Maher v Honeysett & Maher Electrical Contractors Pty Ltd

(b) orders for the specific performance of both those agreements;

(c) an order pursuant to ss.461(e), (k) or (c) of the Corporations Act 2001 (Cth) that HME be wound up on the just and equitable ground; and

(d) an order appointing a liquidator of HME. 5 Mr Honeysett sought leave of the court under s.237 of the Corporations Act to defend the proceedings on behalf of the company and to file a cross-claim. That application was heard by Brereton J on 15 August 2005. His Honour granted leave on 25 August 2005 (Maher v Honeysett & Maher Electrical Contractors [2005] NSWSC 859). 6 The cross-claim brought by HME, in its amended form of 1 June 2006, seeks the following relief as against Mr Maher, as first cross-defendant, and Demaher Pty Ltd ("Demaher"), a company owned and operated by Mr Maher, as second cross-defendant: (a) a declaration that Mr Maher has acted in breach of his fiduciary obligations in relation to HME, including the duty to act in good faith for the benefit of HME and a duty to act for proper purposes;

(b) an order that Mr Maher pay equitable damages to HME;

(c) an order for an account in relation to profits made by Mr Maher or Demaher in consequence of the breach of fiduciary obligations;

(d) a declaration that each of Mr Maher and Demaher hold any profits as constructive trustee in favour of HME; and

(e) a declaration that the November and December agreements were procured by duress or unconscionable conduct on the part of Mr Maher and are void and unenforceable thereby. 7 The case thus falls into two main parts. The first involves questions about the validity and construction of the November agreement and the December agreement and an inquiry into the facts that are said to affect Mr Honeysett's consent to those agreements. The second involves an inquiry into Mr Maher's conduct in connection with and subsequent to his decision to leave HME, and assessment of that conduct in the context of his duties as director of HME. 8 The questions about the agreements of 20 November 2003 and 15 December 2003 raise the following issues: (a) whether each agreement is sufficiently certain in its terms and intent to create legal relations so as to be enforceable;

(b) whether each agreement is supported by consideration so as to be enforceable;

(c) whether HME is a party to each agreement and, consequently, whether it is bound by either;

(d) whether Mr Honeysett was acting under a special disadvantage or disability when he entered into the agreements and, if so, whether Mr Maher took advantage of such disability so as to render the agreements unenforceable by reason of their having been assented to as a result of duress or unconscionable conduct; and

(e) whether Mr Honeysett is prevented from challenging the operation of each agreement by reason of laches or acquiescence. 9 In relation to the second part of the case, the following factual allegations are made in support of the contention that Mr Maher breached his duty to HME: (a) the withdrawal, on 11 November 2003, of Mr Maher's guarantee to Westpac Banking Corporation ("Westpac") of HME's indebtedness, resulting in HME's accounts being assigned the status of "post credits only";

(b) Mr Maher's failure to provide an alternative arrangement to Westpac so as to cause removal of the "post credits only" status;

(c) the taking of steps by Mr Maher to prevent HME's employees from providing their services to HME over the period from 6 November to 24 November 2003;

(d) the alleged withholding of the issue of various invoices to clients of HME, thereby adversely affecting the company's cashflow;

(e) the taking of preparatory steps to establish a company in competition with HME and the misappropriation of the goodwill and existing customer base of HME;

(f) the commencement, from 19 December 2003, of the trading operations of Demaher Pty Ltd, utilizing the existing customer base of HME. 10 I begin with the contractual aspects of the case. The two documents on which Mr Maher relies in pursuing his specific performance claims are said by him to embody contracts between himself and Mr Honeysett as to things to be done by them towards cessation of HME's business and the disposal and division of its assets. Each document is brief. 11 The document dated 20 November 2003 is as follows: "Agreement Between Mark William Honeysett and David John Maher 1. The undersigned agree that both parties will not take legal action towards the other party for company or personel [sic] issues involved or arising from the years of trading due to the actions of the directors or employees of Honeysett & Maher Electrical Contractors Pty Ltd (HME).

2. HME to cease/stop trading on 19th December, 2003.

3. Sale of factory, factory to be valued and sold at end of payments to creditors or with 60 days written notice by either party after 1st January, 2004. If the creditors required to be paid exceed the income shown on HME debtors list, the factory will then be able to be used by either party clear their half of the creditors/cash management - super/any other outstanding bills liable to HME.

4. Complete all contract works, no new contract works to be taken on and all service work to be completed and billed by HME at agreed finish date.

6. All chlorguard material (ie, power supplies, frames, ATI gear, etc) will be acquired by David Maher at half the cost price paid by HME, if David Maher continues chlorguard service work.

9. Purchases relating to material for work in progress or service work only. (No new tools, etc.)

10. HME to guarantee employee's wages and entitlements until 19th December, 2003.

11. All equipment/tools/phones and material to be sold/split at agreed value.

13. Clients need to be informed by letter re: HME status and whom they can contact for work after the agreed date.

14. Creditors need a letter on the 19th December, 2003 from HME stating that no more trading will take place, there for [sic] no liability by directors.

15. Both the undersigned have the right to establish contact with existing HME employees, existing customers and suppliers. This was agreed to take place outside the trading hours of HME (7.00am - 3.30pm) for most meetings/talks.

16. All jobs, material and labour requirements/bookings need to be confirmed through Kevin Annakin the office manager.

(sgd) (sgd) Mark William Honeysett David John Maher

Signed at 9/10 Ferngrove Place, Chester Hill, NSW 2162 ."

12 The document of 15 December 2003 is as follows: "Agreement between Mark William Honeysett & David John Maher Dated 15.12.2003 FACTORY I Mark William Honeysett agree to sell his half share of the factory unit located at Unit 9 No.10 Ferngrove Place Chester Hill 2162 to David John Maher or any other person or company nominated by David John Maher for a [sic] agreed amount of $170,000.00 (One Hundred & Seventy Thousand dollars Australian) Time frame for starting contacts between parties will be as soon as the unit's title is handed over from Westpac to Mark William Honeysett & David John Maher or David John Maher or any other person or company nominated by David John Maher can paid Westpac amount needed to release the deeds (title) and take that monies off contract price. Plus I agree that David John Maher or any other person or company nominated by David John Maher for a agree [sic] amount of $200.00 per week to lease the above premises until the title has been signed over as above for an agreed amount.

VEHICLES Transfer to begin as of the 19.12.2003. I Mark William Honeysett & David John Maher agree to that Demaher Pty Ltd or any other person or company nominated by David John Maher repaid all existing leases over three motor vehicles plus all running costs etc and paid all stamp duty &any other charges in transferring vehicles (Personal & Company's names etc) when signed over from Honeysett & Maher Electrical Pty Ltd. Rego VXL 920 Mercedes Van. Rego XVZ 341 Ford Ute with XL Body Rego XTA 696 Ford Ute normal tray back

I Mark William Honeysett & David John Maher agree to sign over two vehicles owned by Honeysett & Maher. Honeysett & Maher Electrical Pty Ltd to paid all stamp duty & any other charges in transferring vehicles to names agreed to on transfer date (Personal & Company's names etc.) Rego VTS 074 to Mark William Honeysett or any other person or company nominated by Mark William Honeysett. Rego WVA 375 to David John Maher or any other person or company nominated by David John Maher.

TOOLS & MATERIALS Transfer to begin as of the 19.12.2003. I Mark William Honeysett & David John Maher agree to sign over all tools (other than personal hand tools and ladders as agreed) plus all material to David John Maher or any other person or company nominated by David John Maher that is under Honeysett & Maher Electrical Pty Ltd control covering but not limited to all contends [sic] of unit 9 No. 10 Ferngrove Place Chester Hill, tools & material located in vehicles rego VXL 920, XVZ 341, XTA 696 plus other tools & material located outside these areas, work sites etc. David John Maher or any other persons or company nominated by David John Maher agrees to purchase the above for agreed amount of $15,000.00 with funds to go to Honeysett & Maher Electrical Pty Ltd.

CHLORGUARD MATERIAL Transfer to begin as of the 19.12.2003 if David John Maher or any other person or company nominated by David John Maher has an agreement with Orica Vic. I Mark William Honeysett & David John Maher agree to sign over all Chlorguard material at a agreed cost of $30,000.00 to Honeysett & Maher Electrical Pty. David John Maher or any other person or company nominated by David John Maher agrees to purchase the above for agreed amount funds to go to Honeysett & Maher Electrical Pty Ltd.

PHONES Transfer to begin as of the 19.12.2003. OFFICE: Honeysett & Maher Electrical Pty Ltd to pay out any monies owing on phones then I Mark William Honeysett and David John Maher agree to sign over all Honeysett & Maher Electrical Pty Ltd office phone numbers to David John Maher or any other person or company nominated by David John Maher. They include phone numbers of the Fax 9743 8377 & Internet 9743 8400 plus three incoming lines 9645 3350, 9645 3416, 9645 3601.

MOBILES: Honeysett & Maher Electrical Pty Ltd to pay out any monies owing on phones then I Mark William Honeysett and I David John Maher agree to sign over four nokia mobile phones & there [sic] numbers to each other or any other person or company nominated by Mark William Honeysett & David John Maher. Mobile numbers Mark William Honeysett 0418 453 054, 0419 609 634, 0418 498 616 Mobile numbers David John Maher 0418 678 839, 0414 382 005, 0417 662 185, 0438 609 630

INTERNET & EMAIL ADDRESS Internet (Ihug) to be cancelled 31.12.2003 (to be done by Mark Honeysett account holder)

POST OFFICE BOX Transfer to begin as of the 19.12.2003. I Mark William Honeysett agree to sign over Honeysett & Maher's Electrical Pty Ltd PO Box 349 at Chester Hill NSW to David John Maher or any other person or company nominated by David John Maher. I Mark William Honeysett & David John Maher agree to the above agreement signed at Unit 9/10 Ferngrove Place Chester Hill on this date 15.12.2003.

Mark William Honeysett David John Maher Director Honeysett & Maher Director Honeysett & Maher (sgd) (sgd)

Kevin Annakin Witness (sgd)" 13 The amended originating process seeks specific performance of both agreements in their entirety. However, Mr Fernon of counsel, who appeared for Mr Maher, indicated in opening that, as at the date of the hearing, almost all of the obligations contained in both agreements had in fact already been performed, or else had ceased to be relevant. The only outstanding issue pressed by Mr Maher is that concerning the transfer of certain motor vehicles from the ownership of HME to Demaher, this being an obligation said to be contained in clause 8 of the 20 November 2003 document and clause 2 of the 15 December 2003 document. 14 The vehicles the subject of dispute are only those three listed in the first paragraph of clause 2 of the December document as having vehicle registration numbers VXL 920, XVZ 341 and XTA 696. The remaining two vehicles were used in a personal capacity by Mr Maher and Mr Honeysett in the course of HME's active trading. It appears that by consent of the parties reached before commencement of these proceedings in apparent pursuance of that clause, ownership of the vehicles registered as VTS 074 and WVA 375 has passed to Mr Honeysett and Mr Maher respectively. 15 The evidence before the court is that the disputed vehicles have been in the possession of Mr Maher or Demaher since 19 December 2003. In addition, I am satisfied, for reasons appearing at pp.436 to 438 of the transcript (which need not be repeated here) that Mr Maher paid $40,000 to HME which in turn paid an equivalent amount to the lessor of the vehicles, with the result that Mr Maher (or Demaher) provided consideration for the transfer of the vehicles. 16 It is clear that clause 2 of the December document covers in greater detail and with more particularity the matter reflected in clause 8 of the November document. It follows that specific performance of the provision of the later agreement would put Mr Maher in the position he seeks. I proceed nevertheless to consider the effect of both documents. 17 Mr Sirtes of counsel, who appeared for the Honeysett interests (including Mr Honeysett as derivative claimant on behalf of HME), submitted that the November document should be held, in a contractual sense, to be void for want of certainty, being "entirely constituted by clauses which are deficient of essential terms" and should instead be characterised, at its highest, as a "to-do list". He criticised each clause on several bases. With regard to clause 8, he observed that it does not specify which leases are to be paid out, who is to pay them out, a timetable for any such payments, the party to whom the payments are to be made or upon what other terms the payments are to be made; nor does it specify who is to "talk to Westpac", by when, or what the subject matter of that conversation is to be. It also does not specify what is to happen to the subjects of the lease upon their having been paid out. These deficiencies, it is said, render the clause "incapable of comprehension" and therefore incapable of specific performance. 18 Mr Fernon submitted that the document had been prepared by the two shareholders and directors of HME and its office manager of nine years' standing (Mr Kevin Annakin) and that it must be accepted that the two principals had identified with sufficient precision for their own purposes the essential matters requiring attention. He pointed out that there had been no complaint by Mr Honeysett about any essential matter that had not been dealt with by that agreement or any notice given by him of any perceived uncertainty in its terms. 19 There is force in Mr Sirtes' submission, so far as the precise words are concerned, but I would not consider those factors to deprive the clause of all meaning whatsoever, as he contends. The long-settled approach of the courts, following what was said by Lord Wright in Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 at p.514, is to interpret the language used broadly and fairly, particularly when the document in question is drafted by lay persons or business persons in the course of their dealings in relation to matters with which both (or all) are familiar. What may, to an outsider, appear to lack precision may very well be perfectly intelligible and comprehensively complete to the particular insiders whose subject matter is in issue. In Hammond v Vam Ltd [1972] 2 NSWLR 16, Sugerman P observed (at p.18) that it is the duty of the courts to put a "fair meaning" on the words unless it is "utterly impossible" to do so. His Honour there followed the well-known statement of Barwick CJ in Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 at p.437 that "… a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which [the court]… decides is its proper construction: and the court… will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it… So long as the language employed by the parties… is not 'so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention', the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or intention, be resolved." 20 This is not a situation in which the court is unable to ascertain the intention of the parties. Although the language employed is cursory, it is still possible to place a meaningful construction on it in the particular context. The clause really contains one primary operative obligation, that is, an obligation on some person, natural or corporate, to pay out certain leases. The factors said to be lacking are the specification of the leases in question, the identity of the payor and payee, and the time by which payment had to be effected. 21 It may, in the particular context, be safely be inferred that the very fact that the clause does not specify which leases are to be paid out meant that the parties were in agreement about which leases were being referred to. On the facts, there are no leases in question other than those relating to vehicles - for example, leases over plant, premises or any other equipment - to which the reference could pertain. The words "Talk to Westpac" appearing immediately afterwards identify the subject matter with further specificity. The evidence before the court is that three vehicles owned by HME were encumbered by financial arrangements with Westpac and one was encumbered by an arrangement with AGC, a wholly-owned subsidiary of Westpac at the particular time. There can be no doubt that it is only, and all of, the three vehicles leased from the Westpac group to which the clause pertains. That the subject matter is not some subset of those three vehicles is, again, evident from the absence of mention of some more specific arrangement. 22 The identification of the leases necessarily carries with it the identification of the payee, that is, Westpac (or the Westpac group). The identity of the payor must be HME in the first instance since it was the lessee and the party in a contractual relationship with each lessor giving it the standing or ability to "pay out". 23 Insofar as the words "Talk to Westpac" also appear as an imperative term in the clause, it is obvious from the context that the intended substance of that conversation with Westpac could only relate to the paying out of those leases and was regarded by the parties as being simply a necessary or adjunct step towards that outcome rather than an obligation in itself. Mr Maher deposes that, in circumstances to be examined in detail presently, the drafting of that clause occurred after business hours on 20 November 2003 and that it was therefore not possible to consult the bank at that time in relation to the current state of the leases. He says that he said to Mr Honeysett words to the effect of "Let's see the bank tomorrow and talk to Ray" (this being a reference to Ray Dawson, the bank manager in charge of HME's accounts) and that Mr Honeysett agreed that this was a good idea. In cross-examination Mr Maher gave similar evidence to the effect that Mr Honeysett had agreed that it would be necessary to telephone the bank in order to confirm the "pay-out figures" before being able to proceed. Because, as will be seen, Mr Honeysett's evidence is that he is unable to recall most of what happened on the relevant occasion, there is no reason to doubt that general state of affairs. The absence of specificity as to who was to actually talk to Westpac is not material. 24 The remaining issue is whether the absence of a timetable for the repayments constitutes the absence of an essential term. There is some ambiguity as to what is "essential" in this context. In Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 Ipp J cited the judgment of Lloyd LJ in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 (at p.619) in which it was said: "It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word 'essential' in that context is ambiguous. If by 'essential' one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by 'essential' one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by 'essential' one means only a term which the court regards as important as opposed to a term which the court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether they are important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, 'the masters of their contractual fate'. Of course, the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called 'heads of agreement'." 25 The clause clearly contemplates further details being obtained before the logistics of the pay-outs could be effected. Therefore, any timetable would be necessarily dependent upon the consultation with the bank. It does not seem to me that its absence in this clause should be regarded as "essential" in a way so as to void the clause of content altogether. The truly important term is that the parties agree that HME is to bear the cost of the lease repayments. Such an agreement would not be altered by deferral of the question of when that payment was to occur. I do not think that in these circumstances the clause should be seen as an unenforceable "agreement to agree" in the sense contemplated by the so-called third class in Masters v Cameron (1954) 91 CLR 353. 26 It should be noted that the Honeysett parties also rely on the fact that HME is not a signatory to either the November document or the December document and cannot be bound by it to perform any obligations arising therefrom. It is true, of course, that the company could not be bound as a contracting party in its own right, but the situation is specific to these facts. Mr Maher and Mr Honeysett, as the named contracting parties in each case, are the only shareholders and directors of the company in question. To that extent, Mr Maher and Mr Honeysett may be seen to have contracted with each other to exercise their individual powers as directors to wind up the business of the company in a manner consistent with their expressed decision as the only shareholders to divide and dispose of the capital of the company between them. The company would be bound not as a direct function of the contract but by a decision of its board of directors. It could not do otherwise. 27 Mr Fernon nevertheless submitted that the contracts should be read as including HME as a party, albeit one "not expressly named". He submitted that each of Mr Maher and Mr Honeysett was acting in his capacity as a director of HME in making each of the agreements and thereby had authority to bind it. That concept is really only useful in situations where a company is contracting with some other external person or entity. It is not meaningful to speak of a company contracting with itself to do certain things. Nor is it correct to conceive of a company's obligations to comply with decisions of its directors in contractual terms. Those "obligations" - or, more accurately, the legal consequences of controllers' actions - arise separately from the operation of principles of company law. It is accordingly not necessary to attempt to find some basis on which HME can be seen to be a contracting party. 28 Mr Fernon submitted that clause 2 of the December document does nothing more than flesh out and add definition to the arrangement contained in clause 8 of the November document and that it is not affected by any ambiguity. Mr Sirtes submitted that the December clause should be held incapable of specific performance because unsupported by consideration and, as a matter of construction, imposes no personal obligation on Mr Honeysett to do anything. Instead, it is said, the clause constitutes some kind of an acknowledgement that Mr Maher or a nominee specified by him will undertake to repay the leases and associated costs of the vehicles in the event that the vehicles are "signed over" from the ownership of HME to Demaher. 29 A further objection is taken on the grounds that the parties to the agreement are improperly defined. It is said that for the purposes of this particular clause, the promisor is "presumably" HME, the promisee is "presumably" Demaher or "its nominee", and that Demaher is "presumably… in truth" seeking specific performance of "the obligation contained in the clause". That can only refer to an apparent obligation upon HME to transfer the vehicles to Demaher which emerges from the phrases "Transfer to begin as of the 19.12.2003" and "Demaher Pty Ltd… repaid [sic] all existing leases… & any other charges in transferring vehicles… when signed over from Honeysett & Maher Electrical Pty Ltd". It was not argued that there was any ambiguity inherent in the use of the word "when" in the final part of the first paragraph and so I take the content of that obligation to be agreed, in that it denotes a definite and intended event rather than a condition precedent. Mr Sirtes says, however, that because Demaher is not a party to the contract, Mr Maher, having signed in his capacity as a director of HME, cannot seek specific performance on Demaher's behalf of what is really an obligation owed to a third party. 30 These submissions may be dealt with in the following manner. The clause expresses two ostensible "obligations", one being that of HME to transfer the vehicles to Demaher and the other of Demaher to pay the associated costs. However, since neither HME nor Demaher is a party, neither can be said to be the promisor or promisee. The promise being sued on is, in reality, one given to Mr Maher by Mr Honeysett to join in such action as is needed to cause HME to transfer the vehicles to Demaher or another nominee of Mr Maher or to acquiesce in such a transfer. The agreement is again one between the two persons constituting the whole of the membership and board of directors of HME and defines a course of conduct which they will cause to be adopted by and in relation to that company and its property. As consideration for Mr Honeysett's promise, Mr Maher promised to Mr Honeysett to cause Demaher, a company under his control (or "any other person or company" nominated by him, within the obvious limits defined by his ability to control such an agent), to pay the costs of the transfer. Consideration having therefore moved from Mr Maher, it is not material to the operation of the contract that he signed as a director of Honeysett & Maher (a status which could not, merely because "specific", be exclusive of all other offices he might have held) or that the benefit in the form of the vehicles themselves accrues to a third party. Mr Maher is entitled to sue because he is the true promisee in these circumstances. 31 It is also said that there is a legal "impossibility of performance" inherent in the clause because it contemplates the repayment of the moneys only after the vehicles are "signed over", but as a matter of the ordinary operation of transfer of leases, no "signing over" of the vehicles could occur until the leases had first been paid out. The correct interpretation of the clause again turns on the use of the word "when" in the final sentence of the first paragraph. I do not think that "when signed over" should necessarily be read as "after signing over has occurred" in that context. The word "when" merely denotes an event occurring at the same general time as another event. It is not straining the words of the clause to construe them as meaning "when the vehicles are to be signed over". Given that the "signing over" of the vehicles would not be an instantaneous event but a process taking some measurable amount of time, that would also not be inconsistent with the repayments actually being made before the transfer was effected, as legally required, but within that same general period of time. Nor is the mere fact that the words "signed over" are in the past tense significant, particularly when the clause suffers generally from what are conceded to be non-fatal errors of grammar and syntax. 32 In summary, therefore, I am not satisfied that any of the arguments based on the terms of the clauses regarding the leased vehicles, the absence of any necessary party or the absence of consideration acts as a barrier to the entitlement of Mr Maher to have the court's assistance in compelling compliance by Mr Honeysett with the requirements of those clauses. 33 Having reached these conclusions about the provisions of the agreements as they stand, I must turn to the questions of duress and unconscionable conduct and the contentions on behalf of Mr Honeysett that the agreements are vitiated or made subject to avoidance by such matters. 34 In approaching those matters, I should refer to some further background. It is clear that it was Mr Maher who initiated moves towards separation and the scheme of separation eventually set out in the documents of 20 November 2003 and 15 December 2003. His proposal that HME expand into the crane hire business and Mr Honeysett's negative attitude to that were the catalyst. Mr Maher raised the possibility based on crane hire with Mr Honeysett in September 2003. Mr Honeysett, according to Mr Maher, said that Mr Maher should speak to Mr Gleeson about it. Mr Gleeson, a solicitor, is the brother of Mrs Honeysett. Mr Maher raised the matter with Mr Gleeson (with whom he was well acquainted) and gave him a number of documents. Those are mentioned in a letter of 19 September 2003 sent by Mr Gleeson to Mr Maher. The letter is of almost nine pages and refers in detail to numerous matters relevant to the proposal Mr Maher wished to see HME pursue. The letter concluded with a general observation that there were a number of matters still requiring consideration in relation to the proposal. 35 Mr Gleeson wrote a second letter to Mr Maher on 29 September 2003. It commented on further documents submitted by Mr Maher. The letter concluded with generally negative comments about the usefulness of a process in which Mr Gleeson was asked to comment on drafts prepared by Mr Maher rather than being instructed to draft the documents himself. Mr Gleeson invited Mr Maher to contact him if he wanted to "talk about the conceptual issues" and said, "but otherwise I really think that I have taken things as far as I can because I am sure that continuing to have me involved in a critiquing fashion is bound to end in tears". 36 There was apparently no further contact with Mr Gleeson about the matter but Mr Maher continued to press on Mr Honeysett his desire to have HME branch out into crane hire. Mr Maher says that Mr Honeysett's only response was that he should speak to Mr Gleeson. That produced in Mr Maher a sense of frustration. He told Mr Honeysett that, as Mr Honeysett would not commit to the cranes proposal, he (Mr Maher) was going to "leave the company" and "go out on my own". This happened in the early days of October 2003. Mr Honeysett apparently interpreted Mr Maher's statements to mean that the HME business would be "closing down". He became worried about the implications of that, particularly because he had let Mr Maher develop greater day-to-day contact with the major customer, Orica. He was worried that "without the business structure we had developed at HME, I would be just thrown on the scrap heap at forty years of age". Mr Honeysett had been on extended leave attending to house renovations. He says that his conversations with Mr Maher caused him to decide to go back to work on 7 October 2003, which he did. Until then, he had been away from the day-to-day activities of HME for some months. 37 It was in the context that had developed in this way from September 2003 that Mr Maher had his solicitors, Mills Cameron Gallagher, write to Mr Gleeson on 14 October 2003. After stating that they acted for Mr Maher and that they understood Mr Gleeson to act for Mr Honeysett, Mills Cameron Gallagher conveyed on Mr Maher's behalf a request that a meeting take place between Mr Honeysett and Mr Maher (and the respective solicitors) "to discuss our client's proposal to leave the Company". Mr Gleeson replied on 15 October 2003 saying that Mr Honeysett was "agreeable to such a meeting occurring" and asking for an outline, in advance, of Mr Maher's proposal referred to in the Mills Cameron Gallagher letter. The letter concluded: "In the meantime, may I remind your client, through you, that as each of the respective clients are directors, then each owe the company fiduciary obligations. It is being reported to my client by customers that your client is telling them, in words to the effect, that Honeysett & Maher is finished. You would appreciate that such comments are, to say the least, premature and certainly are not in the interest of the company as a whole." 38 Mills Cameron Gallagher wrote on 16 October 2003 giving an outline of Mr Maher's proposal. It was, in essence, that HME simply cease operations and go out of business: "(a) That all existing Contracts with Honeysett & Maher Electrical Contractors be completed by Honeysett & Maher Electrical Contractors.

(b) That the Office Manager for Honeysett & Maher Electrical Contractors be engaged to collect all debts due to the Company and pay all creditors and then liquidate the Company after payment of all expenses and divide all assets of the Company between the shareholders equally.

(c) That from the date of agreement, each of the shareholders be free to form a new business.

(d) That each shareholder take such action as is necessary and proper to ensure completion of all outstanding contracts." 39 It seems, however, that this letter had not reached Mr Gleeson by 22 October 2003 since, on that date, he wrote to Mills Cameron Gallagher again requesting an outline of Mr Maher's proposal. On 23 October, Mills Cameron Gallagher sent Mr Gleeson a copy of the 16 October letter and asked what would be a suitable date for the meeting; but then, in a subsequent letter of the same date (23 October), Mills Cameron Gallagher said that Mr Maher did not wish to proceed with a meeting and believed that since Mr Gleeson had acted for Mr Maher in the past "there may be a potential conflict of interest". Mr Gleeson responded on 28 October saying, in relation to the first matter, "What does your client therefore wish to do?"; and countering the suggestion of possible conflict of interest. 40 Thereafter, on 4 November 2003, Mr Gleeson wrote an apparently unsolicited letter to Mills Cameron Gallagher commenting on the proposal briefly outlined in that firm's letter of 16 October. He commented that the effect of the proposal would be to destroy HME's goodwill and that, to the extent that any new business established by Mr Maher involved existing HME clients, the arrangement "would deprive my client of his entitlements to a share of the goodwill of the company". He added that, since the trading position was strong, sale as a going concern appeared feasible. Mr Gleeson then again referred to fiduciary duties: "As both our clients have fiduciary obligations to the company, it would seem that the taking of any action which would have the effect of destroying the property of the company would be an action which is not in the best interests of the members as a whole. The primary role of the directors remain to act in the best interests of the company and this would include an obligation to preserve not destroy, its assets." 41 At one point in October or early November 2003, Mr Maher offered Mr Honeysett $50,000 "out of the goodness of my heart" to agree to a course generally in line with his proposal as outlined by the solicitors. Mr Honeysett did not accept the offer. By early October 2003, Mr Maher had formed his own company, Demaher. He had also spoken to some HME clients about the possibility that he would leave HME. 42 Several events in November 2003 are of significance, particularly bearing in mind that, by the beginning of that month, discussions on separation had reached a stalemate. The correspondence between solicitors had ceased. Mr Honeysett had rejected the proposal involving an additional $50,000 to him. On 6 November 2003, Mr Maher gave instructions that the employed electricians were not to attend work. Those instructions were relayed to them by Mr Annakin, the office manager, at the request of Mr Maher. On that same day, Mr Annakin saw his doctor and went on "stress leave". He was absent (in the sense of not attending the office on a daily basis) from 6 to 23 November but was in contact by telephone during that period. Mr Annakin, it may be noted, was friendly with and had loyalities to each of Mr Maher and Mr Honeysett. It is understandable that differences between them were stressful to him. His own future was involved in what was happening. 43 On 11 November 2003, Mr Maher gave Westpac notice of termination of his guarantee of HME's indebtedness. That caused Westpac to put the HME accounts on to a "post credits only" basis, the practical result being that HME could not draw cheques with any expectation that the bank would pay them. The accounts were effectively frozen. 44 The third matter to be mentioned is that, by mid-November 2003, there had been no invoicing of customers since the preceding September. 45 The first of the written agreements was signed on 20 November 2003. Within a very short time thereafter, invoicing of customers re-commenced (a total of some $53,000 was rendered), the employees returned to work and Mr Maher's guarantee to Westpac was reinstated. This sequence of events presents the clear possibility that Mr Maher took his original action in relation to each of these three matters (or, at least, in relation to the bank guarantee and the employees) in order to put pressure on Mr Honeysett. Whether that possibility should be accepted will be determined in large measure by inquiring whether Mr Maher's actions were a logical response to some particular stimulus - in other words, whether there was good reason for him to act as he did, unrelated to the exertion of pressure on Mr Honeysett. 46 The apparently odd decision to send the employees home is said by Mr Maher to have resulted from a belief that workers compensation insurance was no longer in place (there is also evidence of some undefined "OS&H issue" having been raised but, in the end, it appears to be the absence of insurance that was the pretext). Mr Maher was informed of this by Mr Annakin. He said in evidence that he did not want HME or its principals to be "at risk of prosecution or claims" while the insurance "was in doubt". The source of the apprehension about absence of workers compensation cover was apparently non-payment of a premium instalment. Mr Annakin had prepared the necessary cheque for signature on 27 October, that is, before he went on stress leave on 6 November. The cheque needed the signatures of any two of Mr Maher, Mr Honeysett and Mrs Honeysett. The practice within HME was for cheques prepared by Mr Annakin to be left in the office so that two signatories could sign as and when they went there (or Mr Honeysett could take them home for signature by Mrs Honeysett). Mr Annakin did not actively solicit signatures, beyond leaving the prepared cheques in the agreed place. 47 So far as Mr Annakin was aware, the cheque prepared on 27 October 2003 had not been signed when his leave began on 6 November 2003. Mr Annakin says that, on that day, he was of the opinion that non-payment of the premium instalment due meant that there was no cover and so informed Mr Maher. Mr Maher, in turn, told him to inform the employees not to turn up for work as from that date. Mr Annakin's precise evidence was: "I told them [the employees] that David [Maher] does not want us at work. He will ring us when we are required back at work." 48 This was a very odd state of affairs. According to Mr Annakin, the cheque for the premium, if signed by two signatories (being any two of Mr Maher, Mr Honeysett and Mrs Honeysett) and presented would have been paid by the bank. But that, of course, was subject to the effect of the "post credits only" status of the accounts that commenced on 11 November 2003. Mr Honeysett, who had returned to work on 7 October and was working on electrical work for the client Mullaly, continued that work despite the perceived problem arising from the non-payment of the workers compensation insurance. And the immediate cause of the problem, at least from 11 November, was the freezing of the bank account - something that flowed directly from Mr Maher's withdrawal of his guarantee. 49 Mr Maher accepted in cross-examination that, even though the HME bank account had been frozen on 11 November 2003, there was still a way in which the perceived workers compensation insurance problem could have been solved - and, moreover, solved by him unilaterally. I quote from his cross-examination: "Q. After November there was not much he could do because you had taken steps to stop withdrawals on any of the accounts? A. What date?

Q. After 11 November? A. Yes, after that I took away my personal guarantees but then again I would have paid out of my personal money if I had to.

Q. But again, just to be quite clear about this, you didn't? A. No one asked me to, no.

Q. You were the co-owner of this business, weren't you? A. Yes.

Q. So who were you expecting was going to ask you to do so, if it wasn't you doing it yourself for the purposes of your own company? A. No - I guess I was just waiting to resolve with Mark what was happening so we could get it done and see what was happening with the bank accounts." 50 The reasonable inference - and the inference I draw - is that although, in reality, Mr Annakin was mistaken in the view that non-payment of the premium caused the insurance to be no longer operative, Mr Maher, as the director to whom Mr Annakin relayed the perceived problem, seized on it as a means of suspending the company's operations, so far as employees' activities were concerned; that this was, for Mr Maher, after 11 November, an unexpected yet welcome by-product of his action in giving the bank notice of termination of his guarantee; and that Mr Maher deliberately preferred to see HME's operations suspended rather than reinstating his guarantee or taking other available steps to create a situation in which the premium could be paid. Mr Maher conceded in cross-examination that, at least before the bank account was frozen, he could have asked Mr Honeysett to sign a cheque for the insurance premium but was not prepared to do so. 51 This leads to a consideration of the rationale for Mr Maher's giving the bank notice of termination of his guarantee. Guarantees by both Mr Maher and Mr Honeysett had been in place for a long time. Each must have known that the guarantees were relied upon by the bank in continuing HME's facilities. Mr Maher's evidence is that he gave notice of termination of his guarantee because of a desire to see Mrs Honeysett removed as one of the three cheque signatories in circumstances where any two of the three could sign. He said that, on 10 November 2003, he raised with Mr Honeysett the point that Mr Honeysett and Mrs Honeysett together could "take the money out of the company" and asked that Mrs Honeysett be removed as a signatory, to which Mr Honeysett replied, "No don't you trust me". Mr Maher says that his response to this was: "No not while this is going on. I am going to the bank to take away my personal guarantee." 52 It is Mr Honeysett's evidence, however, that the action Mr Maher took in relation to the bank was taken without consultation with him. He had no recollection of Mr Maher raising with him a concern about the possibility that, while Mrs Honeysett remained a cheque signatory, Mr Honeysett and Mrs Honeysett together might clear out the bank account. 53 Mr Maher was challenged in cross-examination about the plausibility of this supposed concern: "Q. But he had never done anything like that, had he? A. Like I said, I hope not.

Q. You had no knowledge he had done anything like that? A. How would I even, I just signed over the bank.

HIS HONOUR: Q. You either had knowledge, or you didn't have knowledge of his having done anything wrong so far as withdrawing money was concerned, did you have knowledge of his having done something wrong or did you not have knowledge of his having done something wrong, it is an easy question? A. Like I say, I say hope not and I would say no, that I believe Mark wouldn't do that to me, but now I had to go, he wouldn't take Deb's signature off." 54 Mr Maher thus made it perfectly clear that he had no real or reasonable apprehension that Mr Honeysett and Mrs Honeysett, acting together behind his back, would extract money from the company. They had been in business together for some fourteen years and there had never been any suggestion whatsoever of any predisposition of Mr Honeysett in that respect. Mr Maher had taken extended leave in 2001-2002, leaving all cheque signing in the hands of Mr Honeysett and Mrs Honeysett. I do not accept that, in November 2003, he suddenly developed a mistrust of two people who had previously been trusted by him and had respected that trust. His desire to see Mrs Honeysett removed as a signatory had no objectively rational basis, in the sense of being a rational reaction to some threat or other state of affairs. 55 After Mr Maher had withdrawn his guarantee, Mr Gleeson contacted the bank in an attempt to have the HME accounts restored to operative status. He said in evidence that he had been asked by Mrs Honeysett, not Mr Honeysett, to do this. The bank declined to act while Mr Maher's guarantee was not available. Mr Honeysett gave evidence that, in the days following termination of the guarantee, Mr Maher said to him: "It will all go to shit and you will lose your house."

"I will have the boys over here working earning money and you'll have nothing."

"You will both be in a hole but me and the boys will have work and get out of it." 56 Statements to this effect are consistent with an approach taken by Mr Maher in March 2006 in relation to these proceedings. In a letter written by him and dated 23 March 2006, Mr Maher told Mr Honeysett that he had instructed new solicitors "to pursue [sic] you personally for my losses over the past two years due to your actions". The letter concluded: "I have also agreed with the solicitors & have instructed them to place a caveat on your home & investment property, so I can be assured of my debt recovery." 57 This shows that Mr Maher was able and willing to make threats of loss of or prejudice to Mr Honeysett's home in an attempt to influence Mr Honeysett's behaviour. 58 While the state of affairs centred on freezing of the HME bank account and absence of the employees pertained, Mr Maher, Mr Honeysett and Mr Annakin met for about an hour and a half at a club at Menai. This was on 19 November 2003. According to Mr Maher, they discussed "the direction of HME" and Mr Honeysett said to him that "he wanted to make an agreement so we could wind the company up". Mr Honeysett accepts that the meeting occurred but has no precise recollection of the discussion, although he did say in cross-examination that they were "trying to get the company to function again". At all events, that meeting seems to have led on to a further meeting the following day, 20 November 2003, at which the first agreement was drafted, typed and signed. 59 There are radically different accounts of what happened at the meeting of 20 November 2003 held at the HME office. There is also a dispute regarding a preliminary matter. Mr Maher says that, when he and Mr Honeysett began to approach the task of writing an agreement, they did not know how to go about it. Mr Maher further says that Mr Honeysett phoned Mr Gleeson and later gave the phone to Mr Maher himself. Mr Maher says that he said to Mr Gleeson, "How do we write this agreement to wind up the company?" Mr Gleeson's response, according to Mr Maher, was to the effect, "Just write it from your heart". 60 As will be seen in more detail presently, there is evidence of calls from Mr Honeysett's phone to Mr Gleeson's phone on two occasions on the afternoon of 20 November 2003. One call was at 1.34pm and lasted 5 minutes and 7 seconds. Another, of 53 seconds duration, was timed at 5.24pm. Mr Gleeson accepts that he had these telephone conversation with Mr Honeysett and, as will be seen, has a recollection of what was said in the first but no recollection of what was said in the second - although, in view of its short duration, not much could have been said. It is Mr Gleeson's evidence that Mr Honeysett did not mention the preparation of an agreement in either conversation. Mr Gleeson further says that he did not speak to Mr Maher on that subject of how to "write this agreement to wind up the company" and did not say, "Just write it from your heart". I am satisfied that, if Mr Gleeson had been asked the question Mr Maher says he asked, Mr Gleeson would not have given the answer attributed to him by Mr Maher. This is because of what the evidence shows about Mr Gleeson's attitude to the preparation of contractual documents. In his letter of 19 September 2003 to Mr Maher already mentioned, Mr Gleeson said: "The task of crafting a document intended to meet a specific need is a significant exercise and needs to be done with care.

As I am frequently heard to say to my clients, any commercial document is only as good as the information which the draftsman has at the time of its creation.

The task of creating legal documents is often very similar to the task of an architect drawing a plan for a building. Before an architect can commit to print he must have some idea of the concept that the client wishes to address, what relationships are important to the client and any outcomes which are desired." 61 Someone who speaks of "crafting" a document and likens the task of "creating legal documents" to the work of an architect drawing a plan for a building simply would not say that any document of a legal or commercial kind should be written "from the heart". There is the added and no less pertinent point that Mr Maher had, in October 2003, raised what he considered to be a conflict of interest on Mr Gleeson's part precluding him from acting for Mr Honeysett in relation to the proposed meeting to discuss separation. It is inconceivable that Mr Maher would then have looked to Mr Gleeson as a source of advice on how to go about preparing an agreement for that very purpose. 62 As to the persons present at the meeting of 20 November 2003, it is clear that Mr Maher and Mr Honeysett were present throughout, Mr Annakin was there for a large part of the time and Mrs Honeysett was present for a short time at the end. Mr Annakin acted mainly as "scribe", in the sense that it was he who composed the actual words and typed them on a word processor. Accounts differ as to Mr Annakin's substantive contribution but I am satisfied that, given his position and the fact that the parties were the two persons he regarded as his "bosses", it was not great. He may have assisted with some aspects that lay within his particular knowledge as the main administrative officer. Principally, however, Mr Annakin merely put into words concepts not originated by him. 63 Recollections are imprecise as to the time the meeting started and its duration. It seems likely, however, that the meeting finished some time soon after 8pm and lasted for about four hours. On this basis, the first of the telephone calls in which Mr Gleeson was involved, as outlined at paragraph [60] above, occurred before the meeting began; but the second (and much shorter) of the calls occurred during the meeting. 64 In his affidavit, Mr Maher gives a very detailed description of the genesis of each clause of the 20 November 2003 agreement. The account consists of a series of statements to the effect that one party (usually Mr Maher) stated a particular proposition or proposal, that the other (usually Mr Honeysett) expressed simple agreement and that Mr Annakin then composed and typed appropriate words. Statements such as "Yes ok" plus a few additional words of assent, or "Ok", or "I agree", or "Yes that's a good idea", or "Yes I agree" are attributed on seven occasions to Mr Honeysett and on two occasions to Mr Maher. There is one matter on which both are reported as expressing agreement to something proposed by Mr Annakin. In relation to two matters, the affidavit reports discussion and analysis, as distinct from mere acceptance of a baldly stated position or proposal. 65 Mr Maher denied in cross-examination that his account of the discussions during the preparation of the agreement was the production of "reverse engineering", constructed from the content of the agreement itself. 66 Mr Honeysett's evidence is that he had little recollection of events at the meeting of 20 November 2003. I shall come in due course to the question of his mental state at the time. He did, however, appreciate that the purpose of the meeting was to prepare "a document that would resolve the issues that we had". He knew that, as part of the resolution, the factory (owned by Mr Maher and Mr Honeysett, as distinct from HME) would have to be sold. And he remembered Mr Annakin operating the word processor. Otherwise, he professes inability to recall virtually all that transpired at the meeting. The account given by Mr Maher was put to Mr Honeysett item by item. His uniform response was that he could not recall, that is, that he could neither confirm nor deny the accuracy of what Mr Maher said. 67 The things Mr Honeysett did remember were mainly that he said more than once words such as "You can't do it this way; it is not right" or "What you're doing, it's wrong"; also, he says, that he rang his wife and told her that Mr Maher wanted him to sign a document, to which she replied "Don't sign anything". Continued protestations by Mr Honeysett that what was happening was "not right" or "wrong" might be taken to be a form of challenge to Mr Maher's account. But words to that effect by Mr Maher are not necessarily inconsistent with his engaging in constructive efforts to formulate an agreement. 68 Mr Annakin's evidence is that he cannot recall all that was said at the meeting, but that both Mr Maher and Mr Honeysett "discussed the terms on which they wished to deal with the company". He refers in his affidavit to discussion between the two principals as to the date on which operations should cease, with Mr Maher suggesting 31 December 2003 and Mr Honeysett suggesting 19 December 2003 instead, so that the employees would not have to be paid for the public holidays at Christmas. Mr Annakin also says that it was Mr Honeysett that formulated the wording with respect to notification of customers. Mr Annakin further refers to a suggestion he himself made on that aspect and to the acceptance of the suggestion by Mr Maher and Mr Honeysett. Mr Annakin's evidence on the contribution made by Mr Honeysett in these two particular areas is consistent with Mr Maher's evidence. 69 It is common ground that Mrs Honeysett came to the office after the document had been prepared. She says that she had told her husband on the phone, "Don't you dare sign anything until I get there". 70 Mrs Honeysett testified that, upon arrival at the office, she read the document that had been typed and said, "This is a joke; this is ridiculous"; and, "It's not worth the paper it's written on; it's garbage". She says that she expressed that opinion about the document because it had not been prepared by a solicitor. Mrs Honeysett also deposed to a conversation involving Mr Annakin ("Kevin"), Mr Honeysett ("Mark") and herself ("Debbie") as follows: "Kevin: 'Debbie, don't start this.'

Kevin said: 'We're trying to get an agreement done.'

I said: 'This is not the way to do it. You've got to do it properly. You've got to get it done legally. You're just doing this to bully Mark into signing this.'" 71 Mrs Honeysett deposed to having said this to Mr Maher: "This is so wrong. How dare you do this to Mark. You can see the pressure he's under. He's not well and he shouldn't sign this."

"You're on notice he shouldn't be signing this as he is doing it under duress. This is not what Mark wants. It's wrong." 72 Mrs Honeysett's affidavit continues: "60. David put his arms up in front of him and shook his head. He picked up the document from the coffee table and as he walked past the reception desk he put it down on it. He then walked towards the office past Mark. He said:

David: 'If he doesn't sign it, I won't do anything, I won't sell the factory. I won't invoice or anything.'

Mark said: 'Debbie, if I don't sign it, he won't invoice.'

I said: 'Stretch [Mr Maher], this is blackmail. You know it's morally wrong.'

He said: 'It is what it is. It's either this or I do nothing.'

I said: 'You won't even let us get an agent to get a price on the factory.'

He said: 'The factory next door went for three hundred odd thousand. That's it. That's the price. You either take it or I'll sit. I won't do anything.'

61. I was very angry by now and I shouted: I said: 'You're nothing but a big bully.

Mark said: 'Debbie, I have to sign this. If I don't, we'll be insolvent and lose everything.'

David said: 'Look, I've come in to sort this out and I've just lost my mother-in-law.'

I said: 'And I'm really sorry for your loss. Aud was a really nice person. But what you're doing here is not right.' 62. Mark took me outside. I could see the lights of the factory office shining on his face. He looked frightened. He said to me:

Mark: 'Debbie, I've got to sign this because otherwise he won't do anything.'

Mark said: 'I can't. I've got to sign this document.'

I said: 'You don't, just come home.' Mark said: 'I can't Deb. He won't do anything. He'll just sit and we'll lose everything.

I said: 'Just come home.'" 73 Mrs Honeysett then left. She and her husband had gone to the premises in separate cars. He left after she had departed. He signed the document before leaving. 74 Mr Annakin's evidence is that he had no conversation with Mrs Honeysett but heard what she said and what was said to her by others. He refers to the following having been said: "Mrs Honeysett: 'It doesn't matter, this is a farce, just sign it … Don't come home until you've signed it.'

Mr Maher: 'Don't sign it now, take it home and sleep on it.'

Mr Honeysett: 'You heard what she said, I can't go home until I've signed it.'" 75 Mr Maher's evidence in relation to these aspects corresponds with Mr Annakin's. As far as words spoken are concerned, Mr Honeysett's evidence, so far as it goes, corresponds with that of Mrs Honeysett, in that he recalls her saying words to the effects: "David, you know this is wrong. He's signing under duress. You're nothing but a bully and these are bullying tactics." 76 Three points of importance came out in Mrs Honeysett's cross-examination. First, she was of the opinion that pressure was being put on Mr Honeysett because "they wouldn't invoice" and because "they wanted decisions straight away" and "Mark wasn't given time to think about any of this". Yet, as Mrs Honeysett accepted, the scheme laid out in the document was one that was consistent with the course that Mr Maher had been advocating for some time (including in his solicitors' letter of 16 October 2003), so that, as Mrs Honeysett also accepted, "this deal that was being put forward was no surprise to you, was it, when you read it?" The cross-examination continued: "Q. Because I suggest, madam, that you considered the situation as inevitable, didn't you, that this is what was going to have to occur in relation to the business? A. Inevitable, yes.

Q. It was inevitable that David was going to leave the business, correct? A. Yes.

Q. It was inevitable that the assets of the business were going to be sold? A. Yes.

Q. And it was inevitable that that had to occur sooner rather than later, correct? A. Yes.

Q. You appreciated, madam, that your husband at this time had difficulty determining what particular option he wanted to accept for the purposes of finalising the assets or finalising the winding up of the business? A. Yes." 77 And later: "Q. You accepted, on 20 November, that the final winding up of the business was inevitable? A. It was inevitable, yes.

Q. And I am suggesting to you, that in the circumstances where Mark was having difficulty in forming a view as to what approach to take to wind up the business, that the proposition that David put forward was, in the circumstances, an option that that might as well be accepted? A. No. He wasn't comfortable with it.

Q. How do you know that? A. How do I know that?

Q. Yes? A. Because he is my husband.

Q. Did he tell you that? A. He was unsure. He didn't want to sign it." 78 This emphasises the second important point coming from Mrs Honeysett's cross-examination. The unwillingness to see the document signed was really hers: her husband did not tell her of any unwillingness on his part. That, of course, does not mean that he was not unwilling; merely that her evidence cannot really be the source of any finding as to his unwillingness - to which must be added the reality that, as Mrs Honeysett accepted, the course mapped out by the document was, in this context, a logical one. 79 The third matter emerging from Mrs Honeysett's cross-examination centres on part of paragraph 61 of her affidavit which is quoted at paragraph [72] above. Mrs Honeysett referred to Mr Maher having dictated the price for the factory at the 20 November 2003 meeting by reference to the recent sale of the adjoining property - something about which she complained, saying, "You won't even let us get an agent to put a price on the factory". This, of course, is inconsistent with the terms of the 20 November 2003 document, which expressly contemplated obtaining a valuation. The fixing of $170,000 as the price for a one-half interest in the factory (by reference to an assumed value of $340,000) was something that happened at the subsequent meeting on 15 December 2003. The figure of $170,000 was included in the document prepared at that subsequent meeting. 80 It was put to Mrs Honeysett in cross-examination that she had, in this respect, confused the two meetings. She denied this and adhered to what was said in her affidavit about events at the 20 November 2003 meeting in relation to the setting of the factory price and Mr Maher's denying of an opportunity to obtain a valuation. But the content of the two documents makes it clear that Mrs Honeysett was confused, in the sense that she recalled as having happened at the earlier meeting something that, having regard to the documents, must have happened at the second meeting. Both meetings took place at the same place. Mrs Honeysett attended towards the end on each occasion and saw a document that had been prepared before her arrival. Confusion on her part is understandable and, as I have said, I am satisfied that it occurred. That has implications for the reliability of her evidence to which I shall return. 81 I refer next to another factual question concerning the meeting of 20 November 2003. Mr Honeysett says in one of his affidavits that, during the period prior to the meeting, he said to Mr Maher, "I can't make these decisions. I'm sick, sick in the head". Mr Maher denied that Mr Honeysett said this to him. Mr Honeysett, in cross-examination, resiled from the part of his evidence that fixed the making of the statement as occurring in the period leading up to the meeting of 20 November 2003. The net effect of Mr Honeysett's evidence is that he did make the statement but could not recall when he made it. Mr Maher, for his part, gave evidence that Mr Honeysett was never good at making decisions, preferred not to make them and always had to consult first with Mrs Honeysett and Mr Gleeson. Mr Annakin denied that Mr Honeysett ever made a "sick in the head" statement in his presence. 82 A final matter related to the events of 20 November 2003 is the evidence of Mr Maher that, after the document had been prepared, he suggested to Mr Honeysett that he "sleep on it" and fax a copy to Mr Gleeson before signing. Mrs Honeysett gave evidence that Mr Maher made no such statement in her presence. But she was not there throughout and left before her husband. Mr Honeysett, for his part, said he did not recall Mr Maher making the statement but could not deny that he had done so. Mr Honeysett further said that he felt he had to sign immediately because "if I didn't sign, he wasn't going to invoice, the boys weren't going to come back to work; he made that quite clear to me". 83 I turn now to events after 20 November 2003. The very next day, Mr Maher and Mr Honeysett went together to Westpac. Mrs Honeysett was removed as a HME cheque signatory and Mr Maher reinstated his guarantee. These actions were not required by, or mentioned in, the 20 November agreement. 84 Also on 21 November 2003, Mr Maher told Mr Annakin that "we can go back to work on Monday", that is, 24 November 2003. At Mr Maher's request, Mr Annakin then telephoned the employed electricians, informing them accordingly, adding that they would only be working until 19 December 2003 as the company would then cease trading. The employees' return to work was the subject of the following part of Mr Maher's cross-examination: "Q. You say that the return to work of the employees was something that was unrelated to Mr Honeysett's execution of the 20 November agreement; is that what you say or do you say something different? A. Well, I guess the company has got direction. The guys were worried about that. We went down to the bank so we could pay our workers comp and we were off and rolling, yes." 85 Mrs Honeysett became active after 20 November 2003 in arrangements to implement the course mapped out by the document of 20 November 2003. She gave evidence that, in the week beginning 8 December 2003, she went to the HME office and prepared letters to HME's customers and creditors notifying them of cessation of trading on 19 December 2003. She put the letters in a bundle but did not post them. Later still (on 19 December 2003), she prepared a checklist of matters to be attended to in closing down the business and received a copy of a printout of all accounts receivable and payable which the external accountant prepared on that day. 86 The next matter to be considered is the circumstances in which the agreement of 15 December 2003 was prepared and signed. Mr Maher says that the meeting that led to the signing of that agreement was initiated by Mr Honeysett who wanted to come to an agreement about the financial aspects of the separation. That is implausible but, if correct, would be a reflection of Mr Honeysett's acceptance of the inevitability produced by the first agreement. Mr Maher's evidence (confirmed by Mr Annakin) is that Mr Maher and Mr Honeysett at first met alone and that Mr Annakin joined them later, by which time Mr Maher had already typed part of a draft on the word processor. Mr Maher's evidence refers to the steps taken in discussion between himself and Mr Honeysett to reach the various positions recorded in the document. According to the accounts given by Mr Maher and Mr Annakin, Mr Annakin took over the typing from Mr Maher after arriving. Mr Honeysett's evidence is that Mr Maher and Mr Annakin were both present when he arrived and that he was handed a typed document. Mr Honeysett says that, as he read the document, he said, "This is wrong. You can't do this. All this stuff belongs to the company"; and that Mr Maher replied, "We are the company, we own it". 87 Again, Mrs Honeysett appeared. Mr Annakin then went outside. According to Mr Maher, Mrs Honeysett read the document, laughed and said: "David, what you're doing is wrong"; and when he asked "How", she said, "You just can't leave, you can't do what you're doing". Mr Maher further says that he suggested to Mrs Honeysett that she take the document away and have Mr Gleeson review it, in response to which Mrs Honeysett said to her husband, "Mark just sign it", whereupon Mrs Honeysett left. Mr Honeysett followed her out and then came back in with Mr Annakin whereupon, according to Mr Maher, he suggested to Mr Honeysett that he fax the document to Mr Gleeson and "sleep on it tonight". Mr Honeysett's response, according to Mr Maher, was "You heard what she said", after which they both signed. 88 Mr Honeysett accepts that he signed the document and refers to an argument with his wife. He has little further recollection. Mrs Honeysett accepts that she made the protests described by Mr Maher. She deposed to a conversation between her husband and herself in a context where she felt it did not matter what she said and people had already been told that HME would cease trading on 19 December 2003: "I said: "Well, sign it then and let's go home."

I said: "Then sign it and we'll go home." 89 Mrs Honeysett says that she said these things because she was angry and frustrated since "he was being pushed into signing something he didn't want to". But, as with the 20 November 2003 agreement, the evidence is really that it was Mrs Honeysett, not Mr Honeysett, who was against signing. 90 The agreement of 15 December 2003 settled financial aspects of the cessation of business and provided, in effect, for transfer to Mr Maher or his nominee of the substantial bulk of the operational capability of HME. Mr Maher had already formed Demaher and established bank accounts for it. Demaher was ready to start business. The effect of the agreements, as they were played out after cessation of the HME business on 19 December 2003, was described in Mr Maher's cross-examination: "Q. Just so that we are clear, if its not already clear, on 19 December 2003 Honeysett & Maher stopped trading? A. As per all the agreements, yeah, and the check list and all that we stopped it, yes.

Q. And effectively on the next work day Demaher Pty Ltd continued working out of the same factory? A. What day was that?

HIS HONOUR: Q. 20 December, unless that was a weekend? A. I would have worked Saturdays, if it was a Saturday I would have been in there.

SIRTES: Q. The next day Demaher continued working from the same factory premises? A. Well, as per the agreement, yes, we had the lease and everything sorted out.

Q. I understand that you keep on wanting to say "as per the agreement" but just answer the question I am putting to you? A. Sorry, sir.

Q. As from the next working day, Demaher Pty Ltd continued working from the factory premises that had previously been occupied by Honeysett & Maher Electrical Contractors, that's so, isn't it? A. Correct.

Q. Continued to service the customers, particular Orica, of Honeysett & Maher? A. Not all of Orica, but yeah.

Q. And continued to use the plant, equipment, telephones, et cetera that had been previously used for the purposes of running the business conducted by Honeysett & Maher Electrical Contractors Pty Ltd? A. Yeah, after I bought them out, yes, we just stayed in situ.

Q. So, to all intents and purposes from an outsider's perspective, putting aside the transactions that you say had taken place between you and your fellow shareholder there was no apparent change in the operation of the business? A. Oh, I changed the number, I took, instead of the 3350, I took one of the nine hundred numbers and put it at the front, so I wasn't using the old number. I, yeah, Demaher Pty Ltd, I had to get some business cards, I had to change everything, we never advertise and we were in the back streets, no one ever come to our factory to source work. We never advertised at all, Honeysett & Maher, it was all word of mouth and people who knew me." 91 I refer next to the evidence concerning invoicing in the period leading up to 20 November 2003. It was put to Mr Maher in cross-examination that HME had invoiced only $8,264 or thereabouts as at 8 October 2003 and had not issued any further invoices thereafter. He said that that would not surprise him and "they are always erratic". Mr Maher also explained that Mr Annakin dealt with invoicing, so that if he was absent or otherwise occupied, invoicing would not occur. It was put to Mr Maher that, as Mr Maher stated in his affidavit, he had said to Mr Honeysett at the meeting of 20 November 2003 that, unless he signed the agreement, Mr Maher would not invoice Orica for work done. Mr Maher denied this. Mr Annakin also said that he had not heard Mr Maher say any such thing at the meeting. 92 In cross-examination, Mr Honeysett confirmed that Mr Maher had said to him that he would not invoice Orica until Mr Honeysett signed. But, when cross-examined, he could not say when Mr Maher said this. In his affidavit, he said that such a statement had been made by Mr Maher at the 20 November 2003 meeting and on several occasions over the preceding week. In cross-examination, he could not identify any occasion or occasions when Mr Maher spoke the words in question but insisted that he had spoken them. Mr Honeysett also said that he was concerned to find, when he returned to work on 7 October 2003, that invoicing was behind. 93 There is, however, evidence that, as Mr Maher testified, invoicing by HME was irregular, in the sense that there could be large differences in the amounts invoiced month by month. A sales register put into evidence showed invoices of $2,367.75 for October 2002 and $8,569.00 for April 2003. These contrasted with some $291,000 in August 2002, $75,000 in November 2002 and $71,000 in December 2002. The figure for September 2003 was $153,541.90. 94 Against that background, Mr Honeysett was cross-examined about his supposed worry that lack of invoicing by Mr Maher would imperil HME's solvency and expose him (Mr Honeysett) to personal liability: "Q. No, put it this way, sir, that was a substantial amount of invoicing that would have assisted the cash flow throughout October/November of 2003 for Honeysett & Maher? A. Yes - I don't know what outgoings - again, this number does not tell me what outgoings were related to that. You know--

Q. But your concern I understand at this stage was whether sufficient invoices had been issued for the purpose of cash flow? A. That's correct, yes.

Q. And in September 2003 an amount of $153,000 approximate had been invoiced? A. Correct, yes. Then again, it does not show what that cost, just an invoice.

Q. I am suggesting to you that at no time when you returned in October 2003 was there any true reason for you to be concerned in relation to the cash flow of Honeysett & Maher, was there? A. I believe there was.

Q. Honeysett & Maher was invoicing and trading in the same manner that it invoiced and traded for the last 12 to 18 months, hadn't it? A. I had concerns.

Q. Sir, your concern generally was in relation to ensuring that Mr Maher did not, as you saw it, walk off with the goodwill of the company; that was your concern? A. My concern was for the insolvency of the company - the solvency of the company, sorry." 95 Mr Honeysett said in cross-examination that his fears about insolvency of HME were not resolved until all the creditors had been paid following the closing down of the business. 96 The final matter to be mentioned in relation to invoicing is the evidence of Mr Honeysett that, as at 15 December 2003, he was still under the impression that there would be no invoicing unless he signed the document produced on that day. Ultimately, he accepted in cross-examination that there was no basis for any such apprehension, given the express provision of the 20 November 2003 agreement as to invoicing. 97 At this point, I must refer to the evidence concerning Mr Honeysett's health. An affidavit of his general practitioner, Dr Berger, refers to occasions on which Dr Berger saw Mr Honeysett in September 2003 for physical problems associated with back and chest pain. On 3 November 2003, Mr Honeysett saw the doctor again. On that occasion, he complained of anxiety, inability to sleep and lack of appetite. He referred to problems with his business partner and expressed disappointment with himself. He was worried about financial matters. Mr Honeysett saw Dr Berger again on 19 November 2003 before the meeting later that day at the club at Menai. Mr Honeysett reported thoughts of suicide and significant sleep disturbance. Dr Berger noted a marked deterioration in Mr Honeysett's medical condition from 3 November: "He was avoiding eye contact. He kept his head bowed, he was pale, teary and restless. He appeared distressed. Mark had become very depressed very quickly and he was very down. I was very concerned for his mental health. I formed the view at this time that anti-depressant medication would have assisted him but Mark was already at a point where it was difficult for him to listen to reason because of his anxiety condition." 98 Dr Berger next saw Mr Honeysett on 24 November 2003. He looked very drawn and anxious. He presented in a fashion similar to that of 19 November, avoiding eye contact and with head bowed. He was still teary and restless. Dr Berger saw Mr Honeysett again on 20 November. He was still obviously distressed and suffering from anxiety. When seen by Dr Berger on 1 December 2003, Mr Honeysett's presentation was as it had been on 26 November. He was still very anxious and reported feeling odd. Dr Berger recommended that Mr Honeysett see a clinical psychologist and referred him to Ms Bartlett. 99 Ms Bartlett saw Mr Honeysett twice - on 11 December 2003 and 18 December 2003. On the first occasion, he was very tearful and depressed and appeared to be "in shock". He said that his business partner had "cheated" on him and had taken the company from him; that he was liable for a large debt and was "going broke"; and that he was very worried because he thought he would not be able to pay his creditors and would be sent to prison. 100 On 18 December 2003, Ms Bartlett observed Mr Honeysett to be "severely depressed". He expressed thoughts of suicide but said he probably would not make a suicide attempt. He expressed concern about his ability to pay his debts and the distressing effect this would have on his children. He again she he was afraid of being sent to prison for non-payment of debts. He said he had signed his factory over to his partner without consulting a solicitor, did not know whey he had done so and "hates" himself for it but wanted to make all the problems go away. Ms Bartlett concluded: "In my opinion, at both consultations, Mr Honeysett was in no fit state to have made rational decisions and, in fact, had made some irrational decisions. For example, he knew he was depressed, but was not taking medication which could help him. He had signed his factory over to his business partner but did not know why. He was focusing on possible future problems rather than contemplating any solutions. He was contemplating suicide as a way out of his distress, and I was concerned that his irrational thinking may have led him to attempt it." 101 In cross-examination, Ms Bartlett made it clear that her assessment had been based on two facts or assumptions which are contrary to the evidence in this case: first, that Mr Honeysett was not working at the times he saw her (he in fact worked after resuming on 7 October 2003 until the business closed down on 19 December 2003); and, second, that he had "signed over his factory" for nothing (when in fact he had, on 15 December, three days before the second consultation, agreed to sell his half interest for $170,000). 102 In addition to the evidence of contemporary assessment given by Dr Berger and Ms Bartlett, I have a report by Dr Wilcox, a consultant psychiatrist, prepared for the purposes of these proceedings following an interview with Mr Honeysett on 6 April 2005. Dr Wilcox expressed an opinion as follows: "Mr Honeysett is a 42 year old married father of three who is a self employed electrical contractor. He had been in partnership for fourteen years and while he was on leave his co-director called him into work to inform him that he wanted to terminate the partnership. He was quite shocked by this information and as he was on leave at the time he was unaware of the financial state of the business.

His partner told him that he would not invoice any work that had been completed until he agreed to liquidate the company. His sleep was immediately impaired. He could not think clearly he became fearful that he was going to be arrested for trading while insolvent. He could see no way out and contemplated suicide.

I believe that he was significantly depressed for several months and is still moderately depressed. He initially consulted his family doctor on the 3 November 2003 and had symptoms of depress/anxiety at the time and by 19 November 2003 it is highly probable he would have fulfilled the diagnostic criteria for Major Depression with prominent secondary anxiety.

The diagnosis of Major Depression is based on the history he provided of pervasively depressed mood with suicide ideation, diminished interest in almost all activities, global sleep impairment, loss of appetite with significant weight loss, loss of energy and motivation, diminished ability to think or concentrate and feelings of worthlessness. His heightened anxiety was evident in the physical symptoms he experienced such as vomiting and increased tension.

As a result of his depressive disorder Mr Honeysett was unable to think rationally and had a very pessimistic outlook. He was unable to consider his situation in a calm manner.

I believe that due to being depressed Mr Honeysett's judgment was impaired. It is probable that if he had not been depressed he would not have signed any documentation without having his legal representative first review it. At the time he was convinced he was going to gaol and due to his depressed mood he could not see that he did in fact have options." 103 It was put to Dr Wilcox in cross-examination that elements of the factual material she had considered were incorrect and that, as she had relied largely on what Mr Honeysett told her, distortions may have come from his continued dwelling on matters over the intervening period of some eighteen months. I am satisfied that the factual basis on which Dr Wilcox worked was not wholly consistent with that which emerged in the evidence in this case. I am also very conscious of the reality that Dr Wilcox's evidence is really re-construction a significant time after the event. For these reasons, I place much less weight on her views than on the contemporary observations of Dr Berger and Ms Bartlett. 104 Both Mr Maher and Mr Annakin were asked in cross-examination whether they had noticed weight loss in Mr Honeysett in November 2003 or any other change in his physical appearance. Each gave a negative answer. Mr Maher did, however, view Mr Honeysett as weak and indecisive generally. I quote two extracts from his cross-examination about the meeting of 20 November 2003: "Q. Indeed, he sat in the office during that meeting with his head in his hands? A. He sat on the lounge, yes.

Q. And he sat there with his head in his hands? A. That's nothing unusual." 105 And later: "Q. You say, do you not, in relation to Mrs Honeysett's involvement in that meeting, that she believed the document to be a farce? A. Yep.

Q. Yet she commanded her husband to sign it? A. Correct. I kept telling her, give it to Grant. Fax it Grant. 'Just sign it Mark. Don't come home without signing it'. He, poor bloke, he was just sitting there, similar to him now. That's Mark Honeysett in his normal state."

At the time Mr Maher said this, Mr Honeysett was sitting in court with his head bowed and his eyes downcast. 106 Mr Maher later made it clear that these views and impressions were not confined to the meeting of 20 November 2003: "Q. And you have already said today that you found Mark Honeysett to be an indecisive person, didn't you? A. Very.

Q. He was particularly indecisive and unable to make any decisions in the month of November? A. Every decision he made, he done that every month, he had to talk to Deb and Grant about everything in the company." 107 Another matter to be considered is the availability of legal advice to Mr Honeysett. It is clear that he relied heavily on Mr Gleeson generally and spoke to him regularly. I have already referred to evidence of Mr Honeysett having spoken by telephone with Mr Gleeson on 19 November 2003 (the day of the Menai meeting) and on 20 November 2003 (the day on which the first agreement was signed). Mr Gleeson was, on the latter day, attending court with another client. He gave evidence as follows of receiving a telephone call from Mr Honeysett on that day on his mobile phone: "A. My phone rang during the luncheon adjournment, when I was with my clients in that court case, and my ability to speak to Mark was limited, and all I recall speaking to him about, my recollection is him saying words to the effect, "This is so hard". And I basically gave him some words of reassurance and the conversation didn't go to any of the matters that David has deposed to. The conversation was a matter that was flowing on from the discussion I had had with Mark the evening before. He had called me. I answered the phone. I was involved in this other court case and we finished the phone call and I went back to the court case.

Q. When he said "This is so hard", did he tell you, sir, that he was involved in a meeting with Mr Maher, endeavouring to draft up an agreement? A. No, he did not.

Q. When he said, "This is so hard", what did he tell you that he was referring to? A. He didn't. That's the context in which we were speaking at the time. They were just, sort of, these random comments. The night before I had spent so long trying to understand what was really driving this, and look, I didn't have a context.

Q. Did you ask him what he was referring to when he said, "This is so hard"? A. Well - no, I didn't.

Q. Why not? Didn't you want to know what he was referring to when he speak spoke to you? A. Well, I sort of thought I understood what he was talking about.

Q. What do you think you understood he was talking about? A. The pressure he was under at the time.

Q. The pressure deriving from what? A. The fact that the employees weren't there, the bank had taken some actions, those were unresolved; the fact he felt, as I said, in the discussion with him the night before, he was going to gaol. He was - I inferred all that into it and I must admit, I acknowledge also that I was feeling, at the time, that I couldn't spend too many too much time because I needed to get back to the matter that I was involved in.

Q. So, your evidence is, so that it is clear, that at no time on 20 November 2003 did Mr Honeysett tell you that he was engaged in discussions with Mr Maher for the preparation of a document? A. No, he didn't." 108 The luncheon adjournment to which Mr Gleeson refers must have been before the commencement of the meeting at which the first agreement was prepared. 109 There is evidence of contact between the mobile phones of Mr Honeysett and Mr Gleeson at 5.24 pm on 20 November. The call lasted only 53 seconds. Mr Gleeson does not recall any conversation with Mr Honeysett at that time. He does, however, recall a conversation with both Mr Honeysett and Mrs Honeysett later that night, as already mentioned. 110 Mr Gleeson was available to be contacted by Mr Honeysett on 15 December 2003. Mr Gleeson gave evidence that he was contacted by both Mr Honeysett and Mrs Honeysett on that day in a single telephone call, but only after the second agreement had been prepared and signed. The document was faxed to him the next day. Mr Gleeson's evidence about the telephone call on the night of 15 December 2003 was as follows: "Q. In fact, you had quite lengthy discussions, did you not, with Mr Honeysett, on the evening of 15 December? A. Not lengthy discussions. The phone call went for some time.

Q. The phone call, I think you accept, that lasted in excess of an hour? A. That may be right. You are saying lengthy discussions. They weren't discussions. I spoke again to Deb in that phone call, as I recall, as well as speaking to Mark at some stages. Mark was beside himself.

Q. Did he tell you the details of the document that he had signed? A. No. He just wasn't that coherent, I'm sorry.

Q. What do you recall him saying to you, sir? A. Apologising. "I don't know why I did it". Then in a different part of the conversation: "I had to do it". He was saying things like, "You have got to understand. It is just so hard" and I basically endeavoured to give some consolation as best I could. There were silences. There wasn't much I could say.

Q. Did Debbie tell you what had occurred in her presence at the meeting that led to the signing of this document? A. Look, I am sure that she probably did.

Q. Do you recall what it is that she told you? A. No. I myself was fairly upset when I heard about this, this document." 111 Parts of the evidence of Mr Maher and Mr Annakin, at least in relation to the events of 20 November 2003, reflect an assumption or understanding that Mr Honeysett spoke to Mr Gleeson while the meeting of 20 November 2003 was in progress. This is consistent with the evidence about the telephone call at 5.24 pm. But the length of the call (53 seconds) and Mr Gleeson's inability to recall any conversation between the call during the court luncheon adjournment and the call after the signing of the document suggest that no substantive contact was made by Mr Honeysett with Mr Gleeson at that time. To the extent that the call just mentioned may be relied upon by Mr Maher as the occasion of Mr Gleeson's "Just write it from your heart" advice, the short duration of the call reinforces the other reasons for declining to find that Mr Gleeson made any such statement. 112 In light of the evidence described above, I now proceed to findings. In doing so, I make some general observations about the evidence. First, Mr Honeysett's inability to remember the vast bulk of what happened on relevant occasions (particularly 20 November 2003 and 15 December 2003) casts a cloud over such recollections as he does profess. This is accentuated by his resiling in the witness box from several of the professed recollections or from earlier evidence of the time or times at which things occurred. 113 I am satisfied that Mr Honeysett was, at least from early October 2003, suffering from anxiety and was, in that respect, ill in the way described by the medical evidence. The evidence of Mr Maher and Mr Annakin that they did not notice any change in Mr Honeysett's physical appearance is not contradicted by other evidence. I am also satisfied that Mr Maher was aware that Mr Honeysett had no capacity to make, unaided, decisions about the matters confronting him in relation to HME. I have referred at paragraphs [104] to [106] above to Mr Maher's general appreciation of Mr Honeysett's indecisive disposition and his reliance on his wife and Mr Gleeson. It is clear from that evidence that Mr Maher regarded Mr Honeysett as weak in that respect. This is made particularly clear by the passage of cross-examination quoted at paragraph [105]. That passage shows that Mr Maher considered Mr Honeysett's "normal state" to be that of a "poor bloke … just sitting there" with head bowed and eyes downcast. Similarly with the extract from the cross-examination at paragraph [106]: Mr Maher's general and ongoing view of Mr Honeysett was that he was "very" indecisive, so that, month by month, as decisions were required, he could not make them without his wife and Mr Gleeson. On the evidence, I cannot find that Mr Honeysett actually said to Mr Maher during the period in question that he could not make decisions because he was "sick in the head". Nor can I find that Mr Maher had actual knowledge of the clinical diagnosis that Dr Berger made on 19 November 2003 and subsequently confirmed. But I find without hesitation that Mr Maher was aware of a general disposition or personality trait of Mr Honeysett that made him unable to make, in a normal and confident way and unaided by his wife and Mr Gleeson, business decisions of any significance at all. Mr Maher was aware that Mr Honeysett's powers of independent judgment were impaired in that way. 114 Mr Maher had been in business with Mr Honeysett for some fourteen years. He knew him well. He knew of the disability and impairment to which I have just referred. Part and parcel of that was an inability to stand up to pressure. It was in the knowledge of these matters that caused Mr Maher to embark, from 6 November 2003, upon the course of exerting pressure upon Mr Honeysett. 115 Mr Honeysett's chronic indecisiveness and his general wish that things should stay as they were became frustrating to Mr Maher who wanted to see HME branch out into a new field of endeavour. To begin with, he was content to approach that matter in the way Mr Honeysett preferred, that is, by discussing it with Mr Gleeson. But it must have become clear to him fairly quickly that that course was not going to be productive. The two letters he received from Mr Gleeson in September 2003 about the cranes proposal could not have given him any hope that the approach Mr Honeysett preferred was going to lead to any productive outcome in a short time. Mr Gleeson's letters were very detailed and written in a way that Mr Maher - a straightforward man who puts little store by paperwork - may well have found difficult to grasp in all respects. Mr Gleeson, clearly enough, was concerned to point out pitfalls and matters to be considered but his advice could easily have been perceived as unhelpful by someone of Mr Maher's disposition keen to get on with the job. Mr Maher said in cross-examination that he interpreted Mr Gleeson's letter as telling him, "This is beyond your realm, you are out of your league; just forget about it and it is going to end in tears". 116 It was Mr Maher who initiated the next phase of events. He had his solicitors write to Mr Gleeson requesting a meeting to discuss Mr Maher's "proposal to leave the company". Mr Gleeson, understandably, asked for definition of the proposal. That was given. But Mr Gleeson drew attention to matters of fiduciary duty and the care Mr Maher needed to take in that respect. Thereafter, Mr Maher's solicitors notified Mr Gleeson that Mr Maher no longer wanted the suggested meeting, referring to a perceived conflict of interest. Mr Gleeson nevertheless commented on Mr Maher's proposal, observing that it did not preserve or obtain any return for HME's goodwill. 117 It is clear that, from that point, Mr Maher appreciated that approaches involving Mr Gleeson were leading nowhere. He saw it as necessary to take positive action towards obtaining the outcome he wanted, that he and Mr Honeysett should go their separate ways. Because of what he knew about Mr Honeysett's chronic indecisiveness and resistance to change, he had to bring pressure to bear. He tried the $50,000 "out of the goodness of my heart" approach. That did not work. He needed to do more. 118 I am satisfied that Mr Maher's actions in and about the matters of sending the employees home and giving notice of termination of the guarantee held by Westpac were taken solely in order to exert pressure upon Mr Honeysett. The rational and expected reaction to the message from Mr Annakin (inaccurate though it was) that there was no workers compensation insurance cover because the premium had not been paid would have been to take prompt action to attend to the payment. The cheque had been written on 27 October 2003 and, at the time of Mr Annakin's message on 6 November 2003, there was no impediment to having it signed by two of the signatories and taking it promptly to the insurer. Had that been done, the cheque would have been met on presentation and the perceived problem would have been solved. Alternatively - and as Mr Maher acknowledged in cross-examination - he could have paid out of his own pocket against later reimbursement. 119 Mr Maher (and it was, I am satisfied, Mr Maher alone) decided on a quite different approach. He told Mr Annakin to send the workers home - and, it may be noted, that Mr Maher would "ring us when we are required back at work". That, in my view, was an extraordinary reaction to a simple problem (or perceived problem) with a simple solution. It was not a reaction that was consistent with the prudent conduct of the affairs of HME in a straightforward, prudent and sensible way. Mr Maher obviously had it in mind that the employees' absence would be temporary: hence the message that he would ring when they were required back at work. But the duration of the absence was not to be determined merely by reference to the time at which the insurance payment was made in the ordinary course. I am satisfied that Mr Maher had decided that he would call the employees back when he judged it consistent with his own personal interests to do so, having regard to the position he had reached in his attempts to put into operation the proposal that his solicitors had notified on 16 October 2003 and which he had been unable to progress, despite the offer of the $50,000 inducement. 120 In relation to Mr Maher's withdrawal of his guarantee, I have already said that his stated reason for taking that action - because Mr Honeysett would not agree to removal of Mrs Honeysett as a cheque signatory - had no objectively rational basis (see paragraph [54] above). Mr Maher knew that withdrawal of his guarantee would leave HME in a position where it could not draw on its bank accounts. He engineered that position not because of any real apprehension that Mr Honeysett and Mrs Honeysett together would steal the company's money but as part of the same strategy that caused him to send the employees home - that is, a strategy of bringing about a de facto cessation of operations by HME so as to create a fait accompli that would leave Mr Honeysett in a position where there was no real point in opposing formal recognition and implementation of such an outcome. 121 As regards the matter of invoicing, the evidence does not allow me to conclude that Mr Maher embarked upon any deliberate strategy of avoiding invoicing. Particularly in light of the historical figures, it is clear that there was no steady and consistent pattern of invoicing from month to month. The rendering of invoices depended on provision of information to Mr Annakin by operatives in the field and his then preparing and despatching invoices. It is clear that the process was somewhat haphazard. It is true that clause 5 of the 20 November 2003 agreement read, "Invoice all works to date". That is not, to my mind, indicative of any past disruption. It is true that Mr Honeysett was afraid that Mr Maher would not invoice Orica unless Mr Honeysett signed the 20 November 2003 agreement; also that, according to Mr Honeysett, Mr Maher made specific threats in that regard. But Mr Maher denied such threats and, in light of the anxiety from which Mr Honeysett was suffering, it may be that he himself developed the apprehension, knowing that Mr Maher had the ability to do what Mr Honeysett was fearful that he would do. 122 When it comes to the meeting of 20 November 2003, I am in a position where Mr Maher's account is borne out by Mr Annakin, while Mr Honeysett is unable to recall very much at all and, in some respects, resiled in cross-examination from evidence given in his affidavits. I accept that Mr Honeysett was, on the occasion in question, very strongly influenced by anxiety. But I am also satisfied that he played an active part in the discussions. He may well have expressed misgivings about the wisdom or correctness of what was happening but he nevertheless participated generally in the way described by Mr Maher and Mr Annakin. 123 I have already referred to the three points of importance coming from Mrs Honeysett's cross-examination about the events of 20 November 2003 (see paragraphs [76] to [79] above). She referred to the fact that "they wouldn't invoice". There is no evidence that she obtained information about that from anyone but her husband. I have already mentioned the nature of his apprehension on the subject. It is clear that Mrs Honeysett was fiercely opposed to Mr Maher's leaving the company and the closure of its business. But, by 20 November 2003, she regarded that outcome as inevitable. Furthermore, while she was of the view that her opposition was shared by Mr Honeysett, it may well be that this was not so and that, in her absence, he did not voice any strong opposition. I have also referred to Mrs Honeysett's confusion of the two meetings and the implications of that for the reliability of her evidence. There is consistent evidence from all relevant sources that, at the 15 December 2003 meeting, Mrs Honeysett told her husband, in effect, to sign the document and be done with it. She may well have said this in frustration and exasperation. It is the evidence of Mr Maher and Mr Annakin that she said virtually the same thing at the first meeting, that is, the meeting of 20 November 2003. In view of Mr Honeysett's inability to remember anything much at all about that meeting (and his retreat, in cross-examination, from important aspects of his evidence about what transpired) and Mrs Honeysett's confusion between the two meetings, I accept what was said by Mr Maher and Mr Annakin on that matter. 124 While, on my findings, Mr Honeysett participated actively in the meeting of 20 November 2003 and knew what he was doing when he signed the agreement, I am satisfied that the actions Mr Maher had taken with respect to the employees and the guarantee left Mr Honeysett in a position where he saw the situation of HME as one of emergency and did not think he had any alternative. Mr Maher had stopped the employees working and caused the company to be unable to draw on its bank accounts. From where Mr Honeysett stood, there seemed to be nothing he could do to change those situations. In theory, he might have told the employees to return to work but, at least from 11 November 2005, HME would not have been in a position to draw cheques to pay them. And there was, in truth, nothing that Mr Honeysett could do to re-activate the bank accounts. Mr Gleeson, apparently acting on Mrs Honeysett's instructions, had approached Westpac in an attempt to have the position rectified but there was nothing that the bank itself was willing to do while Mr Maher's guarantee was not available to it. Mr Honeysett felt helpless. 125 In short, Mr Maher, by giving notice of termination of his guarantee, consolidated the situation in which the employees were not working and subjected HME to a form of paralysis which only he could cure. And he did cure it - but only after Mr Honeysett had signed the 20 November 2003 agreement. Once that had happened, he cured the paralysis on the following day. He did so because Mr Honeysett had by then done what Mr Maher sought to force him to do. 126 On 20 November 2003 and the immediately following days, the die was cast. The employees went back to work on 24 November 2003 but were told that they would be finishing up for good on 19 December. Even the reluctant Mrs Honeysett took steps towards implementing what had been agreed. The subsequent agreement of 15 December 2003 was really a detailed follow-on - albeit one slanted heavily in Mr Maher's favour. Mr Maher had engineered a situation in which Mr Honeysett was forced to accept the 20 November 2003 deal; he pressed that home on 15 December 2003. 127 It is, of course, true that Mr Honeysett had ready and continuing access to Mr Gleeson and that he spoke to Mr Gleeson often during the relevant period. But Mr Gleeson testified, and I accept, that Mr Honeysett did not raise the two agreements with him until after they had been signed. Mr Maher's evidence that, on each occasion, he suggested that Mr Honeysett speak to Mr Gleeson before signing was confirmed by Mr Annakin. But Mr Honeysett did not do so. I am satisfied that his failure to do so was a product of his apprehension that he had no alternative but to sign and that apprehension was in turn a product of the atmosphere of emergency that Mr Maher had deliberately created by suspending the employees and causing the bank accounts to be frozen. 128 I have already said that I am satisfied that Mr Maher's actions in sending the employees home and withdrawing his guarantee were taken solely in order to exert pressure on Mr Honeysett. I should mention particularly in that connection the passage of cross-examination quoted at paragraph [84] above. After Mr Honeysett had signed the agreement of 20 November 2003, Mr Maher regarded HME as having regained "direction" - a "direction", it might be emphasised, that entailed its going out of business. That being so, Mr Maher said, he and Mr Honeysett "went down to the bank so we could pay our workers comp and we were off and rolling …". In this passage of cross-examination, Mr Maher made very clear the linkage between the workers compensation issue and the withdrawal of the guarantee, as well as the ease with which both were, in his mind, capable of resolution once matters were "off and rolling" in the "direction" he had forced Mr Honeysett to accept. 129 In light of all the findings I have enunciated, I must now address the question whether the agreements of 20 November 2003 and 15 December 2003 were affected by some factor that will cause equity to decline to underwrite their performance. Although there is reference in the pleadings to "duress" the better approach is to consider matters by reference to principles of "undue influence" and "unconscionable conduct" identified as related but separate by Deane J in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at p.474. The undesirability of concepts such as "economic duress" was emphasised by the Court of Appeal in Australia & New Zealand Banking Group Ltd v Karam (2005) 64 NSWLR 149 at pp.162ff. The approach that should be taken was described by the Court of Appeal as follows (at pp.161-162): "45. In Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, Mason J identified a significant distinction between a claim that a transaction should not be enforced because it has been induced by "undue influence" and one which should not be enforced because of "unconscionable conduct". His Honour stated (at 461) after reference to a number of bases upon which equity might decline to enforce a transaction: '... But relief on the ground of "unconscionable conduct" is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage ... . Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position. ' 46 As was noted in the joint judgment of Gaudron J, Gummow J and Kirby J in Bridgewater v Leahy (1998) 194 CLR 457 at 477 [73], despite the overlap between these concepts, there is danger in failing to attend to the 'conceptual and practical distinctions between them'. But it may be noted that the matters which must be considered under each will fall into three broad categories, namely: (a) those affecting the status, characteristics or situation of the party seeking to resist enforcement of the document or transaction; (b) factors relating to the position of the enforcing party, and (c) the conduct of the one with respect to the other. In the case of undue influence, the focus will, as noted by Mason J in Commercial Bank of Australia Ltd v Amadio , be on the extent to which the will of the innocent party is not independent and voluntary. This result may follow from a particular mental or physical infirmity, or because of the relationship with the stronger party. Nevertheless, where these circumstances arise, whether the will is in fact overborne also requires consideration of the conduct of the stronger party. Whilst, by contrast, the concept of unconscion­able conduct may focus to a greater extent on the unconscientious conduct of the stronger party, the conduct will be treated as unconscionable only where the weaker party 'by reason of some condition or circumstance is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is taken of the opportunity thereby created': see Commercial Bank of Australia Ltd v Amadio (at 462) and the paper by Sir Anthony Mason. 'The Impact of Equitable Doctrine on the Law of Contract', (1998) 27 Anglo-American Law Review 1 at 6-8, quoted in Bridgewater (at 478 [75]). Thus, it remains a combination of the conduct or circumstances of each party which must be taken into account. In relation to unconscionable conduct, it will usually be necessary to have regard to the knowledge of the stronger party and his or her awareness of the situation of the weaker party. Further, it is not necessary to find that the will of the weaker party has been overborne, so that there is no independent and voluntary act. " 130 I consider first, therefore, the question whether the two agreements were brought about by the undue influence of Mr Maher. The relevant concept was explained by Hodges J in Union Bank of Australia Ltd v Whitelaw [1906] VLR 711 at p.720: "[E]quity recognises that persons possessed of the usual capacity to contract may, as a matter of fact, not be free agents, and may enter into obligations under the pressure of what it calls undue influence. 'Influence', as I understand the term in this connection, is the ascendancy acquired by one person over another. 'Undue influence' is the improper use by the ascendant person of such ascendancy for the benefit of himself or someone else, so that the acts of the person influenced are not, in the fullest sense of the word, his free, voluntary acts." 131 In Johnson v Buttress (1936) 56 CLR 113 at p.134 Dixon J explained the principles relating to relief from the exercise of undue influence:

"The basis of the equitable jurisdiction to set aside an alienation of property on the ground of undue influence is the prevention of an unconscientious use of any special capacity or opportunity that may exist or arise of affecting the alienor's will or freedom of judgment in reference to such a matter. The source of power to practise such a domination may be found in no antecedent relation but in a particular situation, or in the deliberate contrivance of the party. If this be so, facts must be proved showing that the transaction was the outcome of such an actual influence over the mind of the alienor that it cannot be considered his free act. But the parties may antecedently stand in a relation that gives to one an authority or influence over the other from the abuse of which it is proper that he should be protected. When they stand in such a relation, the party in the position of influence cannot maintain his beneficial title to property of substantial value made over to him by the other as a gift, unless he satisfies the court that he took no advantage of the donor, but that the gift was the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee." 132 Equitable principles about undue influence are thus concerned with the quality of the consent or assent of the plaintiff: Commercial Bank of Australia Ltd v Amadio (above) at p.474 (Deane J), and form a basis for relief where his independent and voluntary will is overborne: Amadio at p.461 (Mason J). Undue influence may be either presumed from a relationship of trust and confidence (Johnson v Buttress at pp.119, 122 (Latham CJ), 124 (Starke J), 134-135, 138 (Dixon J), 142 (McTiernan J)) or proved by evidence of express influence by the defendant over the plaintiff: Johnson v Buttress at pp.134-135 (Dixon J). 133 This case can only be of the latter kind. Mr Maher and Mr Honeysett were the co-owners and co-directors of HME. Each, as a director, owed duties to the company. But their roles as co-owners and co-directors did not involve the consequence that either reposed trust and confidence in the other. Nor were the actual circumstances such that one came under any fiduciary to the other: cf Brunninghausen v Glavanics (1999) 46 NSWLR 538. I am therefore of the opinion that there was no relationship giving rise to any presumption of undue influence on the part of Mr Maher. The matter must be approached solely by reference to the possibility of actual undue influence. 134 In Bank of Credit and Commercial International SA v Aboody [1990] 1 QB 923 at p.967, the English Court of Appeal propounded the requirements of actual undue influence:

"[A] person relying on a plea of actual undue influence must show that (a) the party to the transaction (or someone who induced the transaction for his own benefit) had the capacity to influence the complainant; (b) the influence was exercised; (c) its exercise was undue; (d) its exercise brought about the transaction." 135 On the findings I have made, it may be accepted that Mr Maher had and exercised a capacity to influence Mr Honeysett by taking the steps he took in relation to sending the employees home and withdrawing his guarantee. I have already said that Mr Maher took those steps in order to put pressure on Mr Honeysett. He succeeded in his objective, in that the pressure he applied was instrumental in causing Mr Honeysett to sign the documents of 20 November 2003 and 15 December 2003. Elements (a), (b) and (d) of the above extract from the Aboody case are therefore established. That leaves for consideration element (c) and the question whether the exercise of the influence was "undue". The relevant concept is that explained by Lord Shaw in a passage in Poosathurdi v Kanappa Chettiar (1919) LR 47 IA 1 quoted with approval by Isaacs J in Watkins v Combes (1922) 30 CLR 180 at p.194: "But, … more than mere influence must be proved so as to render influence, in the language of the law, `undue.' It must be established that the person in a position of domination has used that position to obtain unfair advantage for himself, and so to cause injury to the person relying upon his authority or aid." 136 Central here is a concept of "unfair advantage" to the person exerting influence and "injury" to the person upon whom the influence is brought to bear. The agreement of 20 November 2003 was advantageous to Mr Maher. It laid the ground for cessation of HME's business in the way he wanted and to which Mr Honeysett had been unwilling to agree. While there was, on the face of that agreement, an appearance of equal treatment or even-handedness, any such appearance is, in reality, illusory. There are two reasons for this. First, cessation of business was what Mr Maher wanted, not what Mr Honeysett wanted (his solicitor had already aired concerns that such a course would destroy the company's goodwill to the detriment of its owners); and, second, Mr Maher was given a clear and unwarranted benefit by clause 6 (being the right to acquire certain company property at half its cost to the company). The property concerned (the "Chlorguard" materials) was relevant to the performance of the work HME did for Orica. The agreement was advantageous to Mr Maher and disadvantageous to Mr Honeysett. 137 Any appearance of even-handedness was, however, abandoned altogether when it came to the agreement of 15 December 2003. Under that agreement, Mr Maher (or his company or nominee) obtained a right to buy Mr Honeysett's share of the factory for a price stated in the agreement but in fact dictated by Mr Maher (plus a right to rent, pending purchase); a right to take over the business vehicles on payment of whatever was necessary to pay out the finance leases; a right to take all tools and materials (except "personal hand tools and ladders as agreed") for $15,000; a right to purchase the Chlorguard materials for $30,000 (this being relevant to continuation of the Orica work); and a right to take over, for nothing, the company phone and fax numbers as well as the post office box. The vehicles driven by the individuals and the mobile phones they used were to remain with them. I am satisfied that all the specified amounts of money were decided by Mr Maher and passively accepted by Mr Honeysett without any process of valuation or analysis. 138 The net effect of the two agreements was that HME would go out of business and that Mr Maher would have, to the exclusion of Mr Honeysett (albeit upon payment of the sums fixed in the unsatisfactory way I have mentioned), the business premises, all the business vehicles, the Chlorguard materials relevant to continuation of the part of the business centred on Orica, the totality of the tools and materials (except "personal") and the means of incoming client communication by phone, fax and mail. Mr Honeysett, for his part, was to receive the vehicle he habitually drove, his "personal" tools and three mobile phone services. In other words, virtually the whole capacity to continue the HME business was to accrue to Mr Maher to the exclusion of Mr Honeysett. Upon completion of these transfers, Mr Maher and Mr Honeysett would be equal shareholders in a company that no longer possessed the means to carry on its business (and in fact ceased business) and had as assets, in addition to any net balance of receivables (and cash on hand) over payables, the several sums paid in by Mr Maher pursuant to the 15 December 2003 agreement. 139 The evidence shows that Mr Maher promptly took advantage of the position that arose by virtue of the two agreements on 19 December 2003. Demaher commenced business as soon as HME ceased business. Mr Maher caused Demaher to turn to account for his personal benefit the several advantages accruing to him from and as a consequence of the two agreements. Mr Maher accepted in cross-examination that Demaher, in effect, took up where HME left off: see the passage of cross-examination quoted at paragraph [90] above. The employed electricians and Mr Annakin all joined Demaher. There was apparently some delay in Demaher obtaining an electrician's licence and one document in evidence, signed by one of the employed electricians, suggests that Demaher may have used HME's licence number on one occasion, although there is always the possibility that he used the wrong number by mistake. 140 This analysis leaves no doubt in my mind that Mr Maher's exercise of his influence over Mr Honeysett in relation to the 20 November 2003 agreement and more particularly in the follow-on that produced the 15 December 2003 agreement was "undue" in that it caused Mr Honeysett to accept a position that was very advantageous to Mr Maher and very disadvantageous to Mr Honeysett. 141 That being so, the question is whether Mr Maher can rebut the proof of undue influence by showing that Mr Honeysett's decisions to enter into the agreements were independent, voluntary and conscientious: Johnson v Buttress at 123 (Latham CJ), 124, 126 (Starke J), 135 (Dixon J), 142-143 (McTiernan J). In Spong v Spong (1914) 18 CLR 544 at 552, Rich J stated the relevant test in these terms: "the question is, whether the person parting by way of gift, or entering into a contract, had a full and free opportunity of judging for himself. … 'The principle applies to every case where influence is acquired and abused, where confidence is reposed and betrayed': Smith v Kay [(1859) 7 HL Cas 750; (1859) 11 ER 299]." 142 I am satisfied, in the present case, that Mr Honeysett was not able to judge for himself. Mr Maher had manufactured an atmosphere of emergency in which the employees were not working and the company's bank accounts were frozen. Mr Honeysett felt trapped and there was good reason, created by Mr Maher, for him to feel that way. He was unable to make objective decisions. 143 Mr Honeysett's case based on undue influence accordingly succeeds, subject to questions of laches and acquiescence to be considered presently. I proceed nevertheless to consider his challenge to the agreements based on unconscionable conduct. The relevant principle was explained by Deane J in Amadio at p.474: "The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or 'unconscientious' that he procure, or accept the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable …" 144 The judgment of Mason J in Amadio at p.462 is also instructive:

"I qualify the word 'disadvantage' by the adjective 'special' in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interest, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party." 145 The relevant principles were further discussed in Louth v Diprose (1992) 175 CLR 621. In that case, a majority of the High Court (Mason CJ, Brennan, Deane, Dawson Gaudron and McHugh JJ, Toohey J dissenting) set aside a gift of a house from a man to a woman with whom he had been "utterly infatuated". The court found that woman had tolerated the man's attentions because of the material advantages to her, manufactured a false atmosphere of personal crisis and played upon his love for her by making suicide threats. Mason CJ said at p.626: "By dishonestly manufacturing an atmosphere of crisis with respect to the house, the appellant played upon the respondent's susceptibility where she was concerned. Her conduct was unconscionable in that it was dishonest and was calculated to induce, and in fact induced, him to enter into a transaction which was improvident and conferred a great benefit upon her." 146 Deane J at p.638 stated: "This case [ Louth v Diprose ] was one in which the appellant deliberately used that love or infatuation and her own deceit to create a situation in which she could unconscientiously manipulate the respondent to part with a large proportion of his property. The intervention of equity is not merely to relieve the plaintiff from the consequences of his own foolishness. It is to prevent his victimisation ." [emphasis added] 147 In Bridgewater v Leahy (1998) 194 CLR 457, the High Court held that it was unconscionable for a nephew to acquire land for seriously inadequate consideration from his uncle whom he knew to be emotionally dependent on him, particularly because the acquisition had been at the nephew's initiative. 148 Mr Honeysett was in a position of "special disadvantage" of the kind with which these principles are concerned. He was, as I have found, of a general disposition that made him unable to make, in a normal and confident way and unaided by his wife and Mr Gleeson, business decisions of any significance at all. His disability in that respect became the object of the pressure deliberately applied by Mr Maher. Furthermore, Mr Maher, who had been in business with Mr Honeysett for fourteen years, knew of his disability, took the particular steps in relation to absence of the employees and withdrawal of the guarantee with the deliberate aim of capitalising upon the disability and then took advantage of the exacerbated disability by having Mr Honeysett sign the agreements of 20 November 2003 and 15 December 2003. It is beside the point that Mr Maher may have suggested, on either or both of the occasions, that Mr Honeysett not sign immediately but "sleep on it" and speak to Mr Gleeson. The atmosphere of emergency he had created by sending the employees home and causing the company's bank accounts to be frozen was such that, as he well knew (indeed, hoped and intended), Mr Honeysett should view the matter as so pressing and urgent that there would be no delay. This was so principally in relation to the first agreement (20 November 2003). But it was that agreement that set the stage for the subsequent agreement. 149 Mr Maher deliberately manufactured "an atmosphere of crisis", to adopt words used in Louth v Diprose, and did so in order make more certain and pronounced the effects of Mr Honeysett's disability in the matter of decision-making, being a disability of which Mr Maher was fully aware. 150 The circumstances of this case are such as to activate the last part of the extract from Amadio at paragraph [143] above. Conditions (i) and (ii) there being satisfied, it is for Mr Maher to show that "the transaction was fair, just and reasonable". He has not done that. HME was a profitable company. Had the shareholders wished to vacate the field in the in the way most advantageous to both of them, they would have sold their shares to someone else in the same line of business or caused the company itself to sell its assets and goodwill. Instead, they entered into a transaction which saw Mr Maher alone obtain the ability to step very largely into the company's shoes from the point of view of continuing its business and taking advantage of its market position. 151 It follows that Mr Honeysett's case based on unconscionable conduct also succeeds. Again, however, this is subject to the possibility that Mr Maher may establish a defence of laches and acquiescence to which I shall turn in due case. 152 First, however, I consider the derivative claim of HME brought on its behalf by Mr Honeysett in exercise of leave granted under s.237 of the Corporations Act. 153 The principal relief sought on HME's behalf in the derivative proceeding is a declaration that Mr Maher has acted in breach of fiduciary duty in relation to HME. The relevant fiduciary duty is that owed by a director to his or her company, being a duty to act in good faith for the benefit of the company, to act for proper purposes and not to appropriate any profit from the use of corporation assets, information or opportunities. The existence of such a duty is clear. There is no need to refer to authority. 154 Equity is uncompromising in the standards of conduct it expects of a fiduciary. The primary obligation is to subordinate personal interests to the interests of the person to whom the fiduciary duty is owed. Where that person is a company, the interests concerned are the interests of the company as the personification of the interests of the general body of its members. Intrusion of the interests of creditors is not something that need be considered in this case, as there is no question that the relevant company was in financial difficulties. 155 Numerous cases could be cited and discussed in giving content to the duty. But there is no need for this. I am content to quote the following statement of Arden LJ (with whom Mummery LJ agreed) in Item Software (UK) Ltd v Fassihi [2005] 2 BCLC 91 at p.103: "I prefer to base my conclusion in this case on the fundamental duty to which a director is subject, that is the duty to act in what he in good faith considers to be the best interests of his company. This duty of loyalty is the 'time-honoured' rule: per Goulding J in Mutual Life Insurance Co of New York v Rank Organisation Ltd [1985] BCLC 11, 21. The duty is expressed in these very general terms, but that is one of its strengths: it focuses on principle not on the particular words which judges or the legislature have used in any particular case or context. It is dynamic and capable of application in cases where it has not previously been applied but the principle or rationale of the rule applies. It reflects the flexible quality of the doctrines of equity. As Lord Templeman once put it "Equity is not a computer. Equity operates on conscience …" ( Winkworth v Edward Baron Development Co Ltd [1986] 1 WLR 1512, 1516.)

Professor Robert C Clark has described the fundamental nature of the duty of loyalty in these terms:- 'The most general formulation of corporate law's attempted solution to the problem of managerial accountability is the fiduciary duty of loyalty: the corporation's directors … owe a duty of undivided loyalty to their corporations, and they may not so use corporate assets, or deal with the corporation, as to benefit themselves at the expense of the corporation and its shareholders. The overwhelming majority of particular rules, doctrines, and cases in corporate law are simply an explication of this duty or of the procedural rules and institutional arrangements involved in implementing it. The history of corporate law is largely the history of the development of operational content for the duty of loyalty. Even many cases that appear to be about dull formalities or rules of the road in fact involve disputes arising out of alleged managerial disloyalty … Most importantly, this general fiduciary duty of loyalty is a residual concept that can include factual situations that no one has foreseen and categorized. The general duty permits, and in fact has led to, a continuous evolution in corporate law.' ( Corporate Law (1986) pages 34 and 141, emphasis in the original). Although Professor Clark was writing about the duty of loyalty in the United States, his observations seem to me to express qualities of the duty of loyalty applying equally to the law of England and Wales." 156 In the present case, it is neither necessary nor appropriate to consider independently the separate acts of Mr Maher by way of sending the employees home and withdrawing his guarantee. The appropriate approach is to consider the course of conduct as a whole. The two particular acts were, as I have found, part of a strategy of bringing about a de facto cessation of operations by HME so as to create a fait accompli that would leave Mr Honeysett in a position where there was no real point in opposing formal recognition and implementation of such an outcome. That strategy, which was successful, was part of a broader strategy of Mr Maher (also successful) to create a situation in which HME relinquished, so that Mr Maher might assume, the assets, connections, opportunities and advantages which together made up HME's successful business. 157 It was contrary and inimical to HME's interests for Mr Maher to implement both the narrower strategy and the broader strategy. As a director, he was duty bound to foster HME's business and, in so doing, to subordinate any personal ambition he had to see that business discontinued so that he might himself occupy the relevant field of activity. 158 It is not to the point for Mr Maher to point to agreement on the part of Mr Honeysett, his co-shareholder. While unanimous informal assent of a company's shareholders may authorise what would otherwise be a breach of a director's fiduciary duty, at least where there is no suggestion of financial instability, this can be so only where the assent is freely given and not impeachable on equitable grounds. My conclusions with respect to the unconscientious nature of Mr Maher's conduct in obtaining Mr Honeysett's concurrence in the agreements of 20 November 2003 and 15 December 2003 mean that Mr Maher is not able to rely on any apparent assent by Mr Honeysett to the course of action entailing breach of fiduciary duty. 159 HME is, for these reasons, entitled to the declaratory relief sought on its behalf by Mr Honeysett, being the relief referred to at paragraph [153] above - subject again to the possibility of successful defence by Mr Maher on the grounds of laches and acquiescence. 160 It is to that possible defence, as relevant to both the claims based on undue influence and unconscionable conduct and the fiduciary duty claim, that I now turn. It is true that Mr Honeysett did not seek to challenge the agreements of 20 November 2003 and 15 December 2003 until Mr Maher had initiated specific performance proceedings. Nor was the derivative claim on behalf of HME pressed until that time. But the passage of time alone is not sufficient. The real issue thrown up by reliance on the particular defences is whether it would be unjust (in the sense of visiting injustice upon Mr Maher) to disturb the status quo, having regard to the passage of time and lack of protest or objection by Mr Honeysett and HME in the meantime. 161 These questions arise for determination in a context where no third party rights have intervened, in that Demaher, under the sole ownership of Mr Maher, has continued in business alone since its inception in December 2003 and Mr Honeysett has taken steps of his own to go back into business as an electrical contractor. Furthermore, it is not shown that, since December 2003, Mr Honeysett or HME has caused or induced Mr Maher to change his position in some way in reliance on an assumption that Mr Honeysett and HME would not attempt to assert the rights that have been vindicated in these proceedings. 162 In short, there is no circumstance pointing to any injustice to Mr Maher because of either the lapse of time between the relevant events and the initiation of action by Mr Honeysett and HME or any change of position by Mr Maher during that period on the basis of some assumption that there would be no action. 163 I pause at this point to re-state my principal conclusions: 1. Clause 8 of the 20 November 2003 agreement and clause 2 of the 15 December 2003 agreement (each being an agreement between Mr Maher and Mr Honeysett) were and are complete contractual stipulations having legal force unaffected by unacceptable vagueness, the absence of any essential term, the absence of any essential party or the absence of consideration. 2. Each such agreement was, however, procured and affected by undue influence and unconscionable conduct on the part of Mr Maher as against Mr Honeysett. 3. In exercising the undue influence, engaging in the unconscionable conduct, taking the benefit of the two agreements and causing Demaher to turn to account for his own personal benefit the several advantages accruing to him from and as a consequence of the two agreements, Mr Maher acted in breach of the fiduciary duty owed by him as a director of HME. 164 The question of consequences is one that should be addressed in further submissions, along with the question of costs. 165 I have said nothing to this point about Mr Maher's claim for a winding up order in respect of HME. It is clear from the whole of the circumstances to which I have referred that there has been a complete breakdown in relations between the two corporators. HME no longer carries on business. The purpose for which it was formed - to conduct the business formerly conducted by Mr Honeysett and Mr Maher in partnership - is no longer feasible or viable. It is, in those circumstances, just and equitable that HME be wound up. It is submitted on behalf of Mr Honeysett, however, that a winding up order should await final determination of the other aspects of these proceedings, including as to the consequences referred to at paragraph [164]. I agree. The company is inactive, except to the extent that proceedings are being prosecuted on its behalf by Mr Honeysett. A winding up order and an order appointing a liquidator will be among the orders made upon final disposition of the proceedings. **********

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