Equally, it is made plain in that case that a director is not obliged to ignore totally, or necessarily act contrary to, personal interests in the discharge of duties. If the rule were otherwise, it would be extremely inconvenient and might completely stultify the operation of small companies, where the engagement of directors independent of the shareholders would be a practical impossibility.
198 Similarly, it would be extremely inconvenient if directors could not make loans (represented by loan accounts), especially to small companies, which find in such loans one of their most common sources of finance. Likewise, the provision of guarantees by directors, often supported by the giving of security over personal assets, is often a necessity for such companies to obtain finance facilities from banks and other outside sources. In my view, it is clear that such transactions are not prohibited by the rule.
199 The question then becomes whether a director who has entered into such a transaction is precluded from exercising the personal rights conferred, if that exercise would be in any way detrimental to the company. Such a ban would tend to have the same effect as an absolute prohibition of such transactions, since directors would be strongly discouraged from entering into such transactions, advantageous or even necessary to the company, if they could not enforce their personal rights. In my view, the law does not impose such an absolute ban on the exercise of purely personal rights by directors. Such enforcement cannot be regarded as an act of the director in the role of director, as opposed to an action in a purely personal capacity. It may be that the vindication of a personal right of the director, whether by the recovery of money or otherwise, cannot be regarded as obtaining a gain or benefit within the formulation of Deane J in the passage set out in [195] above. Equally, although it is clear that there is a situation of conflict, it cannot be regarded, in Sir Frederick Jordan's words, as taking advantage of the conflict. It was suggested that in the case of the notice of demand, there was liability because the notice encompassed some items of debt which were not established or as to which there was a bona fide dispute. But I do not think that that changed the situation in this case. I should add that I was not referred to, and was unable to find, any case in which a director was found in breach of duty in circumstances such as those alleged in the relevant parts of the cross claim. I am of opinion that there was no breach of fiduciary duty which the Lewis interests can rely on.
200 In the case of a breach of fiduciary duty, there is no doubt that in appropriate circumstances equitable compensation will be available as a remedy for that breach of duty: see Nocton v Lord Ashburton [1914] AC 932 at 952, 956 - 957; McKenzie v McDonald [1927] VLR 134 at 146; Catt v Marac Australia Ltd (1986) 9 NSWLR 639 at 659 - 660; Day v Mead [1987] 2 NZLR 443 at 460 - 461; Hill v Rose [1990] VR 129 at 143 - 144; Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 at 548, 570 - 571, 589 - 590; and see generally I E Davidson "The Equitable Remedy of Compensation" (1982) 13 MULR 349; W M C Gummow "Compensation for Breach of Fiduciary Duty" in T G Youdan (ed) Equity, Fiduciaries and Trusts (1989) 57; Meagher, Gummow and Lehane's Equity Doctrines and Remedies (4th ed, 2002) at [5-260]. One of the appropriate circumstances, is, of course, that it is demonstrated that the company has suffered a loss and that there is a causal connexion between that loss and the breach of duty. On the evidence before me, it was not established that there was any identified loss actually suffered by Nortex, nor that there was any causal connection between any loss suffered and the actions alleged to constitute breaches of duty. In the case of the notice of demand, the company was not wound up as a result of its service. There is no evidence that there were any costs incurred that were not dealt with in the proceedings ensuing from the notice of demand. In relation to the withdrawal of the guarantee, certainly there is evidence that, on the day following the withdrawal, the Bank withdrew Nortex's finance facility, attributing as its reason the withdrawal of the guarantee. Some time afterwards the company was wound up. However, there is no evidence as to the financial state of the company at the time of the withdrawal of the guarantee or the availability or unavailability to the company of alternative sources of finance. In those circumstances, it is impossible to find that the winding up was caused in the requisite way by the withdrawal of the guarantee. Equally, there is no evidence as to what, if any, losses the company suffered by reason of being wound up. For those reasons alone, these claims for equitable compensation would fail, even if a breach of duty were established.
201 In those circumstances, the claims made in the cross claim which have been agitated upon the trial before me must fail and there will be judgment for Lamru and Lamb in respect of them.
Appeals from liquidator's decisions on proofs of debt
202 The principles applicable on appeals from liquidators' rejections of proofs of debt were discussed in the High Court in Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 per Brennan and Dawson JJ at 340 - 341 as follows:
"If the liquidator, in performing his function of considering the admissibility of proofs of debt, decides to reject a proof of debt, the ordinary remedy of the person claiming to be admitted as a creditor is to apply to the court to reverse or modify the decision …… The proceedings thus instituted, though often referred to as an 'appeal' from the liquidator's decision to reject, are originating proceedings which the court hears de novo: In re Bird's Stores Pty Ltd (1931) 37 Arg LR 94; In re Kentwood Constructions Ltd [1960] 1 WLR 646; [1960] 2 All ER 655; In re Trepca Mines Ltd [1960] 1 WLR 1273; [1960] 3 All ER 304. In such a proceeding, a liquidator who defends his decision to reject a proof of debt is no longer acting in a quasi-judicial capacity; he is cast in the role of an adversary, defending the assets available for distribution against a liability which, according to the view he formed when acting quasi-judicially, is not legally enforceable. The liquidator may defend those assets against the creditor's claim on any ground on which the company might have defended the claim had it been sued by the creditor. If the liquidator relies on those special defences which allow him to go behind a judgment, an account stated, a covenant or an estoppel in order to ascertain the true liability of the company, he is none the less in the role of an adversary. The issue in the proceeding is whether the liability referred to in the proof of debt is a true liability of the company enforceable against it. The issue is contested between the putative creditor on the one hand and the liquidator on the other; the liquidator is a party litigant. And none the less so though the liquidator is required to act fairly in conducting the litigation."