1. The applicant was a director of a group of fourteen Australian companies and three overseas companies. We will refer to the companies in these reasons as the "Elan Group".
2. Eleven Australian companies in the Elan Group were wound up in December 2005, and a twelfth Australian company was wound up in March 2006. We will refer to these twelve companies as the "EG 12". The liquidators of each of the EG 12 subsequently lodged reports with the Australian Securities and Investments Commission (ASIC) pursuant to s 533(1)(e) of the Corporations Act 2001 (Cth) (the Act) to the effect that the companies might be unable to make any distribution to their unsecured creditors.
3. In 2009 ASIC issued a show cause notice to the applicant under s 206F(1)(b) of the Act, requiring him to demonstrate why he should not be disqualified from managing corporations. After conducting a hearing at the request of the applicant, a delegate of ASIC decided to disqualify the applicant from managing corporations for a period of two years.
4. The applicant has applied to this tribunal for review of the delegate's decision.

1. The issue before the tribunal is whether we are satisfied that the applicant's disqualification from managing a corporation is justified. This involves determining a number of primary issues, as follows:

(a) whether any of the companies in the EG 12 are related to one another within the meaning of s 206F(2)(a) of the Act;

(b) an evaluation of the applicant's conduct in relation to the management, business or property of the Elan Group and the EG 12;

(c) whether the disqualification of the applicant would be in the public interest;

(d) a consideration of any other matters that we consider appropriate; and

(e) if the applicant's disqualification from managing a corporation is justified, was the period of disqualification, namely two years, excessive.

1. In addressing the issues referred to in paragraphs 5(b), (c) and (d) above the parties referred to the following sub-issues:

(a) what was the financial position of the EG 12 prior to their collapse;

(b) what was the financial position of the Elan Group prior to the collapse of the EG 12;

(c) whether the collapse of the EG 12 was the direct result of the failure of ANZ Private Equity to effect settlement of a proposed transaction involving the restructuring and refinancing of a number of companies in the Elan Group in preparation for their being floated to the public;

(d) whether the applicant had a proper understanding of the nature of inter-company loans and loans from persons associated with companies in the EG 12 or the Elan Group and their accounting treatment;

(e) whether the applicant breached his duties as a director under s 180 of the Act in consequence of the failure by certain of the EG 12 to pay debts owing to the Australian Taxation Office (ATO) and other debts arising from statutory obligations, and whether such failure was otherwise relevant;

(f) whether the notice requiring the applicant to show cause why he should not be disqualified was served on the applicant within a reasonable time, and if it was not, was the applicant prejudiced by the delay, and what are the consequences of the delay;

(g) the relevance of payments already made by the applicant and his wife to certain creditors of the EG 12; and

(h) the relevance of the size of the losses suffered by the unsecured creditors of the EG 12, and of a recent proposal to make further voluntary payments to those creditors.

1. The following background facts are based on the applicant's evidence, which we accept, and on the documentary evidence before us.
2. The applicant is aged 64. He became qualified as an accountant in 1971, and practised as an accountant from 1967 until 1975. In his early years he worked as an accountant for a company, was promoted, and became its branch accountant and residential company secretary in Papua New Guinea. He has been an active participant in academic training and education through TAFE and the Bankers' Institute of Australia, and has lectured part-time in accounting and cost accounting. In his witness statement (exhibit A3), which he adopted as part of his evidence, he says that he is familiar with generally accepted accounting practices in Australia, is an experienced business man, and has been a director of many companies in Australia and overseas for over 30 years.
3. In 1998 the applicant established a business through a group of companies to operate in what he described as the "health and wellness industries". The Elan Group was mainly a manufacturer of "wellness" products including coconut oil, grape seed oil, pistachio nuts, aloe vera juices and creams, and animal feeds as bi-products. It operated plants in Samoa, Vanuatu, Papua New Guinea, Solomon Islands, and in three Australian locations. According to the applicant's submissions to the delegate, the overseas entities were profitable and enabled their Australian shareholders to develop the above "more emerging" wellness products (exhibit R1, T52, page 3). Management, financial, administration and other services to the group of companies were provided by Elan Trading Corporation Pty Ltd (ETC). The applicant was the sole director of ETC, which was wholly owned by P.O.P.A. Pty Ltd, the trustee of a family trust which the applicant controls through a right of appointment and/or removal of the trustee.
4. By 2005, the group of companies for which ETC provided the above services comprised the Elan Group, which, as mentioned above, consisted of fourteen Australian companies (including ETC) and three overseas companies. In most cases the companies are owned directly or indirectly by P.O.P.A. Pty Ltd, or in some cases, 50% owned by the applicant or P.O.P.A Pty Ltd and the remaining 50% is owned by a third party.
5. In January 2004, the applicant, three companies in the Elan Group and one Peter Boyce entered into heads of agreement with a lender called Robier Holdings Pty Limited (Robier), whereby Robier was to advance loans to certain EG 12 companies on various securities itemised in the agreement. Robier was a company owned or controlled by one Graham Hellier, a businessman resident in Gibraltar. The Hellier Group had agreed to advance funds to the Elan Group on terms that provided for the loans to be converted to equity within five years of the loans being made, at the option of the lender. Subsequent agreements were entered into with Robier and another company in the Hellier Group, namely Thunder Enterprises Pty Ltd, involving advances to various companies in the Elan Group of approximately $15 million. These loans were secured by cross-guarantees and debenture charges across the Elan Group. One of the loans, for an amount of approximately $5 million, was a bridging loan to an EG 12 company called Coonawarra Gold Facilities Pty Ltd, and was to be used as bridging finance to construct a new dryer for the business operated by that company.

1. Section 206F of the Act contains power for ASIC to disqualify a person from managing corporations. It provides relevantly as follows:

"Power to disqualify

(1) ASIC may disqualify a person from managing corporations for up to 5 years if:

(a) within 7 years immediately before ASIC gives a notice under paragraph (b)(i):

(i) the person has been an officer of 2 or more corporations; and

(ii) while the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and a liquidator lodged a report under subsection 533(1) (including that subsection as applied by section 526-35 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006) about the corporation's inability to pay its debts; and

(b) ASIC has given the person:

(i) a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; and

(ii) an opportunity to be heard on the question; and

(c) ASIC is satisfied that the disqualification is justified.

...

Grounds for disqualification

(2) In determining whether disqualification is justified, ASIC:

(a) must have regard to whether any of the corporations mentioned in subsection (1) were related to one another; and

(b) may have regard to:

(i) the person's conduct in relation to the management, business or property of any corporation; and

(ii) whether the disqualification would be in the public interest; and

(iii) any other matters that ASIC considers appropriate."

1. Section 533 of the Act provides for circumstances when reports by liquidators are to be lodged with ASIC. It provides relevantly as follows:

"(1) If it appears to the liquidator of a company, in the course of a winding up of the company, that:

...

(c) the company may be unable to pay its unsecured creditors more than 50 cents in the dollar;

the liquidator must:

(d) as soon as practicable, and in any event within 6 months, after it so appears to him or her, lodge a report with respect to the matter and state in the report whether he or she proposes to make an application for an examination or order under section 597; and

(e) give ASIC such information, and give to it such access to and facilities for inspecting and taking copies of any documents, as ASIC requires.

(2) The liquidator may also, if he or she thinks fit, lodge further reports specifying any other matter that, in his or her opinion, it is desirable to bring to the notice of ASIC."

1. When this tribunal reviews a reviewable decision, it conducts a hearing de novo; that is, the matters in issue between the parties are examined afresh, and the tribunal reaches its own decision upon the material before it, which might, and often does, include new, further or different material than was before the decision-maker whose decision is under review. The tribunal may exercise all of the powers and discretions conferred upon that decision-maker; it stands in the shoes of the decision-maker, and its function is to arrive at the correct or preferable decision on all of the material before it: see Shi v Migration Agents' Registration Authority [2008] HCA 31; (2008) 235 CLR 286 at [34] - [39] and [98] - [99]; Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409 at 419; and Minister for Immigration and Ethnic Affairs v Pochi [1980] FCA 85; (1980) 4 ALD 139 at 143.
2. In Murdaca v Australian Securities and Investments Commission [2009] FCAFC 92; (2009) 178 FCR 119 a Full Court of the Federal Court (North, Kenny and Foster JJ) explained at [101] that the structure and purpose of s 206F is as follows (omitting references):

"(a) Subsection (1) of s 206F comprises, in ascending order of importance:

(i) A trigger mechanism (the conditions, filters or gateway) embodied in subs (1)(a) (stage 1);

(ii) A procedural fairness requirement (the giving of a show cause notice and an opportunity to be heard): subs (1)(b) (stage 2); and

(iii) A merits decision captured in the requirement that ASIC be satisfied that disqualification is justified: subs (1)(c) read with s 206F(2) (stage 3).

(b) ASIC's power to disqualify a person from the management of corporations must be exercised for the purposes for which it was granted. Those purposes are the protection of all those persons who deal with corporations from the consequences of the actions of those corporate officeholders who, either through incompetence or dishonesty or a combination of the two, bring about the failure of corporations and thus cause loss to others ... and the maintenance of professional management standards in the public interest ... ."

1. The Court went on to say that s 206F does not give reports prepared by liquidators pursuant to s 533 of the Act any particular status or weight, and that ASIC is not obliged to have regard to the s 533 report(s) that triggered the disqualification process when considering whether disqualification is justified. Rather, it is to make a decision on the merits as to whether disqualification is justified. Their Honours added at [103] and [104] that s 533 itself does not require that "concrete facts" be presented to the liquidator before he is obliged to report, or that the liquidator form a "concrete opinion" in relation to the topics addressed by the section, since s 533 merely requires it to "appear" to the liquidator that certain things "may" have occurred or "may" be the fact.
2. In determining whether or not the applicant should be disqualified from managing corporations pursuant to s 206F, we also take into account the propositions referred to by Santow J in Re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); ASIC v Adler & Ors [2002] NSWSC 483; (2002) 42 ACSR 80 at [56]. In particular, in considering the exercise of the power of disqualification in the present matter, we take into account the need to protect the public and persons who deal with companies; the deterrent effect of disqualification on the applicant; the need to deter other persons engaged in the management of corporations from engaging in inappropriate conduct in managing corporations; the maintenance of public confidence by ensuring that persons whose conduct falls short of the appropriate standards will be disqualified for an appropriate period from managing corporations; that disqualification should not be used as a punitive measure; and that it is necessary to balance against the foregoing considerations personal hardship to the applicant that would result from disqualification.

"They consider more than the present and future fitness of the defendant to manage corporations. They take into account factors such as the size of any losses suffered by the corporation, its creditors and consumers, legislative objectives of personal and general deterrence, contrition on the part of the defendant, the gravity of the misconduct, the defendant's previous good character, prejudice to the defendant's business interests, personal hardship and the willingness of the defendant to render assistance to statutory authorities and administrators."

1. It has been held in a case under the predecessor of s 206F that legal notions of onus of proof are not applicable to the proceedings before the delegate, but a director who has been served with a show cause notice has a practical onus to adduce further material that has not already been considered by the Commission: Kardas v Australian Securities Commission [1998] FCA 1381; (1998) 53 ALD 303 at 308.
2. The requirements of s 206F(1)(a) and (b), described in Murdaca (supra) as the "trigger mechanism" and the "procedural fairness" stages, have been satisfied in this matter. The issue that arises in the present matter relates to the so-called third stage, namely a merits review of the decision as to whether the disqualification of the applicant is justified. This entails considering the criteria referred to in s 206F(2) of the Act, being the matters to which we referred in paragraph 5 above. We shall consider these criteria in turn.

Section 206F(2)(a) : are any of the Elan Group of companies related to one another?

1. Under s 206F(2)(a), we must have regard to whether any of the EG 12 companies in respect of which s 533(1) reports were lodged were related to one another.
2. The relevance of this consideration was referred to by Deputy President McDonald in Re Feher and Australian Securities Commission (1997) 15 ACLC 1774 at [23], where he referred to the explanatory memorandum in relation to a similar provision when it was first introduced into the Act. This stated that the relevant provision, which required the decision-maker to have regard to the relationship between two companies when considering whether or not it was appropriate to issue a show cause notice, would be relevant in the case of a failure of a group of companies which is in substance a single entity.
3. Section 50 of the Act provides for when bodies corporate are related to each other. It provides as follows:

"50. Where a body corporate is:

(a) a holding company of another body corporate; or

(b) a subsidiary of another body corporate; or

(c) a subsidiary of a holding company of another body corporate;

the first-mentioned body and the other body are related to each other."

1. Counsel for the applicant, Mr Robert Sallis, pointed out that s 206F(2)(a) does not use the defined expression "related body corporate" appearing in s 9 of the Act, being the dictionary section, nor is it expressed to refer to corporations that were related to one another "within the meaning of s 50 of the Act". He also referred to the definition in s 9 of "related entity" which is a more expansive term, and is defined to include a situation where two bodies corporate have a common director.
2. We consider that s 206F(2)(a) should be interpreted in accordance with s 50, and do not accept Mr Sallis's contrary submission. In our opinion, the words of s 50 are clear, and should be applied in order to determine whether corporations referred to in s 206F(2)(a) are related to each other. Our opinion is consistent with the definition in s 9 of "related entity" itself; the relevant paragraph of the definition is paragraph (g), which refers to "a body corporate that is related to the first-mentioned body", but like s 206F(2)(a), it does not import a reference to s 50, and it does not incorporate the defined expression "related body corporate".
3. The ownership structure of most of the Australian companies in the Elan Group appears in exhibit R5. From this, it appears that of the twelve companies that were the subject of show cause notices, the following companies are related to each other within the meaning of s 206F(2)(a), as interpreted by reference to s 50:

(a) ETC and its wholly owned 100% subsidiary, Brownlie Pistachio Nuts Pty Ltd;

(b) Pegara Pty Ltd and its wholly owned 100% subsidiary, Perpetual Plantations of Australia Pty Ltd; and

(c) Wellness Inside Limited, Life Productions Pty Ltd and ETC, each company being 100% subsidiaries of P.O.PA. Pty Ltd.

1. However, other companies in the EG 12 are not related to each other, and so on a strict application of s 206F(2)(a), the failure of the EG 12 cannot be treated as the failure of a single entity.
2. In Re Sheslow and Australian Securities Commission [1994] AATA 250; (1994) 34 ALD 539 at [39], a Deputy President of this tribunal considered a provision in the Corporations Law that corresponded with s 206F(2)(a) of the Act, and adopted the broader view that the three companies in question in that case "should be considered as a group by virtue of their connections in shareholding, directors and activities". However, the Deputy President did not refer to s 50 of the Corporations Law (which is in the same terms as s 50 of the Act) in order to determine whether the companies were related to each other, and we do not agree, with respect, with his conclusion in that case that s 600(4) (the predecessor of s 206F(2)(a)) applied to the group of three companies in question.
3. In the alternative, it was contended on behalf of the applicant that there was nevertheless a close relationship between the companies in the EG 12, because the applicant was a director of each of the companies, ETC provided to the group the management and other services to which we have referred above, the group had the same general manager, namely the witness Timothy John Scala, it used the same professional advisers, and had been offered as a group to PEP and later to ANZ Private Equity.
4. Under s 206F(2)(b)(iii), we may have regard to any other matters that we consider appropriate. We do not think that the presence of s 206F(2)(a) (which makes it mandatory for ASIC to have regard to whether the relevant corporations were related to one another) would mean that we are precluded by the expressio unius rule of statutory interpretation from taking into account the closeness of the relationship between the companies in the EG 12 under the broad provisions of s 206F(2)(b)(iii).

Section 206F(2)(b)(i) : the applicant's conduct in relation to the management, business or property of any of the relevant corporations

1. Mr Sallis contended on behalf of the applicant that there was no evidence that he had been guilty of dishonesty or incompetence, in the sense of negligence or lack of commercial morality, in his management of the Elan Group or the EG 12. He further contended that the collapse of the EG 12 was the direct result of the unexpected failure of ANZ Private Equity to effect settlement pursuant to the ANZ transaction. He submitted that the Elan Group did not have any real opportunity to find a new equity partner because the Hellier Group lender took action, within a short time of the collapse of the ANZ transaction, on the breach by Coonawarra Gold Facilities Pty Ltd of the bridging loan.
2. As against this, counsel for ASIC, Mr Nigel Wilson, referred to the financial position of the Elan Group as it was without the proposed injection of funds from the ANZ transaction. In support of this submission, he referred to certain exhibits, namely exhibits R3, R6 and R8, which were prepared by the respondent to summarise the consolidated trading and asset position of the EG 12 without the funding that would be available from the ANZ transaction. We understand ASIC's contention to be that the EG 12 were in difficult financial circumstances, and that this should be attributed to the applicant's conduct in the management of the EG 12 (as well as the Elan Group). Mr Wilson also referred to the significant deficiency on the liquidation of the EG 12, and to the total of the losses incurred by the unsecured creditors of the EG 12. He further referred to certain specific statutory liabilities which certain of the EG 12 companies had not met, and he relied upon this failure as evidence of misconduct by the applicant in relation to the management of the EG 12.
3. A number of issues relevant to s 206(2)(b)(i) are raised by these competing submissions and by the evidence before us. We will consider these in turn.

(a) What was the financial position of the EG 12 prior to its failure?

1. The applicant did not accept the accuracy of exhibits R6 (the consolidated balance sheet of the Elan Group), R3 or R8. Exhibit R8 is a consolidated profit and loss account that corrected some information in exhibit R3, which may therefore be regarded as having been superseded.
2. Exhibit R6 purported to show the total assets and liabilities and net position of the EG 12, both including and excluding inter-company loans, and also the same information in relation to five other companies, including overseas companies, that were, at least under the initial proposal, to be part of the ANZ transaction. This exhibit was based on the accounting information before the tribunal, but it used various balance dates. The applicant then sought advice from a forensic accountant, the witness David Ian Crase, who provided a report as to the correctness of exhibit R6. This report was disputed in a number of respects by ASIC's forensic accountant, the witness Sam Davies. We then made an order for the two accountants to give concurrent evidence.
3. Prior to their doing so, at our direction, Messrs Crase and Davies prepared a joint report. This recorded that they had agreed that a number of adjustments needed to be made to exhibit R6, being the consolidated balance sheet. They did not advise on the value of the EG 12 as a going concern. Their final agreed position as to the consolidated net assets and liabilities of the Elan Group, on the basis that inter-company loans were included, was as follows (exhibit AR1, page 5).

1. The accountants disagreed with respect to three items included in the combined balance sheets. These items were as follows:

(a) Mr Crase considered, and Mr Davies disputed, that there should be a revaluation of land owned by one of the EG 12, namely Perpetual Plantations of Australia Pty Ltd (which would result in an increase of $2 million in the value of the EG 12);

(b) Mr Crase considered, and Mr Davies disputed, that one half of certain expenses of another EG 12 company, Easy Life Management Pty Ltd, should be considered developmental in nature and therefore capitalised (which would result in an increase in the value of the EG 12 of $484,614); and

(c) Mr Davies considered, and Mr Crase disputed, that an adjustment should be made because no balance sheet was provided for three of the EG 12 companies (which would result in a decrease in the value of the EG 12, as discussed below).

1. The consolidated corrected and adjusted balance sheet of the EG 12 prepared by the accountants included an adjusted net asset of $826,827 for Perpetual Plantations of Australia Pty Ltd (see exhibit AR1, page 5). The balance sheet of that company (exhibit R1, T61, page 1239) included the following non current asset:

"Freehold land at Valn - June-03 $1,876,368.00."

1. We have concluded that it is appropriate to increase the value of the land owned by Perpetual Plantations as at 30 June 2005 by $2 million, in accordance with Mr Crase's opinion.
2. In reaching this conclusion, we have taken into account first that the land was subsequently sold (not by the company in a normal sales environment, but by its liquidator) for $3.2 million. Second, the land was valued at $3.72 million in an earlier valuation dated 13 March 2003 (exhibit A18) (and the valuer identified the risks to which Mr Davies referred, but expressly recognised that they should be reflected in his valuation). Third, in Heads of Agreement dated 30 January 2004 between a Hellier Group lender (Robier Holdings Pty Limited), Perpetual Plantations and Coonawarra Gold Pty Ltd as borrowers, the parties acknowledged that the property had a value of $4.3 million (exhibit R1, T93, page 1415).
3. There was also further evidence of the valuation of the land to which we attach less weight. This included the applicant's evidence that he and his wife had incurred expenses to improve the land after they acquired their interest in it some years earlier; a Report as to Affairs (Form 507) signed by the applicant in December 2005, in which he stated that the valuation of the land was $3.75 million, and that it had an estimated realisable value of $3.5 million; his evidence that the Hellier Group had had the land valued at an amount that supported the figure in the Heads of Agreement of $4.3 million; and evidence that the company itself had obtained a revaluation from the same valuer who had prepared the 2003 valuation at a figure of $4 million. Neither of these further valuations was tendered, and the latter valuation cannot apparently be found. Counsel for the applicant also referred to the amount of stamp duty paid on a mortgage over the land (exhibit A19) which indicated that the document had been stamped as security for $4.85 million in March 2004. However, the mortgage was collateral to another mortgage, and without information as to the value of the prime security, the stamping of the mortgage does not assist to establish the value of the land.
4. In evaluating the evidence of value, we have been mindful that none of the bases for the suggested increase in value is conclusive, and we have taken into account the submissions of counsel for ASIC, as well as the reservations which Mr Davies had as to the matters relied upon by the applicant. But as Mr Sallis submitted, all of the evidence in combination supports the view that the figure included in the balance sheet should be substantially increased, and we think that Mr Crase's adjustment of $2 million is reasonable.

(a) the trading loss should be reduced by $20,000 - $77,000 in round figures because certain costs incurred by Wellness Inside Pty Ltd should be treated as one-off costs incurred in preparation for the PEP transaction; and

(b) the trading loss of Easy Life Management Pty Ltd should be reduced by $484,000 (that is, one half of research and development costs, being the same amount as he had proposed should be capitalised in the consolidated balance sheet of that company). He described the company as a "start-up company, with no sales revenue".

1. There is evidence before us, from the applicant and Mr Scala, that Wellness Inside Limited was the vehicle that was to be used for the PEP transaction, and that it had incurred legal and consultants' costs in connection with that proposed transaction. There is insufficient evidence before us to enable us to determine the amount or precise nature of the costs that were so incurred. We note, however, that the company had no purpose other than to be the vehicle for the PEP transaction, and that the total operating loss that it incurred was approximately $77,000. We accept Mr Crase's opinion that some reduction for one-off costs should be made with respect to this company's activities, and that his estimate of the range of this adjustment is reasonable. It is not necessary, in view of the conclusion that we have reached as to the relevance of exhibit R8, for us to attempt to quantify the adjustment within the broad range that he suggested.
2. Of course, even if both adjustments suggested by Mr Crase are made, significant trading losses were incurred by the EG 12, and there were very significant losses to unsecured creditors following the collapse of the EG 12. However, the EG 12 was part of the Elan Group, and it is apparent that the overseas companies together were in a stronger financial position than the EG 12. In his evidence, the applicant said that the group employed about 350 people, had a turnover in excess of $40 million per year, was trading profitably to 30 June 2005, and had an EBITDA of about $1.6 million (transcript 22.02.10, page 67, line 43). In addition, our above finding as to the value of the Perpetual Plantations property would result in a further adjustment to the corrected consolidated balance sheet and produce a surplus of approximately $1.5 million of assets over liabilities, and a surplus of assets of approximately $0.5 million for the EG 12.
3. There are other matters that are relevant to the financial position of the Elan Group prior to its failure. The EG 12 had not received the benefit of the new equipment that was still being constructed for Coonawarra Gold Facilities Pty Ltd at the time when the Hellier Group appointed receivers and managers; that company was at the point of establishing a new business enterprise, but it had not commenced. In addition, Easy Life Management had not received any return from its investment in research. Further, the applicant estimated that the Elan Group had incurred legal, accounting and consultants' fees in the order of $600,000, which included the expenses of due diligence investigations and preparation of relevant documentation, in connection with the proposed transactions with PEP and the ANZ. He also said that the Elan Group incurred significant audit fees, both for the Australian companies and the overseas companies, that would not have been required if the PEP and ANZ transactions had not been proposed. In addition, the applicant referred to the loss of management time arising from the due diligence process, his own inability to drive the Elan Group's sales due to his involvement, and the impact of these matters on the Elan Group during this period. Mr Scala gave evidence that Coonawarra Gold Pty Ltd had been purchased in early to mid-2004, that its facilities were then in a poor condition, that about eight to nine months were spent putting the facilities into proper condition and testing them, and that the company only traded for three or four months of the 2005 financial year.

1. The applicant contended that the failure of the ANZ transaction was both sudden and unexpected, and caused the collapse of the Elan Group, including the EG 12, and the substantial deficiency on their liquidation.
2. The application of the funds actually available to the Elan Group from the sale of the Perpetual Plantations property and the refinancing of a loan owing to Mulpara Pty Ltd, and the funds that would have been provided pursuant to the ANZ transaction (if it had proceeded) appears in exhibit A4. This shows the receipt of $7.4 million from ANZ Private Equity, $14.269 million from ANZ Bank, $2.8 million from the sale of the Perpetual Plantations' land (that being the net amount received out of the gross sale price of $3.2 million), and $3.2 million from the refinancing of the Mulpara loan. The exhibit also shows the amount of the secured loans of the various companies referred to, and also the repayment of the loans owing to the Hellier Group. As also appears from exhibit A4, two secured loans were to remain in place, namely a loan to Coconut Oil Production Medang Limited from the Bank of South Pacific (which was to be reduced from $4.215 million to $2 million), and a loan from Westpac of $2.5 million to Coconut Oil Production Holdings Limited (previously Coconut Oil Production Vanuatu Limited).
3. There were also two other loans that were not going to be repaid from settlement of the ANZ transaction. One was a loan of $3.2 million owing to Mulpara Pty Ltd on the security of a building at 41 Currie Street, Adelaide. This was refinanced independently. The second excluded loan was for $4 million owing by ETC to Bridgecorp Finance; this was later fully repaid by selling other assets. This second excluded loan is shown in exhibit A6, which supplements exhibit A4 by including reference to that loan.
4. In its final submission, ASIC referred to an extract from a due diligence report prepared by PricewaterhouseCoopers which contained a table of figures illustrating the application of the funds to come from ANZ Private Equity (exhibit R1, T57, page 1183). This extract referred to a debt of $3.5 million owing by Wellness Inside Ltd on the basis that it would be "outside the Pacific Wellness Group". We permitted the applicant to be recalled to explain this reference, and an apparent contradiction in his earlier evidence as to this aspect. It is clear from his further evidence that the report is correct in saying that Wellness Inside Ltd (which was the vehicle established for the purpose of the PEP transaction) would be outside the Pacific Wellness group, but is incorrect in assuming that the loan from the Hellier Group lender to Wellness Inside Ltd would not be repaid out of the funds to be provided pursuant to the ANZ transaction. The applicant explained that the indebtedness of Wellness Inside Ltd to the Hellier Group was to be discharged by receiving repayment of other inter-company loans owing to it, which were in turn to be repaid by ETC from funds received by it at settlement of the ANZ transaction. The flow of the funds to be received at settlement is shown in exhibit A23. We are satisfied that the Hellier loans to the Elan Group would have been fully discharged out of the funds received pursuant to the ANZ transaction, as shown in exhibits A4 and A6.

(c) Applicant's understanding of inter-company and shareholder loans

1. In his reasons for decision, the delegate said that it was "of major concern" that the applicant had in effect treated inter-company loans and loans from people associated with companies as being the same as equity. He concluded that it was important that the public be "protected from directors who hold such views, particularly where the consequences of such views, as here, has contributed to a number of corporate and individuals receiving no return on their loans to companies of which (the applicant) is a director" (exhibit R1, T5a, paragraphs 214 - 216). In support of his conclusion, the delegate quoted from a passage of the transcript of the evidence before him, and emphasised portion of a response from the applicant, in which the applicant had said: "... as you know, most times intercompany loans are deemed to be the same as capital." (exhibit R1, T5a, paragraph 214).
2. ASIC contended that the delegate's finding as to this matter should be upheld. In support of this contention, ASIC led expert evidence from Mr Davies as to the treatment of inter-company loans and loans from related parties, and the formal steps and documentation that were required in order to convert loans to equity.
3. As against this, counsel for the applicant submitted that the delegate's decision was incorrect in this respect. Mr Sallis pointed out that the particular passage from the transcript of the hearing before the delegate, to which the delegate referred in his decision, related to a particular inter-company loan from ETC to Life Productions Pty Ltd, which companies were both wholly owned subsidiaries of P.O.P.A. Pty Ltd. Counsel further pointed out that the question was asked in the context of whether the debtor, Life Productions Pty Ltd, was insolvent by reason of this loan.
4. The applicant gave evidence in the proceedings before us to the effect that it was common practice in Australia for the founders of private companies to provide working capital to their companies by means of shareholder loans, and he referred to the tax and other advantages of that practice. He said further that he was the sole director of P.O.P.A. Pty Ltd, and did not intend to call up the loan, and the inter-company loan would be extinguished if the accounts of the two companies were consolidated.
5. The applicant's evidence was supported by the witness Mr Scala (who could speak from his long experience as a banker), and by the evidence of Mr Crase. In support of his opinion Mr Crase produced a summary of some reasons why accountants may opt not to recommend the conversion of a loan into equity (see exhibit A14).

(d) Failure to pay debts owing to the ATO and other statutory obligations

1. In his final submissions, Mr Wilson referred to and relied upon the delegate's findings to the effect that debts were owing to the ATO, and that other statutory liabilities had not been paid. Counsel contended in effect that such findings constituted a breach of the applicant's duties under s 180 of the Act. He further referred to the importance of the need to meet taxation and other statutory obligations, and adopted the delegate's conclusion, by reference to Piastri v Australian Securities Commission (unreported, Administrative Appeals Tribunal, Deputy President McDonald and Members JTC Brassil and CG Woodard, 20 December 1996) and Re Boyle and Australian Securities Commission [2009] AATA 122, that such failures of directors' duties were significant and important failures on the part of the applicant, and of themselves warranted disqualification for a considerable period (exhibit R1, T5a, paragraph 210).
2. Section 180 provides in effect that a director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of a corporation in the corporation's circumstances, and occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.
3. In his decision the delegate referred to the following taxation and other statutory liabilities (exhibit R1, T5a, paragraph 207).

(a) Coonawarra Gold Facilities Pty Ltd - The delegate referred to this company having a debt of $41,624 to the ATO between 3 August and 17 November 2005. The applicant admitted in cross-examination that a debt of $51,880.37 was owed to the ATO, but in his witness statement he explained that the debt to the ATO related to a running balance account in respect of BAS amounts, and was a current liability when the Hellier debts were called up, and the non-payment of the debt was due to circumstances beyond his control (exhibit A3, paragraph 139a.i). He also admitted that a further $45,077.49 was owed to the former Department of Employment and Workplace Relations (DEWR) for advances made to employees pursuant to the General Employee Entitlements and Redundancy Scheme (GEERS). GEERS is a payment scheme administered by DEWR to assist employees who have lost their employment as a result of the insolvency of their employer and are owed certain employment entitlements, and DEWR has the right to recover payments made from the insolvent employer if funds become available. The applicant said that this debt had since been paid in full (transcript 24.02.10, page 205, lines 16 - 24). We note that the delegate accepted that Coonawarra Gold Facilities was constructing or developing its drying grape marc plant, and the ANZ transaction would have enabled the company to pay its secured and unsecured creditors (exhibit R1, T5b, paragraph 161). We agree with this assessment.

(b) Life Productions Pty Ltd - The applicant conceded that an amount of $40,618.58 was owed to the ATO by Life Productions Pty Ltd. He said that this debt included an unpaid superannuation guarantee charge of $9,952.04, plus interest of $630.21 dating back to 2002. He did not know why this amount had not been paid, and said it appeared to have been an oversight in the context of a group of companies with an annual turnover of $40 million. He said that all other superannuation guarantee amounts were paid in the ordinary course of business, that he never gave any instruction not to pay the amount, and that the non-payment had never been brought to his attention by those responsible for the company's accounts. He further said that the balance of the debt, namely $30,036.33, was a running account balance in respect of BAS amounts and was a current liability at the time when the Hellier debts were called up, and again that the non-payment of that debt was due to the failure of the ANZ transaction, a matter beyond his control (exhibit A3, paragraphs 120 - 129).

(c) Brownlie Pistachio Nuts Pty Ltd - In this case there was a debt to the ATO of $35,454 by way of a running balance account, again in respect of BAS amounts. The applicant gave evidence that, once again, this was a current liability at the time the Hellier debts were called up, and the non-payment was due to circumstances beyond his control (exhibit A3, paragraph 132). In any event, the applicant gave evidence that at the time of liquidation of this company, it had stock on hand that was more than sufficient to pay all of the company's indebtedness (transcript 24.02.10, page 266, lines 1 - 35).

(d) Elan Trading Corporation Pty Ltd - In this case, according to the delegate's decision, the liquidator reported a total of $176,516 owing to the ATO and $439,136 owing to Revenue SA. The applicant stated that no other material was provided in support of the reported debt to the ATO, and that there were no proofs of debt showing the period of the alleged failure to pay this liability to the ATO (exhibit A3, paragraph 139b.i). As to the asserted debt to Revenue SA, he said that this was disputed, was the subject of an objection (apparently on the grounds that an accountant had transferred shares in Mulpara Pty Ltd in error, and the transaction was reversed within 24 to 48 hours of the error being realised), and he had received legal advice that if the objection had been disallowed, the company should appeal to the Supreme Court of South Australia. He said further that the objection had not been decided at the date of the winding up of the company (exhibit A3, paragraph 193b.ii).

(e) Easy Life Management Pty Ltd - According to the supplementary report of the liquidator pursuant to s 533(2) of the Act, this company owed $696 to the ATO, and $3,656 to DEWR. In cross-examination, the applicant admitted these two amounts but said that the ATO debt was a running balance, and the debt to DEWR had arisen from the payment of the GEERS assistance, and was later repaid (transcript 24.02.10, pages 205 - 207).

1. The applicant said further that he had never given any instructions to delay payment of any debts to the ATO, and neither Life Productions nor any other company in the EG 12 had a history of delaying payment to the ATO (exhibit A3, paragraph 126). This assertion in the applicant's witness statement must be read in conjunction with his cross-examination, where he was directed to a statement in the PricewaterhouseCooper's due diligence report to the effect that due to cash flow constraints ETC had withheld payments for superannuation and WorkCover contributions for a number of years (exhibit R1, T 56, page 1178). There was the following exchange in cross-examination:

"That was the case, wasn't it?---Correct.

That was the case being a practice within the Elan Group, wasn't it?---Absolutely not. This was due to cash flow constraints they're talking about - there were some outstanding matters but the only one that was outstanding at the time of the liquidation as I understand it were the ones that you've raised." (transcript 23.02.10, page 198, lines 7 - 12)

1. We also bear in mind the evidence of Mr Scala, where the same extract from the PricewaterhouseCooper's report was put to him, and he said that this was his understanding of the case across the Elan Group (transcript 25.02.10, page 377, lines 23 - 26). However, Mr Scala was not asked any further questions as to the currency or otherwise of the relevant debts.
2. We accept the importance of the responsibility that directors have to ensure that statutory obligations are met. However, we consider that Boyle (supra) can be distinguished because there was found to be an improper and wilful withholding of tax instalments, and in Piastri (supra) it was found that the director should have been alerted to the default in paying significant arrears of group tax because he had been made aware of the default in discharging group tax by another company of which he was a director. In the present case the non-payment of current debts occurred following an event outside the applicant's control that produced insolvency. In addition, on the evidence before us we are not satisfied that there were substantial unpaid taxation liabilities other than current running balances that we accept would have been paid following settlement of the ANZ transaction. We further accept that the applicant was unaware of the comparatively small long outstanding amount of unpaid superannuation charge owing to the ATO by Life Productions Pty Ltd. The applicant's evidence that the DEWR debts have been repaid and that the debt to Revenue SA was disputed was not contested. In all of the circumstances, we are not satisfied that the unpaid taxation and other statutory liabilities justify disqualifying the applicant under s 206F.

(e) Total amounts outstanding to unsecured creditors

1. ASIC submits that the total amount outstanding to the unsecured creditors of the EG 12 was very significant, but there is a very wide disparity between the figure asserted by ASIC and the figure derived from our findings as to the correct analysis of the evidence before us. ASIC calculated the amount at between $13.475 million and $14.185 million, according to the table in paragraph 4 of ASIC's submissions of 22 October 2010 (exhibit R17). As explained below, this amount was derived from proofs of debt referred to in a letter dated 30 July 2010 from the witness Timothy James Clifton, who was appointed the liquidator of eleven companies out of the EG 12 (see Attachment 2 to exhibit R12). We note that ASIC does not assert that the twelfth company, Pegara Pty Ltd, which was a holding company, had any unsecured creditors at the time of its liquidation. The delegate referred to a different figure, namely a total of approximately $9,115,135, when he referred to the total of unsecured creditors (exhibit R1, T5b, page 59a, paragraph 206). Clearly if either figure was correct, the total amount was very significant, and might of itself lead to an inference that the applicant had been incompetent in his management of the EG 12. As appears from paragraph 96 below, we find that the total debts to unsecured creditors were between $2.668 and $3.367 million.
2. The amount owing to the creditors (both secured and unsecured) of the eight companies from the EG12 that remain in liquidation is also relevant to a proposal to which the applicant has agreed, whereby further voluntary payments will potentially be made to the unsecured creditors of six of those eight companies, and also to the creditors of P.O.P.A. Pty Ltd. We will refer to this proposal below.
3. The applicant gave evidence that he disputed a number of the proofs of debt lodged in the liquidation of the EG12. Mr Clifton and the auditor of Perpetual Plantations Pty Ltd, Allen Elliott Bolaffi, also gave evidence as to this issue.
4. ASIC relied on paragraph 135(c) of the applicant's witness statement as constituting an admission as to the above finding by the delegate as to the quantum of unsecured creditors. However, any such admission would clearly be contrary to the applicant's submission to the delegate, as evidenced by the Schedule of Creditors submitted by the applicant, which totalled $2,139,124 (see exhibit R1, T96, page 1638). It was also inconsistent with the applicant's evidence before us as to his estimate of the unsecured creditors of the EG12 as at the date of liquidation, namely $2,173,153.21 (exhibit A36, paragraph 1(a)). We accept his explanation that he did not intend paragraph 135(c) of his witness statement to constitute an admission of the quantum of the debts found by the delegate (which could only have been deduced by referring to the footnote, which in turn referred to the relevant paragraph of the delegate's finding), and that he only intended to admit the proposition in the text of paragraph 135(c), namely that . That admission was then of course qualified by the statement that immediately follows, namely

Amounts owing to unsecured creditors potentially

*Note: The companies denoted with an asterisk were the subject of DOCAs that were approved by creditors. They are no longer in liquidation, and no part of the funds involved in the further proposal made by the applicant will be paid to their creditors.

1. ASIC accepted that the amounts owing to the creditors of five companies out of the EG 12 should not be considered as a factor supporting the banning of the applicant under s 206F(2)(b) of the Act. The five companies concerned are Pacific Wellness, Wellness Inside, Life Productions, Brownlie Pistachio Nuts and Pegara. As we understand it, ASIC accepted this position because in the case of Pacific Wellness and Wellness Inside, the debts had largely been incurred in connection with the unconsummated ANZ and PEP transactions; the amount of the creditors of the other companies was not sufficient to justify a banning order; and ASIC thought it should adopt a consistent approach to that of the delegate. Of course, as explained above, a hearing before this tribunal is a hearing de novo, and it is open to each party to adduce new evidence or to rely on other matters not advanced before the decision-maker whose decision is under review. Further, we are not bound by concessions made by the parties. However, subject to circumstances where new evidence becomes available, or where the position adopted was incorrect or there is a need to address a new position adopted by an applicant, we think it is good decision-making practice for regulatory authorities to adopt a consistent approach on the hearing of applications for review in this tribunal. We think that in the present matter, it is appropriate to exclude the amount of the unsecured creditors of the five companies concerned, for the reasons explained by the delegate and adopted by ASIC in the proceedings before us.
2. On our findings, as summarised in the above table, the total amount of the proofs of debt lodged by unsecured creditors of the remaining seven companies out of the EG 12 in round figures is $3.367 million, or $2.668 million, if the debts to Revenue SA and Mr Wong-Tung are deducted (see paragraph (8) of the Schedule to these reasons). On the face of it, either of these amounts itself is significant. However, we take into account that the position of the EG 12 was affected by the various matters referred to in paragraph 60 above (although we have of course to an extent already allowed for the direct costs incurred in connection with the ANZ and PEP transactions by not counting the creditors of Pacific Wellness and Wellness Inside). In addition, the applicant gave evidence as to the significant turnover and EBITDA of the Elan Group in dollar terms up to June 2005 (see paragraph 59 above), and said that whilst the Elan Group was not , they were , and if it had not been for the PEP and ANZ transactions, the financial position would not have been tight (transcript 24.02.10, page 245, line 27 to page 246, line 12). He also admitted that they were (transcript 23.02.10, page 188, line 44 to page 189, line 11), but he also said that prior to the collapse of the settlement, the Elan Group was not in breach of any of the loan agreements with the Hellier interests or others (exhibit A3, paragraph 103).

Section 206F(2)(b)(ii) : would disqualification be in the public interest?

1. We referred above to authorities that in the context of s 206F emphasise the need to protect the public, the need to maintain professional standards and public confidence in the proper management of corporations, and the deterrent effect of making banning orders in appropriate cases. These matters are all aspects of a proper consideration of the public interest, being the second criterion referred to in s 206F(2)(b).
2. All of the matters that we considered above under the heading referring to s 206F(2)(b)(i) are also relevant in considering whether disqualification of the applicant would be in the public interest. Having regard to our above conclusions as to those matters, we do not think that they would justify the disqualification of the applicant by reference to the public interest criterion.
3. Another matter arose during the hearing. ASIC produced evidence during the applicant's cross-examination that he had entered into a Part 10 arrangement with his creditors between 1980 and 1987, and that he had been bankrupt from 1989 to 1995. The applicant explained in re-examination the circumstances that gave rise to these matters. He said that the first period occurred when, following the death in a motor car accident of the man who was then running the Cornell group of companies, that group did not proceed with the acquisition of his insurance brokerage business which he had agreed to sell on terms that entailed the group assuming responsibility for the liabilities of his business. As to his subsequent bankruptcy, the applicant said that this was the result of providing guarantees to support loans that had been made to a business associate; he said he was helping this person to realise assets and re-establish a business in Queensland in return for an interest in the business, but the loans were called up due to the drop in property values in the 1988 property crash in that State. The applicant tendered a letter from the National Australia Bank, acknowledging that his steps to sell down assets had "assisted the Bank greatly" and had reduced its customer's indebtedness to the Bank (exhibit A7). A second letter from his business associate (exhibit A8) is to the same effect.
4. ASIC did not rely in its final submissions on these earlier episodes of insolvency in support of the banning order. There is no evidence before us that either episode of personal insolvency was the result of activities of the applicant in his capacity as a director or manager of a company. We consider that these matters do not warrant disqualifying the applicant pursuant to s 206F.

1. Section 206F(2)(b)(iii) confers on the tribunal, standing in the shoes of ASIC, a general discretion to have regard to any other matters it considers appropriate. Again a number of the matters that we have already considered might also be relevant under this criterion, but none of those matters has satisfied us that disqualification is justified. We now turn to further matters that arise from the evidence before us and are relevant to this final consideration.

Has there been unreasonable delay on the part of ASIC?

1. In some contexts it has been held that where a statutory power is conferred and the period within which the power must be exercised is not specified, the decision-maker is obliged to exercise the power within a reasonable time once the statutory preconditions to the exercise of the power have been met: Pearce and Geddes, Statutory Interpretation in Australia (Lexis Nexis Butterworths, 2006, 6th Ed.) at [2.32] and [6.50]. However, Mr Wilson submitted on behalf of ASIC that s 206F(1)(a) expressly empowers ASIC to issue a show cause notice within seven years of receipt of a report lodged by a liquidator in relation to a second related company, and he pointed out that in the present case, ASIC had issued a show cause notice well within seven years of 23 November 2006, being the date of receipt of s 533(1) notices in respect of ten of the twelve companies in question. He accordingly submitted that it could not be said that the time within which ASIC or this tribunal could disqualify the applicant had expired.
2. Mr Wilson's contention is supported by a judgment of a Full Court of the Federal Court, namely Culley v Australian Securities and Investments Commission [2009] FCA 1208; (2010) 74 ACSR 604. The Full Court decided that if a show cause notice is given within the period of seven years after the lodging of the first triggering liquidator's report, any lapse of time is only a consideration relevant to the exercise of the discretion to disqualify, and an implied obligation to exercise the power under s 206F(1) with reasonable promptness is not a condition precedent to the exercise of the power. Mr Sallis very properly accepted this position after the Full Court judgment became available (which was after he had first raised his contention on this aspect in the present proceedings). However, he maintained that there had been unreasonable delay on ASIC's part, and that this was relevant for a consideration of "other matters" being the final criterion in s 206F(2)(b)(iii).
3. In Kardas, Heerey J said:

"What is a reasonable time will depend on the circumstances. The affairs of companies vary greatly in their complexity. But the commission does not, as it were, start from scratch. It will, ex hypothesi, have the benefit of a liquidator's report and no doubt the liquidator would usually be willing and able to provide further information and explanation on request." ((1998) [1998] FCA 1381; 53 ALD 303 at 313)

1. We referred in paragraphs 14 to 19 above to the dates when various steps were taken by ASIC leading to the decision by the delegate to disqualify the applicant. The pertinent dates for present purposes are as follows:

Liquidators of 10 of the 12 EG 12 companies that were ultimately the subject of s 533(1) notices lodged s 533(1) reports.

Liquidator of the 11th EG 12 company, Easy Life Management Pty Ltd, lodged a s 533(1) report.

Liquidator of the 12th EG 12 company, Pegara Pty Ltd, lodged a s 533(1) notice.

Show cause notices under s 206F(b)(i) served on the applicant.

1. Mr Wilson submitted that time should be computed from the date of lodgement of the twelfth s 533(1) notice, that is, the notice in respect of Pegara Pty Ltd, and that that report had been delayed for reasons beyond ASIC's control. On that basis, the trigger point would have occurred on 23 November 2008, and the delegate's disqualification decision was served less than twelve months later. He submitted that this did not constitute unreasonable delay on ASIC's part.
2. We think that there may be cases when the "trigger point" should not necessarily be the lodgement of an s 533(1) notice in respect of a second company. If the director concerned was known to be a director of other companies which might be the subject of subsequent s 533(1) notices, it might be reasonable for ASIC to wait to see whether any further s 533(1) reports would be lodged in order to make a judgment as to whether a show cause notice should be issued. However, in the present matter, by 23 November 2006, s 533(1) reports had been lodged in respect of ten of the twelve EG 12 companies. We do not think that it was reasonable for ASIC to delay considering the exercise of its powers of disqualification until it knew whether s 533(1) reports would be lodged in respect of the remaining two companies. This was more particularly so in view of the disparate activities of the ten companies concerned.
3. Mr Wilson submitted in the alternative that even if the period commenced from 23 November 2006, being the date of lodgement of ten of the twelve companies concerned, the above period of two years and eleven months was not unreasonable. He pointed out that the Elan Group is a complex group, its business activities are diverse, substantial losses were to be incurred by unsecured creditors as a result of the collapse of the group, and a number of issues required consideration following the lodgement of the s 533(1) reports by the liquidators. We note that the delegate dealt with a large number of issues in his comprehensive and careful reasons for decision. Many of these issues do not arise in the proceedings before us, but that does not mean that it was not appropriate or proper for ASIC to raise them before the delegate. Mr Wilson also drew our attention to Re Quinlivan and Australian Securities and Investments Commission [2010] AATA 113; , where the tribunal did not find that there had been an unreasonable delay in a case in which there were fourteen companies the subject of a show cause notice.

1. In his witness statement of January 2010, the applicant said that over the past three years he had worked to establish new business enterprises operated by two companies where he had management roles, namely My ATM Pty Ltd and Aussie ATM Pty Ltd. He stated that the first company carries on the business of retailing automatic teller machines, and the second company carries on the business of installing, servicing and maintaining such machines (exhibit A3, paragraphs 179 and 181).
2. He went on to say that between them the companies employ twelve people full time, and there are twelve commissioned sales agents, and in the six months ending September 2009, My ATM had a turnover of $13 million and had traded profitably. He further stated that he had played a pivotal role in negotiating a number of sales agreements with third parties, and had been involved in negotiations with major bankers, financiers and publicly listed companies. He and his wife have an interest in My ATM as beneficiaries of the Shulamite Trust, the trustee of which is Shulamite Pty Ltd. He gave evidence that My ATM had made a profit of about $3 million in something less than twelve months' operation, that counting his and his wife's interests they together hold about a third of the shares of My ATM, and the company was on target to place about 2,500 ATMs into the Australian and New Zealand markets, and he has also engaged in negotiations to place ATMs in overseas countries. He has proceeded with proposals to float the company on the Australian Stock Exchange (ASX), and gave evidence that My ATM had been valued at $47 million. A holding company, My ATM Holdings Limited, lodged a prospectus (exhibit R9) with ASIC on 18 June 2010, and later lodged a replacement prospectus dated 26 August 2010 (exhibit R22) and two supplementary prospectuses dated 12 October 2010 and 22 October 2010 (exhibits R16 and R19).
3. According to an affidavit sworn on 21 November 2010 by one Alex Paior, one of the solicitors for My ATM Holdings Limited (exhibit A40), the company formally closed its replacement prospectus, as extended by supplementary prospectuses, on 18 November 2010. The company then had in excess of 420 shareholders with marketable parcels of shares, and had raised a total of $4,114,500, which was in excess of the minimum subscription under the offer. This meant that the company had satisfied the listing rules of the ASX in relation to the minimum number of share holders with marketable parcels of shares to qualify for admission to the official list of the ASX. In an earlier affidavit sworn on 28 October 2010 (exhibit A39), Mr Paior swore that he expected Eastcom Communications Co Limited, a company listed on the Shanghai Stock Exchange, to subscribe for shares in the company to the value of a further $2,500,000. However, he further deposed that this would require foreign investment approval from the Australian and Chinese governments, and those approvals were not expected by the closing date of the offer. In his second affidavit, Mr Paior deposes that this transaction will now proceed by way of a private placement. Mr Paior goes on to describe the further formal steps necessary before the company can be quoted on the ASX, and indicates that the company will be formally quoted on the ASX in about three to four weeks' time.

Past and proposed payments by the applicant and his wife to unsecured creditors

1. After the liquidation of the EG 12 the applicant made voluntarily payments to four former employees who were unsecured creditors. These payments were made from the applicant's earnings and from the proceeds of sale of his private assets, including the home owned by him and his wife. He also made the payments to DEWR to refund the GEERS advances, to which we have referred above.
2. In addition, after the liquidation of the EG 12, the applicant borrowed $370,000 in order to make offers to 10 companies out of the EG 12 and to the creditors of P.O.P.A. Pty Ltd. As we said above, the creditors of four companies out of the EG 12, namely Pacific Wellness Pty Ltd, Wellness Inside Limited, Coonawarra Gold Facilities Pty Ltd and Welfare Strategies Pty Ltd, accepted the offer. According to information provided by Mr Clifton, payments were made to the unsecured creditors of these companies amounting to $189,270.45 (being the amount borrowed less the liquidator's costs). The payments were made pursuant to DOCAs, and those companies are no longer in liquidation.
3. In total, the payments already made by the applicant and his wife amount to $1,505,758.18. This figure includes funds paid to or in respect of former employees, the creditors of the four DOCA companies, and the fees of administering those companies. He has also indicated his willingness to arrange to contribute additional funds of at least $940,000 to enable further payments to be made to unsecured creditors. If this further contribution is made, it would mean that the total payments made by the applicant and his wife would amount to approximately $2.4 million since the liquidation of the EG 12. We think that the payments already made and the applicant's proposal for contributing further funds are matters that we can properly take into account in the applicant's favour.
4. The proposed contribution of further funds of approximately $940,000 will potentially be available from the applicant's interest in My ATM. During the hearing it became apparent from the evidence as to the success of My ATM that the applicant's interest in the company might enable him to provide further funds to unsecured creditors of the EG 12. We therefore suggested that the applicant might consider submitting a proposal to make a further payment for the benefit of the unsecured creditors of the remaining EG 12 companies that remain in liquidation.

The size of the losses suffered by unsecured creditors

1. Mr Sallis submitted that there was no evidence that the failure of the EG 12 had been due to either incompetence or misconduct of the applicant, and that mere proof that the EG 12 had gone into liquidation with substantial losses being incurred by creditors did not justify the imposition of a banning order under s 206F in the absence of evidence of such matters. Mr Sallis relied in particular on the proposition referred to by the Full Federal Court in Murdaca (supra) where North, Kenny and Foster JJ said that the power to disqualify in s 206F must be exercised for the purposes for which it was granted, and those purposes are "the protection of all those persons who deal with corporations from the consequences of the actions of those corporate officeholders who, either through incompetence or dishonesty or a combination of the two, bring about the failure of corporations and thus cause loss to others ..." [2009] FCAFC 92; (2009) 178 FCR 119, at [101(b)]. Mr Sallis also said in support of his contention that from his review of the authorities, he had not found any case where a banning order had been made because of the size of creditors' losses but where no incompetence or misconduct had been established. Mr Wilson acknowledged that he was unaware of any such case, although he disputed the correctness of the contended interpretation of s 206F.
2. We do not accept the proposition that the power to disqualify under s 206F only arises where there is misconduct or incompetence on the part of a director. We think that it would be incorrect to imply any requirement of misconduct or incompetence as a condition of the power to disqualify in s 206F. To do so would be not to observe the need for decision-makers to give close attention to the relevant legislation, and to disregard the warning that "decided cases ... must not be permitted to distract attention from the language of the applicable statute or statutes" (Shi, supra[2008] HCA 31; , , at [92], per Hayne and Heydon JJ). In the case of s 206F(2), express provision is made for the criteria to which ASIC may have regard when considering whether disqualification is justified. The final criterion, namely s 206F(2)(b)(iii), reads ; these general words, on their ordinary interpretation, would extend to matters other than the person's conduct. That interpretation is reinforced because an earlier criterion, namely s 206F(2)(b)(i), expressly refers to .

"While evidence of contraventions will obviously be relevant to a decision to disqualify, the section has a different focus. The operation of the section is triggered by evidence of a pattern of failure."

1. We conclude that the size of the losses suffered by the unsecured creditors of the EG 12 is, in itself, a relevant consideration under s 206F(b)(iii). It is the first of the matters referred to by McHugh J in Rich (supra) (see paragraph 26 above). We take into account that Rich and also Re HIH Insurance Ltd (supra) were not cases that arose under s 206F, but they arose under the group of sections in the Act that deal with the banning of directors. Further, the extent of the loss suffered by unsecured creditors seems to us to be even more relevant to cases that arise under s 206F, where one of the circumstances which will result in the power to disqualify is the lodging of a s 533(1) return to the effect that unsecured creditors will receive less than 50 cents in the dollar following the liquidation of two or more companies within the prescribed period.
2. However, whilst we are satisfied that s 206F confers power to disqualify in the absence of misconduct or incompetence, it remains necessary to determine whether that power should be exercised in the circumstances of this case. We have referred above to the significant financial detriment to the Elan Group arising from the legal, accounting and audit expenses incurred in connection with the PEP and ANZ transactions, and the consequences of the unexpected withdrawal of ANZ Private Equity from the ANZ transaction. We also referred above to the fact that the Hellier Group appointed receivers and managers to the EG 12 at a time before Easy Life Management Pty Ltd had received any return on its investment in research, and before the new plant and equipment for Coonawarra Gold Facilities Pty Ltd had been completed, so that it too had not received any return for its substantial investment in its new business enterprise. Further, as also mentioned above, significant management time had been lost due to due diligence activities related to the PEP and ANZ transactions, and Coonawarra Gold had only traded for three or four months in the 2005 financial year. In all of the circumstances, we are not satisfied that the losses sustained by the unsecured creditors, or the size of those losses, justifies disqualification.
3. In addition, as explained in paragraph 131 above, the applicant and his wife have already provided significant funds which have been of some benefit to creditors, and the offer by Shulamite Pty Ltd will potentially result in the unsecured creditors of the Offer Companies receiving an average of between 29.7 and 40.2 cents in the dollar if the Non Escrow Shares are sold for the offer price of 20 cents per share referred to in the prospectus. There is also the potential for the unsecured creditors to receive more than this, if the Non Escrow Shares are sold for more than 20 cents per share. The applicant had no legal obligation to provide4 any undertaking to contribute further funds to the companies in the EG 12 that remain in liquidation. The facts that he has arranged to provide the Shulamite undertaking, and that it potentially involves a not insignificant payment that will produce some return to creditors, are matters which we take into account in the applicant's favour (notwithstanding that the undertaking is necessarily provisional on certain conditions being fulfilled).

Should the failure of the EG 12 be regarded as the failure of a single entity?

1. We concluded above that not all of the EG 12 were related to one another within the meaning of s 206F(2)(a) of the Act, and so the failure of the EG 12 could not be treated as in substance the failure of a single entity.
2. Nevertheless, we find from the evidence before us that the failure of the EG 12 was the result of one event, namely ANZ Private Equity's abrupt and unexpected withdrawal from the ANZ transaction, which in turn led to the Hellier Group lender calling up the bridging loan, and enforcing the cross-guarantees given by group companies. This is not a case where there was a pattern of failures, but to use the language of Deputy President Olney in Re Guss and Australian Securities and Investments Commission [2006] AATA 401; (2006) 90 ALD 349 at [49], it is "a case of a group of companies having been brought down by a single catastrophic event".

1. For all of the above reasons, we are not satisfied from the evidence before us that the disqualification of the applicant under s 206F is justified.
2. The tribunal sets aside the decision under review, and in place of that decision, decides that the discretion under s 206F of the Corporations Act 2001 (Cth) not be exercised.

SCHEDULE OF FINDINGS RE UNSECURED CREDITORS OF EG 12

(1) We referred in paragraph 96 above to our findings as to the amounts owing to the creditors of the EG 12 as at the date of their liquidation. We now explain the basis for those findings, by reference to each company.

(2) Pacific Wellness Pty Ltd - The respondent submitted, on the basis of the information provided by Mr Clifton, that the unsecured creditors amounted to $390,206.23. The applicant's position is as follows.

• The sum of $200,000 included in the respondent's figure related to Mellor Olsson's services in connection with the ANZ transaction, and was a success fee that was not payable because that transaction did not proceed.
• The debt claimed by UHY Hains Norton, of $114,602.18, was subsequently paid in full, partly in money and partly by the transfer of shares in My ATM by the applicant and his wife.
• Pacific Wellness Pty Ltd was subsequently taken out of liquidation pursuant to a DOCA, and amounts totalling $20,103.40 were distributed to creditors pursuant to the DOCA.

Mr Clifton, the liquidator, acknowledged that whilst Mellor Olsson had work in progress to the extent of $200,000, they had not rendered an invoice for this amount as at the date of liquidation, and that when he administered the DOCA he was not in a position to dispute the applicant's evidence before us that that amount was not due to Mellor Olsson. However, Mr Arthur from Mellor Olsson did not say in his evidence that the amount claimed by his firm was a success fee. Even though this matter had not been raised at the stage of the hearing when Mr Arthur gave evidence, no application was made to recall him. The lodgement of the proof of debt and the acceptance of a dividend from the administrator of the DOCA is inconsistent with the amount being a success fee. As to the proof of debt by UHY Hains Norton, the applicant conceded that this amount was owing as at the date of liquidation. We consider that the amount owed to creditors at liquidation should not be reduced by the claims made by Mellor Olsson or UHY Hains Norton.

(3) Wellness Inside Ltd - The respondent submitted on the basis of the information provided by Mr Clifton, that the unsecured creditors amounted to $16,079.23, being an account from Norman Waterhouse Lawyers. The applicant said that the account was raised after the liquidation of Wellness Inside Ltd, and he did not know the basis or veracity of this amount. We note that Mr Clifton admitted this claim when making a distribution pursuant to the DOCA, and distributed $643.17 to Norman Waterhouse.

We accept that the balance owing at the date of liquidation was $16,079.23.

(4) Perpetual Plantations of Australia Pty Ltd - The respondent submitted on the basis of the information provided by Mr Clifton, that the unsecured creditors amounted to $1,019,871.82. As to this company, the applicant's position is as follows.

• The proofs of debt included claims from growers amounting to $701,052.69. However, the witness Allen Elliot Bolaffi, a chartered accountant, gave evidence that he was the independent auditor of Perpetual Plantations of Australia Pty Ltd, and he prepared a balance sheet of the company as at 30 June 2005. This showed an asset of $500,218, being the liability of the growers to the company for the costs of harvesting pistachio nuts, and a liability of $512,484.08, being the amount realised from the sale of pistachio nuts, which was payable to the growers (see exhibit A27). Accordingly, in Mr Bolaffi's view, only the difference between the proceeds of sale and the amount owing by the growers, namely $12,266.08, was due to the growers. Mr Bolaffi said that he sighted relevant agreements between growers and the company as to their respective obligations, and the figures referred to in the balance sheet that he prepared took those matters into account, and were arrived at in conjunction with a representative of the growers. He also said that pistachio nuts are not harvested until May or June each year, and so the amount claimed by the growers could not have related to the period after 30 June 2005 and before the date of the liquidation of the company in December 2005. He further explained that the costs of the harvest, for which the growers were liable, were included in the accounts on an accruals basis, and so would have been accounted for in the 30 June 2005 balance sheet. The applicant gave evidence confirming these matters.

ASIC provided a copy of certain agreements between PPA and certain growers, and said that these had been retained from Mr Bolaffi's file, which (contrary to what Mr Bolaffi had said), was returned to him. The most recent of these copy agreements was dated 12 February 1996, and the term of all the agreements produced had expired. They indicate that, at least in the past, growers had to pay a licence fee to PPA for its services in maintaining the pistachio trees, and to that extent they are only marginally relevant, in that they are not inconsistent with the applicant's evidence.

• An amount of $2,681.24 claimed by Mr Scala has since been repaid in full.
• A proof of debt for $2,200 was lodged by a Mr Hateley, and in the subsequent administration of Perpetual Plantations of Australia Pty Ltd he increased his claim to $13,475.93. The applicant at first disputed this increase, but later discovered that Mr Hateley is a grower, and accordingly says that the total claim by Mr Hateley should be rejected (except presumably for his proportion of the net balance referred to above of $12,266.08 due to the growers, who totalled about 300 in number).
• The applicant also thought that a proof of debt claimed by Watkinson Legal amounting to $130,246.56 was excessive, and he later compromised that claim for an amount of $35,000, of which $25,000 has already been paid. The applicant did not, however, fully explain the basis of the compromise or attempt to quantify the extent to which the claim of Watkinson Legal was excessive. In these circumstances, we do not think it appropriate to make any deduction in respect of this proof of debt in assessing the amount owing to that creditor.

Having regard to the evidence before us, we consider that it would be reasonable to reduce the total debts at the liquidation of Perpetual Plantations of Australia Pty Ltd to $303,885.21 (that is, by deducting the growers' claims of $701,052.69 and the claim by Mr Hateley, and by including the net balance due to the growers of $12,266.08). After allowing for the payment by the applicant's wife to Watkinson Legal of $25,000, the amount currently owing to the creditors of Perpetual Plantations of Australian Pty Ltd is $303,885.21.

(5) Welfare Strategies Pty Ltd - The respondent submitted on the basis of the information provided by Mr Clifton that the unsecured creditors amounted to the total of the claims he accepted in administering the DOCA, namely $543,050.88. As to this company, the applicant's position is as follows.

• A proof of debt claimed by P.O.P.A. Pty Ltd of $8,000 was an inter-company loan and should be disregarded. However, P.O.P.A. is not included in the EG 12, and the shareholders of P.O.P.A. and Welfare Strategies are different, and in those circumstances, we do not agree with the applicant's contention that the loan can be disregarded.
• A claim by Mellor Olsson of $10,000 has been compromised and is no longer claimed. However, the applicant did not give evidence that this debt was not properly due at the date of liquidation, or the basis of the compromise, and Mr Arthur was not recalled as to this debt.
• The ATO had lodged a proof of debt for $513,505.93 based on an assessment issued after the date of liquidation of the company. This followed a decision by the ATO to disallow claims for deductions for contributions to a welfare fund of which Welfare Strategies was a contributor. However, the company had not claimed a deduction for its contributions, and so was not liable for the ATO's assessment. Mr Clifton said in his evidence that he took this matter no further than to check that an assessment had issued, and he appeared to be unaware that the company had not claimed a deduction for its contribution to the welfare fund. We think that it was inappropriate to include the amount of this assessment in these circumstances, and refer also to our comments in paragraph 95 above.

Having regard to the above evidence, we find that the liability of Welfare Strategies Pty Ltd as at the date of liquidation should be reduced to $39,544.95 (that is, after deducting the above sum of $513,505.93).

(6) Coonawarra Gold Pty Ltd, Ransom Records Pty Ltd, Life Productions Pty Ltd, Brownlie Pistachio Nuts Pty Ltd and Easy Life Pty Ltd - ASIC submitted, on the basis of the information provided by Mr Clifton, that the unsecured creditors amounted to the respective amounts referred to in each case in the second column of the table in paragraph 96 above. The parties subsequently agreed that those amounts were owing to unsecured creditors as at the date of liquidation, and currently, in each case. There was no evidence before us that is inconsistent with the parties' agreement, and we have accordingly based our findings on the amounts agreed in each case.

(7) Coonawarra Gold Facilities Pty Ltd (CGF) - The respondent submitted on the basis of the information provided by Mr Clifton, that the unsecured creditors amounted to $743,270.10. The applicant's position is as follows.

• A proof of debt by ETC of $89,260.74 is an inter-company loan, and should be disregarded. However, as was the case with the inter-company loan involving Welfare Strategies, the shareholders of CGF and ETC are different, and we do not agree that the loan should be disregarded.
• A proof of debt lodged by Circle Trust of $337,771.36 was based on the indebtedness of Ransom Records Pty Ltd to Circle Trust (and in the case of Ransom Records, Circle Trust had claimed $245,161.97), and the proof of debt lodged by Circle Trust against CGF was apparently based on a guarantee given by CGF of its indebtedness to Circle Trust. Mr Clifton said that he was aware that Circle Trust had lodged proofs of debt against more than one company, for substantially different amounts, but was unable to say whether the claim was properly claimable against Ransom Records only.

We do not think that this indebtedness should be counted twice for the purpose of establishing the total unsecured creditors of the EG 12, and find that the unsecured creditors of this company should be assessed at $405,498.74.

(8) Elan Trading Corporation Pty Ltd (ETC) - The respondent submitted on the basis of the information provided by Mr Clifton, that the unsecured creditors amounted to $10,010,511.76 (being the total shown in Mr Clifton's spreadsheet less an acknowledged deduction for the duplicated claim by Watkinson Legal, and adjusted to correct an arithmetical error in making that deduction). The applicant's position as to this company is as follows.

• A proof of debt for $2,243,000 was lodged by Mulpara Pty Ltd. As we understand it, Mulpara was the trustee of a unit trust which owned a building at 41 Currie Street, Adelaide. It refinanced the property and repaid, on behalf of ETC, a loan owing by ETC to a Hellier company. ETC then became indebted to Mulpara for the amount repaid to Hellier, being approximately $3.2 million, and Mulpara had security for this indebtedness. The applicant gave evidence that just before the liquidation of ETC, he and his wife agreed to transfer their 50% interest in the unit trust to interests associated with a Mr B Glaser, and this transaction also discharged the indebtedness of ETC to Mulpara. The applicant also said that following settlement of this transaction, Mr Glaser had agreed not to make any claim against ETC. The applicant referred in addition to certain proceedings in the Supreme Court of South Australia, and relied upon paragraph 1 of reasons for decision given by Judge Burley in those proceedings (exhibit A28, page 1). These reasons for decision recorded that the proceedings had been settled. ETC was not a party to the proceedings, but according to the applicant's evidence, he, his wife and Mr Forshaw were guarantors of ETC's debt to Mulpara, and the Supreme Court proceedings arose when Mulpara and another company sued them on the guarantee.

The applicant produced a letter and transfer of units, but as Mr Wilson pointed out, these did not constitute a release of ETC. Mr Wilson further submitted that if the applicant and his wife had guaranteed the entirety of ETC's liability to Mulpara, then ETC would no longer be liable to Mulpara, but would be liable to the applicant, his wife and Mr Forshaw, under the principle of subrogation provided for in s 17(1) of the Mercantile Law Act (SA) 1936. However, there is no evidence that the guarantors lodged a proof of debt in the liquidation of ETC, and the guarantee is not before us. We accordingly do not know whether it was for the full amount of the debt to Mulpara, or whether it included terms which excluded the guarantors' right of subrogation against ETC. During his evidence the applicant referred to the value of the building at 41 Currie Street, and said that the value of the security which ETC had provided to Mulpara exceeded its indebtedness to Mulpara. In any event, if (as the applicant says is the case) the indebtedness of ETC to Mulpara has been fully discharged, there would appear to be no basis for a claim by Mulpara against ETC. In the absence of evidence disputing these matters, we think that the claim by Mulpara should not be included in the unsecured creditors of ETC in our consideration as to whether the order for disqualifications is justified.

• Proofs of debt from growers associated with Perpetual Plantations of Australia amount to $134,848.07. The applicant did not identify which claims listed in the spreadsheet were from growers, but gave evidence that there is no basis on which the growers could make a claim against ETC, and that their only entitlement is against Perpetual Plantations of Australia. Mr Bolaffi, the auditor of Perpetual Plantations, did not suggest that the growers had any entitlement against ETC. We do not think that this claim should be included as a debt of ETC.
• The total amount of the proofs of debt includes a claim by Watkinson Legal against ETC of $130,246.56, being the same amount as was claimed against Perpetual Plantations of Australia Pty Ltd. The respondent has deducted this amount from the amount it asserts for ETC.
• A proof of debt for $3,133,638 was lodged by 13 Grenfell Street Pty Ltd. The applicant gave evidence that this company was the trustee of a property trust which owned the former ANZ Bank Building at 13 Grenfell Street, Adelaide, and that in October 2005, ETC agreed to surrender its interest in the property trust in return for an indemnity in respect of ETC's liability under a secured indebtedness to Bridgecorp Finance Pty Ltd, and a release of ETC and the applicant from any liability. A partially executed copy of the release was tendered, and whilst this provided that ETC remained liable for certain amounts less the value of the cancelled units (see exhibit A35, clauses 13 and 17), the applicant gave evidence as to the increased value of the building, and that the present unit holders have not suffered any loss, and the value of their equity in the trust has increased significantly with the increase in the value of the building. In these circumstances, we are not satisfied that the amount of the proof of debt lodged by 13 Grenfell Street Pty Ltd should be included in the total of the amount owing to the unsecured creditors of ETC.
• A proof of debt was lodged by Revenue SA for $439,136.28. The applicant gave evidence that this was stamp duty assessed on a transfer shares in Mulpara Pty Ltd from his wife to ETC, that the transfer was due to an error by an accountant, and that the transaction was reversed within 24 to 48 hours, when the error was discovered. The assessment was disputed by the applicant's lawyers. It appears that this transfer was evidenced by a return lodged with ASIC by the accountant concerned on behalf of Mulpara. We were subsequently told that Mulpara was a land rich company for the purposes of the (SA), and that the share transfer in question from the applicant's wife, in combination with earlier share transfers, led to the transfer of more than 50% of the shares in Mulpara, and so the Commissioner of Stamps issued an assessment of duty based on the value of the land owned by Mulpara. The applicant said further that the accountant lodged the form with ASIC to report the share transfer as part of an estate planning process, but that his wife had never executed any share transfer, and there was never any agreement for her to do so.

This evidence is somewhat at variance with the terms of the Notice of Objection lodged in 2004, which states that neither ETC nor Mulpara had been able to locate the books and records of Mulpara, that ETC "does not necessarily accept" that it acquired the shares in question, that ETC did not instruct its accountants to transfer the shares, and there was no need to do so (exhibit A34, pages 1 and 2). The Objection does not say that the transfer had been made by mistake, or that the transaction had been reversed when the error was realised.

The respondent pointed out that the Objection had been disallowed by the Treasurer, and contended accordingly that ETC was indebted for the amount of the stamp duty as at the date of liquidation (see exhibit R20). As mentioned in paragraph 95 above, we do not accept that it is appropriate for present purposes to take a "snapshot" of ETC's liabilities as at the date of liquidation, if there were reasonable prospects that the company was not liable for the amount referred to in a particular proof of debt.

On the face of it, we find it surprising that an accountant would lodge a return with ASIC that did not reflect a properly authorised and documented share transfer. We received no evidence from the accountant concerned, and the company's register of members was not tendered. On this state of the evidence, we are not satisfied that the proof of debt lodged by Revenue SA should be deducted, although if further information were available, it might be possible to pursue an appeal to the Supreme Court of South Australia against the disallowance of the objection.

• A proof of debt was lodged by Westpac Bank and Westpac Samoa for $3,520,000. This claim was the subject of an action in the Supreme Court of New South Wales against the applicant, his wife and Mr Forshaw. The applicant gave evidence that the claim is based on a guarantee given by ETC of loans made to the Vanuatu and Samoa companies in the Elan Group and that following mediation, the proceedings were settled for $850,000, and this amount has been paid in full. He also said that Westpac subsequently sold the assets over which the loans had been secured in Vanuatu and Samoa, and he understands that Westpac received sufficient funds to satisfy the amounts they are owed. It appears likely that the compromise with the applicant, his wife and Mr Forshaw would in any event release ETC, as a co-guarantor, from any further liability. We do not think that this amount should be included in the total of unsecured creditors of ETC.
• David Wong-Tung lodged a proof of debt for $260,000. He is also claiming the same amount against P.O.P.A. Pty Ltd. The claim is based on a share sale agreement. Contrary to earlier submissions made on behalf of the applicant, ETC is a party to the share sale agreement (see Annexure F to exhibit A26). Clause 11.5 of the agreement confers on Mr Wong-Tung, in somewhat garbled terms, an entitlement to "pursue all and any remedies, claims or actions which ... [Mr Wong-Tung] has or may have against ... [ETC]", but does not provide for ETC to be a guarantor of the obligation to pay the purchase price for the shares that are the subject of the agreement.

However, the applicant tendered a copy of the statement of claim and defence in proceedings issued by Mr Wong-Tung against the applicant and his wife in the District Court of South Australia based on a guarantee that they gave for payment of the price payable to him under the share sale agreement. The statement of claim in those proceedings also refers to a subsequent deed of variation dated 15 November 2005, whereby ETC was to pay the sum of $260,000, which is described as "the amount of the unpaid balance of the purchase price to support the obligations of POPA to pay the balance of the purchase price" (exhibit A30, page 2, paragraph 5.5). A copy of the proposed amended defence was also tendered. This asserts that Mr Wong-Tung did not pay for the shares on their issue to him, and had no title to the shares.

In this matter there is clear evidence before us from the statement of claim in the District Court action of the basis of the proof of debt that has been lodged. It is also clear that the claim is disputed, but we are not in the position to reach any conclusion as to the likely outcome of the proceedings. It may well be that this claim duplicates Mr Wong-Tung's primary claim against P.O.P.A. for the price of the shares, and that as the applicant asserts, the primary liability (if any) to Mr Wong-Tung would rest with P.O.P.A. However, P.O.P.A. is not part of the EG 12, and we are not satisfied that the amount of this proof of debt should necessarily be excluded from the total of the unsecured creditors of the EG 12.

We think it reasonable to assess the total liabilities of ETC as at the date of liquidation at $979,025.69, being the total amount of the proofs of debt less the amounts claimed by Mulpara, the growers, 13 Grenfell Street Pty Ltd, Westpac Bank and Westpac Samoa. If the disputed stamp duty assessment and the claim by Mr Wong-Tung are also excluded, the total liabilities of ETC would be further reduced to $279,889.41.

(9) Pegara Pty Ltd - The respondent does not assert that this company had any unsecured creditors as at the date of its liquidation.

I certify that the 145 preceding paragraphs are a true

copy of the reasons for the decision herein of Deputy President D G Jarvis and Senior Member R W Dunne,

and of the Schedule attached to those reasons for decision.

Date/s of Hearing 22, 23, 24, 25 and 26 February 2010

Solicitor for the Respondent Australian Securities & Investments Commission