Maria's Farm Veggies Pty Ltd v Maria's Kitchen Gardens Pty Ltd

Issues for decision

1. The claims in these proceedings centre on five payments, totalling approximately $2.9 million, which were made out of the funds borrowed by MFV from Macquarie. It is contended on behalf of MFV that, apart from an amount of approximately $0.8 million, these payments were not made for the benefit of MFV but for the benefit of MKG, ADGS and Hortiagro, and that the making of the payments represented breaches of duty on the part of Cornelis and Stefan Disselkoen as directors of MFV.
2. Out of the payments a total of $1.6 million was applied to the purchase of a rural property by MKG and farm equipment by Hortiagro. Claims are made on behalf of MFV for the imposition of a constructive trust over those assets, and for an account against each of the recipient companies.
3. Finally, MFV makes claims for equitable compensation and statutory compensation under the Corporations Act 2001 (Cth) against Cornelis and Stefan Disselkoen for breach of fiduciary duty and breach of their statutory obligations as directors of MFV.

Factual findings

1. The project was ready to begin by the start of 2015. It appears to have been contemplated that some of the equipment required for the project would be purchased through a Hong Kong company, Yuefu Systems Hong Kong Ltd ("Yuefu"). The directors of that company were Ian John Faulkner and Klaas Pieter (known as Nico) Voogt. Mr Faulkner and Mr Voogt also held equal shares in the company. In January 2015, Mr Voogt moved to Australia to act as a consultant for MFV.
2. MFV entered into the loan facility agreement with Macquarie in January 2015. On 6 February, it made an initial draw-down under the facility of $8.28 million. Further large draw-downs followed over the next few months. The moneys drawn down were the source of all of the payments by MFV the subject of these proceedings.
3. MKG was incorporated on 23 February 2015. On the following day, 24 February, it entered into a contract to purchase a property at Bobs Farm which is a rural area east of Williamtown, between Port Stephens and Stockton Beach. The purchase price was $1.175 million. On the same date MKG entered into a written licence agreement with the vendor entitling it to occupy the property for a licence fee of $5,000 per month.
4. At the time of its incorporation, MKG appears to have had no assets of any substance. The purchase contract provided for a deposit of $100,000 to be paid. This amount was in fact paid by MFV by electronic debit on 23 February, the day before the contract was executed.
5. At the same time as MKG entered into the contract to buy the property at Bobs Farm, Hortiagro entered into a contract to purchase certain farm equipment at the property for the sum of $425,000. The contracts were related. The vendors under the two contracts were a couple by the name of Sanders. Mr Sanders was the vendor of the property and Mrs Sanders was the vendor of the equipment.
6. ADGS was incorporated on 23 March. At around the same time, a contract was signed between ADGS and Yuefu for the supply by Yuefu of a large quantity of insect netting for the Williamtown project. The contract in fact bears the date 20 March 2015, which is three days before ADGS was actually incorporated. The price specified in the agreement was €1,180,000. The contract provided for ADGS to prepay fifty per cent of the price, being €590,000.
7. Yuefu operated as a middle man for the supply of greenhouse and solar equipment. It had no office and no employees. It did not hold equipment in stock, but rather brought equipment in once it had obtained an order to supply that equipment to a customer.
8. On 14 April ADGS opened a bank account with the Commonwealth Bank of Australia ("CBA"). On the same day, MFV deposited $1,233,333.33 to the account by way of electronic debit. The narrative described the debit as "Deposit Quote ADGS 15-100". On 17 April, a further $123,333.33 was transferred from MFV to the account by way of electronic debit. The narrative described the debit as "GST on ADGS 15-100". The quote or other document referred to as "ADGS 15-100" is not in evidence, and there is no evidence that ADGS ever supplied, or contracted with MFV to supply, any equipment or services for the project.
9. On 16 April, $818,792.14 was transferred from the ADGS account to Yuefu. This was the Australian dollar equivalent of the deposit under the netting contract.
10. A further transfer of $1,346,100.00 from MFV to the ADGS bank account was made by electronic debit on 1 May. The narrative described the debit as "Deposit Solar installation". At the time, no purchase contract had been entered into which would have answered this description, although later a contract was entered into between MFV and Yuefu (not ADGS) for the delivery and installation of a solar field system (see [26] below).
11. Five days later, on 6 May, the contracts under which MKG purchased the Bobs Farm land and Hortiagro purchased the related equipment were settled. The amount due on the settlement of the contract for the purchase of the land was $1,087,050.74. This was made up of the balance of the purchase price ($1,075,000.00) and an allowance in favour of the vendor ($12,050.74). The allowance was mainly made up of the licence fee ($11,860.61) with a small additional amount for council rates ($297.13) and a small set-off for the registration fee on the discharge of the mortgage ($107.00).
12. In order to effect the settlement, $1,085,615.31 was transferred from the ADGS bank account to the vendors' solicitor. The small additional amount of $1,435.43 to cover the rest of the allowance was presumably paid by someone else on behalf of MKG. The sum of $425,000 (being the purchase price under the equipment contract) was also paid by ADGS by direct transfer to the vendors' solicitor.
13. At this stage, the only moneys paid into the ADGS bank account had been the three deposits from MFV to which I referred above (the account statement shows a credit of $391.76 on 27 April, but this is balanced by a debit for the same amount earlier on the same day and can be ignored). The effect of this is therefore that, directly or indirectly, funds borrowed by MFV from Macquarie were used: (a) to pay $1,175,000.00 for the purchase of the Bobs Farm property, together with $10,615.31 by way of allowance, for the benefit of MKG; (b) to pay $425,000.00 for the purchase of the equipment under the equipment contract, for the benefit of Hortiagro; (c) to pay $818,792.14 to Yuefu under the netting contract.
14. On 26 June, a further transfer was made by MFV to ADGS' bank account by way of electronic debit in the sum of $125,000. The narrative described the debit as "Yuefu Solar Contract Prepayment". By this time, MFV may have entered into the contract to purchase the solar field system with Yuefu (see [26] below), but that contract required payment to Yuefu, not ADGS.
15. At some point after April a new contract with respect to the supply and installation of the insect netting was signed between Yuefu and MFV. The contract was backdated to 20 March 2015, the date of the original Yuefu-ADGS contract. The price was increased to €1,555,756.10 with a payment schedule "to be agreed".
16. A written contract was also signed between MFV and Yuefu for the delivery and installation by Yuefu of a solar field system which included heat pumps, wind turbines and battery storage facilities. The total price under the contract was €12,236,348 with a deposit of €3,670,904.40.
17. The evidence does not identify precisely when these two contracts were signed. According to an affidavit from Mr Faulkner, the revised netting contract was signed "in about May or June" and the solar field contract was signed "in about June". Mr Faulkner said he travelled to Australia to sign the contracts, but did not identify the occasion or occasions on which they were signed with any more precision.
18. Mr Faulkner treated the revised netting contract between MFV and Yuefu as replacing the earlier contract with ADGS, and treated the payment made on 16 April as a payment made under the revised contract. Two further invoices were issued by Yuefu to MFV pursuant to the revised contract and paid by MFV. The netting the subject of the contract was delivered to MFV in about September or October 2015. Yuefu never installed the netting and did not invoice MFV for the installation charge in the contract.
19. In the end, the solar field contract between MFV and Yuefu was never performed. Yuefu never received any moneys (whether from MFV or ADGS) for the equipment specified in the contract, and never supplied any such equipment.
20. On 10 June, Mr Voogt sent Cornelis Disselkoen and Janis Tassell (Janis Tassall appears to have been the same person as Janis Stevenson, who was MFV's "financial officer" according to Mr Disselkoen) an email to which was attached two back-dated invoices from Yuefu to MFV. The first invoice was purportedly dated 14 April. It was for $2,254,719.56, and described as "contract insect netting delivery installation MFV Williamtown". It showed as credits the sums of $1,233,333.33 and $123,333.33 paid by MFV to ADGS on 14 and 17 April (see [18] and [20] above). The second invoice was purportedly dated 10 May. It was for $1,346,100.00, described as a "7% down payment" under the solar contract. This figure corresponded to the amount paid by MFV to ADGS on 1 May.
21. On 4 August, Mr Voogt sent an email to Ms Stevenson that attached a further back-dated invoice. The invoice was purportedly dated 25 July. It was for $125,000, described as "solar contract". This corresponded to the amount paid by MFV to ADGS on 26 June.
22. Although purportedly issued by Yuefu, these invoices required payment to ADGS. Mr Faulkner said that the invoices were issued without his knowledge or authority. He said that he had never agreed, and would never have agreed, to moneys due from MFV to Yuefu being paid to ADGS.
23. It is accepted on behalf of MFV that MFV received the value of the payment of $818,792.14 made by ADGS to Yuefu on 16 April under the AGDS-Yuefu netting contract on 16 April. But MFV received no other value from the payments deposited into the ADGS bank account. Allowing for the amounts paid for the benefit of MKG and Hortiagro from the payments made on 6 May leaves the sum of $498,359.21 received and retained by ADGS. A number of payments were made out of the account to Stichting Disselkoen, but no claim has been made against Stichting in these proceedings, and MFV is content to limit its claim for recovery of the $498,359.21 to a claim against ADGS.
24. The property at Bobs Farm remains registered in the name of MKG, but in November 2015 a mortgage in favour of the CBA was registered on the title to the property. The mortgage was stamped for loan security duty in the sum of $990,000. Subsequently a caveat was lodged so as to protect the interest of MKG. Two subsequent caveats also appear on the title. It is not known how much, if any, of the farm equipment remains in the ownership of Hortiagro.
25. On 24 December 2014, filings were lodged with the Australian Securities and Investments Commission ("ASIC") which notified the change of each of MFV's and Hortiagro's principal place of business and registered office to the Bobs Farm property. The principal places of business changed on 3 December and the registered offices were to change on 31 December. On the incorporation of MKG (23 February 2015) and ADGS (23 March), those companies' principal places of business and registered offices were also notified as the Bobs Farm property. The property thus appears to have been used as the corporate headquarters for all of the relevant Disselkoen companies from December 2014 onwards, although there is no evidence of the basis for the occupation of the property by those companies before the MKG licence agreement on 24 February 2015.
26. Consistently with its designation as the company's principal place of business, the Bobs Farm property appears to have been used as the address for correspondence for the companies. An MFV letterhead in evidence dated September 2015, identified the Williamtown property as the "farm" and the Bobs Farm property as the "office". The statements for the ADGS bank account into which the payments from MFV were made were addressed to the Bobs Farm property.
27. In his affidavit filed in these proceedings, which is dated November 2016, Cornelis Disselkoen gave his residential address as the Bobs Farm property. The property is also listed as his residential address in subsequent ASIC filings. Earlier ASIC filings are not clear as to when Mr Disselkoen started to live there. Filings prior to December 2014 show his residential address as having been in the Netherlands, at the same address in Delft as for Stichting Disselkoen. In the filing for the incorporation of MKG (23 February 2015), his residential address was shown as the Bobs Farm property. The same address was shown on a Change of Shareholder Detail form for MFV lodged on 26 February. But the filing for the incorporation of ADGS (23 March) gave Mr Disselkoen's residential address as being in Susella Crescent, Tuncurry.
28. There is no other evidence to associate Mr Disselkoen with the Tuncurry address. The address is shown in later ASIC filings as the residential address of Geoffrey Anthony Shannon who became a director and secretary of some of the relevant companies in 2017.
29. Mr Faulkner's evidence was that the MFV-Yuefu netting contract which was signed in about May 2015 (see [16]) was signed at the Bobs Farm property, and that Mr Disselkoen was living at the property at that stage. ASIC filings consistently show Stefan Disselkoen's residential address as being in New Lambton, in western Newcastle. Someone must have been living at the Bobs Farm property from December 2014 when it was functioning as the Disselkoen companies' corporate headquarters. I infer that it was Cornelis Disselkoen.

Relief against MKG, ADGS and Hortiagro

1. The relief sought in these proceedings relates to the following payments made out of the moneys borrowed by MFV from Macquarie, to which I will refer as the "MFV Payments": 1. $100,000 paid for the benefit of MKG on 23 February 2015; 2. $2,827,766.66 in total paid to ADGS' bank account as follows: (i) $1,233,333.33 on 14 April 2015; (ii) $123,333.33 on 17 April 2015; (iii) $1,346,100.00 on 1 May 2015; (iv) $125,000.00 on 26 June 2015.
2. At the time that the MFV Payments were made, Cornelis and Stefan Disselkoen were the directors of MFV (as well as of the other relevant companies). Between them they constituted MFV's management. One or other or both of them must have been responsible for the payments.
3. I am satisfied that the MFV Payments resulted from breaches of fiduciary duty by whichever of the Disselkoens was responsible. The payments were of no benefit to MFV. They came from money which had been borrowed by MFV and should have been used for MFV's glasshouse project. Their use for extraneous purposes not only deprived MFV of the benefit of the moneys but exposed MFV to action by Macquarie under the facility agreement, one of the terms of which required that the moneys be used only for the purpose of the project. The backdated invoices for the last two payments ($1,346,100.00 and $125,000.00) are clearly bogus. In any event, the existence of obligations to Yuefu could never have justified payments to ADGS.
4. The principles applicable where money is paid away in breach of fiduciary duty are set out in the judgment of Lord Millett in Foskett v McKeown [2011] 1 AC 102 at 130 (his Lordship uses the language of breach of trust but the principles apply equally to breach of a director's fiduciary duty): The simplest case is where a trustee wrongfully misappropriates trust property and uses it exclusively to acquire other property for his own benefit. In such a case the beneficiary is entitled at his option either to assert his beneficial ownership of the proceeds or to bring a personal claim against the trustee for breach of trust and enforce an equitable lien or charge on the proceeds to secure restoration of the trust fund. He will normally exercise the option in the way most advantageous to himself. If the traceable proceeds have increased in value and are worth more than the original asset, he will assert his beneficial ownership and obtain the profit for himself. There is nothing unfair in this. The trustee cannot be permitted to keep any profit resulting from his misappropriation for himself and his donees cannot obtain a better title than their donor. If the traceable proceeds are worth less than the original asset, it does not usually matter how the beneficiary exercises his option. He will take the whole of the proceeds on either basis. This is why it is not possible to identify the basis on which the claim succeeded in some of the cases. Both remedies are proprietary and depend on successfully tracing the trust property into its proceeds, A beneficiary's claim against a trustee for breach of trust is a personal claim. It does not entitle him to priority over the trustee's general creditors unless he can trace the trust property into its product and establish a proprietary interest in the proceeds. If the beneficiary is unable to trace the trust property into its proceeds, he still has a personal claim against the trustee, but his claim will be unsecured. The beneficiary's proprietary claims to the trust property or its traceable proceeds can be maintained against the wrongdoer and anyone who derives title from him except a bona fide purchaser for value without notice of the breach of trust. The same rules apply even where there have been numerous successive transactions, so long as the tracing exercise is successful and no bona fide purchaser for value without notice has intervened.
5. No valuable consideration was provided by MKG or ADGS for the MFV Payments. Nor was any valuable consideration provided by MKG or Hortiagro for the payments made on to them by ADGS. On the test stated by Lord Millett, that is sufficient to establish the recipient companies' liability. If it is necessary to establish affirmatively that the recipient companies knowingly received the moneys in question (cf. Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 at [251]-[252]), then I think the evidence satisfies that requirement. Because the Disselkoens were directors (in fact the only directors) of all of the recipient companies, the knowledge of whoever was responsible for making the payments from MFV to MKG and ADGS, and of whoever was responsible for making the further payments from ADGS to MKG and Hortiagro, is attributed to the recipient companies. I will consider the individual responsibilities of Cornelis and Stefan Disselkoen below. It is enough, for present purposes, to say that liability for knowing receipt of the MFV payments is made out against the recipient companies.
6. MFV has elected to take the second option mentioned by Lord Millett, namely a judgment for the amount received by the recipient companies together with an equitable charge over the property acquired with those moneys. I will grant relief accordingly.
7. The judgments against the recipient companies will be concurrent with the judgment against ADGS for money had and received to the extent that they represent the same funds. Accordingly, there will be judgment: (a) against MKG in the sum of $100,000 (representing the deposit on the Bobs Farm property); (b) against ADGS and MKG in the sum of $1,075,000.00 (representing the balance of the purchase price of the Bobs Farm property); (c) against ADGS and MKG in the sum of $10,615.31 (representing the payment towards the allowance in favour of the vendor of the Bobs Farm property) (d) against ADGS and Hortiagro in the sum of $425,000 (representing the purchase price of the equipment at the Bobs Farm property); and (e) against ADGS in the sum of $498,359.21 (representing the rest of the money paid to ADGS)
8. The judgments in (a) and (b) will, as against MKG, be charged on its interest in the Bobs Farm property. The judgment in (d) will, as against Hortiagro, be charged on its interest in the equipment at the Bobs Farm property. In each case there will be a declaration that the judgment, together with interest, "constitutes an equitable charge" on the recipient's interest in the relevant asset: Thorn v Boyd (No 2) [2015] NSWSC 199 at [43(2)].
9. This form of order makes clear that, while the charge gives rise to a proprietary entitlement which prevails over unsecured creditors, it cannot necessarily prevail over secured creditors, whether their interests are legal (as in the case of the CBA under its mortgage) or equitable. In the event of any dispute, it will be necessary for the relevant parties to be joined so that the question of priority to the further proceeds can be determined.
10. I will grant liberty to apply for further orders consequential upon the declarations of the equitable charge. In particular, depending on the attitude of the CBA, an order for sale of the Bobs Farm property may be sought. Any dispute about creditors' priorities over the proceeds of the Bobs Farm property may also be determined in this way.

Relief against Disselkoens

1. In putting its case against Cornelis Disselkoen and Stefan Disselkoen for breach of their duties as directors, MFV relies upon their fiduciary obligations in equity. MFV also relies on three specific obligations set out in the Corporations Act: s 180 (due care and diligence); s 181 (good faith and proper purpose); and s 182 (proper use of position).
2. MFV pleads its case against the Disselkoens so far as the $100,000 payment to MKG (defined as the "Deposit") is concerned, as follows: 95. Cornelis and Stefan [Disselkoen], in their capacity as directors and officers of [MFV], caused permitted, allowed and/or authorised [MFV] to pay the Deposit in circumstances where they knew or ought to have known that: (a) [MKG] had no entitlement to claim $100,000 from [MFV]; (b) [MKG] was not entitled to receive $100,000 from [MFV]; (c) the Deposit was to be used to meet the obligations of [MFV] under the [contract to purchase the Bobs Farm property]; (d) [MFV] received no, or no real benefit from paying the Deposit or from the terms of the [contract to purchase the Bobs Farm property]; and (e) in paying the Deposit, [MFV] lost the value of the Deposit, being $100,000. Particulars The knowledge is to be inferred from the fact that at the time of the payment of the Deposit: (a) Cornelis was a director of both [MFV] and [MKG]; and (b) Stefan was a director and the secretary of both [MFV] and [MKG]. MFV's claims in relation to the other payments are pleaded in the same form.
3. MFV's form of pleading alleges two matters. The first is that each of the directors caused, permitted, etc, the payment to be made by MFV. The second is that in doing so, they were aware of certain circumstances which made the payments a breach of duty.
4. Cornelis Disselkoen's defence (as amended) denies each of the relevant paragraphs "in its entirety"; that is, both the first and second allegations are denied. Although Mr Disselkoen did not appear at the hearing, the Court must still, in my view, deal with his defence. Accordingly, the evidence must be such as to satisfy the Court that Mr Disselkoen was personally responsible for the payments in one of the ways alleged.
5. There is evidence before the Court of an authorisation on behalf of ADGS for the payments of $1,085,615.31 and $425,000.00 used to complete the purchase of the Bobs Farm property and the associated equipment. The authorisation was signed by Mr Disselkoen. But there is no comparable evidence identifying who authorised the payments made by MFV which are the subject of the claim. Mr Disselkoen's responsibility for these payments must be established by inference from other evidence.
6. There are a number of factors in the evidence which are suggestive. I have already referred to the evidence which I think sufficiently establishes that the Bobs Farm property was used by Mr Disselkoen as his Australian home at the relevant time. He also personally guaranteed Hortiagro's obligations under the agreement to purchase the equipment there. He was responsible for authorising the payment from ADGS used to effect the settlement. It is reasonable to suppose that Mr Disselkoen was responsible for giving the necessary instructions to complete the purchase. This in itself makes it likely that he was responsible for making the funds available.
7. I have also referred to the evidence which I think establishes that the Bobs Farm property was the corporate headquarters of all of the relevant Disselkoen companies, including MFV. It is reasonable to suppose that, as Mr Disselkoen was living there, payments made by those companies were made by him, or by staff reporting to him. Furthermore, Mr Faulkner's evidence suggested that Mr Disselkoen was the key decision-maker for MFV, at least so far as the Yuefu contracts were concerned. There is also the fact that he was sent the back-dated invoices of 10 June 2015 (see [30] above) by Mr Voogt.
8. Counsel for MFV contended that the circumstances cast an evidentiary onus on Mr Disselkoen to rebut the suggestion that he was responsible for the payments. Counsel appealed to the principle stated by Black J in FAL Healthy Beverages v FAL Retail [2017] NSWSC 476 at [41]: … where relevant facts are peculiarly within the knowledge of the defendant or where the defendant has greater means to produce evidence relating to those facts, then provided the claimant provides sufficient evidence from which the matter can be inferred, the defendant "comes under an evidential burden, or an onus of adducing evidence".
9. This principle is well-known, but I think it is of little or no assistance to MFV in this case. The relevant question is whether Mr Disselkoen authorised, or was otherwise responsible, for the payments in question. No doubt, the answer to that question is within Mr Disselkoen's knowledge. But it is not a fact particularly within his knowledge. I would have thought that direct evidence of who authorised the payments should have been obtainable from MFV's bank. Furthermore, evidence should have been available from Ms Stevenson and perhaps other MFV employees; and there is no evidence before me that they were unwilling to assist the Administrators in prosecuting MFV's claim.
10. The evidentiary picture is therefore incomplete. But I am nevertheless satisfied, even if less satisfied than I might have been, that on the balance of probabilities, Mr Disselkoen was responsible for the payments, or at least was aware of them after they had been made, and could have had them reversed. And if Mr Disselkoen was responsible, he cannot have been unaware of the circumstances which made those payments a breach of duty to MFV.
11. As already mentioned, no amended defence was filed on behalf of Stefan Disselkoen in answer to the amended version of the Statement of Claim. But the factual allegations against the Disselkoens on which the claims for breach of directors' duties were based, a representative example of which is quoted at [51] above, were re-numbered in the amended version of the Statement of Claim, but were otherwise unchanged. Those paragraphs had been the subject of non-admissions in the defence originally filed in November 2016, which remains on the record so far as Stefan Disselkoen is concerned. The allegations have therefore been put in issue on his behalf and must be dealt with by the Court on the evidence.
12. Counsel for MFV conceded that the evidentiary case against Stefan Disselkoen was less strong than that against Cornelis Disselkoen. As already mentioned, Stefan Disselkoen did not live at the Bobs Farm property. There is no evidence to link him to the property, and thus to the corporate headquarters of the Disselkoen companies, as there is for Cornelis Disselkoen. Nor is there evidence to link him to the authorisation of the payments made out of the ADGS bank account used to settle the purchase of the Bobs Farm property and the equipment there.
13. Stefan Disselkoen's name appeared on two of the draw-down notices under the Macquarie facility, and also as one of the signatories on the Bobs Farm licence agreement (see [13] above) and the Hortiagro agreement. He therefore knew that MFV was borrowing large sums of money from Macquarie and, at least, that $475,000 was required to complete the purchase of the equipment at the Bobs Farm property. Counsel submitted that he "must have known" that the money required to purchase the Bobs Farm property and the equipment there came from MFV. But I do not think this necessarily follows. There is no direct evidence that Stefan Disselkoen was involved in raising the finance for purchase of the Bobs Farm property, or for the activities of ADGS generally. This may have been done by Cornelis Disselkoen on his own, without Stefan Disselkoen's knowledge or involvement. In my opinion, on the evidence presented to me, the case against Stefan Disselkoen remains conjectural and his personal responsibility for the MFV Payments is not established.
14. As already mentioned, MFV seeks orders for compensation both in equity and under the Corporations Act 2001 (Cth), s 1317H. Compensation is sought in the full amount of the payments. This claim gives rise to a problem of quantification. It may readily be accepted that Cornelis Disselkoen is liable for the losses suffered by MFV as a result of the payments. But as a result of the payments MFV has entitlements against the recipient companies, both direct and indirect, including proprietary entitlements. There is no evidence before me as to how much MFV will ultimately recover from these sources, and it may take some time before the amount recovered is fully quantified.
15. Counsel for MFV argued that the Court could, and should, enter judgment by way of compensation for the full amounts of the payments made, irrespective of what recovery may ultimately ensue. He relied on the rules governing double recovery. It is well accepted that, where two parties are concurrently liable for the same obligation, judgment may be obtained for the full amount of the liability against both. It is a fundamental principle that the successful party cannot recover, in total, more than its total entitlement. But that principle only comes into play once the liability has been fully satisfied: Tang Man Sit v Capacious Investments Ltd [1996] AC 514 at 5220-H. Counsel for MFV invited me to enter judgment against the Disselkoens for the full amount of the MFV payments, accepting that to the extent that moneys were ultimately recovered from other sources, the judgments would not ultimately be capable of being enforced against them. Counsel relied on the approach of Santow J (as he then was) in ASIC v Adler [2002] NSWSC 483 at [117]-[118].
16. In my view, the principles associated with double recovery would justify such an approach as between the two Disselkoens if they were both liable for breach of director's duties. ASIC v Adler was such a case: it involved liability of multiple directors for the same loss. But the problem with entering judgment against Cornelis Disselkoen for the full amount of the payments as well as entering judgment against the recipient companies is a different one. The two liabilities are not the same. The liability of the recipient companies is a liability to pay a debt owed to MFV. Mr Disselkoen did not himself receive the money and his liability is only for the loss suffered by MFV as a result of the payments being made. Indeed, if there was no question as to the ability of the recipient companies to repay the full amount due to MFV, no compensation could be awarded against him at all.
17. On the other hand, it is unsatisfactory to all concerned for the Court to have to make some sort of estimate of the amount of the recovery that could be made from the recipient companies. Such an estimate must always involve an element of guesswork. In this case, there is really no evidence on which one could make any sensible assessment of that likely recovery. If the Court's assessment proves to be an underestimate of the recovery, it will be unfair to Mr Disselkoen. If it proves to be an overestimate, it will be unfair to MFV. But it would also be undesirable for recovery action against Mr Disselkoen to be deferred for a potentially extended period of time on account of potential recovery from the recipient companies, when it was the wrongful conduct of Mr Disselkoen which led to the moneys being paid out to the recipient companies in the first place.
18. In Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561, a lender was induced, by fraudulent representations on the part of the borrowers' solicitors, to proceed with the loan and accept certain securities from the borrowers. Those securities had some value, but not enough to cover the amounts lent. The question arose as to what damages could be obtained against the solicitor. Meagher and Handley JJA, with whom Mahoney JA agreed on this point, referred to equity's concurrent jurisdiction to award equitable compensation in cases of common law fraud. They said: Accordingly, a court of equity can grant relief for fraud which would not have been available to a court exercising purely common law jurisdiction. It can award full compensation to the plaintiff on terms that, on satisfaction of the judgment, the defendant will succeed to any unrealised benefits which accrued to the plaintiff under the transaction which would or might reduce the plaintiff's loss. … Such orders may afford more complete relief to a plaintiff than could be secured by an unconditional award of common law damages. Where the plaintiff's loss has not been fully crystalised before trial, and securities and other rights remain to be enforced, difficulties of valuation and uncertainty as to the delay, cost and proceeds of realisation could easily result in a plaintiff being under or over compensation by an award of common law damages. Equity can solve these problems by awarding full compensation to the plaintiff without attempting to value any remaining securities in his hands provided always, of course, that the plaintiff has acted reasonably. Equitable compensation can be awarded on terms that the plaintiff will hold any remaining securities and rights against third parties as security for the compensation awarded against the defendant, and on satisfaction of the judgment debt those securities and other rights would be held on trust for the defendant. In such a case common law damages may not be an adequate remedy for the defrauded plaintiff and this was always one ground on which the Court of Chancery was prepared to exercise its concurrent jurisdiction in cases of fraud.
19. The Court ordered that, upon payment by the solicitor of the judgment debt, interest thereon and costs, that the lender transfer to the solicitor "at his costs and for his benefit" its securities and its rights thereunder, but the order provided that in the meantime, the lender should hold those securities as "collateral security of the judgment debt, interest and costs with liberty to realise such securities".
20. In my opinion, this approach is equally available in the present case. The Court can, and should, overcome the practical difficulties created by uncertainty in what will be realised under MFV's judgments against the recipient companies by ordering equitable compensation against Mr Disselkoen for the full amount of the payments, on terms that should Mr Disselkoen satisfy the judgment, he will be entitled to receive an assignment of MFV's judgment debts against the recipient companies. In the meantime, MFV should be entitled to pursue enforcement of its judgments against the recipient companies as a collateral means of recovery.
21. Under the Corporations Act, the Court is required to award "compensation". That term is not defined but may be closer in meaning to the traditional common law concept of damages, rather than the concept of equitable compensation. But it is not necessary to decide whether s 1317H is flexible enough to allow for compensation to be awarded on terms. The award of compensation under s 1317H is discretionary. In this case it is unnecessary to grant relief under the Corporations Act, simply because full and satisfactory relief is available in equity.

Orders

1. The judgments in [40] above will carry interest from the date the relevant payments were made. I will adjourn the proceedings for a short time to allow for the calculation of the interest and to allow MFV to consider whether to accept the terms which I require as a condition of allowing MFV to enter judgment for equitable compensation as against Mr Disselkoen for the full amount of the payments.
2. The order of the Court is:
3. Order that the proceedings be adjourned to a date to be fixed with my Associate for entry of judgment in accordance with these reasons.

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