MF Lady Pty Ltd (Trustee) v Henry Morgan Limited

HML 5 According to the New Encyclopaedia Britannica, vol 8 (15th ed, 1993), Sir Henry Morgan was a 'Welsh buccaneer, most famous of the adventurers who plundered Spain's Caribbean colonies during the late 17th century'. Henry Morgan Ltd was incorporated on 26 September 2014. In late 2015 it made an initial public offering of its shares, together with one option for every share issued. The prospectus for that public offering described it as an unlisted investment company which sought to become a listed investment company on the ASX. 6 The prospectus referred to a 'Management Services Agreement' with John Bridgeman Limited (JBL, the company in the centre of the top row of Diagram 1) into which HML had entered on 12 March 2015. The agreement was said to relate to the provision of investment management services to HML. 7 The public offering closed on 17 December 2015, having raised $15.6 million. The official quotation of the issued shares in HML on the ASX commenced on Friday 5 February 2016. It appears that approximately $15 million in further funds were raised by reason of the conversion of options over subsequent years. 8 On 9 June 2017, all of HML's securities were suspended from quotation on the ASX, in circumstances that will be described below. From around June 2018, HML began to ask ASX to lift the suspension. Substantial correspondence between HML and ASX ensued, which will also be described further below. On 30 May 2019, ASX expressed the view that it would be inappropriate to reinstate the securities of HML to trading until the outcome of certain investigations by the Australian Securities and Investments Commission (ASIC) were known. ASX removed HML from its official list on 3 February 2020.

JBL 9 The book International Criminals Past and Present (Frederic Boutet, Walter Mostyn trans, Hutchinson & Co, 1930) records that '[c]onspicuous among those pirates of the seventeenth century were the strange beings who were known as the Kings of Madagascar, and of whom James Avery became the most famous' (at 124). Avery had many aliases, including Henry Every, Long Ben and Captain Bridgeman, and so went by the name of John Bridgeman: Encylopaedia Britannica (online). John Bridgeman Limited, that is, JBL, is a public company. It was listed on the National Stock Exchange of Australia (NSX). That listing was, however, suspended on 1 October 2019, because the company failed to lodge its audited financial statements for FYE 2019 (although the securities had originally been suspended on 10 April 2019). On 23 October 2020 the NSX removed JBL from its official list which, according to NSX, was due to the non-payment of annual listing fees for FYE 2021 (this judgment will use the convention 'FYE' to designate the financial year ending on 30 June in the relevant year). 10 Up to at least the end of FYE 2018, the main business of JBL was investment management and, as has been said, it was party to an agreement for it to provide services of that kind to HML. JBL not only acted as the investment manager for HML, as at 16 June 2021 (the date of Mr McAuliffe's first affidavit in this proceeding) it held a 46.28% interest in HML. 11 International Criminals Past and Present describes Bartholomew Roberts as 'undeniably the greatest pirate captain of his time', and leader of the 'most formidable gang of pirates that ruled the waves in the eighteenth century' (at 172, 176). Bartholomew Roberts Pty Ltd is another company in the group (in the second row of Diagram 1). JBL was also the manager of investments for Bartholomew Roberts Pty Ltd and, as at 13 December 2019, JBL held a 49.66% interest in that company. HML also held a 29.93% interest in Bartholomew Roberts Pty Ltd as at 13 December 2019. 12 Benjamin Hornigold was one of a 'powerful and insolent' group of pirates in the Bahamas though after receiving a pardon he 'was back at sea; but this time in the service of law and order' engaged 'in hunting down his former associates': Caribbean Pirates (Warren Alleyne, Macmillan Education, 1986) at 32, 33, 36. JBL is also the manager of investments for Benjamin Hornigold Limited (BHD), the other company at the top of Diagram 1. BHD is listed on the ASX.

JBFG 13 Diagram 1 shows that between them, HML, JBL and Bartholomew Roberts held approximately 60% of the issued shares in JBFG as at 13 December 2019. 14 It can also be seen from Diagram 1 that JBFG directly and indirectly held 100% of the shares in a number of subsidiary companies, including King's Currency Exchange Pty Ltd and Growth Point Capital Pty Ltd, subsequently known as Capital Credit Pty Ltd (Capital Credit). According to the plaintiffs' submissions, holding those shares was its predominant function. 15 Receivers were appointed to JBFG on 28 October 2019, and on 19 November 2019 it was placed into voluntary administration. On 5 August 2020 it went into liquidation.

Directors and executives 16 Stuart McAuliffe is the Managing Director of HML and has been since it was incorporated on 26 September 2014. He is also a director of JBL; in fact, since 8 January 2015 he has been JBL's Managing Director and Chief Investment Officer. 17 Between 15 December 2016 and 21 February 2018, Mr McAuliffe was also a director of JBFG, and between 8 May 2017 and 3 November 2019 he was the Group Chief Executive Officer of that company. 18 Between 28 September 2016 and 12 June 2019, Mr McAuliffe was also a director of BHD. He was appointed executive chairman of BHD in or about February 2017 and resigned as a director of BHD on 12 June 2019. 19 Also, since 22 April 2016, Mr McAuliffe has been a director of Bartholomew Roberts. 20 Also, between at least August 2016 and April 2019, Stuart McAuliffe's father John McAuliffe, and one Rosario (Ross) Patane were directors of each of HML, JBL and Bartholomew Roberts. (Save where necessary for clarity, I will generally call Stuart McAuliffe 'Mr McAuliffe' in this judgment, and will refer to John McAuliffe by name.)

The proceeding, the pleadings and the issues 21 The first plaintiff commenced this proceeding on 24 December 2020. The second plaintiffs were joined as parties on 10 November 2021. The matter went to trial over two days on 13 and 14 December 2021. Final written closing submissions were filed by the plaintiffs on 20 January 2021. HML made an application to reopen which was heard and dismissed on 30 June 2022, for reasons that will be given below. 22 The plaintiffs are shareholders in HML; in the case of the first plaintiff, as a beneficial owner through custodian arrangements and in the case of the second plaintiffs as registered shareholders. By the time of trial, no point was taken as to the plaintiffs' standing to apply to wind the company up. 23 The matter proceeded on pleadings. However several potentially significant developments occurred after the close of pleadings, and these were the subject of evidence filed shortly before trial which was largely admitted by consent. Counsel for the parties accepted in closing that the issues at trial had changed since the pleadings and that the parties were content to deal with those issues in substance, and that was also manifest throughout the course of submissions. For that reason it is not necessary to describe the pleadings in great detail. They are mainly relevant here for the purposes of identifying factual matters that are not in dispute. 24 For the most part HML does not dispute the underlying facts on which the plaintiffs rely. Most of those facts are matters of public record, such as the contents of the prospectus for the initial public offering, the share registry initially engaged by HML, the holding of annual general meetings (AGMs), and the release of reports to the ASX. In broad terms the parties joined issue on whether the company should be wound up by reference to the following alleged matters: (a) HML's failure to conform with the purposes or objects stated in the prospectus under which it raised funds from investors; (b) related party transactions, at least some of which have caused HML to suffer loss; and (c) various concerns that could be classified as compliance concerns (which is neither to minimise nor to emphasise their importance, if established), namely HML's lack of a share registry, its failure to maintain the required number of directors, its failure to hold AGMs, its failure to publish financial reports and its failure to maintain a registered office or principal place of business. The plaintiffs submit that these issues have been rectified only belatedly, and for the most part not at all. 25 In relation to the compliance concerns, the plaintiffs submit that HML has displayed a cavalier attitude to the requirements to lodge accounts and the delay is not adequately explained. They also submit that the unaudited accounts that had been provided by the time of the hearing give rise to real concern about whether HML is insolvent. The plaintiffs also point to what they say was a large number of statutory notices and requests from ASX and ASIC. 26 Other alleged matters on which the plaintiffs relied in closing to submit that HML should be wound up were as follows: (1) The 'substratum' of HML has collapsed. It had been marketed to shareholders as a listed investment company but it was no longer listed and had engaged in no trading activity for the last two years. Its now stated purpose is instead to pursue litigation opportunities, chiefly (perhaps only) against ASX. The plaintiffs say that is entirely outside the common understanding of members when the company was formed and listed. (2) HML's affairs were being conducted in a manner that was oppressive or unfairly prejudicial to or unfairly discriminatory against a member or members or in a manner that was contrary to the interests of members as a whole. The plaintiffs relied in particular on an extraordinary general meeting that was held on 3 December 2021 (EGM), which they say was conducted in an oppressive manner, and on various loans and other transactions with related parties, on the lack of trading activities and the failure to maintain appropriate standards of corporate governance. 27 A theme which underlies many of these allegations and the plaintiffs' case as a whole should also be mentioned. It is that Mr McAuliffe is alleged to have been in substantial control of HML, JBL and JBFG, which in turn informs the plaintiffs' characterisation of various transactions as related party transactions. But, the plaintiffs submit (and HML agrees), it is neither necessary nor appropriate for the Court to make findings of contraventions of the Corporations Act in relation to alleged related party transactions at this time. It is enough, according to the plaintiffs, that the fact and complexity of the transactions, along with the lack of an apparent return to HML, 'point to a real need to investigate the affairs of HML'. The plaintiffs submit that the most appropriate person to do that is a liquidator. 28 For HML's part, while it accepts that there have been shortcomings in relation to its administration and management, and compliance with some of its Corporations Act obligations, it submits that it has made serious efforts to address those issues, that most of those issues have been addressed, and there is a serious and credible plan to rectify the remaining issues in the short-term future. And so, as a result of that, HML submits that the Court should not be satisfied that the just and equitable ground has been made out to warrant the drastic remedy of winding up the company. 29 HML points to evidence that the compliance and governance failures have been rectified or are in the process of being rectified. It also relies on the EGM of 3 December 2020, at which a special resolution for a members' voluntary winding up was defeated, with about three quarters of the votes cast being votes against. It submits that the loss of capital invested is a risk that every contributory takes when they invest in a company. 30 HML disputes the submission that it is defunct or dormant. It points to lines of credit it has obtained from Mr McAuliffe on which it can draw down to fund the ongoing activities including litigation against ASX. It says that the company has been 'undergoing a rebuilding period, of consolidation and change'. It also denies that there has been any failure of substratum in the sense of a departure from its original purpose that would justify winding up. It points to what it says is shareholder approval at the EGM of a change to its purpose to being an unlisted investment company. It submits that it is open to it and reasonable for it to undergo 'a period of consolidation', including by the realisation and recovery of assets through litigation, before turning again to investment activities. 31 HML disputes that Mr McAuliffe was in a position to control HML or the other entities said to be related parties. It also says that the plaintiffs' submission about how the Court should approach findings on that issue is properly made. That is, HML agrees with the plaintiffs that it is neither necessary nor appropriate for the Court to make findings of contraventions of the Corporations Act in relation to the alleged related party transactions on which the plaintiffs rely. While it denies the plaintiffs' allegations, it mounts no real rebuttal of the proposition that an investigation into those transactions is warranted. It submits, however, that the appropriate entity to make that investigation is ASIC, not a liquidator. 32 In relation to oppression, HML characterises the plaintiffs' complaints as reflecting unhappiness with commercial decisions that have been made by management, unhappiness with being outvoted by majority shareholders, unhappiness that the capital they invested in HML has been diminished, and unhappiness with its delisting. According to HML, none of those things amounts to oppression and they do not justify the winding up of the company. 33 HML also submits that s 467(4) of the Corporations Act means that the Court should not make a winding up order. That section concerns circumstances where plaintiffs are acting unreasonably in seeking to have the company wound up, instead of pursuing other remedies that would be available. 34 Much of the rest of this judgment will consist of a chronological account of the evidence relevant to the plaintiffs' allegations, making observations and findings along the way with the above areas of dispute in mind. I will then reach conclusions about whether HML should be wound up because it is just and equitable to do so, or because its affairs have been conducted oppressively. But it will be helpful first to review the statutory provisions and the principles that the Court must apply, and also necessary to give reasons for the dismissal of two interlocutory applications HML brought which were disposed of at or after trial.

The legislation 35 Section 461(1) of the Corporations Act provides that the Court may order the winding up of a company if, relevantly: (f) affairs of the company are being conducted in a manner that is oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or in a manner that is contrary to the interests of the members as a whole; or … (k) the Court is of opinion that it is just and equitable that the company be wound up. 36 Section 462(2)(c) confers standing to apply for such an order upon contributories, where a contributory is defined in s 9 to include a holder of fully paid shares in the company. As I have said, there is no issue about the plaintiffs' standing to make this application. 37 Section 467(4), on which HML relies, provides as follows: Where the application is made by members as contributories on the ground that it is just and equitable that the company should be wound up or that the directors have acted in a manner that appears to be unfair or unjust to other members, the Court, if it is of the opinion that: (a) the applicants are entitled to relief either by winding up the company or by some other means; and (b) in the absence of any other remedy it would be just and equitable that the company should be wound up; must make a winding up order unless it is also of the opinion that some other remedy is available to the applicants and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.

The just and equitable ground 38 The plaintiffs base the application principally on the just and equitable ground. That is potentially broad in scope. In In Re Straw Products Pty Ltd [1942] VLR 222 at 223, Mann CJ said: Facts rendering it just and equitable that a company should be wound up cannot be resolved into categories. Cases upon the subject are to be read with this always in mind. They merely illustrate the diversity of the circumstances calling for an exercise of the Court's discretion in winding up a company because it is just and equitable so to do. See also Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 at 374-375 (Lord Wilberforce). The classes of conduct which justify the winding up of a company on the just and equitable ground are not closed, and each application will depend upon the circumstances of the particular case: Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) [2013] FCA 234 at [19] (Gordon J). 39 It can, however, be said that 'at the foundation of applications for winding up, on the "just and equitable" rule, there must lie a justifiable lack of confidence in the conduct and management of the company's affairs': Loch v John Blackwood Ltd [1924] AC 783 at 788 (Lord Shaw). Three general fundamental principles are relevant to that consideration: a lack of confidence in the conduct and management of the affairs of the company; a demonstrated risk to the public interest that warrants protection; and reluctance on the part of the courts to wind up a solvent company: ActiveSuper at [20] quoting Australian Securities and Investments Commission v ABC Fund Managers Ltd [2001] VSC 383 at [119] (Warren J). 40 In relation to the first of these, in ActiveSuper at [21] Gordon J said (quoting from Galanopoulos v Moustafa [2010] VSC 380 at [32] and citing other authorities as well) that: … a lack of confidence may arise where, 'after examining the entire conduct of the affairs of the company' the Court cannot have confidence in 'the propensity of the controllers to comply with obligations, including the keeping of books, records and documents, and looking after the affairs of the company'. 41 In relation to the second consideration, Gordon J said at [23] (citations omitted): … a risk to the public interest may take several forms. For example, a winding up order may be necessary to ensure investor protection or where a company has not carried on its business candidly and in a straightforward manner with the public. Alternatively, it might be justified in order to prevent and condemn repeated breaches of the law. 42 The public interest justifies intervention where, among other things, it is required for investor protection and where there have been regular or repeated breaches of the law: Australian Securities and Investments Commission v Chase Capital Management Pty Ltd [2001] WASC 27 at [75] (Owen J). 43 I will return to the third consideration, solvency, below.

Failure of company's purpose and failure of substratum 44 It may be appropriate to wind a company up on the just and equitable ground 'where it is impossible to carry on the company's business because the "substratum of the company" has failed or, in other words, it has become impossible for the company to achieve the purpose for which it was formed': Re CNPR Ltd [2018] NSWSC 989 at [9] (Black J). 45 HML submits that the '"failure of substratum" factor is limited to circumstances where it is an impossibility for the company to fulfil its original purpose' (original emphasis). It relied on Re CNPR, on CIC Insurance Ltd (prov liq apptd) v Hannan & Co Pty Ltd [2001] NSWSC 437, and on Kingjade Holdings Pty Ltd v Pineridge Nominees Pty Ltd (1997) 15 ACLC 910. But Re CNPR was an essentially uncontested case (the company was itself the applicant) where, in terms quoted above, the Court said only that it may be appropriate to wind the company up when it had become impossible to carry on the company's business or impossible to achieve its purpose. CIC Insurance was also uncontested (the company's sole shareholder was the applicant) and was based on corporate paralysis, because there was no one willing to serve as director, not on a failure of substratum or purpose. In Kingjade, the rule ultimately depended on approval of a 1964 journal article in which the doctrine of winding up on just and equitable grounds was reduced to three principles: (1) where initially it is, or later becomes, impossible to achieve the object for which the company was formed; (2) where it has become impossible to carry on the business of the company; (3) where there has been serious fraud, misconduct or oppression in regards to the affairs of the company. [BH McPherson, 'Winding Up on the "Just and Equitable" Ground' (1964) 27(3) Modern Law Review 282] To reduce the breadth of the term to those principles is, with respect, inconsistent with the broader course of authority on the just and equitable ground described above. 46 The true approach appears in Menhennitt J's comprehensive summary of the principles in Re Tivoli Freeholds Ltd [1972] VR 445. At 468 (point (4)) his Honour stated the basic principle as follows (citations removed): It has been recognized that it may be just and equitable to wind a company up if the company engages in acts which are entirely outside what can fairly be regarded as having been within the general intention and common understanding of the members when they became members. The cases on loss or failures of substratum are an illustration of this more basic concept. This more basic concept is not, it appears to me, confined to cases of 'partnership' companies or 'main object' companies. Whilst it may be easier to find the general intention and common understanding in those cases I can see no reason in principle why it should be confined to such cases and I am not aware of any decision that it is so confined. 47 The following discussion of authority in Re Tivoli Freeholds at 469 (point (5)) is also relevant in this case: But where, even although a company could still pursue its original objects, whether they be main or paramount objects or not, if in fact the matter has gone beyond intention and the company had in fact embarked upon a course which, even although it is within power, is quite outside and different from what was originally commonly intended and understood, then it appears to me that it may be just and equitable to wind up a company. The case of Re National Portland Cement Co. Ltd., [1930] N.Z.L.R. 564, was one in which a main object had never been pursued for five years and it was then proposed to pursue a subsidiary object. However, it appears to me that Myers, C.J., was stating a principle which can have general application when he said at p. 572: 'The most that can be said by the directors is that if their present proposed experiment of hydrating lime is successful they may be able to secure capital to carry out the main object for which the company was established. It seems to me that this really involves an abandonment of the primary object of the company, and that the shareholders who have taken up contributing shares are being asked to leave their money in a venture different altogether from that to which they have subscribed.' At 471 (at point (7)) his Honour described it as a 'question of equity between a company and its shareholders'. 48 In fact there are many cases where there has been held to be a failure of substratum even though the circumstances fall short of impossibility of fulfilment of the company's original purpose. The tenor of many of those cases is that something fundamental to the company's business has fallen away: see e.g. Hillig v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1371 at [36] (failure of substratum once trustee company's assets transferred to beneficiary company, overturned on appeal but not on this point: Hillig v Darkinjung Pty Ltd [2008] NSWCA 75); Commonwealth v ABC2 Group Pty Ltd (court-apptd recs and mgrs apptd) [2009] NSWSC 1442 at [39] (failure of substratum of company used to run and sell childcare centres as going concerns, once sales made); Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342 at [72] (expiry of licence to use patent). 49 Once again, the truth is that it is a matter of degree. Obviously, not every departure from a company's stated or commonly intended objects will justify its winding up; in many cases, even very substantial departures will not attract that consequence. The Court must make sensible allowances for the fact that the circumstances of a company will change over time, and so too may its objects and purposes: see Haselgrove v Lavender Estates Pty Ltd [2009] NSWSC 1076 at [81] (Ward J). Sometimes, the span of time will be considerable indeed, such as the near century involved in Re New South Wales Leagues' Club Ltd [2014] NSWSC 1610. 50 Nor, obviously enough, will every difficulty the company experiences in carrying on its business put it at risk of a just and equitable winding up; a realistic chance that the difficulties will resolve, and the company will be able to carry on, may make that undesirable. The just and equitable outcome will depend on all the relevant facts in the circumstances of the particular case. 51 Another submission HML makes is that the prime source to use for determining the purpose of a company is its memorandum of association or constitution. It cited Re Tivoli Freeholds at 471 (point (8)), where Menhennitt J said: All the authorities appear to me to recognize that the prime source for ascertaining the general intention and common understanding of the members is the company's memorandum of association which among other things states its objects. 52 Counsel for HML also relied on a 1991 case (Strong v J Brough & Son (Strathfield) Pty Ltd (1991) 5 ACSR 296 at 300) which in turn relied on a 1980 decision (Re Johnson Corporation Ltd [1980] 2 NSWLR 681) for the principle that 'one does not look at the prospectus to find the main object, but one looks at the memorandum of association'. 53 But that asserted principle implies an assumption that the company will have a memorandum of association that does state its objects. While that assumption was no doubt sound in 1972 or 1980, it is not any longer. The LexisNexis service, Australian Corporation Practice (online), summarises the contemporary position as follows (at [7.075]): The company's constitution may specify the objects of the company: s 125(2). Originally companies were required to provide an objects clause in their memorandum of association. This was abolished in 1981 when companies were granted the legal capacity of an individual: s 124. The abolition of the doctrine of ultra vires in its application to companies, achieved by ss 124-125, has largely circumvented the need for object clauses, other than for the companies noted below. Object clauses will generally only be included in a company's constitution where this is required by law or otherwise necessary in order for the company to qualify for the applicable tax concessions … 54 In Re Tivoli Freeholds (at 468, point (3)) Menhennitt J acknowledged that in having regard to previous decided cases in relation to the just and equitable ground, 'it would be necessary to have regard to changing circumstances and developments in relation to company practices including any relevant changes in the law'. At 471 (point (7)) his Honour said that regard should be had to all relevant developments including changes in the law. It has since been recognised that changes in the corporations legislation have borne directly upon the significance to be attributed to the public purposes served historically by the documents making up a company's constitution: Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812 at [75] (Finn J) approved in Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; (2006) 156 FCR 1. 55 It is true that in Strong, decided in 1991, Young J was considering a company which had no objects stated in its memorandum of association, and his Honour held, citing Re Johnson Corporation, that it was doubtful how far a prospectus would be determinative. But I do not consider that Strong is clear authority that one looks to the constitution rather than a prospectus to determine the company's objects or purposes. The relevant observations were obiter dicta: there was no prospectus in Strong, and in any event it was not a winding up case, but a case about whether, on the construction of a provision of the articles of association, the directors were authorised to dispose of the company's main business. Further, in relation to Re Johnson Corporation, Young J describes Needham J as saying that one does not look at the prospectus to find the main object, but one looks at the memorandum of association. But Young J was, with respect, not accurately stating Needham J's view. What Needham J in fact said in Re Johnson Corporation (at 689-690) was: It is, in my opinion, still an open question whether, in determining whether a company has main objects and, if so, what they are, the court may go outside the memorandum of association. It could be argued that a prospectus issued at the time of incorporation could be examined, although, I hasten to add, there is authority against that proposition. 56 In my opinion that question, while open in 1980, is no longer open now more than 40 years later. In Registered Clubs Association of NSW v Australian Broadcasting Corporation [2016] NSWSC 835, McCallum J said at [18]: Implicitly, the Corporations Act contemplates the possibility that a company will have neither a constitution nor stated objects. Plainly, in such a case, the ascertainment of the objects for which the company was formed would require inquiry beyond the documents by which it was formed, potentially extending to consider its activities and published statements since incorporation (what the company had said and done). 57 Even in Re Tivoli Freeholds in 1972, Menhennitt J seemed to accept the potential relevance of prospectuses for the purposes of identifying the objects of the company: see 472 (point (9)), although his Honour also acknowledged authority to the contrary. His Honour held that: a basic consideration is that the material being looked at must establish something general or common to all members and this consideration of itself precludes something passing between only the company and a particular shareholder unless it can be concluded that it was a matter common to all shareholders. 58 Similarly, in Strong Young J said that 'one looks to "the general intention and common understanding of the members"'. A prospectus on the basis of which most members provide funds to subscribe for shares can meet that criterion. In a just and equitable winding up, which will always depend on the particular circumstances of the case, there can be no rigid rule against having regard to a prospectus to determine the purpose for which a company was formed. In my view it is open to the Court to put weight on documents, such as the prospectus under which the bulk of the funds employed by a company have been raised, in order to ascertain what was, in truth, generally intended and understood among members who subscribed to shares on the basis of that prospectus.

Relevance of breaches of the law 59 On the subject of regular or repeated breaches of the law (Chase Capital Management, see above) relevant breaches may include breaches of directors' duties, inadequacy of accounts and record keeping, and failure to comply with legal requirements with respect to financial records and reports: Australian Securities and Investments Commission v Merlin Diamonds Ltd [2019] FCA 1546 at [107] (O'Bryan J); Pages Property Investments Pty Ltd v Boros [2020] NSWSC 1270 at [203] (Black J, overturned in Boros v Pages Property Investments Pty Ltd [2021] NSWCA 288 but not on this point). On this subject HML relied on cases including Gregor v British-Israel-World Federation [2002] NSWSC 12, where failure to comply with statutory requirements for financial and directors' reports was held at [146] to be 'an additional but not independently weighty ground supporting the making of a winding up order', and Gognos Holdings Ltd v Australian Securities and Investments Commission [2018] QCA 181, where non-lodgement of financial reports for eight to nine years, when the reporting had still not been brought up to date, did justify winding up. But each of these cases turned on their own facts, and they do not give rise to any rigid rules as to when non-compliance is, or is not, enough to justify a winding up order. 60 Observations in Gognos by McMurdo JA (Sofronoff P and Gotterson JA agreeing) do, however, provide guidance on how the Court is to approach a situation, which has arisen in this case, where the defendant company seeks to rectify non-compliance shortly before trial. His Honour said at [98]: The task for the judge was to assess the nature and extent of the risks to the public interest from these companies being allowed to continue, given their lamentable history of mismanagement and misconduct. Ultimately, it was common ground that as things stood just a few weeks or days from the trial, there was a compelling case for the companies to be wound up. Her Honour had to consider whether the risk to the public interest had been eliminated, or at least reduced to an acceptable level, by what had been put in place at the eleventh hour. That is the approach I will follow here. 61 In relation to breaches of the Corporations Act generally, a serious issue may exist to justify intervention even where the Court has not reached a final conclusion as to whether particular alleged breaches have been established: see Chase Capital Management at [77]. In many cases it will not be necessary or appropriate to reach any final conclusion. As I have already indicated, in this case both sides effectively embraced that proposition. So, for example, in Australian Securities and Investments Commission v Uglii Corporation Ltd [2016] FCA 1099 at [78], Davies J found it relevant to the just and equitable ground that a lack of evidence to support certain substantial cash flow projections was a matter warranting independent investigation by an external controller.

Oppression 62 As to s 461(1)(f) of the Corporations Act, concerning oppression, the plaintiffs submit, and HML does not contest, that the principles that have been developed in relation to remedies for oppressive conduct, as found in s 232 of the Corporations Act, may be applied to cases of winding up. In Hylepin Pty Ltd v Doshay Pty Ltd [2021] FCAFC 201; (2021) 288 FCR 104 at [124]-[130], the Full Court (Markovic, Banks-Smith and Anderson JJ) summarised as follows, with apparent approval, the review of those principles conducted by the primary judge (O'Bryan J): [124] The primary judge commenced a review of the oppression principles under s 232(e) by noting that 'oppressive to, unfairly prejudicial to, or unfairly discriminatory against' is a compound expression: Hillam v Ample Source International Ltd (No 2) (2012) 202 FCR 336 at [4]. [125] His Honour referred to Re Ledir Enterprises Pty Ltd (2013) 96 ACSR 1, where Black J observed at [178], and having referred to various authorities including Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459, that the phrase in s 232(e) is concerned with 'commercial unfairness'; or 'a departure from the standards of fair dealing, or where a decision has been made so as to impose a disadvantage, disability or burden on the plaintiff that, according to ordinary standards of reasonableness and fair dealing, is unfair'. [126] The primary judge cited the statement of Brennan J in Wayde (at 472-473) that the relevant test as to unfairness in the context of oppression is 'whether reasonable directors, possessing any special skill, knowledge or acumen possessed by the directors and having in mind the importance of furthering the corporate object on the one hand and the disadvantage, disability or burden which their decision will impose on a member on the other, would have decided that it was unfair to make that decision'. Whether there has been unfairness in the requisite sense is to be judged objectively: Wayde at 472-473. To those references we would add that the section requires proof of oppression or proof of unfairness. Proof of mere prejudice to or discrimination against a member is insufficient to attract the court's jurisdiction to intervene: Wayde at 472. [127] His Honour also cited the test as to unfairness as described in Catalano v Managing Australia Destinations Pty Ltd (2014) 314 ALR 62 at [9], being whether 'objectively in the eyes of a commercial bystander there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision fair'. [128] It was noted that mismanagement alone does not constitute oppression, and a court is concerned 'to avoid an unwarranted assumption of the responsibility for management of the company': Wayde at 467 (Mason ACJ, Wilson, Deane and Dawson JJ). [129] Turning to s 232(d), the primary judge said that whether conduct is 'contrary to the interests of the members as a whole' is also objectively ascertained, citing Goozee v Graphic World Group Holdings Pty Ltd (2002) 170 FLR 451 at [42]-[44], and is determined by an assessment of whether the conduct adheres to 'accepted standards of corporate behaviour' or is in accordance with how reasonable directors would act in attending to the affairs of the company. [130] Further, the primary judge noted that although s 232 is not subject to any limitation period, and a court may grant relief even if the oppressive conduct has ceased, a court has a broad discretion as to remedy, citing Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [65] (French CJ), [182] (Gummow, Hayne, Heydon and Kiefel JJ). 63 In Hylepin at [133]-[135] the Full Court held that it was necessary to look to the cumulative effect of the whole course of conduct, in overview, since (at [136]) 'depending on the circumstances, an accumulation of conduct, even where none of the separate matters of conduct is found to be oppressive, may have that result'. 64 HML submits, and I accept, that the mere fact that a member of a company has lost confidence in the manner in which the company's affairs are being conducted does not lead to the conclusion that the member is oppressed, and nor does mere dissatisfaction with or disapproval of the conduct of the company's affairs; nor does even a fundamental disagreement with a decision made by majority shareholders and directors (by itself) amount to oppression: see John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A'asia) Pty Ltd (1991) 6 ACSR 63 at 6; Shelton v National Roads and Motorists Association Ltd [2004] FCA 1393 at [24] (Tamberlin J).

Relevance of solvency 65 As for the winding up of a solvent company, in Hillam v Ample Source International Ltd (No 2) [2012] FCAFC 73; (2012) 202 FCR 336 at [70] (Emmett, Jacobson and Buchanan JJ) it was held that there is no presumption against this, although: the warnings given in the authorities, that an order to wind up a solvent company is an extreme step, are warnings which should be borne in mind … An order to wind up a solvent company may often be too extreme a step to take (and therefore not justified or appropriate) but that is very different from proceeding upon any 'principle' or assumption that a winding up order of a solvent company is inappropriate. No such implication arises from s 232 or s 233 of the Act, or should be made in those terms. The real question is whether a winding up order was appropriate to deal with and address the grounds for relief which had been established. The answer to that question must be found in the facts of the particular case. These comments were made in the context of a remedy of winding up being sought under the provisions of the Corporations Act concerning oppressive conduct, but there is no reason to think they do not apply more broadly. 66 It is notable that in the principal case to which the Full Court in Hillam referred before reaching the above conclusion, Cumberland Holdings Ltd v Washington H Soul Pattinson & Co Ltd (1977) 13 ALR 561, the warning was against the winding up of 'a successful and prosperous company and one which is properly managed' (at 566). This confirms what would be evident from the broad evaluative nature of the statutory criteria in any event, namely that it is a matter of degree. Obviously, a court will be more reluctant to wind up a successful, prosperous and properly managed company than it will be to wind up a company of doubtful solvency and dubious management practices. So a stronger case may be required where the company is prosperous, but solvency per se is no bar to the appointment of a liquidator, particularly where there have been serious and ongoing breaches of the Corporations Act: ActiveSuper at [24]. 67 As will be seen, HML does not defend the case on the basis that the strength of its financial position meant that it would be an extreme step to order its winding up. It submits that this is a neutral factor. Nevertheless, the Court must keep in mind the interests of creditors and members of the company as a whole and the considerations just outlined remain relevant to the exercise of the discretion.

Section 467(4) 68 HML relies on s 467(4) of the Corporations Act to submit that an order for winding up would not be appropriate. That sub-section, which is set out above, requires the Court to make a winding up order, relevantly on the just and equitable ground, if it is satisfied of the necessary matters, but then provides for an exception that lifts that requirement, if the Court 'is also of the opinion that some other remedy is available to the applicants and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy'. So it imposes a mandatory duty on the Court to make a winding-up order with a discretion not to make one if certain conditions are satisfied: Vujnovich v Vujnovich [1989] 3 NZLR 513 at 518-519, applied to s 467(4) in Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd [2018] QCA 48; [2018] 3 Qd R 520 at [96] (Jackson J). 'Other remedy' in s 467(4) is not restricted to a legal remedy in the sense of a cause of action but is to be understood in the wider sense of a course of action otherwise open to the party: Host-Plus Pty Ltd v Australian Hotels Association [2003] VSC 145 at [67] (Hansen J). 69 The onus is on the defendant to establish that this exception is made out: Asia Pacific Joint Mining at [43] (McMurdo JA, Gotterson JA and Jackson J agreeing). The question of whether an applicant is acting unreasonably requires an objective assessment of the applicant's preference for a winding up order: Asia Pacific Joint Mining at [45]. In Asia Pacific Joint Mining at [47] McMurdo JA said (footnotes omitted): The evident purpose of the proviso in s 467(4) is to avoid the extreme step of a winding up if there is an alternative and adequate remedy. Consequently a winding up will be ordered if there is no other remedy which is adequate, in that it would redress the consequences of the facts and circumstances which are the basis for relief. This is another way of saying what McPherson J said in Re Dalkeith Investments Pty Ltd [(1984) 9 ACLR 247] about the statutory predecessor of s 467(4) namely 'that winding up is to be regarded as a remedy of last resort and [one] which ought not to be granted if some other less drastic form of relief is available and appropriate.' In referring to a winding up as 'drastic form of relief', McPherson J was referring to the far reaching consequences of a winding up. In referring to an alternative form of relief which was 'appropriate', his Honour was referring to what was necessary, in the interests of the applicant, to redress the consequences of the relevant events and circumstances.

Application to set aside a subpoena 70 Before turning to describe the evidence it is convenient to give reasons for a decision that was made at trial concerning an application to set aside a subpoena. It will also then be necessary to give reasons for the dismissal of an application to reopen that HML made after trial. 71 As has been indicated, the trial commenced on 13 December 2021. On 8 December 2021, that is, three business days before, an affidavit of Mr McAuliffe was filed that set out a substantial amount of new evidence that was not covered in his first affidavit, which had been filed in accordance with pre-trial directions on 16 June 2021. Some of the evidence in the second affidavit appears to have been intended to bring the Court up to date about developments since the first affidavit. There was no objection to reliance on the affidavit and the evidence in it will be considered below. 72 However the late date of filing of the second affidavit was relevant to the subpoena, because the plaintiffs applied for its issue on the same day, that is, 8 December 2021. It was addressed to Mr McAuliffe and sought the production of documents in two categories: For the period from 1 October 2021 to 6 December 2021, a copy of any bank statement for any account held (either individually or jointly) in your name that records: 1 the transfer of funds by you to Henry Morgan Limited ACN 602 041 770; and / or 2 the funds available to you. 73 The first of these was not in issue. The application to set the subpoena aside concerned the second. A registrar gave leave to issue the subpoena and it came to be returnable before me at the commencement of the trial on 13 December 2021. At that time counsel for HML, acting on instructions from Mr McAuliffe, applied to set aside the subpoena to the extent of that disputed ground. I dismissed the application and said I would give reasons as part of this judgment. 74 Mr McAuliffe sought the setting aside of the subpoena on the grounds of oppression and lack of a legitimate forensic purpose, that is, relevance. The oppression ground was based on things said from the bar table to the effect that Mr McAuliffe's funds were held in 12 different accounts, some in Australian dollars, some in various different foreign currencies, and they included futures contracts. It was said that it would be time consuming to collate the relevant bank statements in order to comply with a subpoena that was served only one clear business day before the commencement of the trial, at a time when Mr McAuliffe needed to prepare for the hearing and had other personal and work commitments. 75 As to relevance, counsel for Mr McAuliffe submitted that HML did not put its solvency in issue as a factor against the winding up order sought. He submitted that at most the company's solvency position was a neutral factor in relation to the winding up sought on just and equitable grounds. While HML is relying on some funding from Mr McAuliffe, and there is evidence about the current position of the funds he has provided, the possible extent of any future funding he is to provide is not an issue before the Court. Evidence in Mr McAuliffe's second affidavit is to the effect that he was providing funding of up to $410,000 to HML for the purposes of working capital and funding of up to $2 million for the purposes of conducting litigation. Counsel for the plaintiffs said, in reply to Mr McAuliffe's submissions, that he would be submitting that the financial statements for HML (that were also annexed to Mr McAuliffe's second affidavit) demonstrated that HML will be insolvent without Mr McAuliffe's ongoing financial support, so that Mr McAuliffe's ability to provide that support was relevant. Counsel indicated from the bar table that the subpoena was directly prompted by Mr McAuliffe's second affidavit which explained the timing of issue of the subpoena. 76 I did not accept either of the bases that HML advanced as warranting the setting aside of the subpoena. The short time for responding to the subpoena was a function of the fact that an affidavit from Mr McAuliffe deposing to his funding of HML was only filed on 8 December 2021. The application for the issue of the subpoena was made on the same day. As for the submission that there were a large number of bank accounts and it would be difficult to comply, that was not supported by evidence and in any event the subpoena only required the production of bank statements. It appeared to me to be quite feasible for Mr McAuliffe to locate such bank statements as were in his possession, custody or power for the purpose of production to the Court. In the circumstances I was prepared to permit him to do so overnight, between the two days on which the matter was listed for hearing. Although that was a short period of time, it was a function of the lateness with which the question of the funding of HML's ongoing activities was raised. 77 As for the relevance objection, the threshold is one of apparent relevance which is not necessarily at the level required for the material to be admitted into evidence: see the summary of principles in Harvard Nominees Pty Ltd v Tiller [2019] FCA 1672 at [3]-[6] and the authorities referred to there. I understood counsel's submission about relevance to be to the effect that Mr McAuliffe had already provided financial support to HML, so Mr McAuliffe's ability to provide further amounts in the future was not relevant. But there was no clear evidence that the advances promised had been drawn down, whether fully or at all, and it is inherently unlikely from the legal activity described below that the $2 million line of credit taken out to support the activity of potential litigation against ASX has been fully utilised. 78 As will be set out below, on HML's case that potential litigation is a substantial rationale for its ongoing existence. It is also clear that HML will not be able to engage in this activity unless it obtains funding to do so. The $2 million line of credit appears to have been taken out for that purpose. No substantial source of funding for potential litigation other than Mr McAuliffe has been suggested in the evidence; while HML has raised some funds from investors, there is no evidence that this money was raised to fund the litigation, and one of those investors has been Mr McAuliffe himself, and the amounts raised have not been nearly as large as the line of credit. The only potential defendant named is ASX, in connection with its decision to suspend HML's securities from trading and its refusal to approve the release of meeting materials in respect of a proposed transaction involving JBFG (each of which will be described further in these reasons). It can be expected that to pursue successful litigation of that kind against a defendant such as ASX will cost the best part of the $2 million that Mr McAuliffe has promised, if not all of it. Mr McAuliffe's ability to fund litigation in future therefore satisfied the test of apparent relevance required to justify the issue of a subpoena. 79 For those reasons, the subpoena was not set aside. And despite what was said from the bar table, on the second day of trial Mr McAuliffe ended up complying with the subpoena by producing only one bank statement in connection with only one bank account. His counsel (that is, counsel for HML) stated on the second day that the instructions that he had been given before he made his submissions on the first day were incorrect because 'Mr McAuliffe had misunderstood the breadth of the subpoena'.

Application to reopen 80 As has been said, the hearing finished and judgment was reserved on 14 December 2021, although the parties filed further written closing submissions with the last of those received on 20 January 2022. On 26 May 2022, HML filed an interlocutory application to reopen its case in order to adduce further evidence in an affidavit of Mr McAuliffe of the same date. The plaintiffs opposed the application and at a hearing on 30 June 2022 I dismissed it. These are my reasons. 81 Other than an up to date company extract for HML, the further evidence in Mr McAuliffe's affidavit of 26 May 2022 was three annual reports for HML for FYE 2019, FYE 2020 and FYE 2021, which had been lodged with ASIC on 26 May 2022. These included accounts that had been audited by Pitcher Partners. As will be seen below, annual reports and audited reports for those years were outstanding at the time of the substantive hearing. 82 On 27 June 2022 Mr McAuliffe swore a further affidavit by which HML sought to adduce evidence that HML had convened an AGM to be held on 25 July 2022. 83 HML submitted that the annual reports amounted to highly probative evidence, primarily because the audited accounts, and the fact of their filing with ASIC, went to two issues that it submitted would be central to the Court's decision, namely the company's compliance with the Corporations Act and its financial position. HML submitted that this meant that it would be in the interests of justice to admit the evidence as it would probably affect the outcome of the case. While HML accepted that it would be necessary to show that it could not, by reasonable diligence, have adduced the evidence earlier, it submitted that this was the case here, as the audited accounts were not in existence at the time of the hearing. HML submitted that the prejudice to the plaintiffs would be minimal. It suggested that the matters the plaintiffs would need to follow up would be discrete. 84 The plaintiffs disagreed with that, having put on evidence in an affidavit of Michael Catchpoole, one of their solicitors, affirmed on 7 June 2022, as to further work they would need to do. This would include subpoenas to HML's accountants (Pilot Partners) and its auditors (Pitcher Partners) for the production of their working files in order to seek to understand a number of important differences between the audited accounts of May 2022 and the unaudited ones produced in December 2021 which were in evidence at the hearing. The plaintiffs submitted that they would then need to cross examine Mr McAuliffe on the differences and on the reasons for the further delay in producing the audited reports (noting that, as will emerge, the evidence at hearing was that Pitcher Partners had expected to complete the audits by 28 January 2022). The plaintiffs would also seek to subpoena JBL, Mr McAuliffe and another company, Tetue Pty Ltd, to seek to understand a particular transaction which appears to have converted a deficiency in shareholders' equity and working capital, as shown in the unaudited accounts, to a surplus, as shown in the audited accounts. I will describe the evidence about that transaction shortly. They would also need to obtain documentary evidence about a further placement of shares referred to in the annual reports that appears to have taken place in May 2022. 85 The plaintiffs also submitted that the annual reports could have been produced prior to the hearing and that it was a 'commercial and forensic choice' not to arrange for their inclusion in HML's case. They submitted that the reasons given for the delay were unsatisfactory. They also submitted that the expiry of possible limitation periods for taking action in respect of certain transactions were approaching so that excessive delay would prejudice them, assuming that a liquidator is appointed. 86 As to the applicable principles in an application to reopen, it is convenient to repeat the summary I gave in Frigger v Trenfield (No 7) [2020] FCA 1740 at [22]-[24]: The power is discretionary: Urban Transport Authority of New South Wales v Nweiser (1992) 28 NSWLR 471 at 474; Commonwealth of Australia v Davis Samuel Pty Ltd (No 7) [2013] ACTSC 146; (2013) 282 FLR 1 at [1578]. The ultimate question is where the interests of justice lie: Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22 at [24] (Kenny J); Telstra Corporation Ltd v Australian Competition and Consumer Commission [2008] FCA 1436; (2008) 171 FCR 174 at [208] (Lindgren J); Spotlight Pty Ltd v NCON Australia Ltd [2012] VSCA 232; (2012) 46 VR 1 at [26]. Broadly speaking, there are four recognised classes of cases where leave to reopen may be given, although the classes are not closed: (1) fresh evidence; (2) inadvertent error; (3) mistaken apprehension of the facts; and (4) mistaken apprehension of the law: Bradshaw at [24] (Kenny J); Spotlight at [25]-[26]. Likely prejudice to the party resisting the application will be relevant: Nweiser at 478. So will the public interest in the timely conclusion of litigation: Australian Securities and Investments Commission v Rich [2006] NSWSC 826; (2006) 235 ALR 587 at [18]. The probability that the additional evidence will affect the result is also relevant: Telstra at [209]. If success in reopening is not likely to make any difference to the outcome of the trial, that would weigh against putting the parties and the court to the delay, trouble and expenditure of resources involved in reopening. 87 Relevant to that last point, HML submitted that one factor that guides the court's discretion is whether the further evidence, if accepted, would probably affect the result of the case. It seems to me, however, that the Court cannot assume that the evidence will be accepted. The probability that the evidence will be accepted as true (if admitted) is relevant to the probability that it will affect the result. In any event, counsel for HML agreed that in deciding the application to reopen, it was necessary for the Court to make a preliminary assessment of the likelihood that the new evidence will affect the case. 88 Also relevant are the following observations in Spotlight Pty Ltd v NCON Australia Ltd [2012] VSCA 232; (2012) 46 VR 1 at [17]-[18] (Harper and Tate JJA and Beach AJA, footnotes omitted): There are good reasons why the circumstances must be exceptional before a court may allow a case, having been closed and judgment reserved, to be re-opened. The need for finality in litigation is one. It is no answer to this point to say that the further evidence sought to be adduced by the respondent in this case is confined to the quantum of damages. Were applications to re-open to be allowed almost as of course, such applications would be regularly made. That would add enormously to inefficiencies in the administration of justice, even if the re-opened hearing was strictly confined. The discipline which ought to attend the conduct of litigation by highly competent litigators would also inevitably decline. The very strict rule that, subject to any applicable process of appeal or review, the presentation of their cases by parties to litigation must conclude with the end of the trial, has another important justification. It is that, very often, the boundaries of the re-opened issues would be hard to define and as difficult to protect. The re-opened hearing would then be bedevilled by arguments about whether one party or the other was seeking to take advantage of the re-opening to polish parts of its case which were more or less within the scope of the re-opened proceeding but not clearly on one side or the other of the prescribed limits. 89 I dismissed the application to reopen on the basis of these principles, and because I did not consider that the evidence to be adduced was likely to affect the result. My specific reasons were as follows. 90 First, there was no reason to doubt or second guess Mr Catchpoole's affidavit to the effect that the plaintiff would seek to subpoena a number of people or entities to investigate the new developments disclosed in the annual reports. What that reveals is that, decisive or not, the new evidence would open up a range of issues going both to the financial position of HML and to further transactions in which it has engaged. The application would be a prime example of one where, in the words used in Spotlight, 'the boundaries of the re-opened issues would be hard to define and as difficult to protect'. 91 Second, the particular transaction involving Tetue Pty Ltd was likely to raise further concerns. The transaction is described in the annual report for FYE 2021 (also in the reports for the prior years) as a post reporting period development. It concerns debts between HML and JBL. A debt of approximately $2.4 million owed to HML by JBL (described in more detail in the narrative of the evidence below) was valued at nil in the unaudited accounts for FYE 2019, but in the audited accounts was given full value. According to the FYE 2021 annual report, that was because of the following transaction: On 5 May 2022, Henry Morgan Limited entered into a Deed of Assignment & Novation with Stuart McAuliffe, Tetue Pty Ltd and John Bridgeman Limited to offset amounts payables [sic] and receivable between the above-mentioned parties. As set out in the notes to the financial statements, the balance of any net loans receivable will be repaid from funds held in trust with the Company's legal counsel. 92 The note to the 'Loans and Receivables' section in the accounts then said: (a) On 8 August 2018 the Company made a loan of $2,411,000 to JBL for a term of one year at 11.5% pa interest. On 28 June 2019 the term of the loan was extended to 31 March 2021. As of 5 May 2022 the Loan to John Bridgeman Limited is subject to rights of set-off of liabilities as set out in: • Note 6 Trade and Other payables, being Accrued expenses of $194,883 (2020: $73,333) and Other payables - JBL of $1,172,008 (2020: $1,172,008); • Note 7 Borrowings, being loans from Stuart McAuliffe $343,916 (2020: $85,261). Whilst the net amount receivable from John Bridgeman Limited as at 30 June 2021 of $603,751 is past due, it has not been impaired on the basis of these funds being transferred to the Company's legal counsel trust account on 25 May 2022. 93 A company search of Tetue Pty Ltd that is in evidence on the interlocutory application shows its sole director is one Brett James McAuliffe and its previous directors include Stuart McAuliffe, John McAuliffe and a Barbara Joan McAuliffe. In short, this evidence, if admitted, would raise yet another transaction with connected parties which the plaintiffs would submit requires investigation. The evidence to be adduced by HML on any reopening would be limited to the new annual reports, so there would be no further explanation of the transactions in evidence. It would be necessary, as Mr Catchpoole's evidence showed, for the plaintiffs to investigate by the issue of more subpoenas and test HML's claims by further cross examination of Mr McAuliffe. 94 Also in relation to solvency, the directors noted in the annual report for FYE 2021 (also in the reports for the prior years): The continuation of the Company as a going concern is largely dependent on the Company's ability to: • maintain forecast expense levels; • raise additional capital and funding, of which $410,000 was raised subsequent to 30 June 2021 (refer note 10); and • have funds continued to be advanced from one of its Directors to allow it to maintain its solvency and allow it to pay its debts as and when they fall due. These conditions give rise to a material uncertainty which may cast significant doubt of the Company's ability to continue as a going concern. Should the above actions not generate the expected cash flow, the Company may be required to realise assets and extinguish liabilities other than in the normal course of business and at amounts that differ from those stated in the financial statements. The report does not include any adjustments relating to the recoverability and classification of recorded assets amounts and classification of liabilities that might be necessary should the Company not continue as a going concern. 95 It therefore appeared to me that the evidence sought to be adduced would raise further questions about transactions with connected parties and about the solvency of HML. There was some confusion at the hearing of the application to reopen as to the significance of the issue of solvency to the case, but in his written closing submissions filed in December 2021 counsel for HML said: the court need not make any specific finding as [to] the solvency of the company, as [HML] does not submit that this case falls within the category of cases where courts have held that the strength of solvency of a company was such that it would be an extreme case to order a winding up. In the present case, it is submitted that solvency would be a neutral factor in the Court's decision. That being so, it appears unlikely that admitting the audited accounts would significantly improve HML's case. Despite the apparent change in net assets that they record, they are hardly likely to rise to the level of establishing a strong case for solvency. HML did not put the application on the basis of any proposed change of such significance in the nature of its case. Rather, it was put on the basis that the new evidence was highly relevant to the case as framed by the time that judgment was reserved. 96 Nor would the less contestable fact that the audits and annual reports had been completed be likely to change the result; while it might be relevant that it has put an end to certain defaults in legislative compliance, it cannot erase the very long delay before that occurred, and the concerns about the management of HML the delay might raise. 97 I therefore did not consider it likely that the evidence would affect the result. I did consider it likely that admitting the evidence would lead to significant delay in the resolution of the proceeding by opening up new areas of inquiry. Those considerations, together with the systemic importance of holding parties to the closing of their cases in all but exceptional circumstances, led me to conclude that it would not be in the interests of justice to permit reopening. 98 In reaching that conclusion I placed no weight on the plaintiffs' argument based on limitation periods. Those periods have been approaching for some time and it would have been within the plaintiffs' power to inform the Court earlier and take appropriate procedural steps to ensure that the limitation periods would not expire. I note HML's submission that the plaintiffs here made deliberate forensic decisions to obtain extensive discovery, issue numerous subpoenas and engage in lengthy cross examination exploring the affairs of the company in depth, when they could have brought an application for a just and equitable winding up framed in simpler terms which would have led to a quicker result. The volume of evidence about to be addressed in this judgment goes some way to bearing that submission out. 99 I also did not place any weight on the plaintiffs' argument that the annual reports were not really fresh evidence, because they could have been prepared earlier. I agree that any unexplained delay is relevant to the question of whether it is just and equitable to wind up HML, but how it impacts on the different discretion to permit the reopening of the trial is not something that is necessary to decide in the present case. Nor did I put any weight on a submission made by the plaintiffs that it was open to infer that HML deliberately waited to complete the audits and make the application to reopen specifically to disrupt the orderly resolution of the matter. I did not consider that the evidence supported that inference. 100 I did, however, put some weight on the plaintiffs' submission that HML could have sought an adjournment of the hearing pending the production of the annual reports. The audit was expected to be concluded as soon as 28 January 2022, noting that final submissions did not come in until 20 January 2022. The option of an adjournment application was raised in discussion between the bar and the bench at the hearing, but was not taken, instead leaving any developments after the hearing to depend on an application to reopen, as has in fact occurred. It was appropriate to hold that decision not to seek an adjournment against HML's application, given the importance of holding parties to some finality in the closing of their cases.

Stuart McAuliffe 101 It is convenient to start the discussion of the evidence by making some observations about the evidence of Mr McAuliffe, as he was the only witness from whom HML adduced evidence and the only person who gave oral evidence in the proceeding. 102 Mr McAuliffe was 51 years of age when he gave evidence. He holds a Bachelor of Arts from the University of Queensland, a Graduate Diploma of Legal Studies from the Queensland University of Technology, and a Masters of Education from Bond University. Between 2007 and 2014 he was an Associate Professor in finance and investment analysis at Bond University. Between 2012 and 2015 he was investment manager for the Aliom Managed Futures Fund No 1, a 'wholesale investment fund'. His various positions at HML and other companies are identified above and below. According to Mr McAuliffe, those roles as director or CEO of companies have given him approximately seven years of experience managing listed and unlisted investment companies and managing all aspects of their operations. 103 I found Mr McAuliffe to be an unsatisfactory witness. His approach to his cross examination tended to be obstructive and, beyond that, to have an unreal quality. For example, he accepted that HML, JBL, BHD, Bartholomew Roberts and JBFG were all located at the same Brisbane CBD address, which had been notified to ASIC as their business premises, but asserted that 'the operational [sic] of the company was with the independent directors, and they weren't located there'. He accepted that the companies all had interests in each other, including that HML was the largest shareholder in JBFG. He accepted that there were various loans between the different companies. He appeared to accept that they used the same accounting staff, although he sought to qualify that by saying 'Some internal people were - were the same; although, I don't know if that's really exactly accurate, because not every person worked on - on - on every company'. He accepted that JBL was the investment manager for HML, and that: his role at JBL was investment manager; he was also the Managing Director of JBL; and that he had oversight of its business. He accepted that he was a director of JBL along with his father and Mr Patane, and that he has a 22% shareholding in JBL. He accepted that JBL provided office services and corporate support to HML. And yet he did not accept the common sense proposition that HML was 'part of a wider group of companies which appears to be referred to variously as the JBL Group'. 104 There were also several examples of Mr McAuliffe's refusal to accept propositions that were evidently true. One was that he did not agree that since it was listed, HML had a relatively consistent experience of complaints from ASIC and ASX. The history about to be recounted shows that was plainly so. Nor would he accept that a number of matters raised by ASX and ASIC remained unresolved. 105 Another example occurred when Mr McAuliffe was shown meeting logs apparently prepared by KPMG during the audit of various companies. He was listed as having been present at several of the meetings. But he refused to accept that he was at any of the meetings or to confirm whether he considered the records of discussion accurate, because he had not seen the KPMG notes before. When pressed he said 'Well, it's - it's possible even if I was present, I was present for part of it, and that - and that was it'. There is no reason to think that the KPMG audit personnel who prepared the meeting logs were mistaken in thinking that Mr McAuliffe attended the meetings; in the normal course of events the logs prepared by auditors on such occasions would be accurate in that regard. It would be one thing for a witness in his position to say that he did not remember specific meetings; that would be plausible. But to refuse to accept that he was at a particular meeting recorded in the working papers of the company's own auditors, and then to grudgingly accept as a possibility that if he was present it was only for part of the meeting, is to give evidence in an evasive way. 106 The following passage, about the transaction in which HML advanced approximately $2.4 million to JBL, is another example of the combination of unreality and obstruction that marked much of Mr McAuliffe's cross examination: So as best you can recall, how was it that HML could finance this transaction, given that it had cash of 11-odd thousand dollars, as best you can recall?---I wasn't a party to extending it, so I don't - - - No. I know you weren't a party - sorry. Sorry, Mr McAuliffe?---You're asking me to comment on a meeting of independent directors that I wasn't present at. I don't know. But you were a director of HML. You're not arguing with me about that, correct?---What I'm arguing with me - with you about is if we have legal advice and company secretarial advice to not participate in a transaction, then I don't. Mr McAuliffe, is it your evidence that you've got no idea how it was that HML was to finance this transaction, given that it had - appears that it had cash equivalents of 11-odd thousand dollars?---Well, what I'm telling you is I'm not privy to a meeting I wasn't at. Did you regard this loan to JBL of 2.4-odd million as an authorised investment? And you know what I mean by that: one that was authorised for the purpose of the JBL management agreement?---No, because no loans were done under the JBL management agreement. They were done only by the independent directors. You would agree that this kind of transaction was not the kind of investment that was envisaged by HML's prospectus. You would agree with that?---Not necessarily. Well, you would agree that this transaction is not one that is an investment in listed equities?---It's not … list with equities, but it wasn't done under JBL's management group. You would agree that this transaction wasn't one that comprised an investment in global exchange traded futures contracts. You would agree with that?---I would agree with that. You would agree with that?---Yes. 107 In cross examination, Mr McAuliffe also sought to deploy the separate legal existence of different companies as a way of avoiding the need to give candid answers to questions. Some instances of that appear in the history recounted below. An example is as follows: And then, you will see there's reference to the loan to - sorry - John Bridgeman, at the top?---I see it. And what was that loan for?---I don't know. Mr McAuliffe, you're the group CEO of this company, JBFG?---But you're not asking me in that capacity, you're asking me in my capacity as a director of Henry Morgan. I'm asking you if you can tell me, given your roles across these companies, what you understood this transaction with JBL was?---I believe there's a dispute about that. Between who?---Between JBL and JBFG. What, a current dispute between the liquidator of JBFG and JBL, is that what you're saying?---That's what I'm saying. Okay. But you can't tell me what this transaction was for; the loan, what the loan funds were applied to?---No, I can't. Certainly not in my capacity as a director of Henry Morgan. I don't quite follow what you mean. You had a role at JBFG, you had a role at JBL, roles of the highest order in terms of seniority, and I'm not quite sure what you mean by in your capacity as a director of HML?---Well, that's what you're asking me …… as now, any of these other companies, what you will find - and you would need to go and review this - is that I didn't participate in any of these decisions. I think - is it the case - forget about what hat you have on, whether as a director of HML or a director of JBL, or forget about what hat you may be wearing at present. But is your evidence that you just don't know what this transaction concerns, the loan of 9.165 million, and what it was used for? Is that your evidence?---I'm saying I wasn't privy to the loan being made, and I don't know the breakdown of the loan. I've also been instructed by JBL not to break any privilege, given some of the cases that JBL has on foot. That's what I'm telling you. I don't think that's an answer - I don't think that's a satisfactory answer to the question, Mr McAuliffe. I'm asking you to tell me what the purpose of the loan by JBL to - as disclosed on this page - to JBFG was?---I'm not privy to the information. So you're asking me something I don't know. 108 As this passage shows, Mr McAuliffe was often an evasive witness who, wrongly, seemed to consider that the fact that this proceeding concerns HML permitted him profess ignorance of the affairs of other entities, including entities of which he was Managing Director or CEO. 109 I will now turn to a narrative of the evidence about the history of HML.

2014 110 HML was incorporated on 26 September 2014 as an unlisted public company limited by shares. Its constitution says nothing about its objects or purposes. Under cl 1.4, it could 'exercise any power, take any action or engage in any conduct which the Corporations Act permits a company limited by shares to exercise, take or engage in'.

The Management Services Agreement with JBL 111 On 12 March 2015, HML and JBL entered into a Management Services Agreement under which JBL was to provide management services to HML which included assuming responsibility for achieving HML's 'Investment Policy'. The primary services JBL was to provide were services of an investment management nature: cl 3. Those primary services included 'ensuring investments by the Company are only made in Authorised Investments as part of the Manager's investment mandate': cl 3(b). JBL also contracted to supply other management services to HML, including office services, corporate support and information technology services support: cl 4.1. 112 Investments that were Authorised Investments under the Management Services Agreement (Investment Mandate) included unlisted securities, provided that the amount of investment in them was not to exceed 10% in value of the total assets held by the company at the time of the investment. The Investment Mandate did not include lending money, other than by deposit with a bank or a corporation declared to be an authorised dealer in the short term money market, or a government entity or 'if authorised by the Company, a corporation of at least an investment grade credit rating granted by a recognised credit rating agency in Australia': Management Services Agreement cl 1.1, 3(b).

The Prospectus 113 As earlier referred to, HML issued a prospectus on 26 October 2015 and a replacement prospectus on 5 November 2015. The differences between the two were minor, so it is only necessary to refer to the latter, which I will call the Prospectus. 114 It appears that HML did not commence operations for over a year after it was formed, although according to the Prospectus, Mr McAuliffe was appointed Managing Director in September 2014. The other members of the Board were John McAuliffe and one Simon Richardson, who appears to have had experience as a futures trader. Mr Richardson was identified as an executive director responsible for overseeing business operations, risk management and compliance. 115 The Prospectus was for the offer of 14 million shares at an offer price of $1.00 per share to raise a minimum of $14 million, with attached options issued for nil consideration on a one for one basis and exercisable by 31 August 2018 at $1.00 each. It contemplated that oversubscriptions for up to a further 20 million shares with attaching options could be accepted. According to the Prospectus, HML had already applied for admission to the official list of the ASX. 116 The Prospectus said that an investment in HML 'should be considered speculative' and that the company's business was subject to a high degree of risk. The Chairman's letter signed by John McAuliffe near the beginning of the Prospectus said: Investing in the Company will enable investors to gain exposure to an investment portfolio (Portfolio) which is actively managed by an experienced Manager, John Bridgeman Limited (Manager). The Managing Director and Chief Investment Officer of the Manager, Stuart McAuliffe, has experience in achieving above average returns for investors in other entities that have not been dependent on the performance of traditional ASX-linked investments and the broader Australian property market. The Company will trade both long and short positions in global markets across exchange traded futures contracts such as equity market indices, fixed income, currencies and commodities through a managed futures strategy. … The Board believes an investment in the Company provides investors with advantages that are not available to investors of many other listed investment companies, including: • a Chief Investment Officer with a successful track record of investing in global markets; • the ability to earn returns that are not correlated to traditional ASX-linked investments which dominate the strategies of many current listed investment companies; • the ability to earn returns in both bull and bear markets across a variety of exchange traded futures contracts; • investments limited to deeply liquid/high volume markets enabling scalable investments and the entry and exit of positions without significant impact on market flows; and • strong risk management oversight. 117 The Chairman's letter later said: The founder and Managing Director of the Company, is Stuart McAuliffe. As noted above, Stuart is also the Managing Director and Chief Investment Officer of the Manager. Stuart brings multistrand skills in investment strategy, systems development, valuation and forecasting modelling and high level trading techniques to the Company. Stuart has an academic background specialising in index design and assessment and the development of complex short and medium term valuation and forecasting models and indicators. 118 Further emphasis on Mr McAuliffe's skills and experience appears in a later section of the Prospectus headed 'Experience of the Manager' (that is, the experience of JBL). 119 In an 'Investment summary' section early in the Prospectus, the Prospectus said of HML and its business model: On successful completion of the Offer and admission to the Official List, the Company will be a listed investment company seeking to achieve moderate to high portfolio returns over the medium to long-term. The Company's Investment strategy will seek to take advantage of imbalances in global market valuations through the active management of investments predominantly in global exchange traded futures contracts including equity market indices, fixed income, currencies and commodities and fixed income futures. Whilst the Company's investment strategy will primarily be executed through investments in exchange traded futures contracts, the Company may also invest in listed equities as well as exchange traded futures options (for hedging purposes only). The Company's investments will be limited to deeply liquid, high volume global markets to enable ease of entry and exit of positions. 120 Much of this was repeated in an item on 'Investment Strategy' on the following page. Another item in the Investment summary section stated that 'The Directors do not intend to use borrowings'. 121 Some other items in this section related to investment management. In response to a question 'Who will be responsible for managing the investments of the Company?', the Prospectus said that HML had appointed JBL as investment manager and that JBL 'will manage the Portfolio in accordance with the terms and conditions of the Management Services Agreement'. Another question 'Does the Board approve investments?' was addressed as follows: Board approval by the Company is not required for investments undertaken by the Manager in accordance with the Company's investment objectives, strategies and guidelines, which are detailed in the Management Services Agreement. 122 Similar statements about investment strategy were made in an 'Investment overview' section later on which was apparently intended to expand on the initial 'Investment summary' text. The Investment overview section also said that the company would: focus on investing in global markets primarily through exchange traded futures contracts … including equity market indices, fixed income, currencies and commodities with the aim of achieving above average returns over the medium to long term, as compared to the Barclay's Global Macro Hedge Fund Index. The Investment overview section also explained the nature of various kinds of futures contracts in some detail. Part of this section discussing 'Other Investments' stated that while HML 'may at times invest in individual listed equities and futures options', HML did not 'anticipate investments in individual listed equities to make up a material percentage of the overall investment Portfolio'. 123 The following section entitled 'Investment objective' reiterated a focus on active management of exchange traded futures, exposure to global markets, and 'diversity of investments in deeply liquid markets'. 124 There was also a more detailed section about HML's investment strategy which, once again, focussed on 'global exchange traded futures contracts including equity market indices, currency and interest rate futures'. 125 In answer to a question 'What are the key strengths of the Company?' in the earlier Investment summary section, the Prospectus expanded on the Chairman's letter as follows: The key strengths of the Company may be summarised as follows: • the Manager and the Managing Director of the Company (Stuart McAuliffe) have extensive experience in Australian and global markets. Stuart McAuliffe will be able to apply his experience and skills as he will be responsible for the investment management strategies and services to be provided to the Company; • the strategy used by the Manager is very scalable given the deep liquidity in the markets in which the Company intends to invest. Deeply liquid markets are characterised by high volumes allowing the Manager to enter and exit positions without significant impact on market flows and most investments can be executed within seconds of giving the order; • by investing in global markets as well as having the ability to take long and short positions in exchange traded futures, provides potential for returns that are not correlated to traditional equity market investments … 126 A later item in the Investment summary section, on the specific subject of liquidity of assets, said: As at the date of this Prospectus, the Company reasonably expects that, once the Portfolio has been established it will be able to realise at least 90% of the Portfolio's assets under normal market conditions, at the value ascribed to those assets in calculating the Company's net asset value, within 5 trading days. 127 Under a heading 'Investment guidelines' later in the Prospectus there were described 'key investment guidelines for the Manager in implementing the Company's investment strategy [as] contained in the Management Services Agreement'. These included that: 'The Company may not hold unlisted securities'. Another 'key investment guideline' was that 'Borrowings are not a planned element of the Company's investment strategy'. 128 There was then another heading, 'Scalability', under which that concept was again emphasised, attributed, in part, to HML's investment strategy of investing in 'the most liquid exchange traded futures contracts globally'. There was then a heading 'Use of Leverage in the Investment Strategy' under which it was said: Trading in futures is key to the Company's investment strategy. Leverage is inherent in futures trading as futures contracts generally provide a much larger exposure to the underlying assets with a relatively small initial outlay. … The Company will not have a maximum anticipated or allowed level of leverage. The Company will manage risk by analysing volatility across markets, ensuring margin used remains below 50% of capital, diversifying across futures markets and by taking a mixture of long and short positions. 129 A section on risk management similarly highlighted how HML would manage the risk of its futures trading by diversifying across different futures markets, all of which were to be 'deeply liquid', and other measures. 130 The Prospectus also said elsewhere that 'The Company will invest in futures and cash'. 131 A section of the Prospectus headed 'Keeping you informed' set out different kinds of information that would, and would not, be made available to shareholders in HML. Included among the information that was going to be regularly disclosed was the 'actual allocation to each asset type … (for example currencies, equity indices, cash bond allocations)', derivatives counterparties and '[a]ny material change in the Company's risk profile, strategy and change in the individuals playing a key role'. 132 The Prospectus disclosed the Management Services Agreement with JBL as a material contract. It said that the Management Services Agreement was an agreement with a related party due to the common directorships. Stuart McAuliffe, John McAuliffe and Simon Richardson were all directors of JBL. 133 As has been said, the offer made in the Prospectus closed on 17 December 2015, having raised $15.6 million, with an issue of 15.6 million shares at an issue price of $1.00 per share. There is no direct evidence of how many shareholders took part in this initial fundraising, but a register of shareholders from 2021 indicates that nearly 90 of the current shareholders subscribed in 2015. The second plaintiffs were among them. That register lists around 750 shareholders, so it can be inferred that from the beginning the shares were quite widely held. 134 HML commenced using Link Market Services Limited (Link) as its share registry no later than 26 October 2015. The company had not commenced trading by the end of 2015.

2016 135 The official quotation of the issued shares in HML on the ASX commenced on Friday 5 February 2016. All of the 15,601,000 shares in the company (the 15,600,000 issued under the initial public offering, and an original 1,000 shares held by Mr McAuliffe) were quoted as well as 14,000,000 options that were issued pursuant to the Prospectus. 136 Simon Richardson, who had been designated as executive director of HML responsible for overseeing business operations, risk management and compliance, resigned as a director on 31 March 2016. Mr Patane became a director (for the second time) on the same day. 137 It appears from the pleadings that approximately $15 million in further funds was raised by reason of the conversion of options over subsequent years. It is difficult to be precise as to how much of that came from the conversion of the original options issued under the Prospectus, but the annual reports indicate that it was likely to have been $11.5 million as a minimum. 138 The evidence does not make clear the activities in which HML engaged, if any, from the close of the offer in the Prospectus at the end of 2015 and in the first half of 2016. I consider below the evidence as to whether it actually engaged in its stated main activity of trading in global markets in exchange traded futures contracts.

Transactions in relation to connected companies in late 2016 139 In the second half of 2016 it appears that HML began to embark on a number of transactions that involved the acquisition of shares from and in unlisted companies of which Mr McAuliffe was a director, and the advance of funds to such companies. As I have said, it is common ground that it is not necessary for me to find, for example, that any of these transactions were related party transactions which contravened provisions of Chapter 2E of the Corporations Act and I will make no such findings. However the fact that Mr McAuliffe held offices in the companies shown in Diagram 1 above is relevant, and I will describe those companies more neutrally as 'connected' companies. 140 On 8 August 2016, HML acquired 300 shares in JBFG for approximately $50,000. That was 25% of the issued shares in JBFG. The seller of those shares was Bartholomew Roberts (at the time Bartholomew Roberts' directors included Stuart and John McAuliffe). That acquisition priced shares in JBFG at $167.02 per share. 141 On 1 October 2016, JBL and HML entered into a services agreement under which HML engaged JBL to provide a wide range of back office services. It is not clear why this agreement was necessary or what it added to the Management Services Agreement, which already provided for JBL to provide various management services to HML. The term of this later agreement was three years unless extended by agreement: cl 10.1. 142 On 13 October 2016, HML invested $1.2 million in Bartholomew Roberts at an issue price of $1.00 per Bartholomew Roberts share. The issue of 2,077,417 shares in Bartholomew Roberts, including the 1,200,000 issued to HML, occurred on that day. 143 On 18 October 2016, shareholders approved an amendment to the Investment Mandate in the Management Services Agreement with JBL so as to permit more than 10% of the company's portfolio to be held in unlisted securities. According to Mr McAuliffe's evidence in cross examination, this resolution was 'passed with 98.5 per cent of the vote'. But there is no direct evidence about the terms of the resolution or the notice of meeting, of what was disclosed to shareholders, or of who voted, other than McAuliffe saying in broad terms 'I never voted on any of those decisions or investments'. 144 Then, on about 9 December 2016, HML acquired a further 235 shares in JBFG for approximately $6.25 million. This was an injection of capital in return for newly issued shares. It priced shares in JBFG at $26,667 per share. 145 Also on 9 December 2016, HML advanced $500,004 to Risk & Security Management Pty Ltd (RSM). But on 19 December 2016, it appears that HML assigned the benefit of the loan to Bartholomew Roberts in return for 55,556 shares in Bartholomew Roberts at an implied value of $9.00 per share. The evidence in documents produced by or on behalf of HML about the position of RSM in the connected group is confusing and conflicting. It is not even clear whether it was a proprietary as opposed to public limited company, or whether it was a subsidiary of BRL or of JBFG (see for example Diagram 1 but compare a submission HML made to ASIC in July 2017). It is not necessary to resolve that confusion in this judgment.

January to April connected party transactions 146 It appears that the substantial investment of $6.25 million in JBFG was not disclosed to the market for more than six weeks. That occurred on 23 January 2017, when HML made an announcement to the ASX which said, in part: As previously advised to the market, JB Financial Group is an unlisted financial services company with established and profitable broking and foreign exchange arms, which intends to list in the short to medium term. To provide shareholders with further detail regarding this investment, Henry Morgan Limited advises it has invested $6.25 million in JB Financial Group Ltd, and holds approximately 12.8% of the fully diluted capital in that company. 147 In HML's interim financial report for the half year ended 31 December 2016, HML referred to an 'acquisition by the Company of additional shares in Bartholomew Roberts Ltd, a subsidiary of the Investment Manager John Bridgeman Limited' as a transaction with a related party that had been conducted on normal commercial terms and conditions. That acquisition was said to have taken place during the half year in three tranches, by which HML acquired 36.4% of Bartholomew Roberts for consideration of $1.7 million. 148 On 28 April 2017, HML loaned $400,000 to Bartholomew Roberts. Then on 17 May 2017, that was converted to 40,040 shares in Bartholomew Roberts at an implied value of $9.99 per share. On 25 May 2017, HML invested a further $1,999,998 in Bartholomew Roberts at an implied $9.90 per share. The total cost of HML's investment in Bartholomew Roberts over the space of seven months, including the transactions in 2016 (at [142], [145] above), was $4,100,002 (or, on a different calculation, $4,099,998 - see [174] below).

The bonus option offer and the ASIC stop order 149 On 30 May 2017, HML announced the issue of one free bonus option for every five shares in the company. The option was for the issue of one fully paid ordinary share in HML at an exercise price of $2.05. The issue was expressed to be '[i]n recognition of the support from its shareholders'. On 2 June 2017, HML issued a prospectus in respect of the offer of bonus options (Bonus Option Prospectus). 150 According to the Bonus Option Prospectus, as at 1 June 2017 Mr McAuliffe held 5,375,811 shares in HML directly or indirectly, which was a little over 18% of the issued shares in the company. 151 On 7 June 2017, ASIC made an interim stop order under s 739(3) of the Corporations Act which prohibited offers, issues, sales or transfers of options under the Bonus Option Prospectus for 21 days. A statement of concerns that ASIC provided with the stop order said that ASIC was concerned about misleading statements in market announcements which were deemed under s 712(3) to have been incorporated by reference into the prospectus. The statement of concerns identified, in particular, ASX announcements made on 5 January 2017, 28 February 2017, 7 March 2017 and 26 May 2017. The concerns related to figures given in the announcements for the net tangible asset (NTA) backing per share of HML. 152 ASIC's statement of concerns noted that the 5 January 2017 announcement stated an NTA backing of $2.0827 (before tax, undiluted), while in the half yearly report for the six months ending 31 December 2016, the NTA backing was stated to be $1.15. ASIC also noted that the assets included 'financial assets recorded at fair value' of $13.24 million, which included listed shares of $4.771 million and unlisted shares of $8.300 million. The unlisted shares included an investment in JBFG. Of all this the statement of concerns said: 12 ASIC notes the substantial discrepancy between the NTAs announced on 5 January and those recorded in the books of the Company at 31 December 2016 and in the financial statements of the Company lodged on 28 February 2017. It is noted that the unlisted assets were only acquired in the period after 30 June 2016 and are understood to make up a substantial part of the increase in NTA calculated by the Company. The NTA performance is disclosed in the announcement of 109.61%. This appears to indicate the portfolio doubling in value in the six month period. 13 ASIC also notes further subsequent announcements which record further increases in NTA. An ASX announcement dated 26 May 2017 further discloses that post the contemplated transaction the pre-tax NTA could be as high as $2.51. 14 Given the very large increases in reported NTA, ASIC is concerned about whether these NTA figures have a reasonable basis and are supported by an appropriate valuation methodology. 153 The statement of concerns raised issues about the internal financial reporting of HML. It said (at paragraph 16): 'Of note, the Company does not produce monthly management accounts. After two notices, and an inspection under section 29 of the Australian Securities and Investments Act 2001, the best documentation that was produced was a trial balance as at 31 May 2017'. This did not record any increase in value of the unlisted investments, which ASIC considered 'may indicate that the valuation increments have no reasonable basis'. 154 The statement of concerns also raised issues about the basis on which HML's share of JBFG had been valued. One matter on which the valuation was based was a profit forecast for JBFG of approximately $5.5 million for FYE 2016, where a review of internal budgets and forecasts raised concern about whether there was a reasonable basis to make the forecast. Another matter was an assumption that JBFG would become listed, where ASIC was concerned that may be misleading and may have rendered an estimated market valuation of $83 million for JBFG misleading. Also, an announcement of the sale of HML's shares in JBFG for $42,265,000 may 'provide little evidence in support of the NTA valuation' where the proposed purchaser was JBL, 'the investment manager of the Company whose recommendation was made to the Company to invest in the JBFG in the first instance'. 155 The statement of concerns concluded (paragraph 23): Based on the above concerns, ASIC has formed the initial view that the monthly NTA calculations included in the ASX Announcements are misleading. The information ASIC has received under notice does not support the conclusion that the NTA calculations disclosed in the ASX Announcements have a reasonable basis. As a result, ASIC is of the view that the Prospectus contains misleading statements in accordance with s 728(1) of the Act, as the ASX Announcements are deemed to be included in the Prospectus. 156 Mr McAuliffe's evidence about this stop order was unconvincing and, had it been convincing, it would not have reflected well on his management of HML. It was unconvincing because he claimed not to recollect that the stop order had been made because ASIC alleged that the Bonus Option Prospectus was misleading and might contravene the Corporations Act. I do not accept that he would forget such a fundamental criticism by ASIC of the market disclosures of the company of which he was the Managing Director at the time. If I did accept that he had forgotten it, that would show a cavalier disregard for serious allegations made by the corporate regulator that caused the regulator to go so far as to put an interim stop on a public issue of securities in HML.

The ASX suspension 157 On 8 June 2017, the day after ASIC made the interim stop order, ASX suspended the bonus options from quotation. It is not clear whether they had actually been issued by then (the date for the issue of the options stated in the Bonus Option Prospectus was 14 June 2017) or how they had been issued in view of the interim stop order, but nothing turns on that. The following day, all of the securities in HML were suspended from quotation, according to ASX 'at the request of the Company, pending the release of an announcement regarding the outcome of the interim stop order'. 158 Mr McAuliffe's evidence about the suspension of these securities was also unconvincing. He said that ASX's suspension of HML's securities on 9 June 2017 was 'nothing to do with that stop order'. That simply cannot be true, given that suspension of the company's securities occurred on 8 and 9 June 2017 after the stop order of 7 June 2017, and given the content of the two ASX announcements. Indeed, it is contradicted by his own evidence in his first affidavit, which said that 'HML requested a voluntary suspension of trading of HML's securities on the ASX, pending the release of an announcement regarding the outcome of the Interim Stop Order issued by ASIC on 2 June 2017' [sic 7 June 2017]. 159 ASIC issued a final stop order in relation to the bonus options some time before 31 July 2017 (the stop order itself is not included in the evidence before the Court but there is an ASX announcement by HML dated 15 August 2017 which refers to a previous announcement of 31 July 2017, that in turn referred to 'the Final Stop Order issued by the Australian Securities and Investments Commission … in respect of the Company's prospectus for the issue of Bonus Options dated 2 June 2017').

July 2017 connected company transactions 160 On 10 July 2017, HML agreed to lend $450,000 to Capital Credit, a subsidiary of JBFG formerly known as Growth Point Capital Pty Ltd (see Diagram 1) of which $221,884 was drawn down. The term of the loan was one year. In cross examination, Mr McAuliffe asserted that there was no restriction on investing in 'unlisted assets via a loan'. However there is no evidence that the restriction in the Investment Mandate on lending money, other than by deposit with a bank etc (see [112]) was ever varied by resolution of shareholders or otherwise. 161 Mr McAuliffe was a director of Capital Credit at the time that loan was made, along with three other individuals. Mr McAuliffe said in his first affidavit that he considered the other directors to be independent of HML but I place no weight on that broad and unsubstantiated assertion. Like many other parts of Mr McAuliffe's evidence that will be mentioned below, it was in evidence on the basis of an agreed ruling under s 136 of the Evidence Act 1995 (Cth) that it was admitted only as evidence of the witness's knowledge, opinion or belief and not as evidence of the truth of the facts asserted (s 136 ruling). 162 Mr McAuliffe also stated (subject to the s 136 ruling) that since he was the only common director of HML and Capital Credit, he did not have control over the outcome of decisions about Capital Credit's financial and operating rules. That overlooks the fact, however, that as at 10 July 2017, Mr McAuliffe was a director and Group CEO of JBFG, which indirectly controlled 50% of the shares in Capital Credit, and a director of Bartholomew Roberts, which held the other 50%, and Managing Director of JBL, of which Bartholomew Roberts was a subsidiary, and which also acted as manager of investments for Bartholomew Roberts. 163 Mr McAuliffe's assertions about the numbers of directors ignores the broader realities of the web of inter-company shareholdings and investment management agreements, as well as his position as an active executive director of key companies within the group. I therefore do not accept his general assertions about the independence of various other directors or his inability to control various entities. Those assertions are belied by the reality of all the relationships between Mr McAuliffe and the various entities. It also ignores the reality of the web of substantial investments between the connected companies represented in Diagram 1 above (and Diagram 2 and Diagram 3 below). I have above described Mr McAuliffe's holding of directorships or other offices in some of these companies as a common thread. With that in mind it would be an extraordinary coincidence if the boards of all these entities, acting independently of Mr McAuliffe, just happened to alight on each other as the best vehicles for investment of their funds. 164 It is true that Mr McAuliffe was not cross examined on these assertions thoroughly in respect of each of the connected companies. However as the Managing Director of the defendant who was closely involved in its defence of this proceeding, I am satisfied that he was aware that his control of the various connected companies was an issue in the proceeding, so the above observations involve no unfairness to him or to HML. In any event, the specific evidence he gave which the observations contradict was received subject to the s 136 ruling, and so was evidence solely of his state of mind. Whether he believed that the other directors were independent of him is neither here nor there in this proceeding and I need make no finding about whether his evidence to that effect was given honestly.

Retractions to ASX announcements 165 It appears from the announcement of 15 August 2017, referred to above, that HML had retained an independent expert to review the company's valuation of the unlisted assets included in its NTA backing and that 'the Company currently anticipates seeking to have the voluntary suspension of trading in its quoted securities lifted following completion of that exercise'. 166 The announcement of 15 August 2017 retracted a statement that had apparently been made in multiple prior announcements, as follows (emphasis in original): In the 12 December [2016] Announcement the Company stated in part that: Following shareholder approval received at the meeting of Henry Morgan Limited shareholders on 18 October 2016, the Company has taken its first significant stake in an unlisted, pre-IPO vehicle - JB Broking Ltd, an unlisted financial services company with established and profitable broking and foreign exchange arms, which intends to list in the short to medium term. (Emphasis added) At the time of the 12 December Announcement JB Financial was registered under the name 'JB Broking Ltd'. Accordingly, the reference in the announcement to 'JB Broking Ltd' relates to JB Financial. Based upon its examination of the relevant financial statements available, ASIC disagreed with the description of JB Financial as having an established and profitable broking arm at the time of the 12 December Announcement. The Company notes that while it submitted to ASIC that it was accurate to describe the operations of JB Financial as a whole as profitable and established, it does accept that an inference could be drawn that the broking business alone was profitable. In the circumstances ASIC found that this statement regarding the profitability of the broking business was misleading if further qualification was not provided. The Company states that it did not intend to give such an impression. Accordingly, the Company retracts that statement insofar as it relates to JB Financial's broking arm profitability as at 12 December 2016. The Company also retracts that statement where it appears in any other announcements, including without limitation those made by the Company on 5 January 2017, 23 January 2017 and 23 June 2017. 167 It is reasonably clear from the above, though, that the 12 December 2016 announcement does more than give rise to an inference that JBFG's broking business alone was profitable; it says that the broking arm was profitable (see also the 23 January 2017 announcement quoted at [146] above). This evidently grudging retraction shows a lack of candour on the part of HML's management even at a time when, reluctantly, it had been required by ASIC to correct its previous statements. 168 Another retraction contained in the ASX announcement of 15 August 2017 was as follows (emphasis in original): Corrective disclosure - 15 December Announcement In the 15 December [2016] Announcement the Company stated in part that: In addition, management has approved an increased roll-out of 42 new retail foreign exchange units, including two in Queensland, 20 in New South Wales, and 20 in Victoria. Directors believe this expansion will positively impact earnings, and may require a review of the 2017-2018 management forecast of net profit for JB Broking Ltd noted in the Business Update released to the market on 12 December 2016, of $5,579,000. (Emphasis added) ASIC found that the Company did not provide documentation to evidence that the Board had considered and specifically approved the 42 store roll-out as described in this announcement, and that this statement gave a misleading impression as to the size and scale of the relevant operations, and was material. Accordingly the Company retracts this statement. 169 The ASX announcement of 15 August 2017 made yet another retraction, as follows (emphasis in original): Corrective disclosure - 26 May Announcement - regarding turnover of JB Financial In the 26 May [2017] Announcement, the Company made the following statement in part of its response to ASX's question 3: When established, JB Financial Group had one employee and turned over circa $100,000 annually. Currently, JB Financial Group Ltd has a turnover of approximately $96 million and total staff of 428 employees plus 250 contractors. (Emphasis added) ASIC has found that forecast revenues for the businesses of JB Financial were clearly not in the vicinity of $96 million. Further, ASIC expressed the view that these forecasts implied an historical (or current) turnover rather than forecast turnover. Further, ASIC believes that it was logically a reference to annual turnover. Accordingly, ASIC was of the view that this statement was misleading, as it gave the impression that JB Financial was much larger than in fact it was at the time. The Company acknowledges that this reference to a turnover of approximately $96 million should not have been included in the announcement of 26 May 2017. For clarity, these numbers were derived from the Company's internal projections and assumed acquisitions that were at that point in time not settled. The Company accordingly retracts this statement. In the following table the Company sets out the annualised revenue, employees and contractors of JB Financial as at 26 May 2017, and by way of comparison those same numbers as at the date of this announcement: 26 May 2017 14 August 2017** Annualised Turnover* $10,755,979 $55,223,726 Employees 67 194 Contractors 1 791

170 So, plainly, the previous announcement of which this was a correction was misleading. JBFG's turnover was nowhere near $96 million and its staff numbers as at the time of the previous announcement was not 428 employees plus 250 contractors. Even as at the time of the correcting announcement, nearly three months later, the turnover and employee numbers were nowhere near those in the previous announcement. Although there appear to have been a large number of contractors on the books, the basis on which they were retained and what they were retained to do is not clear. 171 And even this correction of an incorrect previous announcement required close reading if it were not itself to be misleading. The asterisks in the table marked footnotes which appeared in smaller print immediately below the table as follows (emphasis added): *The 'Annualised Turnover' (the Turnover) is the annual turnover for the entities for the 2016/2017 financial year, that the Company as at 26 May 2017 controlled or anticipated controlling, and then again as at 14 August 2017. The Company notes that the Turnover as at 14 August 2017 includes the Turnover for the entities which the Company as at 26 May 2017 controlled or anticipated controlling, in addition to the Turnover for those entities which were controlled by, or which the Company as at 14 August 2017 anticipated controlling. **The Turnover and the numbers of 'Employees' and 'Contractors' (the Headcount), assume the completion of the acquisition of 100% of the issued share capital of Genesis Proprietary Trading Pty Ltd, which was the subject of an announcement by the Company to the market on 23 June and 15 August 2017 (the Genesis Acquisition). The Company notes that the agreement for the Genesis Acquisition is unconditional. The parties aim to complete the Genesis Acquisition on or about 7 September 2017. The Company knows of no reason why the Genesis Acquisition will not complete as planned. The Company further notes that it is informed by JB Financial that JB Financial knows of no reason why the Genesis Acquisition will not complete as planned. However, the Company also notes that every transaction is subject to some degree of completion risk. If the Genesis Acquisition does not complete, then the Turnover and/or Headcount will not be achieved and in which case, the Company will update the market accordingly. So these turnover figures, like the misleading ones in the previous announcement, were based on anticipated, not actual numbers, and assumed at least one acquisition that had not actually occurred at the date of the announcement. 172 Despite these retractions and further clarifications of other matters that were contained in the 15 August 2017 ASX announcement, all securities in HML remained suspended from trading.

September to November 2017 connected party transactions 173 It appears that JBFG's acquisition of Genesis Proprietary Trading Pty Ltd referred to in the notes extracted above was completed in September 2017. On 16 October 2017, HML entered into a profit sharing arrangement with Genesis Proprietary Trading Pty Ltd. 174 On 30 October 2017, HML released its annual report for FYE 2017. Despite the concerns about asset valuations that led ASIC to issue the interim stop order on 7 June 2017, the annual report indicated that the investment in JBFG was revalued to $29,510,120, up by $23,210,014 from its acquisition cost of $6,300,106, and its investment in Bartholomew Roberts was revalued to $14,114,148, up by $10,014,150 from its acquisition cost of $4,099,998. This was the subject of an unqualified audit opinion from KPMG, which specifically identified the valuation of investments in unlisted entities as a 'Key Audit Matter'. 175 On 17 November 2017, HML acquired 1,398,573 shares in JBL at $2.05 per share, so for $2,867,074.65 total consideration, with an attached option per share. Mr McAuliffe's first affidavit justifies this transaction by saying that (received subject to the s 136 ruling): … the decision by HML's board of directors to participate in the JBL placement was an investment decision based on HML's investment strategy of investing in listed equities as part of its overall portfolio. The investment in JBL provided HML with the benefit of securities in a listed company, which in turn held shares in a sizeable financial services operating business, namely JBFG. Participation in the placement aligned with the investment strategy of HML, by facilitating exposure to operating businesses to increase a defensible income stream to HML, expand its investment portfolio and maximise returns to HML shareholders. 176 This justification is expressed in broad generalities, without addressing the facts that both the listed company and the financial services operating business in which it held shares both happened to be companies of which Mr McAuliffe was a director and Managing Director or CEO. Indeed, the investment was in JBL, the very company that was retained to manage HML's investments at the direction of JBL's Chief Investment Officer, Mr McAuliffe. And there is no evidence as to when, how and why HML came to adopt this strategy of investing in listed equities as a large part of its overall portfolio, when the Prospectus had clearly put the emphasis of its investment strategy on futures contracts in liquid global markets.

More ASX queries 177 On 14 February 2018, ASX sent HML a letter making detailed queries about announcements that HML had made to the market concerning JBFG and other companies, and the annual reports of JBFG and other companies. One of the queries was a request to provide: a diagram clearly showing the interrelationships between HML, John Bridgeman Limited, Bartholomew Roberts Ltd, JBFG, K-Ching Holdings Pty Ltd and K-Ching Pty Ltd. As a minimum, the diagram should show common directors, shareholdings and loans between these entities, as well as any other relevant agreements or connections between the entities. 178 HML's response on 27 February 2018 included the following diagram:

Diagram 2 - Annexure A 179 This shows that as at February 2018, the same three people, Stuart McAuliffe, John McAuliffe and Rosario Patane, were directors of HML, JBL, and Bartholomew Roberts and that HML held over 20% of the shares in JBFG and over 30% of the shares in Bartholomew Roberts which in turn held over 33% of the shares in JBFG. Despite that, HML's response to ASX said, 'HML is not directly aware of the interrelationships between John Bridgeman Limited, Bartholomew Roberts Pty Ltd and JB Financial Group Ltd and is not able to provide the details requested in respect of these interrelationships'. Nor did the response acknowledge the 'relevant agreement or connection' comprised of JBL's position as investment manager of HML under the Management Services Agreement. 180 In cross examination Mr McAuliffe refused to accept that this was, in the words of the cross examiner, 'a ridiculous thing to say in response to the request from the ASX as to what the relationships were all about'. His justification was that 'This was written by the independent directors' and 'you've got to understand that the companies are run independently'. And yet, the companies were related in the way shown in Diagram 2, and in the case of most if not all of them, had the same registered place of business, shared internal accounting staff and, in the case of HML and JBL, had the same Managing Director (Mr McAuliffe), together with, in the case of JBFG, Mr McAuliffe as Group CEO. It also happened that several of these companies had substantial investments in each other by way of debt finance. It beggars belief that each company amongst several companies connected in that way truly would be run independently. Mr McAuliffe's protestations that the companies were run independently of each other and, implicitly, independently of him, are incredible. 181 It is also implausible to say that HML's letter to ASX was written by the independent directors. Even if it were true, it would be entirely unsatisfactory to leave persons who are, apparently by design, ignorant of the full extent of the relationships between the companies, to answer queries from ASX about those relationships. Mr McAuliffe was the Managing Director of HML. It was his responsibility to ensure that responses to ASX were candid and accurate. He could not delegate that responsibility to 'independent directors'. The truth is that he must have been aware of these relationships. This is another example of a lack of candour on the part of HML in its disclosure to ASX and another example of Mr McAuliffe's lack of candour with the Court. 182 On 8 March 2018, ASX wrote to HML requiring it to make an announcement to the market that the acquisition of shares in JBL that it made on 17 November 2017 (see above) had breached the listing rules. The alleged breach was of Listing Rule 10.1, which requires that a listed entity must not acquire a 'substantial asset' without shareholder approval if the acquisition is from, among other things, a 'person whose relationship to the entity … is such that, in ASX's opinion, the transaction should be approved by security holders': Listing Rule 10.1.5. ASX's letter said: Under Listing Rule 10.1.5, ASX advises that given JBL's relationship to HML's Executive Chairman, Stuart McAuliffe, and its role as HML's Investment Manager, ASX considers that the acquisiton [sic] of the JBL Securities requires shareholder approval pursuant to Listing Rule 10.1. 183 ASX's letter also said: ASX reminds HML of its contract with ASX to comply with the listing rules. In the circumstances ASX considers that it is appropriate for HML to make necessary arrangements to ensure there is not a reoccurrence of a breach of the listing rules. 184 While ASX's letter is unclear, it appears to proceed on the basis that Mr McAuliffe's control over both JBL and HML is what led to the requirement for shareholder approval of the acquisition. In its reply to ASX on 12 March 2018, HML wrote: First, Mr John McAuliffe is HML's Chairman and performs this role in a non-executive capacity and secondly, Listing Rule 10.1.5 requires more than merely a subjective judgement about the influence that Mr Stuart McAuliffe and JBL might have over HML. HML submits that on an objective basis a reasonable person would expect that the nature of the relationship of the relevant person to HML must be such that the identified person has the power to control decisions about the financial and operating policies of HML. HML asserts that Mr Stuart McAuliffe, while being the Managing Director of JBL and HML, does not have the power to control decisions about the financial and operating policies of either company. 185 Mr McAuliffe was cross examined about this response. He accepted that he was a director of both JBL and HML but did not accept that he had power to control the financial and operating decisions of either JBL or HML. He said 'If you look at the board minutes, you will see that I didn't actually interfere with those things'. But there were not many board minutes for HML in evidence and HML did not point to any in which Mr McAuliffe absented himself from deliberations and votes. Rather, there were board minutes in evidence in which the other directors decided that Mr McAuliffe could vote in relation to particular transactions, which is quite a different thing: see minutes for 7 August 2018 and 5 September 2018. There is also a circular resolution of 10 July 2017 approving a loan, to which Mr McAuliffe's signature was appended, that merely noted his role sitting on the board of the borrower (Growth Point Capital Ltd). Nevertheless, he refused to accept the proposition that he 'at least had a degree of power to control decisions such as financial and operating matters of either company'. 186 HML submits that Mr McAuliffe was not seriously challenged on this evidence and that he was not taken to the board minutes to explore or contradict it and so it would not be appropriate to make a finding that he controlled either entity. HML submits that it did not appear to have been put to Mr McAuliffe at all that he controlled JBFG. But 'seriously challenged' or not, it was put to him that he had capacity to control financial and operating decisions of both HML and JBL, and his denial that he had any degree of control was implausible. It is also not easy to reconcile with evidence he gave in cross examination, as I have already mentioned, that he had oversight of JBL's business. He was, after all, Managing Director of both companies, and he was Chief Investment Officer of JBL, a principal activity of which was supposed to be investment management, and which had sole responsibility for managing the investments of HML, that is, HML's main activity. This is yet another example of the air of unreality around much of Mr McAuliffe's evidence. 187 On 13 March 2018, HML issued an ASX announcement noting ASX's view that due to JBL's relationship with Mr McAuliffe, ASX considered that HML's acquisition of 1,398,573 shares in JBL breached the listing rules because it required shareholder approval. HML said that although it did not agree with ASX, it would seek shareholder approval. 188 On 19 March 2018, ASX wrote to HML again, querying its first purchase of unlisted shares in JBFG on 8 August 2016, before the resolution was passed to remove the restriction on holding unlisted securities, and querying, in effect, whether any part of the issue of shares in Bartholomew Roberts to HML had also occurred before that change. 189 On 23 March 2018, HML responded to ASX's query of 19 March explaining that while it had indeed acquired shares in Bartholomew Roberts and JBFG before the resolution was passed, that was within the terms of the Management Services Agreement. Although the Prospectus said flatly that HML 'may not hold unlisted securities' (see [127] above), in fact the Investment Mandate in the Management Services Agreement permitted it to hold up to 10% of its portfolio in unlisted securities. The unlisted shares in JBFG and Bartholomew Roberts that were acquired before the resolution was passed were under that 10% threshold. HML's letter described the resolution as follows: On 18 October 2016, shareholders approved a removal of the restriction on the investment manager's investments in unlisted securities enabling the Company access to sophisticated investment opportunities offered in the unlisted environment, which have the potential to provide relatively high returns on investment in pre-IPO placements. 190 On 11 May 2018, HML announced on the ASX that JBFG had agreed to acquire HML's shares in JBFG and Bartholomew Roberts for $79.16 million, in the form of a $67.16 million debt owed by JBFG to HML, secured against the shares in King's Currency Exchange Pty Ltd, and a convertible note from JB Trading House Pty Ltd with a face value of $12 million. On 20 June 2018, HML announced some variations to the terms of the transaction.

Request to lift ASX suspension 191 As at 19 June 2018, the securities in HML remained suspended from trading on the ASX. On that day the company wrote to ASX, requesting that the suspension be lifted. That was mainly on the basis that the suspension had resulted from concerns about HML's disclosure of its NTA, and, according to the company, those concerns had been resolved. 192 ASX's response (on 28 June 2018) was terse: Under Listing Rule 17.3, ASX advises that it intends to continue the suspension in trading of securities of HML. ASX will only be in a position to consider the reinstatement of quotation of HML's securities, once HML rectifies the outstanding breach of Listing Rule 10.1 and provides satisfactory responses to any outstanding ASX queries (including ASX's letter of 27 June 2018). ASX expects HML to make an immediate announcement to the market advising of ASX's decision to not reinstate HML's securities at this time. 193 Extensive correspondence on the subject of the suspension ensued, but the securities remained suspended. 194 Also on 19 June 2018, ASIC announced that it had restricted HML from eligibility to issue a reduced-content prospectus until 8 June 2019. ASIC said its decision 'was based on HML's failure to lodge a financial report, directors' report and auditor's report for the financial year ended 30 June 2017, within 3 months, as required by the Corporations Act'.

July to September 2018 connected party transactions 195 On 10 July 2018, HML extended the term of its $450,000 loan to Capital Credit to 7 January 2020. In its financial report for FYE 2018, HML disclosed that this loan was impaired by $250,000. 196 On 20 July 2018, HML announced that it had lodged with ASX and ASIC the meeting materials for the transaction with JBFG originally announced on 11 May 2018, described as being 'to enable the disposal of its interests in all unlisted assets'. However that prompted a series of queries and concerns from both ASX and ASIC, neither of which approved the meeting materials. 197 On 3 August 2018, HML sold its shares in JBL to JBL by way of share buy back. The shares were sold for approximately $2.8 million. On 6 August 2018, HML announced on the ASX that this effectively cancelled the transaction that ASX had alleged breached Listing Rule 10.1. But on 8 August 2018, HML lent $2,411,000 to JBL unsecured for a term of 12 months at an interest rate of 11.5% per annum. On 16 October 2018, the term was extended by six months. In cross examination Mr McAuliffe maintained that the 16 October 2018 extension of this loan was approved by 'independent directors' at a meeting at which he was not present. He used that to resist the proposition that he knew how HML could finance the loan of $2.4 million to JBL. However there are minutes of the directors' meeting of 7 August 2018 in evidence which record Stuart McAuliffe, John McAuliffe and Ross Patane (directors of JBL as well as of HML) as participating in the decision to advance the loan, albeit after the other directors approved their participation. And even if it were to be accepted that Mr McAuliffe did not participate in the decision to lend the money, it does not follow that he did not know how it was going to be financed. As Managing Director of HML, it was incumbent on him to know how HML was able to finance a loan of such a material amount. 198 On 20 August 2018, HML wrote to ASX about a number of topics, included in which was confirmation of the buy back of the shares by JBL. However HML made no mention to ASX of the fact that within days it had loaned $2.4 million to JBL. The loan was, however, disclosed on 30 September 2018 in HML's FYE 2018 annual report (see further below). This was the subject of queries by ASX (in a letter of 7 November 2018) which show that the annual report first drew the transaction to ASX's attention. 199 On 5 September 2018, JBL made an indicative scrip for scrip offer to acquire all the shares in HML at a ratio of 0.95 JBL shares for every one HML share. JBL announced the bid (and a scrip for scrip bid it was making for BHD at the same time) to the NSX on 10 September 2018. According to HML's Target Statement in respect of the takeover, as at 6 December 2018, JBL held a relevant interest in 18,889,972 HML shares and voting power of approximately 58.40%. On 28 December 2018, shareholders in the Company made an application to the Takeovers Panel in respect of the proposed transaction. On 25 January 2019, the Takeovers Panel made a declaration of unacceptable circumstances in relation to the affairs of HML, and on 8 February 2019 it issued orders preventing JBL from processing acceptances received under the bid. 200 On 19 September 2018, HML made an announcement to the ASX about the status of the proposed transaction for JBFG to acquire all of HML's shares in JBFG, as well as other interests. This said that the company had not been able to dispatch the meeting materials for approval of the transaction to shareholders because ASX had not approved that dispatch. The announcement said, 'As a result, the condition in relation to shareholder approval is unlikely to be satisfied by 30 September 2018 and, unless the condition is waived or extended, it is unlikely that the JBFG Transaction will proceed'.

HML's annual report for FYE 2018 201 In HML's annual report for FYE 2018, released on 30 September 2018, the company's investment in JBFG was revalued downward by $4,632,620 to $24,877,500 and its investment in Bartholomew Roberts was revalued downward by $5,288,793 to $8,825,354. HML reported a loss before tax of $18,904,604 and after tax of $13,253,940 for that year. The company's revenue before expenses for that year was negative $12,429,630, consisting mostly of net unrealised losses from investment activities of $11,012,051. 202 An examination of the annual report shows that since raising a substantial proportion of the approximately $27 million raised from members of the public under the Prospectus, there had been a significant change in the company's investment strategy, for want of a better term. The annual report commences with a letter from Mr McAuliffe in his capacity as Managing Director. This is the letter, in full: The past 12 months have been an interesting period for Henry Morgan Limited. While the Board believed the transaction which was proposed with JB Financial Group Pty Ltd earlier this year would have provided significant benefits to Henry Morgan, unfortunately shareholder approval was not able to be obtained due to ASX's delay with the meeting material. However, opportunities may lie elsewhere - even where others may not see them. Hedge funds are facing turmoil in global markets. It is even possible that we are headed for another credit crunch. Ironically, the measures which were implemented to stave off the Global Financial Crisis (GFC) such as quantitative easing (QE) and negative interest rates, are only going to make the next bust worse. For example: 1. The largest economy in the world is the European Union. The EU, despite massive QE and negative interest rates, has not recovered from the GFC and their government fiscal position has never been worse. European Central Bank head, Mario Draghi, may be the first ECB head to serve a full term without raising rates even once. Current economic conditions would actually suggest that he is more likely to need to stimulate further - if that is possible. 2. The fourth largest world economy, Japan, has indulged in the largest money printing exercise since the Weimar Republic. This has failed to achieve an inflation rate above 1%. 3. The third biggest economy in the world, China, is continuing to look for ways to continue high growth. However, it has racked up prodigious and unsustainable levels of debt in doing so. 4. The world's second largest economy is the USA. Substantial tax cuts and a significant QE programme has kept growth strong in that economy. However, if that falters, and it surely will, that will lead to a domino effect across equity markets, currency markets and debt markets. The recent October falls, which have seen equity market experience the largest pull backs since 2008 (the height of the GFC), are a stark early warning sign. 5. The largest risk is real estate. The reason why real estate is such a risk is because it is the asset class in respect of which investors and the finance industry have the largest exposure. Real estate globally is severely overvalued. Any further deterioration in real estate markets would likely trigger a substantial retrenchment in the provision of credit. 6. Finally, in Australia, the ASX is at the levels it was at in 2006. We believe this volatility will provide opportunities for Henry Morgan going forward. 203 This in a year where HML reported an annual loss before income tax of $18,904,604, representing a before tax difference of negative $49,066,317 compared with the reported profit for FYE 2017. The letter contains no acknowledgment, let alone explanation, of that turnaround in the company's fortunes. Instead, it commences with a glib and uninformative statement that the year has been 'interesting' for HML. The only description of the activities of the company during the year is to refer to the proposed transaction with JBFG. The blame for the failure of the transaction is laid at the feet of ASX. And that is done in a way that does not acknowledge the concerns that ASX, as well as ASIC, expressed and rather paints ASX's non approval of meeting materials as a delay, as though it was mere inefficiency on the part of the exchange. The balance of the letter is a brief, selective and superficial account of the state of world markets, closing with the bland and uninformative statement that 'this volatility will provide opportunities' for HML going forward. In a year where the company's financial results had deteriorated so dramatically, shareholders deserved more candour, let alone information, than that. 204 The directors' report in the FYE 2018 annual report describes the activities of HML in the following terms: Principal activities … The Company invests in global markets through derivative instruments providing exposure to equities, equity indices, bonds, currencies and commodities. The Company also invests in listed and unlisted securities and in foreign currency banknotes with the aim of achieving above average risk-adjusted returns (whilst limiting volatility) over the medium to long term. Business model and objectives The Company aims to deliver shareholder returns by providing an actively managed portfolio with diversification across products and global markets. 205 Compare that statement with the summary of HML's actual investments found in note 13 of the financial statements in the FYE 2018 annual report: Note 13. Investments at fair value through profit or loss 2018 2017 $ $ Listed ordinary shares (a) 2,043,046 3,240,611 Unlisted ordinary shares 33,802,854 43,924,268 Foreign currency banknotes (b) 645,604 - 36,491,504 47,164,879

206 The note (a) then reveals that the listed ordinary shares were shares in JBL, of which Mr McAuliffe was Managing Director and Chief Investment Officer, and BHD, of which he was Executive Chairman. As for the unlisted ordinary shares, according to a 'Review of unlisted assets valuation for Henry Morgan Limited' dated 8 June 2018 conducted by Leadenhall, these were comprised primarily of investments in JBFG, of which Mr McAuliffe was Group CEO and, until 21 February 2018, a director, and in Bartholomew Roberts, of which he and the other two directors of HML, John McAuliffe and Ross Patane, were the directors. 207 In short, despite the company's apparent strategy of achieving 'diversification across products and global markets', nearly all of its investments by asserted value ended up in companies connected with Mr McAuliffe. Even the foreign currency banknotes were held in the custody of and traded and managed by JBFX Wholesale Pty Ltd, referred to in note (b) to note 13 as a controlled entity of the JBL for accounting purposes. 208 It is unclear to what extent HML had, in FYE 2018, made or held any investments 'in global markets through derivative instruments', as described in its statement of principal activities. Mr McAuliffe was cross examined briefly about this by reference to the FYE 2018 annual report as follows: And this is, of course, the notes to HML's last known audited accounts for 30 June 2018, and you will see under Listing of Financial Assets - and you will see there foreign exchange bank notes, but there's no investment recorded in global exchange traded futures contracts, are there?---Yes, there - there were, but it's just listed as cash. Cash?---So a - - - For - - -?---A - a futures exchange contract is purely based on cash. So if you go to your - the CME, the Chicago Mercantile Exchange, and you say, 'What have I got?' They say, 'You've got $1 million or $10 million', or whatever, then you may have against that 100 positions, one position, no positions. Yes. But there's no - there's $46,000 in cash referred to here at page 2669, cash and equivalents?---Yes. At - at that particular point in time. 209 The plaintiffs' closing submissions described this as Mr McAuliffe asserting that the revenue from those investments appeared in the cash and cash equivalents line in the financial reports of the company. But that is not what his cross examination says. While it is not very clear, he appears to be saying that an amount related to the face value or other value of the investments appears, not under the listing of financial assets, but against cash. He is not talking about revenue. Also, the line item of '$46,000 in cash' does not appear to represent the value of investments in derivatives. In fact the position is described in a note to the accounts in the FYE 2018 annual report as follows: Note 9. Balances held with brokers The Company places cash with investment brokers as security against open derivative positions with use of these funds restricted until these open derivative positions are settled. 2018 2017 $ $ Balances held with brokers 122,073 3,476,677

A similar note to this in the annual report for FYE 2016 shows 'security against open derivative margins' of $3,482,473. 210 The evidence simply does not permit a firm conclusion as to how much money HML had invested in futures contracts throughout FYE 2016, FYE 2017 and FYE 2018. So I do not find that there was a complete and wholesale departure from the objectives described in that prospectus from the beginning of HML's operations. 211 Notes appeared in the annual reports recording balances held with brokers and also 'derivative assets' and 'derivative liabilities', but it is not clear without more whether all or any of these related to futures contracts. The highest figures were those recorded as balances held with brokers. So if one assumes, favourably to HML, that cash deposited with brokers was all security against open contracts, then in FYE 2016 and FYE 2017, at least, HML had made significant investments in derivatives. That may have been comprised of, or at least included, the 'global exchange traded futures contracts' on which it placed emphasis in the Prospectus. However by 30 June 2018, it seems, derivatives were at most a relatively insignificant part of HML's portfolio. Based on the figures for value given in that report, that portfolio was almost entirely made up of investments in other companies connected with Mr McAuliffe. 212 The FYE 2018 annual report for HML also sheds light on the company's relationship with JBL. In its audit report, HML's auditor, KPMG, referred to that relationship as follows: The Company is a Listed Investment Company, managed by John Bridgeman Limited, the Investment Manager. John Bridgeman Limited is also the parent entity of a diverse group of companies with complex cross shareholdings. There are significant transactions between the Company and entities controlled by John Bridgeman Limited. Related party transactions are considered a key audit matter due to: • the complex nature of the John Bridgeman Limited Group structure and the judgement required to identify related party transactions; • the quantum of related party transactions relative to the Company's financial position and performance; and • the complexity of the related party transactions and the judgement required to determine the appropriate accounting treatment under Australian Accounting Standards. 213 It was clear at trial that Mr McAuliffe had a significant role at JBL. As I have said, he accepted in cross examination that he had oversight of the company's business and that it was his responsibility to ensure that the company complied with significant agreements that it had entered into, including the management agreement with HML. 214 HML submits that nevertheless Mr McAuliffe was one of only three to five directors of JBL during the relevant period. That is true, but for much of the relevant period he was one of three, and for a period of time from January 2020 he was one of only two. He was also, as said earlier, JBL's Managing Director and Chief Investment Officer. It appears that Mr McAuliffe's shareholding in JBL was approximately 22%.

JBFG's results for FYE 2018 215 On 31 October 2018, JBFG issued its annual report for FYE 2018, showing a pre-tax loss of $21,249,948 for that financial year and showing that its current liabilities exceeded its current assets by $2,255,424. That deficit was largely driven by a big increase in 'trade and other payables' liabilities and a big decrease in 'trade and other receivables' assets. 216 Mr McAuliffe's original affidavit evidence was that he became aware of matters that were disclosed in the annual report on or about 31 October 2018, following sign off by JBFG's auditors and release of the report. But when it was put to him in cross examination that he knew about JBFG's 'going concern problem quite early on in 2018', he denied it and said 'No. So regarding JBFG - just - just before I thought you were talking about Henry Morgan. I get a bit lost with what company you're talking about. But - but JBFG, I - I don't recall it at all, and I - I wasn't on the board of the company'. This change in his evidence, from only becoming aware of the problems from 31 October 2018 to not being able to remember at all, further erodes the credibility of that evidence. 217 Mr McAuliffe says in his first affidavit that in his view at 30 June 2018 it was relevant to the solvency of JBFG that 'the directors of JBL had made enquiries of JBFG's management, and examined the consolidated group's current financial position and financial forecasts'. According to him, the directors of JBL expected that JBFG had adequate financial resources to continue as a going concern. 218 This evidence about JBFG's financial position illustrates well the air of unreality around much of Mr McAuliffe's evidence. What he fails to acknowledge at this point is that on 30 June 2018 he himself was the Managing Director of JBL and its Chief Investment Officer, and was Group CEO of JBFG (and had been a director of JBFG as recently as 21 February 2018). It stretches credulity to picture the directors of JBL, including its Managing Director Mr McAuliffe, as a group of people independent of JBFG and dependent on it for knowledge of its financial position, making unspecified enquiries of JBFG's management, which presumably must have included its Group CEO, none other than Mr McAuliffe. This evidence was admitted subject to the s 136 ruling. So whatever Mr McAuliffe's state of mind was at the time, his unsubstantiated and spurious generalities about the enquiries do not shed light on the actuality of the relationships between the board of JBL and the board of JBFG.

JBL's results for FYE 2018 219 JBL's financial results for FYE 2018 were also not good. They recorded a loss of $21,688,173 (before income tax benefit) and an excess of current liabilities over current assets of $2,601,518. Mr McAuliffe claims that he, the Managing Director of JBL, first received a copy of the financial statements on 18 October 2018, being the day before the directors (John McAuliffe, Stuart McAuliffe, and Mr Patane) resolved to approve them. Mr McAuliffe's further evidence is that as at 28 August 2018 he had not received the 'final' accounts for the JBL group for FYE 2018: and so did not know that the JBL Consolidated Group had incurred a loss of $16,672,668 for the financial year ended 30 June 2018 and that current liabilities exceeded current assets by $2,601,517. As at 28 August 2018, the auditors for the JBL Consolidated Group were still reviewing and considering the relevant financial transactions and accounts, and undertaking internal valuation processes. 220 This is, in effect, evidence that the Managing Director of JBL was unaware after the end of the financial year that it had suffered a loss of that magnitude and that, as far as its balance sheet indicated, it was insolvent. It implies that the Managing Director had not received unaudited financial statements, or at least management accounts, from which financial problems of that magnitude were apparent. Mr McAuliffe was not cross examined on the plausibility of these matters, so I do not find that the evidence is untrue. But it is evidence that demonstrates a deplorable level of ignorance of and inattention to a public listed company's precarious financial position by its Managing Director. That is only made worse by the fact that he was also Managing Director of HML, which just before 28 August 2018 had advanced more than $2.4 million to JBL on an unsecured basis.

KPMG step down as auditors 221 According to ASIC's records, KPMG ceased to be HML's auditors on 29 November 2018. There appears to have been no auditor of the company registered with ASIC from that time until Pitcher Partners were appointed as auditor on 23 January 2019. It appears from an email that Pitcher Partners sent to ASIC later on that the appointment was at the request of ASIC, so the rectification of that breach was not an initiative of HML. In December 2018, ASIC served HML with a notice of failure to appoint auditor.

2019 222 As has been said, on 25 January 2019, the Takeovers Panel made a declaration of unacceptable circumstances in relation to the affairs of HML, and made orders impacting on JBL's scrip for scrip bid: Benjamin Hornigold Limited 02 and Henry Morgan Limited 02 [2019] ATP 1. 223 The Takeovers Panel decision, which was admitted into evidence by consent, contains the following diagram showing the relationships between connected companies in December 2018:

ASX refuses to lift the suspension 224 As at 30 May 2019, HML and ASX had been corresponding for nearly a year about whether the suspension of HML's securities should be lifted. On that day, ASX sent HML a letter which appeared to foreclose any real possibility of the suspension being lifted. It is worth quoting in full: Henry Morgan Limited ('HML'): Continued Suspension ASX refers to your letter of 23 May 2019 regarding the continued suspension of HML by ASX. In particular, HML requests that ASX lifts the ongoing suspension without delay. Trading in the shares of HML was suspended on 9 June 2017 at HML's request, following the receipt of a statement of concerns raised by ASIC about a prospectus issued by HML. Of particular concern to ASIC was HML's calculation of its net tangible asset backing per share ('NTA') required under Listing Rule 4.12. ASX continues to hold serious concerns about the conduct and operations of HML, Benjamin Hornigold Limited ('BHD') and their investment manager, John Bridgeman Limited ('JBL'). These concerns include: • Poor governance practises, examples of which include: • The Final Stop Order issued by ASIC on 28 July 2017 in relation to HML's prospectus for the issue of bonus options dated 2 June 2017, which led to corrective disclosure by HML on 15 August 2017 where it clarified or retracted a number of statements in earlier announcements. • ASIC's decision on 19 June 2018 to restrict HML from issuing a reduced content prospectus until 8 June 2019, following HML's failure to lodge a financial report, directors' report and auditor's report for the financial year ended 30 June 2017, within 3 months, as required by the Corporations Act. • HML's breach of Listing Rule 10.1 whereby it acquired 1,398,573 shares and options in JBL on 23 November 2017 without shareholder approval. • BHD's breach of Listing Rule 10.1 whereby it acquired 536,585 shares and options in JBL on 23 November 2017 without shareholder approval. • HML's protracted breach of Listing Rule 4.12 whereby it failed to lodge its NTA for the months ended May 2017, June 2017, July 2017, August 2017, September 2017, October 2017, November 2017, December 2017, January 2018, February 2018, March 2018 and April 2018 within the timeframe required by that rule. This delay was largely caused by HML electing to couple the proposed review of its NTA calculations by BDO Corporate Finance (Qld) Ltd to the completion of an independent expert's report for the proposed acquisition by JBL of HML's shares in JB Financial Group Limited ('JBFG'), and periodically renegotiating the terms of that acquisition. • HML acquiring on 8 August 2016 25% of the issued shares of JBFG, despite section 3.4 of its Replacement Prospectus dated 5 November 2015 stating that '[t]he Company may not hold unlisted securities'. HML did not obtain shareholder approval to amend the investment guidelines of the Company (as articulated in its Prospectus dated 5 November 2015) until 18 October 2016. • The Takeover Panel's declaration of unacceptable circumstances on 25 January 2019 in relation to the affairs of BHD and declaration of unacceptable circumstances in relation to the affairs of HML, in connection with bids made by JBL for each of BHD and HML. The Panel declared the circumstances unacceptable because (among other things) shareholders had not been given sufficient information to assess the bids; JBL, BHD and HML failed to adequately advise shareholders in relation to the bids; and certain transactions between JBL, BHD and another entity operated as a lock-up device in relation to the bid for BHD. The Panel made orders, which included cancelling acceptances, requiring repayment of a $4.5 million loan from BHD to JBL and further disclosure. • A large part of the activities of BHD and HML appear to consist of investments in, or loans to, various unlisted entities connected with Mr Stuart McAuliffe (BHD's Executive Chairman, HML's Managing Director, and JBL's Managing Director and Chief Investment Officer). For HML, this has included at various times investments in JBL, BHD, JBFG, Bartholomew Roberts Pty Ltd and loans to Capital Credit Pty Ltd and JBL. For BHD, this has included at various times investments in JBL and loans to JBFG, Genesis Proprietary Trading Pty Ltd and JBL. Both HML and BHD have also entered into, or have proposed to enter into at various times, unusual transactions for which in ASX's opinion, convincing commercial rationales were not provided. For example, under proposed arrangements with JB Trading House Pty Ltd ('JBTH'), it was not clear why JBTH would agree to incur substantial debts ($25.5 million) to BHD and HML in consideration solely for undertakings from those companies to trade exclusively with JBTH and its subsidiaries, when there are no minimum trading requirements imposed on BHD or HML, nor why JBTH would agree to issue securities to BHD at a discount of 40% to an arm's length valuation. • Viewed collectively, the combined activities of BHD and HML, call into question whether or not BHD and HML still satisfy the definition of 'investment entity' within the Listing Rules, as they appear to be being used (along with other entities) to secure (or maintain) control over various unlisted companies connected with Mr McAuliffe. JBL's takeover offers for BHD and HML are further evidence of this objective. ASX also understands that there are ongoing investigations by ASIC into the activities of BHD and HML. Given the concerns outlined above, ASX considers that it would be inappropriate to reinstate the securities of HML to trading until the outcome of ASIC's investigations are known. HML's securities will remain suspended from trading until further notice. 225 Despite the fact that the plaintiffs also quoted this letter in full in their written closing submissions, and so relied on it heavily, HML neither objected to its admissibility on any basis, nor (with one qualification) pointed to any evidence to contradict the apparent factual basis of the letter. Mr McAuliffe disagreed in cross examination with the characterisation of HML and its activities in the last two bullet points quoted but the basis of his disagreement was difficult to follow. The cross examiner asked him whether he agreed with that characterisation at least of HML. His response was: No. No, I would not. When you've got a company, being HML, that has got such a substantial stake in JBFG, to have people say it's associated to me but not associated to Henry Morgan - now, also, the ASX's complaint was that the deals - that you just referred to with JB Trading House was that it was in fact too favourable to Henry Morgan. That was their specific complaint. 226 The qualification is evidence I have already referred to suggesting that before the resolution to vary the Investment Mandate in the Management Services Agreement was passed on 18 October 2016, HML's investment in unlisted securities did not exceed the 10% of its portfolio that was in fact permitted under that unamended mandate. 227 Subject to that qualification, and in light of all the evidence summarised to date, and in view of HML's failure to advance any cogent basis to doubt the balance of the concerns ASX expressed in the letter, I find that the concerns had a reasonable basis.

Capital Credit loan novated 228 On 28 June 2019, Capital Credit's obligation to repay its loan from HML (which by then had a balance of $447,306.16) was novated to JBFG. It appears that this means that it became an amount owed by JBFG to HML. Mr McAuliffe claimed in cross examination not to have been privy to that decision. He therefore claimed that he did not know what HML received in return for agreeing to novate. He said that 'there was a discussion by the independent directors, and evidently, they believed that it made more sense to have JB Financial Group owe them money than Capital Credit' because 'JBFG was a much larger company than Capital Credit'. But he was not aware whether HML had received any consideration for the novation.

HML's financial reporting for FYE 2019 229 In February 2019, HML issued a half yearly report for the period ending 31 December 2018, showing a loss of $5,005,318 before income tax. It did not issue any annual report for FYE 2019, but on 4 September 2019 it did release on the ASX's market announcements platform an 'Appendix 4E Preliminary final report' for FYE 2019. ASX wrote to HML about the preliminary financial report on 18 September 2019 with queries about a number of things, including why HML had extended the term of its $2,411,000 loan to JBL until 31 March 2021 (see [197] above) as well as several other matters. 230 On 6 September 2019, the Takeovers Panel made a declaration of unacceptable circumstances in relation to the affairs of BHD because, it found, certain arrangements 'operated as a lock-up device in relation to John Bridgeman's off-market takeover bid for Benjamin Hornigold': Benjamin Hornigold Limited 05, 06 & 07 [2019] ATP 18 at [1]. Orders giving effect to that decision were made 24 September 2019. This appears to have prompted the audit partner at Pitcher Partners to email a director of HML, Peter Ziegler, on 26 September 2019 to say: I know we are scheduled to try and work through HML finalisation today, however the release just out from BHD would appear to materially impact Kings, and thus JB Financial, and thus HML's investment / loans etc. As such we suggest we defer today's meeting until we can all work through what this might mean. Can you please suggest this to the appropriate parties at your end? 231 Mr Ziegler replied on the same day: I agree that the BHD Panel Orders need to be carefully considered for their potential impact on HML's recoverability of its loans, the carrying value of unlisted investments and equally the going concern assumption for HML. I think that it is certainly inappropriate to have an Audit & Risk Committee Meeting today until the above matters, and any other relevant matters, are properly and carefully considered. This may take some time. So, the meeting is cancelled. 232 On 1 October 2019, JBL was suspended from quotation on the NSX for failing to lodge its audited financial statements for FYE 2019. According to Mr McAuliffe, the finalisation of JBL's accounts was interrupted by the appointment of a receiver to JBFG. 233 On 8 October 2019, JBL's Chief Financial Officer, John Fulton, emailed Pitcher Partners as follows (copying in representatives of HML): As you know the HML financial statements have been put on hold whilst the JBL/JBFG group obtains financing, which will ultimately allow JBL to partake in the proposed HML rights issue and placement. We will have much more detail about this during the current week, I therefore intend to circulate an updated going concern paper and asset impairment paper including the revised information. It is our intention then to go straight to submitting the annual report with MD's letter and shareholder info included. My aim will be to send these as well as the revised board papers to you by the close of this week.

Other developments in 2019 234 On 28 October 2019, an external creditor appointed receivers and managers to JBFG. On 19 November 2020, administrators were appointed to JBFG under Part 5.3A of the Corporations Act. At the time of the latter appointment, HML was the second largest shareholder on JBFG's register, holding 5,350,000 shares representing just under 20% of the issued capital. BHD was the largest, with a shareholding of 32.87%. HML was also an unsecured creditor in the amount of $445,670. Uncontradicted and unobjected to evidence in an affidavit of Anthony Bennett, a financial adviser to one of the plaintiffs, attributed the administration (and subsequent liquidation) of JBFG to 'amongst other things, loans from JBFG to related parties'. 235 On 30 October 2019, HML announced a notice of an annual general meeting to be held on 29 November 2019. The resolutions to be proposed were routine. But on 20 November 2019, the company announced that the AGM had been cancelled. It gave no explanation in the announcement, although it did say that a new date for the AGM would be communicated to shareholders. But no date for a 2019 AGM was ever notified and no AGM has since been held. In his first affidavit sworn 16 June 2021, Mr McAuliffe said that HML intended to hold an AGM before 30 September 2021, but that never occurred. In his affidavit of 8 December 2021, sworn just before the hearing, Mr McAuliffe said that he and the other directors intended for HML to call and hold an AGM within two weeks of completion of outstanding audits, which was projected to occur in early 2022. Mr McAuliffe said in his first affidavit that HML had not held an AGM since 29 November 2018 'because the audited financial statements are being finalised'. This appears to be a way of saying that the AGMs were not held because the audited accounts had not been finalised.

2020 236 On 14 January 2020, Mr Patane ceased as a director of HML and on 15 January 2020, Mr Ziegler also ceased to be a director. The evidence does not disclose why this exodus of directors occurred at that particular time. By 15 January 2020, the only directors of HML were Stuart McAuliffe and John McAuliffe. That was one less director than was required under the company's constitution: cl 19.1. 237 On 3 February 2020, ASX announced that HML (and many other companies) had been removed from the official list under its policy that it is appropriate to do so in relation to any entity whose securities have been suspended from trading for an unacceptably long period. 238 The unaudited accounts of HML for FYE 2020, which were admitted to evidence annexed to the second affidavit of Mr McAuliffe, show total current assets and total assets of $51,304 and total current liabilities and total liabilities of $199,090, leaving a deficit in working capital and in total equity of $147,786. A note to the accounts said: (j) Going Concern For the year ended·30 June 2020, the loss for the Company after tax was $339,842. Notwithstanding the reported results, this financial report has been prepared on a going concern basis as the directors consider that the Company should be able to realise its assets and settle its liabilities in the normal course of business and at the amounts stated in the financial report. The directors consider that the reported loss does not reflect the expected future financial performance of the Company. In particular, operating expenses for the reporting period included significant non-recurring and non-cash expenses arising from impairment and fair value adjustments. The continuation of the Company as a going concern is largely dependent on the Company's ability to raise additional capital. The Company has recently commenced the necessary steps in order to raise new capital by way of a Rights Issue to existing shareholders. A share placement is also being considered. In addition, the company has the confirmed financial support from one of its Directors to allow it to maintain its solvency and allow it to pay its debts as and when they fall due.

Link share registry 239 Mr McAuliffe accepted in cross examination that HML did not have the available cash to finance the debts owing to Link and Pitcher Partners as at 30 June 2020, although he maintained that the company could raise capital to do so. But there is no evidence in the FYE 2020 accounts of any capital raising or Mr McAuliffe (or any other director) having advanced funds to HML during that financial year. 240 HML ceased using Link's share registry services from at least 27 February 2020 and as at 28 September 2020 Link was pursuing HML for more than $10,000 in unpaid fees, dating back to 17 September 2019. Link remained unpaid throughout 2020. 241 In his first affidavit Mr McAuliffe said that HML ceased using Link's services because the cost to HML was too high in circumstances where HML securities were not being actively traded. He said that until a new share registry provider was appointed, HML was maintaining the share register itself in house. Mr McAuliffe said that HML has been investigating alternative and less costly share registry service providers, and he anticipated that a new share registry service provided would be appointed 'in the near future', this having been said in his first affidavit sworn on 16 June 2021. 242 I do not accept this evidence. I put no weight on Mr McAuliffe's general and unsubstantiated assertions that Link was somehow too expensive, and that there were other unspecified share registries that were less costly by an unspecified amount. Those assertions seem inconsistent with Mr McAuliffe's later evidence in his second affidavit that on 29 November 2021 (not 'the near future') HML requested Link to manage its share register once again. Mr McAuliffe makes no attempt to explain that apparent inconsistency, for example by evidence that Link's prices had gone down. 243 Mr McAuliffe's evidence in cross examination as to why HML ceased using Link's services was also not very clear. He appeared to assert that it was not because HML did not have the money, but because he as a director decided that paying Link was not the best use of the company's funds. That best use, according to his evidence, appeared to be expenditure 'in the order of $800,000' in 'a situation where I think assets can be recovered, and that would be a substantial benefit to shareholders'. 244 The effect of that evidence appeared to be that Mr McAuliffe thought that it was preferable to spend money on legal fees and other costs in order to pursue litigation against parties that presumably included ASX, than to pay a relatively modest sum to a trade creditor who had been supplying the service of maintaining a share registry, something essential to the proper functioning of a company. That evidence is inherently incredible and I do not accept it. Mr McAuliffe accepted later in cross examination that HML did not have available cash to pay its liabilities shown in its accounts as 'trade and other payables', which included its debt to Link, unless it raised capital. 245 In light of all this, the true explanation for the non-payment of Link throughout 2020 and most of 2021 that emerges from the evidence is the one that is obvious in light of HML's financial position as disclosed in the unaudited accounts for FYE 2020: the company did not have the money to pay it.

Further developments in 2020 246 On 5 August 2020, JBFG commenced to be wound up. 247 John McAuliffe died 7 September 2020, at the age of 80. 248 HML did not issue any annual report or annual or half yearly financial statements in 2020. 249 In September 2020, the plaintiffs' solicitors, Corrs, tried to send correspondence to the company secretary of HML, and to Mr McAuliffe, at email addresses that were contained in previous ASX announcements by the company. Both emails bounced back. An attempt to send the correspondence by registered post to the company's registered office and principal place of business according to ASIC records also failed. When Corrs telephoned the reception of the building, they were told that HML was no longer a tenant and had left around February 2020 giving no forwarding address. 250 On 23 October 2020, a law graduate working for Corrs attempted to visit the address, and she found that HML was indeed no longer a tenant at the building. 251 Also on 23 October 2020, JBL was removed from the official list of the NSX for non-payment of annual listing fees for FYE 2021. According to Mr McAuliffe, because JBL was by that stage in dispute with NSX, the directors of JBL formed the view that it was not in the company's best interests to pay the listing fees. 252 This proceeding was commenced on 24 December 2020. An ASIC company search of HML obtained on 20 December 2020 showed that the premises it had vacated were still its registered office and registered principal place of business. At this time, only Stuart McAuliffe and the late John McAuliffe were shown as its directors, so the only actual director at that time was Stuart McAuliffe. It appears from the ASIC search that there was no company secretary, and had been none since 4 November 2019, and the evidence at the time of hearing indicated that no company secretary had been appointed. This was a breach of s 204A(2) of the Corporations Act as well as violating the terms of HML's own constitution (cl 23.2). 253 In cross examination Mr McAuliffe accepted that HML had not traded throughout 2020, including that it had not 'been trading from an investment perspective'. But he appeared to say that the company was engaged in the activity of 'looking at legal options' and that 'its focus is clearly on recovery of assets'. He also accepted that throughout 2020 and into 2021 HML had not engaged in the investment activities that were described in the Prospectus. And he accepted that the company's unaudited accounts for FYE 2021 were an accurate reflection of the company's position as at 7 December 2021 (the week before the hearing) and that the balance sheet in those accounts represented a catastrophic change to the company's financial position since 2018.

HML's directors and future plans 254 In his first affidavit, Mr McAuliffe said that Henry Koster and Jay Grauf had agreed to be appointed as directors of HML, so that it would comply with the requirement for three directors in its constitution. Mr McAuliffe's evidence as at 16 June 2021 was: I have spoken with each of the individuals listed above and I have confirmed with each of them that they agree to be appointed as directors of HML. HML is currently in the process of lodging the necessary documentation with ASIC in order to give effect to their respective appointments as directors of HML. I anticipate that this will be completed by 23 June 2021. 255 According to Mr McAuliffe's evidence, Mr Koster was appointed on 16 June 2021. However Michael Martin (not Mr Grauf) was not appointed until 30 September 2021. That was, according to Mr McAuliffe's evidence on 8 December 2021, because Mr Grauf 'had taken on a different opportunity since I had originally spoken with him'. That is curious, since Mr McAuliffe said on 16 June 2021 that Mr Grauf had confirmed that he agreed to be a director, and both made it sound as though the documentation was in the process of being lodged with ASIC, and indicated that this would be completed within a week. In those circumstances, Mr McAuliffe's characteristically general explanation of why Mr Grauf was not appointed is unsatisfactory. And there is no explanation of why Mr McAuliffe did not correct his affidavit before 8 December 2021. 256 As at the time of the affidavit of 16 June 2021, Mr McAuliffe's evidence about the future plans of HML was as follows: HML intends to operate as an unlisted investment company going forward. The board is also currently exploring capital raising opportunities and obtaining advice in respect of instigating legal proceedings against various parties. The board of HML intend for it to address any outstanding Corporations Act requirements over the next 6 months. This includes finalising financial reports, holding AGMs as required, and obtaining any appropriate members' approvals. HML also intends to obtain funding in order to commence litigation in the name of the company in respect of causes of action which are currently available to it. HML intends to obtain funding in this regard from key shareholders and HML directors. 257 Also in his affidavit of 16 June 2021, Mr McAuliffe deposed that the registered office of HML was Level 11, 66 Eagle Street, Brisbane. He appeared to say that HML had relocated to those premises because the tenant of its previous registered office had been JBL, so that when JBL relocated, HML also relocated. He said that HML had been operating from premises in Chelmer, Queensland and is now operating from premises in Spring Hill, Queensland. However what those operations consist of is not clear from that affidavit. 258 In cross examination, however, Mr McAuliffe accepted that HML had not operated from its registered principal place of business on Eagle Street, Brisbane, at all in 2020 or 2021. Yet an ASIC company search in evidence shows that the registered office was listed as that address in May 2021 and the principal place of business was only changed in June 2021. Mr McAuliffe's explanation for this was that it was an oversight on his part because he was working on many things at the time. I accept that explanation as plausible; taken alone, an omission to change a company's principal place of business as registered with ASIC would not merit strong criticism. I also take it into account, however, as yet another example of a lax approach to corporate compliance, along with the many other instances of that detailed above and below. That the absence of trading activities of HML in 2021 may have contributed to that omission does nothing to increase the Court's confidence in Mr McAuliffe as the person who was, at that time, solely responsible for the management of the company.

Mr McAuliffe promises to advance money to HML 259 It appears that on 13 October 2021, Mr McAuliffe provided a line of credit of $250,000 to HML to meet legal costs. It appears from his cross examination that around the same time, Pitcher Partners' outstanding audit fees were paid. It is hard, then, to see how the audited accounts could have been in the process of finalisation as at 16 June 2021. 260 On 3 November 2021, HML entered into two loan agreements under which it could borrow money from Mr McAuliffe. I have referred to these already in connection with the application to set aside a subpoena. One agreement was for a limit of $410,000 for working capital expenses such as legal fees, audit and accounting fees, ASIC fees, directors' fees and any share buy backs. Mr McAuliffe was unable to say in cross examination whether this was in addition to the $250,000 just mentioned or whether the $250,000 became part of the $410,000 advanced. The other was for a limit of $2 million and was for 'initial litigation funding in respect of claims against the ASX and other parties identified by the Board of the Borrower or for such other purpose agreed to by the lender': cl 3.2. 261 As has been said, the subpoena sought production of records of any transfer of funds from Mr McAuliffe to HML for the period 1 October 2021 to 6 December 2021. No document was produced in response to that. It also sought production of any bank statement that recorded the funds available to Mr McAuliffe during that period. One bank statement showing a balance of $206,881.31 (as at 13 December 2021) was produced in response to that. 262 Each of the loans is repayable 24 months from drawdown date: cl 5.2. They become repayable upon demand, however, if events of default occur: cl 9.2. The list of events of default is extensive, and include an application for the winding up of HML: cl 9.1. It is not clear whether the current proceeding means that each facility is in default, given that the proceeding was already on foot (that is, the application had already been made) when the loan agreement was made. It is also not clear how much of them has been drawn down: Mr McAuliffe gave vague evidence in cross examination that the $2 million facility had been drawn down (how much he did not say) to pay costs of HML's solicitors, McCullough Robertson, in relation to a proposed action, that has resulted in McCullough Robertson sending correspondence to ASX (see below).

Capital raising 263 On 4 November 2021, the directors of HML approved an issue of 3,000,000 shares at 5 cents per share raising $150,000 in equity capital. Details of each investor are contained in forms attached to the circular resolution of directors. The small group of persons and entities to whom the shares were issued included Stuart McAuliffe, Brett McAuliffe, and Henry Avery Partners Pty Ltd (contact person Stuart McAuliffe). In cross examination Mr McAuliffe accepted that some of the around 18 million shares voted in favour of the resolution at the EGM, noted above and described in more detail below, were voted by entities related to him or entities which he had an interest. But he baulked at the suggestion that 'the vast majority of it was'.

The declaration of solvency 264 On 7 November 2021, HML's directors, including Mr McAuliffe, signed a declaration of solvency under s 494 of the Corporations Act, as a necessary preliminary to the proposal of a resolution to wind the company up at the EGM. The declaration of solvency attached a statement of assets and liabilities that showed that as at that date HML had assets with an estimated realisable value of $648,000 and liabilities of $97,000, yielding a surplus of $569,000 (sic - the arithmetic in the document is out by $18,000). 265 It became clear in cross examination of Mr McAuliffe that there was a significant error in the declaration of solvency which explained much of that surplus. The section of the statement headed 'Statement of assets and liabilities' contained an item for 'loans and advances' with an 'estimated realisable value' of $410,000. Mr McAuliffe conceded that this was, in fact the line of credit that he had agreed to provide to HML. So it was not an asset of the company at all, it was a potential liability, albeit one which, if drawn down, would result in a holding of cash. The declaration of solvency contained a separate item for cash of $150,000 and it is not apparent that had any connection with the line of credit. It contained no offsetting liability for the line of credit; the only liability shown apart from estimated expenses of winding up was 'trade accounts' of $77,000. 266 Even after acknowledging that the 'asset' was the line of credit, Mr McAuliffe refused to accept that it was wrong to put it in the declaration of solvency as an asset. He argued that it was 'liquidity' and that it was 'referring to available liquidity that the company has'. He refused to accept the plain fact that a loan to a company could not be an asset of the company, and continued to assert that it was 'still liquidity'. He ventured a reading of the summary line in the ASIC form for the declaration of solvency, 'estimated surplus after paying debts in full', that somehow neutralised the effect of the misplacement of the $410,000 in the assets part of the form. At a different point in the questioning, he improvised the explanation that 'I didn't believe there was any loan from me to the company, as that has only come out in the accounts after the fact', which he later modified to say that he believed the loans 'were in existence, but I didn't believe they had been drawn down'. That cannot of course explain how a loan to HML, which on that hypothesis did not exist, could be characterised as an asset of the company. He could not say whether any amount had been drawn down to pay legal costs, and when it was pointed out to him that a $25,500 liability to JBL also did not appear on the declaration, he said it had been waived by JBL. 267 While it may be that the line of credit provided HML with access to funds, and so was relevant to its solvency, it was plainly misleading to list it as an asset of the company with no offsetting liability. But Mr McAuliffe refused to accept that the declaration of solvency contained errors, and when it was put to him that there were no grounds for making the statements in it as lodged with ASIC he said 'No, I think there's a strong basis for making that'. Mr McAuliffe's obdurate refusal to accept the plain truth that the declaration of solvency was wrong, and his ex temporising on the witness stand to try to patch over the errors in it, reflect very poorly on his credibility.

The EGM 268 On 8 November 2021, HML circulated a notice of EGM to its shareholders. The notice came with a covering letter from Mr McAuliffe in his capacity as a director of the company. It said (emphasis in original): Request for support Henry Morgan Limited seeks your support for its current direction. We enclose a Notice of Meeting, which sets out four resolutions relating to the Company's current business strategy and Board of Directors. Over the past two years, the Company has been putting into place operational and business resources to pursue litigation against certain significant parties. The Company is also in the process of updating audited accounts and intends to call an annual general meeting upon completion of those audits. The Board also currently intends to take steps to offer a share buy-back following completion of the audit. The Company is currently raising capital to assist to fund these activities. However, an application has been made to wind up the Company pursuant to section 461 of the Corporations Act 2001 (Cth). We are seeking your support through this Notice of Meeting to continue as an unlisted investment company. Your Board unanimously recommends that you vote: 1. AGAINST the resolution to wind up the Company; 2. FOR the resolution to continue operating the Company as an unlisted investment company; 3. FOR the resolution confirming Henry Koster as director; 4. FOR the resolution confirming Michael Martin as director. The letter then gave proxy voting instructions consistent with those recommendations. 269 The notice of meeting then set out the four resolutions and repeated the recommendations as to which way to vote. The first two resolutions were: 1. That the Company be wound up pursuant to section 491 of the Corporations Act 2001 (Cth). 2. That, subject to Resolution 1 not being passed, the purpose of the Company be to continue to operate as an unlisted investment company. 270 The notice was accompanied by an 'Explanatory Memorandum' which said in relation to the first two resolutions (emphasis in original): 1. On 24 December 2020, proceedings were commenced in the Federal Court of Australia against the Company applying for, inter alia, orders that the Company be wound up pursuant to section 461(1)(f) or 461(1)(k) of the Corporations Act 2001 (Cth) (Corporations Act). The final hearing of the application is listed to be heard by the Court on 13 and 14 December 2021. The Company intends to resist the winding up application. 2. The purpose of Resolution 1 is to provide the members of the Company the opportunity to vote either in favour or against the Company being wound up, consistent with their statutory right under section 491(1) of the Corporations Act. 3. The Board recommends that the Company's shareholders vote against Resolution 1. 271 Nothing was said about the 'litigation against certain significant parties' mentioned in the covering letter. Apart from the above, the 'explanatory memorandum' only contained details about the careers and experience of each of the proposed new directors. Mr Koster was the founder of King's Currency Exchange until he sold that business (presumably to JBFG) in 2016. Mr Martin was described as 'one of Australia's leading futures execution brokers'. 272 On 26 November 2021, Corrs wrote to McCullough Robertson about the notice of EGM saying, among other things, that 'in the absence of any information as to the company or its affairs, and given John Bridgeman Ltd's own stake in HML, the utility of the EGM is entirely questionable, or in fact further evidence of oppressive conduct'. 273 HML held the EGM on 3 December 2021, ten days before the hearing of this matter. Before the votes were cast, there was an opportunity for shareholders to ask questions. Many of the questions shareholders asked were pertinent. According to the uncontradicted evidence of the plaintiffs' solicitor Ms Gordon, who viewed the meeting by video link, in response to a question as to the activities the company had conducted over the last two years the chair of the meeting, Matthew Reynolds, merely said words to the same effect as the third paragraph of the covering letter to shareholders. Mr Reynolds has never been a director of HML, and the evidence does not disclose who he is or why he was appointed to chair the meeting. 274 Mr Reynolds appears to have had little knowledge of the company's affairs as the answers he gave to shareholder questions were entirely unsatisfactory. He declined to answer questions from shareholders about the financial position of the company and other matters such as the pros and cons of a winding up until the audit was complete. He did not say when that would be. The following passage from Ms Gordon's notes of the meeting is illustrative of the course of questioning generally: Q: Paul from Petrie 345 Pty Ltd (P345) - question in relation to winding up, that is the key issue. Appointment of directors is administrative. The ASX delisted this company quite a while ago, since quite obvious dubious reporting of NTA misleading to investors. There is very little money left in company and there are mainly legal fights against investors and on takeovers etc. As an investor, why would we want to keep the company going? Apart from paying your salaries. Why would I want to keep the company going, what chance have I got in recovering any money? MR: Understand the question, MR is not on salary (side issue). It is a good question, can't currently address nor can the board, since whether there is an advantage/disadvantage depends on outcomes of other matters. At this stage, will speak openly about boards generally. MR's view is that you act in the best interests of the members, not specific members but all. The approach MR takes is that if there is some remedy that is available to the company that will give the company additional funds and return value to shareholders and it is appropriate to do so, then the board should seek to pursue that course. This board cannot state definitively outcome of litigation which is uncertain. Typically you have assessment of merits by experts and if they assess to be better than 50% then you'd proceed, if that improves the position of the company and members, then you would pursue. A calculated risk. Company should pursue that outcome for better outcome. Whether it will be better or not, not until litigation runs its course. The directors are funding the litigation rather than taking more from investors. P345: Invested in an investment company and now focus is on litigation and very little investing and very little plan as a company to deliver return to shareholders. Seems to be centred around litigation, not overly inspiring. MR: I understand, can only say details are following in the audit and will speak to the litigation and position of the company. Don't know the outcome, the current application is before the Courts. All I can do is answer with the information given at the time, probably going to be inadequate. Stuart Alexander (SA): is Stuart McAuliffe still in the room? Left you to fend off the wolves? MR: He has stepped out. SA: So you're like Hodor from Game of Thrones? MR: Any questions I can take on notice. The present intention of the board is that questions will be responded to in writing once possible on the company platform SR: Disappointed SM is not even in the room. Consider that very rude. My question is directed to SM. Since investing in company my perception is that investment is a total loss and other investors feel the same? How does SM feel about it? MR: put that to him. SR: The fact he is not even in the room speaks a lot. Pretty much answers the questions but I would like that put to him. Second question is also directed to SM. Has HML at any point during existence, been a pump and dump scheme? MR: Not sure what that is. Will put the question. Q: Gary Miller from GM Enterprises (GM): On auditing of accounts, if we've spent two years trying to get accounts audited, what makes you think we can do it now? And if we haven't spent the last 2 years trying to get accounts audited, why did we try? MR: Believe you're asking, why haven't the accounts been audited earlier? GM: yes. MR: Don't have an answer to that question, will put and take on notice and address in writing. It is a valid question and I'm sure there is a response but I don't have that right now. GM: We've had zero correspondence for around 2 years, then suddenly last month we get a request for support? How could a company expect shareholder support after two years? MR: understand the question, can't provide consolation. 275 The outcome of the meeting was that Resolution 1, to wind HML up, was not passed, with 5,662,319 votes recorded in favour and 18,106,969 recorded against. Resolution 2 for the purpose of the Company to be to operate as an unlisted investment company was passed, with 18,110,743 votes cast in favour and 5,658,545 cast against. 276 According to Ms Gordon's analysis of the votes at the EGM, based on a voting report that McCullough Robertson provided to Corrs, 13,883,545 of the votes against the resolution were cast by JBL, of which Mr McAuliffe is the Managing Director and Chief Investment Officer. 365,000 votes against the resolution were cast by Mr McAuliffe himself. Ms Gordon identifies some 2,549,000 other votes cast by entities or persons which, she says, are connected with Mr McAuliffe, but it is not necessary to detail those or to make findings as to whether they are connected. If the votes cast by Mr McAuliffe and JBL alone were eliminated, the resolution to wind the company up would have passed. 277 HML objected to a further statement in Ms Gordon's affidavit that 'the votes of members connected to Stuart McAuliffe (set out in paragraph 23 above)' totalled 16,797,545, on the basis that it was a submission rather than evidence. That objection was overruled, but I have approached the statement on the basis that it goes no further than to add up the votes detailed in the previous paragraph of the affidavit (to which there was no objection). 278 The plaintiffs made further submissions that by way of the share placement of November 2021 to select parties, members comprised of Mr McAuliffe and entities or persons associated with him 'stacked' the vote. I do not find that this is what occurred, as the 3 million shares issued in the capital raising were not enough to swing the vote one way or another. A Form 604 that HML lodged with ASIC on 18 April 2019 showed that JBL had a relevant interest in 46.28% of the shares in HML with 14,971,009 votes, and there is no reason to think that had changed substantially by December 2021. It is therefore likely that the shares held by JBL were sufficient to determine the result and there would have been no need to issue more shares to guarantee the outcome at the EGM. The evidence is not sufficient to establish that the purpose or effect of the November 2021 capital raising was to stack the vote at the EGM. I will, however, return below to the significance of JBL's decisive vote.

The financial statements 279 On 7 December 2021, HML finalised its accounts for the financial years ended 2019, 2020 and 2021, each of which was styled 'Financial Report'. They were all unaudited. It will be recalled that by this time, HML had not published any annual reports or financial accounts since publication of the half yearly report for the period ending 31 December 2018, although it had released an Appendix 4E Preliminary Report published to the ASX on 4 September 2019. 280 The explanation for that default which Mr McAuliffe gave in his first affidavit was that '[t]he internal accounting staff utilised by HML to prepare its annual and financial reports were all employed by JBFG and subsequently dismissed following JBFG entering into receivership in October 2019'. But the appointment of receivers happened at the end of October, when HML had been in the practice of releasing its annual reports in September or October, so the appointment is unlikely to be the reason why the annual report for FYE 2019 had not been prepared. 281 Mr McAuliffe also apparently sought to explain the default by reference to HML's investigation of the circumstances surrounding the appointment of a receiver and subsequently administrators to JBFG, as well as COVID-19, and the death of John McAuliffe. It may be accepted that all of those things took time, or took time away from Stuart McAuliffe. But in the absence of any detail as to how much time, it is unlikely that they prevented the filing of accounts for over three years. If Mr McAuliffe's protestations of ignorance about the FYE 2018 accounts of JBFG and JBL before those accounts were published are to be believed, he took little part in the preparation of financial statements. 282 In fact, according to Mr McAuliffe's second affidavit, HML did not even instruct the accountants to prepare the accounts until 26 October 2021. There is no satisfactory explanation as to why that could not have been done earlier. The explanation Mr McAuliffe sought to give in cross examination did not appear in his affidavit evidence. It was: I met with Pilot Partners multiple times over the last two years, kept them informed of where I felt we were headed in terms of litigation, and once that uncertainty had been cleared, then we would proceed with audited accounts, because there was too much uncertainty as to say - as to what we would even put in those accounts. Pilot Partners were the accounting firm apparently tasked with the preparation of the accounts. But the source of the uncertainty about future litigation, and how it had been cleared, and how it prevented accounts being presented for three years, remained unexplained. The uncertainty did not prevent the release in February 2019 of the half yearly report for the period ending 31 December 2018, or the release in September 2019 of the Appendix 4E Preliminary Report. 283 I have referred to the half yearly report and the Preliminary Report above as well as to contemporaneous correspondence indicating that the Takeovers Panel declaration of unacceptable circumstances in September 2019 in relation to the affairs of BHD delayed finalisation of the accounts. But it is not clear from the evidence what happened after that, and exactly why the finalisation of HML's accounts for FYE 2019, FYE 2020 and FYE 2021 continued to be delayed. In any event Mr McAuliffe does not mention the Appendix 4E Preliminary Report or the impact of the Takeovers Panel declaration in the quite different explanation given in his evidence for the delay. 284 That does not reflect well on the credibility of Mr McAuliffe's evidence. I do not accept his improvisatory explanations given in cross examination for the company's delay in producing accounts for FYE 2019, FYE 2020 and FYE 2021. I find that HML has given no satisfactory reason for the delay. I do not, however, find as the plaintiffs submit, that the delay was motivated by a desire on the part of HML not 'to have its true financial affairs see the light of day', as that was never put to Mr McAuliffe. 285 Mr McAuliffe's attitude to the default in the provision of accounts was also unacceptably cavalier. In cross examination he described HML's continuing breach of the Corporations Act in failing to prepare and lodge accounts as a 'technical breach'. 286 Relevant matters disclosed in the financial reports included that the value of HML's investments in JBFG and Bartholomew Roberts had been written down to nil as at 30 June 2019. In addition, the report for FYE 2020 disclosed a trivial amount of income for that financial year ($1,870) connected with foreign currency banknotes, from which it can be inferred that HML engaged in no trading or investment activities since at least June 2019. 287 The unaudited accounts for each of FYE 2019, FYE 2020 and FYE 2021 include the following note: The principal activity of the company is to operate as an unlisted investment company, which may include pursuing litigation to recover assets, debts and damages. This was approved at an EGM on 3rd December 2021. 288 The accounts also all say that no insurance premiums have been paid for any person who has been an officer or auditor of HML. The plaintiffs submit that the lack of directors' indemnification insurance creates real and obvious risks. That is especially so in light of the numerous matters raised by ASX and ASIC with which the company has had to deal. I accept that submission. This is a matter which reduces confidence in the management of HML. Persons who agree to become directors will be exposing themselves to potentially large liabilities. This may affect the stability of the composition of the board and the ability of HML to attract competent, responsible people to be on that board. 289 The financial report for FYE 2021 records that there was one 'meeting' of the directors of HML in that year; the only person to attend it, though, was Mr McAuliffe. Similarly there was only one board meeting and one audit and risk committee meeting held in FYE 2020, though more than one person attended each (Mr McAuliffe attended none). The report said that the company had continued to operate according to its 'principal activity' during the year, as quoted above being to operate as an unlisted investment company 'which may include pursuing litigation to recover assets, debts and damages'. It says '[t]his was approved at an EGM on 3rd December 2021', even though the resolutions passed and the 'explanatory memorandum' make no mention of the proposed litigation, which was only referred to in the vaguest terms in the covering letter as litigation against significant parties which the company was exploring. 290 Each of the FYE 2019, FYE 2020 and FYE 2021 financial reports noted that subsequent to the year end Mr McAuliffe had provided a line of credit of $250,000 to HML to meet legal costs, and also referred to two 'separate credit facilities of up to $2m for initial litigation funding and $410,000 for working capital, legal fees to fund a share-buy-back on 1 November 2021'. They also said that subsequent to the year end $150,000 of fund raising had been 'successfully completed to assist the Company in being able to continue to pay its debts as and when they become due and payable' and that: The board has approved an additional $100,000 placement to professional investors at a board meeting on the 6th December 2021. The board intends to raise additional equity through a rights issue and major shareholders have indicated they will take up at least half of the $400,000 raise. 291 The financial statements included in the FYE 2021 Financial Report showed expenses of $260,183 for the FYE 2021 and no income, equating to a loss of the same amount. Total current assets, being equivalent to total assets, were $51,304 and total current liabilities, also equivalent to total liabilities, were $459,273, leading to a deficit in working capital and total assets of $407,969.

Audit 292 It will be recalled that the financial statements just discussed were unaudited. It is convenient at this point to review the evidence as to why no audit of HML's financial statements had been conducted since 2018. Mr McAuliffe's evidence appeared to be to the effect that the board of HML instructed the auditors, Pitcher Partners, to prepare audit reports in respect of those accounts on 7 December 2021, and a letter dated 8 December 2021 from Pitcher Partners to McCullough Robertson supports that timing. Mr McAuliffe's evidence gives no explanation as to why the instruction was not given until then. But the Pitcher Partners letter suggests that they, the auditors, only received accounts to audit from the accountants, Pilot Partners, on 7 December 2021. 293 It appears, however, that Pitcher Partners had encountered obstacles to any audit well before then. That appears from emails between Pitcher Partners and ASIC (on 24 September 2020 and again on 20 April 2021). In the first of those emails, ASIC records Pitcher Partners as having concerns about their independence given that HML still owes them unpaid fees for work undertaken in the past, and an inability to contact HML's accounting staff. In the second email, Pitcher Partners confirms that they have been 'unable to contact the Directors or Management' in order to complete the audits. Specifically, a partner of Pitcher Partners, Warwick Face told ASIC (in response to numbered questions): 3. I understand the last face to face meeting with the company was attended by Mr Nigel Batters and myself with Mr Stuart McAuliffe at their offices on 14 February 2020. During that meeting we discussed specifically outstanding audit issues, and fees. This was previously communicated to ASIC. Subsequent to that meeting, our firm sought to contact the company on various dates, some of which are difficult to ascertain. I note those for which I can provide ASIC specific evidence are as follows: - 24 September 2020 - Telephone call at 12:40pm to Mr McAuliffe no answer to mobile [number redacted by court] - 29 September 2020 - Telephone call at 6:40pm to Mr Samuel Elderfield no answer to mobile [number redacted by court] - 29 September 2020 - Telephone call at 6:40pm to Mr Elderfield no answer to mobile [number redacted by court] I note various marketing emails were sent to employees / officers, and these bounced back as undeliverable. This was generally the manner in which we were made aware such persons had ceased working at Henry Morgan, or former related entity John Bridgeman. 4. We note Pitcher Partners has $77,512 which remains outstanding. 294 In cross examination, after having been referred to that email, Mr McAuliffe maintained that agreement had been reached at the meeting of 14 February 2020. He also claimed that to his knowledge, Pitcher Partners had not repeatedly tried to contact him in relation to outstanding fees. Yet he did not give the terms of any such agreement. He had no explanation for why Pitcher Partners sought to be removed as HML's auditors including for unpaid fees, other than 'I can't tell you what's in the minds of Pitcher Partners'. There is no reason to doubt the detail that Mr Face gave in his email to ASIC. It reflects poorly on Mr McAuliffe's credibility that he refused to accept what was set out in that email, and instead sought to create an impression that HML had reached some sort of agreement with Pitcher Partners, presumably about their outstanding fees. 295 Also, on 18 June 2021, Pitcher Partners submitted an auditor breach report to ASIC under s 311 of the Corporations Act alleging that the nature of the breaches identified were 'Insolvent trading/Going concern issues' and 'Financial Reporting - Non-lodgement of financial reports'. On the same day, Pitcher Partners wrote to the directors of HML informing them of the breach notice and of an application by the firm to ASIC for permission to resign as auditors. 296 On 22 June 2021, Pitcher Partners submitted their application for consent from ASIC to resign as auditor, which gave as reasons that they had still not been provided with complete information to complete the audit for FYE 2019, their attempts to contact directors and management had remained unanswered, and 'our firm have material outstanding fees and thus no longer consider ourselves to be independent'. ASIC raised with Pitcher Partners by email their omission to pay the $40 fee for the application, to which the firm responded: 'We were requested to accept appointment by ASIC on this company, and have never been paid by the Company. Accordingly, we will not be expending any more money in order to resign as Auditors'. However Pitcher Partners had been unable to arrange a replacement auditor or seek the confirmation of the directors of several other matters because they could not contact the directors. For the reason that those matters were outstanding, ASIC refused the application for consent to resign on 7 September 2021. 297 On 19 October 2021, and again on 5 November 2021, Pitcher Partners were still requesting that their unpaid fees of approximately $78,000 be paid. 298 In his second affidavit, Mr McAuliffe said that the costs of the audit for FYE 2019, FYE 2020 and FYE 2021 would be met using the working capital facility that had been agreed with him. Mr McAuliffe also said in that affidavit that the directors would call an AGM within two weeks of completion of the audited reports and there is evidence of a directors' resolution to that effect. They planned to do this in early 2022.

Possible proposed litigation 299 Mr McAuliffe's affidavit of 8 December 2021 deposes to his belief: that the company may have a right to institute proceedings against the Australian Stock Exchange Ltd (ASX) seeking an award of damages arising out of: (a) the suspension of HML's securities from trading on the financial market operated by the ASX, which occurred over the course of 2017 and 2018; and (b) the refusal by the ASX to approve the release of meeting materials to HML shareholders in respect of a proposed transaction involving JB Financial Group Pty Ltd (JBFG), which occurred in late 2018. The proposed transaction with JBFG was the $79.16 million acquisition of HML's shares in JBFG and Bartholomew Roberts which was the subject of an announcement to the market on 11 May 2018 (see [190] above). Mr McAuliffe's affidavit says that the costs associated with the potential litigation will, if necessary, be met using the funds made available through the litigation funding facility. 300 Mr McAuliffe's affidavit annexes a letter dated 11 October 2021 from McCullough Robertson to ASX in relation to possible claims. The letter sought further documents from ASX and foreshadowed applications for preliminary discovery under r 7.23 of the Federal Court Rules 2011 (Cth) if they were not provided. Consistently with the requirements for such an application, the letters say that HML did not have sufficient information to decide whether to start a proceeding in court against ASX. 301 There was subsequent correspondence during November 2021 between McCullough Robertson and solicitors for ASX concerning the claims and request in this letter. In this correspondence, ASX denied liability and denied that McCullough Robertson had identified a proper basis for any entitlement to preliminary discovery, but nevertheless volunteered documents on behalf of ASX 'for the purpose of disposing of this issue efficiently and reinforcing the absence of any basis for relief'. It appears that those documents were provided to McCullough Robertson in early December 2021 but there is no evidence of the outcome of any review of the documents, and there is no legal opinion in evidence as to the merits of the possible proceedings. 302 In cross examination, Mr McAuliffe refused to agree that there was no foreseeable prospect of HML being somehow relisted, because, he said, '[i]t's part of our action against the ASX'. He also referred to it as 'a current legal action'. But there is no action against ASX. All there is is a review of documents provided in lieu of preliminary discovery. The possible causes of action against ASX outlined in the correspondence about preliminary discovery are described at a high level of generality and there is no basis articulated in that correspondence as to how the litigation might result in HML becoming being relisted. 303 When it was put to Mr McAuliffe that there is no legal action on foot and that a better way of putting it was that there was 'a consideration of the possibility of one' he said '[w]ell, it's one way of putting it, but I've got a degree of confidence that you might not share'. This is another example of Mr McAuliffe refusing to accept a straightforward proposition. I consider his asserted confidence in the possible legal action against ASX and his apparent position that the company may be relisted one day to be speculative.

Consideration 304 The above evidence, considered in light of the principles summarised earlier, leads me to conclude that it is appropriate to wind HML up, on the ground that it is just and equitable to do so. I will describe each of the several reasons that lead to that conclusion shortly. But in essence, it is clear that the purpose put to members of the public as the basis on which some $27 million was raised from them is no longer the purpose of HML, nor is it a purpose that HML will ever be able to realistically pursue or achieve. And that fundamental departure from its original purpose was not the result of a considered change of strategy, let alone one that was approved by the members of the public who had contributed those sums or their successors as shareholders. It was the result of a catastrophic collapse of the company's business. And a significant contributor to that collapse was a set of large transactions which, once again, were outside that initial purpose. Further, the lawfulness of those transactions is open to question, as there is cause to investigate whether they were impermissible related party transactions or otherwise involved breaches of the duties of the directors of HML. And they occurred against a background of a troubling record of inquiries and investigations into HML by ASX and ASIC along with several failures in basic requirements of corporate governance. 305 These matters combine to give rise to a lack of confidence in the conduct and management of HML's affairs, and so a risk to the public interest that warrants protection. In this case, I do not consider that the solvency position of the company outweighs those considerations and, as has been said, ultimately HML does not submit that it does outweigh them. 306 I will now articulate each of these reasons in more detail. Square bracketed references are to paragraphs above.

Fundamental change of purpose 307 First, HML has essentially abandoned its original purpose and has embarked on a quite different one. The original purpose does not appear in its constitution but, as explained earlier in these reasons (at [51]-[58]), in a modern Australian company that is of little moment. HML's original purpose is best derived from the public document on the basis of which it raised approximately $27 million. That sum is comprised of the money raised in the initial public offering of shares and options under the Prospectus (raising approximately $15.6 million [133]), and the money raised as a result of the exercise of those options afterwards (at least $11.5 million [137]). It is a substantial amount of money, raised from numerous members of the public [133] who may be expected to have contributed their funds on the basis of the corporate purpose set out in the Prospectus. That prospectus was, at the time of its issue and at the times when funds were subscribed, an objective indication of purpose that was general and common to all shareholders: see Re Tivoli Freeholds at 472. 308 The Prospectus set out clearly and repeatedly HML's corporate purpose and the kind of company it was to be. It was to be a listed investment company [119]. The company's investment portfolio was to be actively managed [116], [119], [123]. It was going to 'trade both long and short positions in global markets across exchange traded futures contracts such as equity market indices, fixed income, currencies and commodities through a managed futures strategy' [116], also [119], [122]. 309 Those investments were to be 'limited to deeply liquid, high volume global markets to enable ease of entry and exit of positions' [119], also [116], [129]. This deep liquidity was part of one of the 'key strengths' of the company [125]. It would permit diversification [128], [129]. It would allow investments to be executed in seconds [125]. The commitment to liquidity of investments was not vague; liquid assets were to comprise 90% of the company's portfolio, specifically those which were realisable within five trading days [126]. 310 The emphasis on global markets was another 'key strength' [125]. The strategy of 'active management of investments' was described in some detail [119]-[130]. The kinds of investments to be made were specified. The focus was to be 'on investing in global markets primarily through exchange traded futures contracts', which was to be the primary way in which its investment strategy was to be executed [122], also [119], [128]. Other than that, the only classes of possible investment described were listed equities and exchange traded futures options, the latter for hedging purposes only [119], also [122]. There was a specific statement that HML may not hold unlisted securities [127]. 311 In light of these clear and repeated statements in the Prospectus, I do not accept a submission made on behalf of HML that investing in exchange traded funds was merely an investment strategy that the company said it would deploy. It undoubtedly was a statement by HML of the strategy it would deploy, but in this case it rises higher, to be an intrinsic statement of the kind of company HML was to be. Or, to put it another way, the Prospectus was comprised of strong and clear statements as to what would be done with the money that was raised from members of the public. It was a publicly made statement of objects that was, as a matter of substance if not legal form, the basis of the bargain under which investors contributed their funds, and so is to be accorded weight in considering whether the company should be wound up, in part because it has abandoned that bargain. 312 Turning to compare those statements in the Prospectus with the position as at the time of the hearing: HML was suspended from quotation on the ASX in June 2017 [157] and never returned to the boards. It was removed from the official list on 3 February 2020 [237]. It can comfortably be inferred that there is no realistic prospect that it will ever become listed on an Australian stock exchange again. Mr McAuliffe's protestation that becoming relisted is 'part of action against the ASX' has no realistic basis in the materials, including his own second affidavit which refers to the proposed litigation as an action for damages [299], also [302]-[303]. The sworn evidence in Mr McAuliffe's first affidavit is that HML intends to operate as an unlisted investment company going forward [256]. HML is no longer and can never be a listed investment company. 313 Further, HML had engaged in no investment activities of any kind from at least June 2019 until the hearing in December 2021 [253], [286]. It had, as Mr McAuliffe rightly conceded, suffered a catastrophic change in its financial position since 2018 [253]. The investment management services of JBL, which featured prominently in the Prospectus, were no longer being provided. The Management Services Agreement between HML and JBL was due to expire within five years from 12 March 2015, unless certain arrangements were made to extend it (cl 6) and there is no evidence it was extended. It appears that HML's trading and investment activities had ceased by June 2019, if not earlier [286] and from at least October 2019, the company was inoperative. That was the month in which HML's financial statements were 'put on hold' [233] and in which the company issued a notice for an AGM that never took place [235]. 314 As at the time of the hearing, the sole activity of HML was to possibly pursue ASX for damages arising out the suspension of HML and ASX's alleged refusal to release meeting materials in connection with a proposed transaction with JBFG. On the face of things, that is an unpromising enterprise; in any event, no materials have been given to shareholders or the Court which permit any judgment as to the likelihood of success. This activity - suing the operator of the stock exchange - is a far cry from the investment activities for which HML raised some $27 million to pursue. It represents a comprehensive abandonment of the company's original purpose. 315 HML seeks to describe 2020 and 2021 as 'a rebuilding period, of consolidation and change'. I reject that euphemistic description of what has occurred. Instead, it is clear that the company was entirely dormant in 2020, and even after the commencement of this proceeding, and only in October to November 2021, with the hearing of this matter imminent, did it take belated steps to rectify its compliance failures and start to pursue what appears to be its only remaining actual enterprise, litigation against ASX. I infer that the company's main and apparently only business enterprise is that possible litigation because the collapse of its investment activities have left it with no other course. 316 In cross examination Mr McAuliffe agreed that the purpose and objects of HML as initially propounded to investors in the Prospectus had changed by reason of the resolutions passed at the EGM and the new direction that the company had taken. He also said: 'There's no company in the world that says, "I'm going to do the same thing for years and years and years, and keep doing what we're doing". You go and change.' As a general proposition that is true; of course, companies evolve and change over time, and there can be no rigid rule that the original purposes of a company must remain its purposes over its entire life. Nor do I suggest that in every case a company is required to obtain formal approval for a change in strategy, for example by a shareholder vote. But in this case, HML's change in purpose has been so fundamental, and so linked with a collapse in its original business, that it justifies a lack of confidence in those who have managed the company and who were responsible for the change. I will address the potentially relevant shareholder votes that did take place shortly. 317 In this case, even though the constitution of the company provided for no particular objects, the substantial sums of money raised from persons who became shareholders in the company were provided on the basis of an understanding that it would be used for certain objects and on the basis that HML was to be a company of a certain kind. And it goes without saying that it was provided on the basis that those in charge of the company would observe certain elementary rules of governance to provide transparency in relation to the stewardship of that money. 318 HML has failed to meet those basic implied conditions on which investors provided their funds. To return to Menhennitt J's words in Re Tivoli Freeholds, the company has engaged in acts 'which are entirely outside what can fairly be regarded as having been within the general intention and common understanding of the members when they became members' and has 'embarked upon a course which, even although it is within power, is quite outside and different from what was originally commonly intended and understood' ([46]-[47]). As will be summarised below, that course has led HML to deploy a large proportion of its funds, not for the purposes stated in the Prospectus, but for the purposes of other, mostly unlisted, entities connected with Mr McAuliffe. Whether or not that gives the investors any contractual recourse, it weighs heavily in favour of the exercise of the discretion to wind HML up for failure of its corporate purpose. Investors knew when they provided their funds that the enterprise of investing in exchange traded futures was inherently risky, but HML's use of their funds exposed them to quite different risks. And now, going forward, HML will operate as an unlisted entity, which is dependent on director borrowings for its survival and looks to the precarious endeavour of litigation in order to make money. As counsel for the plaintiffs submitted, that is 'a fundamentally different creature to that [in] which my clients took an interest when they initially invested some years ago'.

Resolutions concerning changes in Investment Mandate or purpose 319 Given that the plaintiffs have established that HML engaged in a radical departure from the purpose articulated in the Prospectus, the onus of establishing that events such as shareholder resolutions provide sound authority or justification for that departure fell on HML. In deciding whether it has discharged that onus, it is appropriate to weigh the fact that if there was evidence indicating, for example, that the resolutions were passed after full disclosure of relevant matters to shareholders, it is likely to be in HML's power to produce that evidence. As to this approach to the onus of proof, see Plaintiff M47/2018 v Minister for Home Affairs [2019] HCA 17; (2019) 265 CLR 285 at [39]-[40]. 320 There were two occasions on which shareholders passed resolutions which could be advanced to support an argument that they approved these changes in purpose. However I do not consider that the either of those occasions alleviates the concerns that arise from HML's abandonment of its original purpose. 321 The first occasion is the resolution of 18 October 2016 in which the shareholders of HML apparently approved an amendment to the Investment Mandate in the Management Services Agreement to permit investments in unlisted securities to make up more than 10% of the company's portfolio [143], also [189]. I say 'apparently' because there is no direct evidence of the terms of the resolution, how it was passed (for example whether it was at a meeting of shareholders and what transpired at the meeting) and no evidence at all of what information was disclosed to shareholders before they passed it. It could be possible that the resolution was presented as merely the lifting of a numerical cap, or it could have been presented as a significant change in investment strategy (which is what it proved to be). Knowing which of those took place would make a difference to the Court's evaluation of the effect of the resolution. But all the Court has is Mr McAuliffe's assertion in cross examination that 98.5% of the shareholders passed the resolution. Given my view about his credibility, I put little weight on that. As a result, HML has not even attempted to discharge its onus of establishing proper disclosure to shareholders. 322 One final point to make about that resolution is that it appears to have only lifted the restriction on investments in unlisted shares to a maximum of 10% of the portfolio. There is no evidence of a change in another restriction in the Investment Mandate in the Management Services Agreement, which prohibited JBL as Investment Manager from lending HML's money other than by way of deposit with a bank, similar financial institution or government entity [112]. In cross examination about a particular loan to JBL, Mr McAuliffe once again sought to rely on the different legal entities involved by arguing that 'no loans were done under the JBL management agreement. They were done only by the independent directors' [106]. But HML offered no substantiation of this, and in any event the Prospectus had said that HML's investment portfolio would be managed by JBL as investment manager, and implied that HML's board would not approve investments, as they would instead be undertaken by JBL in accordance with the Investment Mandate [121]. And yet, as has been seen, HML proceeded to discard the Investment Mandate too. 323 The other occasion that could be relied on as evidencing shareholder approval of the change in purpose is the EGM of 3 December 2021 [268]-[278]. But I do not accept that the relevant votes - one being in effect not to wind up HML, the other to pass a resolution that the purpose of the company 'be to continue to operate as an unlisted investment company' [269], [275] - provide good answers to the concern that the purpose of the company has fundamentally changed. There are several reasons for that. 324 First, the resolution to wind HML up was defeated after the company produced a declaration of solvency that, for reasons that have been explained, was materially misleading [264]-[267]. 325 Second, the resolutions were passed on the basis of meeting materials that were expressed in vague terms and contained very little information about what HML's proposed future activities were to be and the prospects that they would be successful, and no financial information [268]-[271]. 326 Third, the disclosure of information and answers to shareholders' questions at the EGM itself were manifestly deficient, including a lack of answers to fundamental questions bearing on why shareholders would want to keep the company going [274]. Mr McAuliffe did not expose himself to questioning, but left that role to an individual who was not even a director, whose connection with HML was unclear and whose knowledge of the company appears to have been meagre. 327 Fourth, the resolution to continue the purpose of the company as an unlisted investment company does not authorise or address its supposed sole proposed future enterprise, which is litigating against ASX [289]. It is no answer to this to say that litigation against ASX may be encompassed in the broader activities of an unlisted investment company. Given the difficult circumstances in which HML found itself and the obviously risky prospects of the proposal to stake its future on litigation against ASX, shareholders were entitled to know precisely what the alternative was to winding the company up. The vague references in the covering letter to pursuit of 'litigation against certain significant parties' were wholly insufficient. 328 Fifth, the resolution to wind HML up failed by reason of the votes of Mr McAuliffe and JBL, a company of which he was Managing Director and Chief Investment Officer. Those votes also determined the outcome of the resolution to approve the purpose of HML to operate as an unlisted investment company. As described further below, it is likely that Mr McAuliffe had the capacity to exert practical influence over JBL's decision as to how to vote its shares in HML. It is, however, unnecessary for me to make a firm finding that he did control JBL or its voting, and I do not do so. In circumstances where, as I have said, the onus was on HML, it is enough to say that the evidence does not establish that the vote was independent of Mr McAuliffe. 329 HML submits, in effect, that this was irrelevant, because Mr McAuliffe and any companies he may have controlled were entitled to vote on resolutions about the future of the company. That is true, as far as it goes, but it does not go very far in HML's defence of this winding up application. HML's ultimate submission on the point was that the fact that the votes of more than 70% of the shares in the company were cast against a resolution to wind up the company is a highly relevant consideration that weighs heavily against the Court ordering a winding up of the company. But I do not accept that it weighs heavily against winding up in this case, because HML as the party making the submission has not established that the votes of that majority were cast independently of Mr McAuliffe's wishes. If they were not cast independently, then all the vote indicates is that Mr McAuliffe, who is evidently moving HML to oppose the winding up, also opposed it at the EGM. In short, it would show that those who control HML do not want it to be wound up. Of course the fact of that opposition is highly relevant; if it were absent, this proceeding would have had a completely different complexion. But since HML has not established that the result of the vote would have been the same independently of Mr McAuliffe's wishes, the vote does not weigh heavily against winding up. The fact that those managing HML do not wish it to be wound up cannot outweigh the many concerns about the conduct of those managing HML that are summarised above and below. 330 In contrast to the position of the majority shareholders, HML emphasises the fact that on its calculations the plaintiffs together hold only 61,644 or 0.174% of the shares in the company. But the fact that, in the circumstances of the EGM as described, some 5.6 million votes were cast in favour of winding up shows that the concerns that the plaintiffs express are much more widely based among shareholders. And in any event for the reasons given above and below, those concerns are reasonably based. I put no weight on the relatively small proportion of shares held by the plaintiffs.

Transactions with connected companies 331 For the reasons just described, HML has changed its corporate purpose in ways that have not been proved to have been properly authorised by shareholders, and not because it was an attractive strategic direction, but because of a catastrophic collapse in the company's financial position. Of cause for further concern is that the collapse is at least partly attributable to large investments, the lawfulness of which is open to question, and many of which were outside the original corporate purpose. Their lawfulness is open to question because the counterparties may have been related parties of HML or Mr McAuliffe and, in any event, the transactions may have involved breaches of legal duties on the part of HML's directors. 332 As I have said, it was common ground that I need not and should not make findings that the transactions were unlawful. It is enough for present purposes to say that they exhibit troubling features that warrant investigation. 333 The troubling features centrally concern the fact that each of the companies in which HML invested by way of the transactions concerned was connected with, and quite possibly controlled by, Mr McAuliffe. The connections between the companies and the reasons why it is quite possible that Mr McAuliffe controlled them have also been canvassed at several points in the course of the narrative. In summary: (1) The Prospectus referred to Mr McAuliffe as HML's founder [117]. It emphasised, as important to HML's future success, Mr McAuliffe, his 'multistrand skills', and his position as HML's Managing Director and as Managing Director and Chief Investment Officer of JBL, HML's investment manager [116]-[118]. Mr McAuliffe's experience and skills were one of HML's 'key strengths' [125]. In contrast to Mr McAuliffe's repeated assertions in cross examination, it would be surprising if a director who is that important to the company's operations simply permitted decisions to be made by others such as non-executive 'independent' directors. (2) Mr McAuliffe's own evidence was that his various positions at HML and other companies have given him approximately seven years of experience managing listed and unlisted investment companies and managing all aspects of their operations [102]. This suggests that he was able to influence the operating and management policies of HML and other connected companies. (3) Under the Management Services Agreement, JBL was responsible for the conduct of HML's investments. Until shortly before the hearing of this matter, investing was HML's sole business enterprise. At material times JBL controlled a substantial proportion of HML's issued shares [10], [199], [278], also Diagrams 1, 2 and 3. So it can be inferred that JBL had considerable influence over HML's activities. JBL was also responsible for a wide range of services supporting that business, including office services, corporate support and information technology services support [103], [111], [141]. JBL had the same registered office as HML, and when JBL relocated, so did HML [257]. Mr McAuliffe was at all material times Managing Director and Chief Investment Officer of JBL. He held approximately 22% of its issued shares [103], [214]. In those capacities he must have had substantial power to influence the activities of both companies at all levels (including how it would vote its shares in HML). In cross examination Mr McAuliffe gave at least limited acceptance to the proposition that he had oversight of JBL's business and that it was his responsibility to ensure that it complied with significant agreements such as the management agreement with HML [213]. (4) As of late 2015, the common directorships between HML and JBL, including that of Mr McAuliffe and his father, led HML to describe them as related parties in its own Prospectus [132]. (5) KPMG's audit report for FYE 2018 noted the relationship between HML and JBL, and JBL's role as 'the parent entity of a diverse group of companies with complex cross shareholdings' in the course of noting that related party transactions were a 'key audit matter' [212]. (6) Mr McAuliffe was Group CEO of JBFG at all material times from May 2017 and a director of JBFG from December 2016 to February 2018 [17]. It is likely that in those capacities, and in particular in the capacity of Group CEO, he had the power to influence decisions about the operating and financial policies of JBFG until JBFG's receivership in October 2019 [15]. (7) The affairs of the connected companies were further intertwined by the fact that until JBFG's receivership, it employed all the accounting staff used by HML [103], [180], [280]. In fact, it is not clear that HML ever had any staff of its own. (8) The first transaction of concern appearing in the evidence in which HML engaged was to acquire 25% of the shares in JBFG, on 8 August 2016, for the relatively modest sum of $50,000 [140]. At that time Mr McAuliffe was Managing Director of HML and the Chief Investment Officer and Managing Director of JBL, the company that had been contracted to manage HML's investment portfolio. Further, the shares were acquired from Bartholomew Roberts, of which Mr McAuliffe was a director as was his father and fellow HML director, John McAuliffe, and his fellow HML director, Ross Patane (the only other director of Bartholomew Roberts at that time was one Bryan Cook). Those connections do not take into account cross shareholdings that also connected at least some of the companies at this time. (9) The next transaction on 13 October 2016 was not for a modest sum - it was an investment of $1.2 million in Bartholomew Roberts [142]. The common directorships have already been mentioned. (10) The next transaction was also substantial. On 9 December 2016, JBFG (Group CEO, Stuart McAuliffe) issued 235 shares to HML (Managing Director Stuart McAuliffe) for a total of $6.25 million [144]. The change in pricing of this and the earlier issue implies that between 8 August 2016 and 9 December 2016, the shares in JBFG had increased in value from $167.02 to $26,667. Nothing in the evidence explains how an increase of that magnitude could have occurred in such a short period of time and thus how a price of $6.25 million paid by HML was justified. (11) On the same day, and inconsistently with the Investment Mandate, HML loaned $500,004 to RSM. But within ten days that was converted into an investment in the shares of Bartholomew Roberts (of which Stuart McAuliffe, John McAuliffe and Ross Patane were directors) [145]. By 31 December 2016, HML owned over one third of the shares in Bartholomew Roberts, and had provided consideration of $1.7 million for them [147]. HML's own half year report described this as a related party transaction, albeit one said to have taken place on normal commercial terms and conditions. By the end of May 2017 it had invested even more in Bartholomew Roberts - a total of over $4 million [148]. This included another loan (inconsistently with the Investment Mandate) that was converted to shares. (12) On 10 July 2017, HML loaned $450,000 to Capital Credit, a subsidiary of JBFG [160]-[164]. This was inconsistent with the Investment Mandate. Mr McAuliffe was a director of Capital Credit, Group CEO of its 50% indirect shareholder JBFG, a director of Bartholomew Roberts its other 50% shareholder, and Managing Director and Chief Investment Officer of Bartholomew Roberts' parent company and investment manager, JBL. In June 2019, the loan was novated so that it became a loan from HML to JBFG rather than to Capital Credit. In cross examination, Mr McAuliffe professed ignorance of the reasons for the novation and what HML received in return for agreeing to it [228]. (13) On 17 November 2017, HML paid over $2.8 million for shares in JBL, its own investment manager, of which Mr McAuliffe was Managing Director and Chief Investment Officer [175]. While JBL was a listed company at this time, the Prospectus had identified investing in listed companies as not a primary part of HML's investment strategy [119], [122]. ASX considered that this transaction required shareholder approval because of JBL's relationship to Mr McAuliffe [182]. HML's response to ASX, that Mr McAuliffe did not have the power to control decisions about the financial and operating policies of either company, was implausible [184]-[186]. He was its Managing Director and both the Managing Director and the Chief Investment Officer of its investment manager. While HML said it did not agree with ASX's view, it said it would seek shareholder approval for the transaction [187], but instead the transaction was effectively cancelled when JBL bought back the shares [197]. (14) That was not, however, the end of the matter, because two days after HML announced that the transaction for the $2.8 million acquisition had been cancelled, it proceeded to lend over $2.4 million to JBL on an unsecured basis [197]. In a letter sent to ASX less than two weeks after the loan, HML referred to the buy back but made no mention of the loan and it does not appear that it was disclosed until over a month later [198]. If ASX was concerned about a purchase of shares in JBL because of Mr McAuliffe's association with it, it is hard to see that it would not have been concerned about an unsecured loan of nearly as much money to the same company immediately after the share purchase had been reversed. Also, the loan to JBL may have been in breach of the Investment Mandate in the Management Services Agreement which governed investments by HML's investment manager, that is, by JBL. 334 The above transactions are limited to those involving HML. There are a number of other transactions involving companies such as JBL, JBFG, Benjamin Hornigold and Bartholomew Roberts disclosed by the evidence which have not been canvassed. 335 The need for investigation of the transactions I have described speaks for itself. They may involve breaches of Chapter 2E of the Corporations Act, concerning related party transactions, or of listing rules on that subject. Mr McAuliffe accepted in cross examination that HML had never called meetings to approve loans to related companies, although he did not accept that they were related companies. As to that issue, s 228 in Chapter 2E defines related parties of a company to include a director of the company, and any entity controlled by such a director: see s 228(2)(a) and s 228(4). At the relevant times, Mr McAuliffe was a director of HML, and there is also, at least, substantial cause to investigate whether he controlled counterparties to the transactions including JBL, JBFG and Bartholomew Roberts at relevant times. That is so at least because of Mr McAuliffe's board and executive positions with those companies, and even before their shareholdings in each other, and Mr McAuliffe's shareholdings, are taken into account. 336 Further, I have made comments in the narrative of evidence above about the unreality of Mr McAuliffe's apparent view that these transactions were all the result of decisions made by directors who were independent of him. The transactions may involve breaches of directors' statutory duties or duties at common law or equity, for example because they may not have been carried out bona fide in the interests of the company as a whole. They warrant investigation in order to ascertain whether such breaches have occurred. 337 More broadly, from the evidence in the proceedings detailed above, it is possible to see that at least $13 million flowed out of HML by way of share investments in and loans to connected companies [140], [144], [148], [160], [197]. It appears that the bulk of those funds will not be recovered from those companies. On that basis, it can be said that the transactions described above have contributed to the collapse in HML's financial position. 338 It is also relevant that the transactions involve a significant departure from the purposes of HML that were explained so clearly in the Prospectus. Investors provided their funds on the basis of a document which repeatedly emphasised that the company's investment would be limited to deeply liquid, high volume global markets, primarily through investments in exchange traded futures contracts. The Prospectus said very specifically that under normal market conditions the company would be able to liquidate at least 90% of its portfolio quickly. Instead, from at least August 2016, HML engaged in a program of providing many millions of dollars to companies connected with Mr McAuliffe, several of which were unlisted. For the reasons I have given, the resolution passed in October 2016 and the resolution passed in December 2021 were not sufficient to authorise that fundamental change of purpose. Nor does it appear that a decision to change the strategic direction of the company was ever disclosed to shareholders or the market. That is despite an assurance in the Prospectus that any material change in HML's risk profile or strategy would be disclosed. These transactions indicate that the abandonment of the company's original purpose occurred much sooner than the time that it became inoperative, or the time at which it decided that its main activity was to investigate legal action against ASX. 339 HML submits that if an investigation is needed, then ASIC is the most appropriate body to do so. I do not accept that. While HML points to evidence that ASIC is investigating, that evidence dates back to October 2019 at the latest. There is nothing to indicate whether the investigation is ongoing. HML submits that ASIC has extensive investigative powers. It does, but so does a liquidator. It is true, as HML submits, that a liquidator requires funding and, speaking broadly, ASIC already has funding. But it is notorious that liquidators have many possible avenues of funding available to them, such as litigation funders and interested creditors and shareholders. In contrast, given that the last evidence of ASIC taking steps to investigate HML dates from October 2019, the prospect that it remains willing to expend public funds to investigate the company further is at least equally uncertain. Further, ASIC's regulatory functions of pursuing persons for breaches and penalties is different to the likely purpose of a liquidator, which is to recover funds for creditors and shareholders. The transactions detailed above provide ample scope for investigation for the latter purpose.

Governance concerns 340 All of the above took place against the background of a troubling record of behaviour prompting multiple inquiries from and disputes with ASX and ASIC, as well as significant failures of compliance with basic requirements of the Corporations Act. Some of the inquiries and disputes were prompted by the transactions considered above, so there is overlap between this head of concerns and the previous one. Concerns of this kind include the following: (1) In the Prospectus, HML promised that it would make regular disclosure to shareholders, including of the actual allocation of investments among various classes of assets and any material change in the company's risk profile and strategy [131]. It is true that the Investment Mandate was altered in October 2016 by a resolution of shareholders to permit more than 10% of HML's portfolio to be invested in unlisted securities [143], also [189]. But there is no evidence of any disclosure to shareholders that the board of the company was considering or had decided upon a change in the strategic direction of the company which meant that less than two months later a substantial proportion of its funds, over $6 million, was invested in one unlxisted company's shares, namely JBFG [144]. In fact it does not appear that the investment was disclosed at all until 23 January 2017, more than six weeks after it was made [146]. On any view, a decision to invest that much money into one unlisted company was a significant change in risk profile and strategy for a company that raised funds on the basis that it would invest in exchange traded futures contracts in deeply liquid global markets. (2) In June and July of 2017, ASIC stopped the issue of the bonus options on the basis of concerns about misleading statements to the market about HML's NTA backing and the basis on which its large investment in JBFG had been valued [149]-[156], [159]. ASIC also had concerns about the adequacy of HML's internal accounting [153]. ASIC's statement of concerns was detailed and specific and admitted into evidence without objection and without any ruling sought as to the evidentiary use that could be made of it. I acknowledge that it is just ASIC's opinion, and that it would not be appropriate to find in a proceeding like this that the concerns were correct. I do, however, consider that it is appropriate to find that ASIC had reasonable cause for the concerns. As with the ASX letter set out at [224], HML adduced no evidence to the contrary. As I have explained, Mr McAuliffe's evidence about the initial stop order was unconvincing and, even if accepted, it would not have reflected well on his management of HML [156]. (3) At the same time and connectedly, as I have found despite Mr McAuliffe's evidence, ASX suspended the securities in HML from quotation [157]-[158]. The securities were never returned to quotation on the ASX. (4) On 15 August 2017, HML was forced to retract prior statements it had made to the market. Even the retractions lacked candour [165]-[171]. (5) In its annual report for FYE 2017, and despite ASIC's concerns, HML revalued its investments in JBFG upwards by over $23 million and its investment in Bartholomew Roberts upwards by over $10 million [174]. Over the course of the following year it would become clear that the investment in JBFG was worthless and as at 30 June 2019 its investment in Bartholomew Roberts was also revalued to nil [286]. (6) ASX made further detailed queries about HML's announcements in February 2018. The company's response again lacked candour [177]-[181]. (7) On 8 March 2018, ASX wrote to HML requiring it to announce that its acquisition of shares in JBL on 17 November 2017 breached the listing rules, because of JBL's relationship to Mr McAuliffe [182]-[183]. (8) HML began to actively seek the return of its securities to quotation on the ASX from June 2018. ASX still held concerns and refused [191]-[193]. It appears that at the same time ASX held concerns about late financial reporting by HML [194]. (9) In their annual reports for FYE 2018 each of HML [201], JBL [219] and JBFG [215] announced very large losses which, in the case of the latter two companies, resulted in a net deficiency of working capital (meaning current assets less current liabilities). And yet, the tenor of Mr McAuliffe's evidence was that he did not know about JBL's financial problems until shortly before the public accounts were released (in October 2018) [219]-[220], or about JBFG's financial problems until after the accounts were released [216]-[218]. Assuming that this evidence is truthful, it shows a remarkable lack of diligence and oversight on the part of Mr McAuliffe, who was not just Managing Director of HML but also Managing Director and Chief Investment Officer of JBL and Group CEO of JBFG. Also, Mr McAuliffe's communication to HML's shareholders about the decline in their company's fortunes lacked candour or, even, information [202]-[203]. (10) HML had no auditors between 29 November 2018 and 23 January 2019. ASIC served HML with notice of its failure to appoint an auditor [221]. (11) On 25 January 2019, the Takeovers Panel made a declaration of unacceptable circumstances in relation to the affairs of HML [222], also [199]. (12) On 30 May 2019, in something of a culmination of the correspondence about the suspension of the company's securities, ASX wrote to HML detailing numerous 'serious concerns about the conduct and operations' of HML, BHD and JBL. HML made no real attempt in this proceeding to contradict the factual bases of the concerns, which had a reasonable basis [224]-[227]. (13) On 3 February 2020, ASX removed HML from the official list because it had been suspended for an unacceptably long period of time, and it has not been restored [237]. (14) No AGM was held between 29 November 2018 and the hearing [235]. To fail to hold an AGM at least once every calendar year is an offence: Corporations Act s 250N(2). (15) By 15 January 2020, HML had only two directors, when its constitution requires a minimum of three, and by the end of September 2020 it had only one, Mr McAuliffe [236], [247], [252]. The insufficient number of directors was not remedied until 30 September 2021 [254]-[255]. (16) From about 4 November 2019, HML had no company secretary and it still did not have one at the time of the hearing [252]. That means it was in breach of s 204A(2). (17) HML did not arrange for the completion of an audit of its accounts after the accounts for FYE 2018 (published in September 2018) up to the time of the hearing, more than three years later. Unaudited accounts for the missing three years were only prepared shortly before the hearing. The explanations HML has given for the delays are unsatisfactory [279]-[284], [292]. The true explanation for the lack of any audit as at December 2021 was because the company had not paid its auditor's fees and its director, Mr McAuliffe, and another company officer were not engaging with the auditor's attempts to speak to them [293]-[296]. For over two years, from around September 2019 to the time of the hearing, HML failed to provide any accounts to its shareholders [229], let alone audited accounts. Mr McAuliffe thinks this was a 'technical breach' [285]. It was not; it was a significant failure to meet basic obligations to disclose HML's financial position to its shareholders and the public. (18) HML had no professional share registry between about February 2020 until at least the date of the hearing. That is because it could not pay its share registry service provider, Link [239]-[245]. (19) From about February 2020 until the end of 2021, HML did not maintain a registered office or registered principal place of business nor, it seems, functioning email addresses [249]-[250], [252], [257]-[258]. (20) HML lodged a materially misleading declaration of solvency with ASIC [264]-[267] and proceeded at the December 2021 EGM to put a resolution for the voluntary winding up of the company to shareholders on the basis of it. A director who makes a declaration of solvency under s 494 without having reasonable grounds for his or her opinion that the company will be able to pay its debts in full within the period stated in the declaration is guilty of an offence: Corporations Act s 494(4). (21) The lack of directors' liability insurance raises further concerns about the composition and conduct of HML's board [288]. 341 The above is a mere subset of the numerous inquiries made and concerns expressed by ASIC, and especially ASX, during HML's time as a public listed company. I acknowledge that they are just concerns and inquiries, not firm findings of contravention. Individually, each concern might not justify an order to wind up the company. But their sheer number undermines any confidence in the management of HML, and I have found that significant aspects of the concerns had a reasonable basis. Taken together with all the other matters detailed above, they provide reason to consider that the protection of the public is best served by winding up. 342 As for the basic governance and compliance failures that have been incontrovertibly established - not publishing audited accounts, not holding AGMs and not having an accurate registered office or principal place of business - these were not remedied for up to a year after the commencement of the proceeding. No attempts to fix them were made until the eleventh hour, before the hearing, and as at the date of the hearing those attempts had not resulted in either audited accounts or the holding of an AGM. Even if those things could be expected to have taken place in 2022, that would not erase the record of poor governance and poor compliance with basic requirements of the ongoing status of a company. Whether eventually remedied or not, that record is damaging to the level of confidence the Court has in those managing the company. To adapt the words used in Gognos (see [60] above), I do not consider that the risk to the public interest has been eliminated or reduced to an acceptable level by what has been put in place at the eleventh hour, even if it leads to belated compliance with requirements of the Corporations Act. 343 Indeed it seems that from at least September 2020 to June 2021 (when Mr Koster was appointed), to speak of those persons in the plural would be incorrect, because the sole person in a position of management responsibility was Mr McAuliffe. The Court has no confidence in his management of HML, and has no reason to think that the other directors appointed in 2021 will bring about any improvement. It is unlikely that they will manage the affairs of HML independently of Mr McAuliffe. They have given no evidence to the effect that they will do so, and as is discussed below it is likely that the company's ongoing operation depends on Mr McAuliffe extending substantial funds to HML, and not calling for repayment of those funds when the 24 month expiry date for the facilities comes around, or earlier if there is a default [262].

Solvency and HML's prospects 344 As noted above, HML does not defend the case the basis that the strength of its solvency meant that it would be an extreme step to order its winding up. It submits that this is a neutral factor [75]. Nevertheless, the Court must keep in mind the interests of creditors and members of the company as a whole and the evidence as to the financial position of the company is relevant to the exercise of the discretion. 345 The unaudited accounts of HML that were available to the Court as at the time of the hearing presented reason to doubt that the company would be able to continue as a going concern. By the time of the hearing it had raised relatively small amounts of capital from a small group of persons, including Mr McAuliffe and several others connected with him [263]. To a large extent the company was also dependent on ongoing direct financial support by way of loans from Mr McAuliffe. 346 On the basis of the principles summarised earlier in these reasons, and the way the parties' cases were put, I do not need to make a finding about whether HML is solvent, and I make no such finding. It is enough to say that it could not by any stretch of the imagination be called a prosperous enterprise, and it is likely to be dependent on ongoing financial support from Mr McAuliffe if it is to continue in operation, if that is the right way to describe its current sole proposed enterprise of possibly litigating against ASX. A successful outcome for such an enterprise can only be described as speculative, and when any such outcome could be achieved is entirely unknown. It would have been within HML's power to produce legal advice as to the prospects of the proposed litigation, although I acknowledge that it may have been reluctant to waive privilege over that advice. But on any view, it can be expected to take years and many millions of dollars to prosecute any claim against a defendant like ASX. Even the $2 million facility promised by Mr McAuliffe to HML is expressed to be for 'initial' litigation funding only [260]. 347 Whether anyone other than Mr McAuliffe will be willing to keep funding HML through those years of expensive uncertainty must be highly doubtful, as must the ongoing willingness of Mr McAuliffe himself. In addition, the evidence of his ability to keep funding the company is doubtful. As described above in connection with the application to set aside a subpoena, the plaintiffs had put that in issue, albeit just before trial when Mr McAuliffe filed his second affidavit (which evidenced the loans he granted to HML) [75]. It was in his power to produce evidence of his financial position in order to allay any concern that he could keep HML in the necessary funds. He did not produce anything, apart from a single bank statement (under compulsion) which shows that in one bank account he has just over $200,000 in cash [261], also [79]. HML submits that it is reasonable to infer that he has access to other funds but in view of his apparent inability or unwillingness to provide direct evidence of that, I do not make that inference. HML points to Mr McAuliffe's shareholdings in various companies including JBL and BRL but points to no evidence that those shares have any value. So there is no real basis for the Court to find that it is likely that Mr McAuliffe will be willing and able to continue to fund HML in its possible claim for compensation against ASX, which is likely to cost millions. Whether or not HML is currently solvent, its ability to carry on any successful business activities in future can only be described as highly doubtful. 348 For those reasons, on the particular facts of this case, and in light of the numerous serious concerns about the company that have been summarised above, HML's financial position and future prospects are not so sound as to warrant the Court refusing to make an order to wind the company up.

Whether plaintiffs are acting unreasonably in not pursuing another remedy 349 As has been said, HML relies on s 467(4) of the Corporations Act in submitting that the plaintiffs are acting unreasonably in seeking to have the company wound up instead of pursuing some other remedy that is available to them. I have set out earlier in these reasons the principles that govern the application of this proviso in s 467(4); the key question is whether, assessed objectively, the plaintiffs are indeed acting unreasonably in not pursuing another remedy, noting that 'remedy' in this context can mean something other than pursuit of a court ordered remedy. 350 HML points to several 'alternative remedies' which, it says, engage the proviso: the plaintiffs could bring a claim for damages for alleged breaches of continuous disclosure provisions; they could pursue the making of resolutions at an AGM, which HML describes by saying that an AGM would provide an opportunity for accountability and member participation; they could transfer their shares; and ASIC can take action in relation to compliance issues and in relation to related party transactions. 351 I do not consider that any of these alternative remedies, or all of them considered together, are sufficiently likely to remedy the plaintiffs' concerns to mean that the plaintiffs are acting unreasonably not to pursue them, recalling that the onus of establishing that is on HML. First, the claim for damages for alleged breaches of continuous disclosure provisions is postulated in a vague way, without naming a defendant. Assuming that the defendant would be HML, the evidence provides no firm basis to think that it will be able to meet any judgment against it, a judgment that would doubtless only be reached after long and expensive litigation. HML has not identified any other prospective defendants to a continuous disclosure action. 352 The potential benefit of a winding up, in contrast, is that a liquidator may investigate the transactions described above and others with a view to recovering substantial assets and, ultimately, making a distribution to the plaintiffs as contributories. In any event, while the pleadings indicated emphasis on alleged failures to ensure continuous disclosure, as the present application proceeded, it became clear that the concerns raised by the plaintiffs went well beyond failures in continuous disclosure. 353 As for the other alternative remedies, the benefits to the plaintiffs of an AGM are put in the vaguest possible way and, given the conduct of the EGM as detailed above, there can be no confidence that it will be a true opportunity for accountability and shareholder participation. The idea of a transfer of shares is also put in an extremely vague way, without saying to whom or for what consideration. Any valuation would no doubt be based on the company's parlous position, in which it finds itself partly as a result of the transactions detailed above, where, once again, the objective of a liquidator would be to try to recover funds potentially including funds lost as a result of those transactions. 354 It is convenient at this point to deal with an evidentiary objection made at trial that was left to be resolved in these reasons. HML tendered two letters from its solicitors, McCullough Robertson, to the plaintiffs' solicitors, Corrs Chambers Westgarth, in which offers were made to purchase the plaintiffs' shares in return for the discontinuance of the proceeding and fixing of costs. The plaintiffs objected under s 131 of the Evidence Act to the admission of the letters (other than in relation to any question of costs). 355 Section 131(1) relevantly provides that evidence is not to be adduced of a communication between persons in dispute in connection with an attempt to negotiate a settlement of the dispute. I uphold the objection on that basis. The two letters make offers to settle the proceeding. They fall within the words of s 131(1). Counsel for HML submitted that they did not because, as well as making an offer to settle the proceeding, they also served the additional purpose of 'resolv[ing] the rights of the shareholders and the complaints they make' by allowing the plaintiffs to exit the company and obtain return of their capital. I reject that submission. The breadth of the wording in s 131(1) belies it - to engage the section a communication need only be 'in connection with' an attempt to negotiate a settlement of the dispute. The section imports no 'sole purpose' or 'dominant purpose' test: Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 3) [2009] FCA 1075 at [67], [75] (Foster J). 356 HML also submits that if s 131 did apply to the letters, they came within the exception in s 131(2)(d), which provides that s 131(1) does not apply if 'the communication or document included a statement to the effect that it was not to be treated as confidential'. I also reject that submission. Neither of the letters said any such thing. Counsel for HML submitted that the 'statement' of non-confidentiality was implied but the statutory requirement that the communication 'included a statement' plainly requires that the lack of confidentiality be expressed in the letter. I therefore rule that the letters are not admissible evidence. So they can have no bearing on whether there is an 'alternative remedy' of a transfer of shares available to the plaintiffs. 357 As for the final 'alternative remedy' that HML says the plaintiffs should pursue, being action by ASIC, there is no evidence that it intends to continue its investigations into HML, when those investigations might result in litigation, or how such litigation might directly benefit shareholders in HML. The suggestion that this is an alternative remedy that the plaintiffs should pursue is entirely speculative and, since it depends on action by ASIC, not the plaintiffs, it would not fit the relevant words of s 467(4) of some other remedy that is 'available to the applicants'. Even if a narrow view of what is in the plaintiffs' interests is taken, they are not acting unreasonably in pursuing the appointment of a liquidator with powers to recover assets for the benefit of shareholders rather than, say, agreeing to be bought out at a value that is likely to reflect the company's parlous financial state. In my view, the proviso in s 467(4) is not engaged.

Conclusion on just and equitable winding up 358 One of the bases of HML's opposition to winding up was that the alleged circumstances constituting a 'failure of substratum' did not arise and, if they did, did not justify winding up. But I have found that there has been a fundamental abandonment of HML's original purposes which has contributed to a catastrophic loss of shareholder funds. HML also claims that at the time of the hearing the various failures of compliance had been addressed or would be addressed soon. But even if that is so, those failures have been fundamental and persistent, with partially effective measures only taken at the eleventh hour before the hearing, even in the face of a winding up application that had been on foot for a year beforehand. They provide serious cause for concern leading to a justifiable lack of confidence in HML's management. The company's lack of candour with shareholders, the market and regulators exacerbates that concern. And the concerns arising from the transactions described above warrant investigation which is best carried out by a liquidator. 359 I take account of the authorities on s 461 that describe winding up a solvent company as an extreme step with far reaching consequences beyond the plaintiffs. Even assuming that HML is solvent (which is at least doubtful), I consider that the extreme step is warranted here. The reasons just given lead to the conclusion, after examining the entire conduct of the affairs of the company, that the Court can have no confidence in the propensity of those managing HML to comply with their obligations. The company has not carried on its business candidly with the public and in a straightforward manner and it will be protective of the public interest to wind the company up.

Oppression ground 360 Having reached that conclusion it is not strictly necessary for me to express any view about whether HML should be wound up on the ground that its affairs have been conducted in a manner that has been oppressive to shareholders such as the plaintiffs. I need only comment on that ground briefly. There is no evidence that the plaintiffs or any minority shareholders have been specifically targeted for unfair treatment to the benefit of majority shareholders. While I do not put any weight in the company's favour on the outcome of the EGM, I do not find that it rises to the level of oppressive conduct. But the conduct of the affairs of the company as I have described it does meet the criterion of having been contrary to the interests of members as a whole. As required by the principles set out earlier in these reasons, the conduct of the affairs of the company has not complied with accepted standards of corporate behaviour and is not consistent with how reasonable directors would have acted in attending to the affairs of the company. It is not necessary to repeat all the reasons given above, which apply equally here. Whether any individual occurrence would merit the description of oppressive conduct in the sense of conduct contrary to the interests of members as a whole, the accumulation of conduct that has been described does merit that description: see Hylepin at [63] above. For that reason, and contrary to HML's submissions [32], the complaints on which the plaintiffs rely go beyond the complaints of minority shareholders who disagree with management decisions and are disgruntled at the loss of the value of their investments. At the very least, before embarking on a program of investing substantial funds in unlisted connected companies and advancing substantial sums to such companies, reasonable directors would have made full disclosure to shareholders of their intentions and the possible outcomes of the transactions. They would have put the change in strategy to shareholders for approval before risking their capital in a quite different venture from the one that they originally embarked on. However the case for just and equitable winding up is stronger and it is on that basis that HML will be wound up.

Orders 361 There will be an order for the winding up of HML and the appointment of the individuals nominated by the plaintiffs as liquidators. The plaintiffs' costs of the proceeding will be costs in the winding up. I certify that the preceding three hundred and sixty-one (361) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.