit of the alleged breaches of fiduciary duty. He did not press an objection to the separation of the questions of liability and quantum. 68While I am persuaded that there should be a separate hearing on liability in advance of the hearing on quantum, I am not persuaded that the four questions put forward by the Philpott/Sassoon interests provide an appropriate line of demarcation. 69The question is how that separation should be achieved. In Thompson v White and Another; ACDC v Thompson (No 3) [2005] NSWSC1257, where there was a claim based on an alleged oral agreement giving rise to a joint venture, Gzell J separated the issues associated with quantum from the remaining issues of the claim and did so by determining that all issues other than certain specified issues would be dealt with in the initial hearing in advance of those remaining specified issues. It was submitted that the prospect of a result occurring similar to the position in that case (where, on appeal, the matter was remitted to Biscoe J on the question of quantum) would make it inappropriate for separate issues to be tried. 70The parties here, while accepting that a separate determination of issues as to liability would be appropriate, were not agreed as to whether this should be achieved by identifying specific issues to be determined at the 2 nd stage (ie that on the initial hearing all issues other than a list of specific issues should be determined) as was the case in the decision by Gzell J in Thompson v White on which reliance was placed by Mr Stomo (this being the course propounded by the plaintiffs) or, rather, for there to be a list of the specific questions to be determined at the initial hearing (as propounded by Mr Harris). Mr Harris indicated that the defendants would be happy to expand the list, if I were so minded, to include questions as to whether there was a breach of either of the agreements (if the making of those agreements was found to have occurred). Quite candidly, Mr Harris informed me that what his clients were trying to avoid was the necessity for expert evidence at this stage. 71Mr Stomo seemed to accept (at least at one stage during oral submissions) that the SPL enquiry overlaps to some extent with the issues that will be heard in the present proceedings (and therefore there might be a question as to whether they should they be heard at the same time), though he ultimately maintained the position that the overlap perceived by the defendants was misconceived. 72It does not seem to me to be able seriously to be disputed that the import of the SPL's further investigations would be that there is a duplication in relation to the investigation of broadly the same facts and involving the same parties albeit in a different capacity (and, in the case of the plaintiffs, in circumstances where any claim on their behalf as creditors would be pursued through the SPL and not by them in their own right). 73I consider that this is an appropriate case for the separate determination of questions of liability and quantum and that it is not appropriate to be prescriptive as to the evidence on which either side may wish to rely on questions of liability. I consider that no more is needed than an order that questions of liability be determined in advance of quantum. So that there is no misunderstanding I note that the questions of liability arising on the current pleadings include the matters raised in the four questions posed by Mr Harris but also the questions as to whether there has been a breach by Mr Philpott/Ms Sassoon of either of the alleged agreements (assuming they are found to have been made); whether Mr Philpott/Ms Sassoon owed any fiduciary duties to Mr Bright arising out of the alleged joint venture agreement (or any fiduciary duty to creditors of ASC having regard to their position as directors) and, if so, were in breach of any such duty; and whether, if the alleged promises and representations were made and constituted misleading and deceptive conduct, there was reliance thereon by Mr Bright or the corporate plaintiffs. (ii) Stay of powers of Special Purpose Liquidator 74The Philpott/Sassoon interests seek a stay of the activities of the SPL that I appointed to the company in November last year, pending the determination of the hearing of these proceedings (or, if the application for separate determination is successful, until that separate determination). 75The plaintiffs oppose this. They do so, first, on the basis that the SPL has reported having encountered difficulties in obtaining information from the directors and from the receivers and managers appointed by them to the company. (Mr Stomo, in oral submissions, suggested that had the Philpott/Sassoon interests simply co-operated in the provision of the complete books of the company then the need for the present application would have been averted - although it is not immediately apparent to me that this would have been the case, since Mr Dean-Willcocks' enquiries seem to travel far beyond a request for books and records.) Secondly, it is said that the SPL, having identified possible breaches of duties by the directors and the possibility of having property returned to the company he should be permitted to continue investigations into those matters. 76The jurisdiction to grant a stay of orders 1(i)-(xv) that were made by me on 26 November 2010 is put on a number of bases: first, the jurisdiction that the Court has over the SPL as an officer and appointee of this Court (on the basis that the Court's control over the exercise of his powers extends to staying the exercise of those powers) (a jurisdiction said to fall within the inherent or incidental powers of the Court); secondly, the powers under s 1321(d) of the Corporations Act to make such orders as the Court thinks fit; and, thirdly, in the context of special purpose liquidators, the continuing jurisdiction under s 473(8) of the Corporations Act recognised by Barrett J in McGrath; Re HIH Insurance Limited [2006] NSWSC 385 at [12] (his Honour stating that "the court's jurisdiction under that section is of a continuing nature, so as to enable it to supplement and vary the initially confirmed powers should the need to do so arise.") 77Mr Stomo took issue with the notion that application can be made for a stay of orders (rather than their termination) and says that there is no basis for the creditor's power to seek the enforcement of directors' duties to be 'diminished'. He placed emphasis on the fact that no application had been made to vary the orders and that the plaintiffs had not come to court to meet any such application. Mr Stomo's contention was that a creditor is entitled to have SPL carry out the investigation for which the SPL was appointed (and seemingly that there can be no interference with that investigation even by the Court). (I would rather have thought that there would be a stronger argument against the defendants' application if there had been an attempt to have the appointment of the SPL terminated, as tantamount to an appeal.) 78Mr Stomo also submitted that if there were to be a question as to the powers of the SPL then the SPL should be heard on that application (but there was in fact an appearance on behalf of the SPL at the outset of the hearing before me and I was informed that the SPL had no interest in making any submission as to the extent of his powers and simply wished to be heard if there was any question as to his costs). Mr Stomo then submitted that if there were to be a variation of the SPL's powers that affects the creditors they should be heard (but in fact the relevant creditors are the plaintiffs who were heard at some length on the application). 79I note that in the One.Tel liquidation, the Court made various orders over the period from the appointment of the special purpose liquidator in 2004 for the limitation and later expansion or variation of the purposes for which he had been appointed and his powers in relation thereto. It seems to me that the suggestion by Mr Stomo that, having been appointed, there is no power to vary (or in this case, stay) the exercise of the SPL's powers is inconsistent with McGrath and One.Tel and is misconceived. No authority was cited in support of that proposition. I consider that there is jurisdiction to stay the orders made last year. 80The basis on which the stay is sought in this case is particularised in a document served in accordance with directions made by me in March this year. In essence, the Philpott/Sassoon parties base their claim for a stay on what they maintain (but the plaintiffs dispute) is a complete overlap between the relief which the plaintiffs seek in these proceedings and the relief which the SPL will obtain for the benefit of creditors, assuming both were to succeed in the claims made or (in the case of the SPL) foreshadowed. They also submit that the continuation of the investigations and enquiries of the SPL are likely to result in collateral forensic advantages to the plaintiffs which they are not otherwise entitled to receive and which are oppressive. 81As to the overlap, it is said that what the plaintiffs seek to pursue in various ways is monetary compensation and that if they are successful in their claims in the present proceedings (which it is said, on this stay application, the Court is bound to assume), (and, I might add if they recover in full the judgment debt) then the basis for the appointment of the SPL (namely that it was in the interests of creditors) will fall away as there will then be no unsecured creditors left (having regard to the undertakings proffered by Mr Philpott and Ms Sassoon). 82It is therefore said that the investigations, inquiries and work that the SPL proposes to carry out, on this hypothesis will not be for the benefit of creditors and it is no answer that this will be at the expense of the plaintiffs because, in the interim, the Philpott/Sassoon parties will be put to considerable cost and expense in responding to the SPL's enquiries, will bear the non-monetary burden of being diverted from their professional and business activities in so doing, and will be at the same time conducting their defence in the present proceedings. Reputational concerns and concerns as to loss of confidentiality in commercially sensitive information to the plaintiffs who are their competitors were also raised in this context. 83As to the potential for a collateral forensic advantage to be obtained by the plaintiffs, concern is again raised as to the overlap between the transactions the subject of the SPL's investigations and the claims made by the plaintiffs in the current proceedings - by reference to the allegations as to the Philpott/Sassoon loans and charges, the transfer of the Bond Eye trade mark, the circumstances of the appointment of the administrator and liquidator to ASC and the circumstances and purpose for creation of the new corporate entities associated with Mr Philpott/Ms Sassoon. 84The perceived collateral advantages are said to be likely to manifest themselves through the receipt of evidence, including possibly transcripts, from the foreshadowed public examinations by the SPL under ss 596A and 596B of the Corporations Act ; the benefit of any admissions arising from the written responses to the SPL's enquiries; the receipt of documents from the SPL outside the interlocutory procedure of discovery in the proceedings; the receipt of information and intelligence from the SPL not otherwise available to the plaintiffs in the proceedings (such as reports setting out the outcome of investigations and inquiries and likely conclusions); and the competitive benefit of the Philpott/Sassoon parties' financial and human resources being diverted from these proceedings during the SPL's investigations and any proceedings commenced against them by the SPL. 85Mr Harris suggested that there is an ability of the plaintiffs to direct the SPL's investigations as a result of the fact that they are responsible for his remuneration. In that regard, it is perhaps telling that at the conclusion of the hearing of the application before me on 12 May 2011, when an issue arose as to whether there should be an interim stay of the SPL's activities while judgment was reserved, Mr Stomo indicated (at T 49) that the plaintiffs could direct the SPL simply to adjourn a proposed creditors' meeting then scheduled to take place (saying that "we will have the ball in our court because we are the creditors appointed as SPL" and that they would be in a position to withdraw funding), suggesting that the plaintiffs' perception, whether that accords with reality or not, is that they are in a position to direct the conduct of the SPL in some respects. 86Mr Harris was at pains to emphasise that there was no allegation of misconduct against the SPL but, rather, that what was sought was a stay of his office of limited duration while the parties to the present proceedings progress the litigation to judgment. It is said that this will preserve the SPL's investigations (and prospects for recovery proceedings if the circumstances warrant), yet at the same time protect against detriment and prejudice to the Philpott/Sassoon interests. 87As to the question of overlap, Mr Harris points to the fact that the plaintiffs' application for the appointment of the SPL was directed towards the investigation of the directors' loans, directors' charges, the transfer of the trade mark, and the circumstances of the creation of Bond Eye Holdings and Bond Eye Australia, each of which is a matter for enquiry in the present proceedings. 88Insofar as the premise for the plaintiffs' application was that ISL and ASC Asia are unsecured creditors of ASC, it is said that when regard is had to the pleaded case this can only be the position if the plaintiffs are successful in making good the two oral agreements or (in the alternative) the promises/representations and that, if he cannot, the foundation for the appointment of the SPL evaporates. 89Mr Stomo submits that the perceived overlap is misconceived because, while there are similar matters that may be in issue, the remedies sought (and hence the nature of the enquiries to be made) are different. In particular, it is said that a claim by the SPL to set aside a voidable transaction (such as an improper transfer of property) would not give any rights to the plaintiffs for the losses which they claim for breaches of the fiduciary duty and/or misrepresentation. Further, it is said that to the extent that a plaintiff is a creditor of the company (and the suggestion that Mr Bright was a creditor was expressly disclaimed) then that plaintiff might receive no more than a dividend on a pari passu basis if there is recovery of property by the SPL. 90The second main argument on which the plaintiffs rely in this regard is one based on public interest and the interest of creditors in the proper performance by directors of their duties. Thus, Mr Stomo asserts that the SPL's enquiry is not simply directed to the return of assets but also to inappropriate use by the directors of their position as directors. Mr Stomo submits that creditors have an interest in the proper investigation by a liquidator into the affairs of the company and his ultimate report to ASIC. 91Mr Stomo emphasised the public duty of the SPL to report any malfeasance on the part of the directors of the company which his mandate requires him to investigate, whether or not that will result in recovery by the plaintiffs. 92Insofar as Mr Stomo (at T 43) emphasised the 'entitlement' of creditors to have areas investigated "as do other public bodies such as ASIC" and maintained that the creditors "have the ability to say that directors have not run this company properly in accordance with the laws of the State of NSW", this had the flavour of the plaintiffs effectively maintaining a right to conduct a private prosecution of the directors or adopting a regulatory role. 93Reliance was placed by Mr Stomo on what was said by Doyle CJ in relation to examinations by liquidators in Sandhurst Trustees Ltd v Harvey (2004) 88 SASR 519 at [50]-[51]: [50] this line decision establishes that the discretion conferred by s 596B is a wide one. It is to be exercised to enable enquiry to be made into the examiner will affairs of a corporation, with a view to exposing misconduct (which might attract civil or criminal sanctions, or possibly action by a body such as a professional regulator) which may provide information that will advance (in a broad sense) external administration of the corporation in question. [51] The fact that a consequence of an examination order may be a forensic advantage to a particular class of creditors, or to a particular creditor, of the corporation, or to a particular person, does not of itself lead to the conclusion that the order was not made for a proper purpose. Nor does the fact that the order was made at the instance of that person or creditor. On the other hand, the power is not conferred with a view to its exercise solely to benefit an individual with a claim of some kind against the corporation in question, or with a claim arising out of its affairs. Nor, I consider, is it conferred to enable an applicant for an order to pursue an enquiry into a matter in relation to which the applicant has no legitimate interest. 94Reference was also made to what was said by Perry J in Sandhurst Trustees Ltd v Harvey at [88]- [91] [88] Invariably, applications for examination orders pursuant to s 596A or s 596B of the Corporations Act 2001, are brought in order to obtain an order which, it is thought, will assist in the making of decisions by the applicant as to other action which may be taken concerning the corporation. Commonly, but not always, that action may be the commencement of proceedings against the corporation, or the continuation of such proceedings already in train. [89] In that sense, the institution of proceedings seeking an order under either section will always be for a collateral purpose. But to use that description does not mean that the proceedings will necessarily constitute an abuse of process In this context, "collateral purpose" cannot be equated with "abuse of process" [90] There is much discussion in the cases as to what may or may not be a legitimate object to which an application for such an order may properly be directed. [91] It is clear from the authorities referred to by Doyle CJ that it is no longer a requirement that the application be directed towards benefiting the company or corporation as a whole, whatever that phrase may mean, see the dictum of Ormiston J, with whom Tadgell and Harper JJ agreed, in Flanders v Beatty and Anor Now the powers given under s 596A to s 597B are clearly so wide and so easily exercised by 'eligible applicants' (cf s 596A) that the purposes to be served by examinations ought not be limited by reference to the benefit of the company or its creditors or contributories. (emphasis in judgment) 95Mr Stomo noted, and I accept, that the purpose of examinations by liquidators goes beyond simply the gathering of information to enforce company rights and that they include the wider public purpose and interest in the public in the disclosure of information relating to the administration of companies formed under public laws. He submits that potential breaches of the Corporations Act and directors' duties are matters of interest to ASIC and the public at large when they are dealing with companies. 96I accept that there is a well-recognised public interest in examinations of liquidators being held in public. In Parbery Re Trio Capital Ltd [2010] NSWSC 775, Barrett J at [7] - [8], when considering an application for liquidators' examinations to be held in private, referred to John Fairfax Publications Pty Ltd v District Court (NSW) [2004] NSWCA 324; (2004) 61 NSWLR 344 and to the philosophy recognised in Friedrich v Herald and Weekly Times Ltd (1990) VR 995, at p 1003 as underlying the requirement that such examinations be held in public: There can be little doubt, therefore, that an examination in public, in contrast to one in private, is seen as the norm under the present legislation. One may venture some opinions as to why this is so. The legislature must have seen it to be desirable that, whenever an examination is ordered, it should be given as much publicity as the matter deserves. Since no dispute is resolved upon the hearing of an examination, the benefit must be seen in the general publication of the proceedings, whether by press, radio, television or by word of mouth. Not only might that lead to the possibility of further information being provided from other sources to the liquidator or other person in control of the company, but the risk that improper activities of company officers might thereby be spread abroad may have been thought as some form of deterrence to them: cf McPherson on Company Liquidation, 3rd ed, p 431. One may doubt that the more thick skinned of the company "sharks" of this world would be especially conscious of the risk of examination, but at least the possibility of public examination may be seen as part of the price paid for the privilege of incorporation and the right to transact business as a company, albeit that the price is usually paid by those who become directors or officers of that company. However, it is not for this court to query the policy of the statute, whatever views one may have as to the need for a public examination for the purposes of para (b) of subs(2). 97Mr Stomo submits that as the SPL has identified a number of areas of further investigation it is in the public interest that these be pursued and he also refers to various matters in the affidavit of Mr Philpott filed on the current application as raising issues of concern for further examination in the public interest. With respect, that submission seems to me to conflate the public interest in examinations by liquidators being held in public with the question whether it is in the public interest that an investigation take place in the first place. While the submissions now put to me emphasised the public interest in the proper performance by directors of their duties, it is fair to note that the application for the appointment of the SPL, as put to me in the first place, was as a means to enable the creditors to recoup amounts said to be owing to them by the company in circumstances where it was considered that the liquidator was not pursuing such investigations. 98What the plaintiffs say they are concerned about is the conscious decision by Mr Philpott/Ms Sassoon to organise their affairs through the powers vested in them as a directors of the company in order to avoid paying creditors of Mr Philpott's choosing and yet to be able to maintain all the benefits of the business including the profits. Those concerns will be tested in the present proceedings having regard to the issues raised in the pleadings. The overlap with the SPL's proposed investigations in relation to these issues seems clear and gives rise to the concern raised by Mr Harris as to multiplicity of proceedings. 99In effect, Mr Harris says that the defendants' argument is that there should not be a multiplicity of actions and they should not have to fight on two fronts when really its plaintiffs' claim in both proceedings. 100In that regard, in light of the offer by defendants to put in place a regime whereby other creditors will be paid out of proceeds of recovery by receivers appointed under their charge, the dispute can be readily seen as an issue between the parties in these proceedings going to issues as to their business relationship (and not the broader corporate issue as to directors' conduct in general). 101I have already noted the submission by Mr Stomo that any detriment occasioned by the need to divert resources in relation to the SPL enquiries (the extent of which he contends has not been large in the scheme of things) has been brought about by the conduct of Mr Philpott/Ms Sassoon by their conduct in putting ASC initially into administration and subsequently into liquidation ( Mr Stomo contending that there was no necessity to do so as there was no default under the charges). With respect that seems to me in effect to assume matters that are in contention in the proceedings, namely that there was some breach of duty or misconduct in relation to the circumstances in which ASC was put into liquidation. 102This gives rise to the question as to the public interest in the enforcement of directors' duties and the standing of creditors to enforce that public interest. It is a fundamental principle of company law that directors owe their duties to the company as a whole. This phrase is generally interpreted to mean the shareholders as a whole ( Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286 at [291]). The consideration as to whether directors have complied with their duties involves a determination of whether the conduct diverged from the interests of the company's shareholders (often referred to as the "shareholder primacy norm"). The question that then arises is where the public interest fits within the shareholder primacy norm (and what legitimate interest the public has in the enforcement of directors' duties). 103The concept of the "public interest" has been said to be both nebulous and amorphous (see Tomasic, "Commercial Morality and Public Policy as Principles of Corporate Insolvency Law" in Cranston (ed) Making Commercial Law: Essays in Honour of Roy Goode (1997) p 463). In Australian Securities and Investments Commission v Storm Financial Ltd [2009] FCA 269, Logan J stated (at [64]) that: ...of course the interest of the public is not synonymous with the public interest. 104It has been held that the phrase "public policy" refers to the interests of the community in general; a definite and governing principle which the community as a whole has already adopted, either formally by law or tacitly by its general course of public life ( Wilkinson v Osborne (1915) 21 CLR 89; 22 ALR 57). It has also been said that notions of public policy are not fixed, but vary according to the state and development of society and conditions of life in the community ( Stevens v Keogh (1946) 72 CLR 1). 105In Richardson v Mellish (1824) 2 Bing 229, in a statement referred to in passing by Mr Harris, Burrough J sais at [252] that public policy "is a very unruly horse, and when you get astride it you never know where it will carry you." It seems to me to be an apt reflection of the position in which the parties now stand - having obtained orders for the SPL in order to enforce a claim to recover debts said to be owing to them, they now seek to resist any stay of those orders by reliance on the public interest. 106The concepts of public interest, public policy and commercial reality in the context of corporate governance encompass considerations of community confidence in the management of commercial businesses by directors. Various indicators point to the fact that there is a public interest in the enforcement of the duties owed by directors to their companies. Indeed, the role of the State (via ASIC) in the enforcement of statutory duties, the existence of civil penalty provisions, and the ability for directors to be held criminally liable for their actions, confirms the recognition of a public interest in the enforcement of directors' duties. However, the role of enforcement is not there left to individual creditors. 107The wider role of the statutory duties of directors compared with their general law duties was highlighted in Castlereagh Motels Ltd v Davies-Roe (1966) 84 WN (Pt 2) (NSW) 182, where Wallace P stated (at [184]) that the purpose of the statutory duties is: ... not the prevention of financial loss to the company which appears to be the main or direct object of the [statutory duties], but the ensuring that companies are benefited by the proper and devoted discharge by directors of their fiduciary duties. 108In Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115, Tadgell J noted at [126], in relation to the statutory duty of care and diligence, that: As the complexity of commerce has gradually intensified (for better or for worse) the community has of necessity come to expect more than formerly from directors whose task it is to govern the affairs of companies to which large sums of money are committed by way of equity capital or loan. In response, the parliaments and the courts have found it necessary in legislation and litigation to refer to the demands made on directors in more exacting terms than formerly; and the standard of capability required of them has correspondingly increased. 109In exercising its enforcement powers, ASIC has publicly recognised the need to take the public interest into consideration and seeks properly to manage the community's expectations. Thus, in considering whether to take action on an alleged contravention of statutory directors' duties, ASIC has outlined that it considers not only the interests of the shareholders in the particular company, but also the public interest in the enforcement of the duties. A recent ASIC publication (D'Aloisio, ASIC Chairman, "An Update on ASIC's Priorities for 2007/2008 and How These Relate to AICD Members", paper presented to the Australian Institute of Company Directors (Sydney, November 2007) at [7]) highlights that the public interest is a relevant consideration when assessing which cases to pursue: From ASIC's perspective, we have run a series of court cases where we have said that it is in the public interest to pursue directors (i.e. individual liability). Examples are HIH where we were concerned that behaviour fell short of what the law expected. In One.Tel and in the Greaves Case, to ensure directors were across the company's financial position. In Water Wheel we wanted to send the message that insolvent trading would be treated seriously and directors would be held personally liable. 110The existence of a legitimate public interest in the enforcement of directors' duties does not of itself seem to me to justify a creditor seeking (through a liquidator) to enforce those duties, at least absent a claim by the creditor against the company that may be vindicated in that process. There is a question as to the extent to which the interests of creditors and the public interest overlap in this regard. 111The interests of creditors are generally expressed in clearly defined monetary terms. In Alternative Business Solutions Deputy Commissioner of Taxation v Alternative Business Solutions (Aust) Pty Ltd (in admin) [2006] FCA 400, in the context of an application under s 440A(2) to adjourn the hearing of an application to wind up a company while the company is under administration, Lindgren J said (at [9]) that: When s 440A speaks of "the interests of creditors" it is referring to the creditors' interests as creditors, that is to say, to their interests in recovering what is owed to them , not to "interests" arising from family relationships, friendship or emotional attachment (my emphasis) 112In recent years, both English and Australian courts have recognised that, in discharging their duty to act in good faith and in the interests of the company, directors may be obliged to have regard to the interests of the company's creditors, particularly where the company is nearing insolvency ( Ford's Principles of Corporations Law at [8.100]). Owen J in The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 70 ACSR 1; [2008] WASC 239 at [4384] - [4450] considered the duty to consider the interests of creditors in an "insolvency context" as part of the duty to act in the best interests of the company but noted that it was not an independent duty owed to creditors and it did not mean that the interests of creditors are necessarily paramount; they being dependent on the particular circumstances in each case. Owen J considered that a financial state short of insolvency might enliven the obligation to consider the interests of creditors, saying that "adversity might strike short of actual insolvency and might propel the company towards an insolvency administration. And that is where the interests of creditors come to the fore..." (at [4445]). 113The principle that directors must take into account the interests of creditors has been accepted by the English courts (see Winkworth v Edward Barron Development Co Ltd [1987] 1 All ER 114 and West Mercia Safetywear Ltd v Dodd [1988] BCLC 250.) The statement in Kuwait Asia Bank EC v National Mutual Life Nominees Ltd [1991] 1 AC 187; [1990] 3 All ER 404; [1990] 3 WLR 297, where the Privy Council on appeal from New Zealand suggested that a director "does not by reason only of his position as director owe any duty to creditors or to trustees for creditors of the company" can be read consistently with this as meaning that any duty to consider the interests of creditors remains a duty owed to the company and not directly to the creditors. 114Ford's at [8.100] notes directors' duties are not owed directly to the creditors, but rather, to the company as a corporate entity (i.e. viewed as a personified fund or estate upon which creditors have claims). In Sycotex Pty Ltd v Baseler (1994) 122 ALR 531, Gummow J stated that where a company is insolvent or nearing insolvency, "there is a duty of imperfect obligation owed to creditors, one which creditors cannot enforce save to the extent that the company acts on its own motion or through a liquidator". 115In the context of insolvency, the requirement that directors consider the interests of creditors appears to only arise in relation to situations where there is a likelihood that certain or all creditors will not receive what they are owed from the company; that is, where there is an excess of liabilities over assets ( Nicholson v Permakraft (NZ) Ltd [1985] 1 NZLR 242; (1985) 3 ACLC 453 per Richardson and Somers JJ) or a lack of liquidity ( Nicholson v Permakraft per Cooke J; Grove v Flavel (1986) 43 SASR 410; Jeffree v NCSC [1990] WAR 183; (1989) 15 ACLR 217; and Galladin Pty Ltd v Aimnorth Pty Ltd (in liq) (1993) 11 ACSR 23; 11 ACLC 838). Once a company becomes insolvent, then the directors' duty to consider the interests of creditors gives rise to a duty not to prefer some creditors over other creditors and contributories who have claims on the fund in liquidation. Thus if directors of an insolvent company decide to prefer creditors with guaranteed debts, they may be held to be in breach of their duties as owed to the company ( West Mercia Safetywear Ltd (in liq) v Dodd [1988] BCLC 250) 116On the application before me last year I recognised that the usual circumstances in which a special purpose liquidator will be appointed are where there is some form of conflict in the duties of the appointed liquidator (as in Onefone Australia Pty Ltd v OneTel (in Liq) [2003] NSWSC 1228; (2003) 48 ACSR 562, where there were competing cross-claims), which was not then the case. However, I noted that such an appointment may be made in other circumstances, where it is in the interest of creditors. Reliance was placed by Mr Stomo on what was said by Barrett J in Lo v Nielsen & Moller Autoglass (NSW) Pty Ltd; [2008] NSWSC 407; (2008) 26 ACLC 497 a case Mr Stomo pressed as being not in dissimilar circumstances to the present. 117Mr Stomo submitted in November last year that on the evidence then before me the inference could be drawn that there was an agreement in relation to the alleged joint venture; that the sum of $110,000 provided to Moontide was transferred to ASC; that the joint venture did not commence until June 2009; and that Mr Philpott and Ms Sassoon breached their obligation to transfer shares to Mr Bright and encumbered the assets of ASC for their own benefit. It was said that this gave Mr Philpott and Ms Sassoon an unfair preference in regard to any winding up and that they took advantage of this to wind up the company and avoid payment to the plaintiffs as creditors. Those are matters squarely raising the pecuniary interest of the plaintiffs. 118The issues sought by the plaintiffs to have determined by the SPL at that stage included:

whether the charge to Mr Philppott/Ms Sassoon was an unreasonable director related transaction under ss 588FDA and 588FDE of the Corporations Act ;
whether the conversion of unsecured debt to secured debt and the subsequent calling up of the security was to 'create' an environment of insolvency;
why the Bond Eye trademark was transferred;
whether the transfer of the Bond Eye trade mark is a disposition as an unreasonable director related transaction; and
the reason for the creation of the new corporate entities (Bond Eye Holdings and Bond Eye Australia). 119Relevantly, on that occasion the receiver submitted that there was a lack of evidence as to why such investigation would be desirable in the interest of creditors (as opposed to plaintiffs seeking evidence in their own cases) and (with some prescience, as it turns out) that the proposed activities for which the special liquidator is sought to be appointed were too wide (although they largely mirrored those made in Lo v Nielsen ). 120It seemed to me that at that time the situation in the present case (where a substantial creditor complained as to the circumstances in which the directors of the company registered charges over the company's assets and, upon the expiry of the relation back period, withdrew their support for the company and placed it into voluntary administration from whence it was placed into liquidation, giving rise to the suspicion that the directors were effectively 'burying' the company and avoiding any investigation of its activities or of those controlling it because of a lack of funds and the directors' voting control) made this a similar case to that in Lo v Nielsen. 121It therefore seemed to me (not, I should add, without some hesitation) that the facts were sufficiently similar to those in Lo v Nielsen to warrant the conclusion that it was appropriate to appoint a special purpose liquidator in this case. Barrett J in Lo v Nielsen had accepted that in circumstances where a significant creditor had expressed misgiving as to the investigation being carried out by the then liquidator (and funding was conditional on a new liquidator being appointed) there was an appropriate case for a special purpose liquidator to be appointed if it was at no additional cost for creditors and otherwise just and beneficial for creditors for investigation to be carried out. I considered that to be the case in the present proceedings. However, with hindsight, it seems to me that I gave insufficient weight to the overlap between the proposed investigation and the existing proceedings, particularly in circumstances where the only creditors in whose interest the SPL investigation will be are the plaintiffs in these very proceedings in which the same issues will be ventilated (although different relief will be sought in the respective proceedings). I noted the submission of the receiver that any investigation would be for the purpose, in effect, of obtaining information in order for the plaintiffs to pursue their own case against the directors, but focussed on the question whether there was a reasonable basis to consider that an investigation of the kind sought to be made has the prospect of producing a benefit for creditors. 122It seems to me to be reasonably clear from the discussion in the authorities cited earlier that, in the context of insolvency, creditors' interests are regarded as purely pecuniary or mercenary in nature. The public interest in the enforcement of directors' duties on the other hand appears to be based primarily in a need for proper corporate governance and community confidence in the management of commercial businesses by directors. This does not seem to intersect with the fiscal interests of creditors to recover the debts owing to them. Importantly for present purposes, it follows from this that there does not appear to be any legitimate interest in a creditor seeking to enforce the duties that directors owe to the company in circumstances where that creditor has already recovered its debts and been compensated as a result of litigation commenced in its personal capacity. Hence, there seems no reason in principle to resist the application for a stay on the basis that the creditors (who are also the plaintiffs in other civil proceedings involving the same issues) are seeking to act in the public interest in ensuring that directors are publicly accountable for their conduct. 123Mr Harris submits that if the plaintiffs are proved right, then the SPL can resume his investigations and inquiries but that if the Philpott/Sassoon interests are successful, then the Court will have reduced the pecuniary and other burdens they are currently bearing. There is force in that submission. 124I am concerned at the overlap in the factual issues to be determined in the present proceedings and the investigations simultaneously sought to be pursued by the SPL. I am also concerned at what seems to me to have proved to be the very real prospect of the plaintiffs seeking to obtain a collateral forensic advantage out of the SPL's investigations and at the suggestion that the plaintiffs consider themselves at least in an indirect sense to be in a position to control the activities if the SPL (by withdrawing funding if nothing else). In a somewhat telling response to the question I posed as to why ASC Asia should cause costs to be expended prior to the time it was determined to be a creditor, the response I was given was "because it has a cause of action against Philpott which it wishes to pursue" T29.50 (which seems to elide the claims made against Mr Philpott personally in the current proceedings and any claims that the company, through the SPL, might bring against Mr Philpott). 125With the benefit of hindsight I consider that I gave insufficient weight to the practical consequences of the overlap between the factual issues (if not the remedies) when the order appointing the SPL was made. Having regard to events since then, and to the matters raised on the current application, I am not satisfied that the public interest in the enforcement of directors' duties generally is one that outweighs the considerations in favour of a stay in this particular case. Conclusion 126For the reasons set out above, I consider that it is appropriate to order the separate determination of issues as to liability in advance of issues as to quantum and that, pending that determination, the orders made in November 2010 for the conduct of the SPL's investigations be stayed. I therefore propose to make the following orders: 1.Pursuant to rule 28.2, I direct that this case proceed by way of separate and preliminary determination of issues relating to the question of liability on the part of the defendants for on the causes of action pleaded against them in the Second Amended Statement of Claim, in advance of the question of quantum of any damages or other relief sought by the plaintiffs. 2.I stay the operation of Orders 1(i)-(xv) made on 26 November 2010 in this matter pending the preliminary determination of the issues of liability referred to in order 1 above. 127Subject to any submissions that may be made, I consider it appropriate that the plaintiffs pay the cost of the defendants' Notice of Motion insofar as they relate to the issues that have now been determined by me.

International Swimwear Logistics Ltd v Australian Swimwear Company Pty Ltd

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