Moss v Gunns Finance Pty Ltd

Moss v Gunns Finance Pty Ltd - [2018] FCAFC 185 - FCAFC 2018 case summary — Zoe

[10]

A Introduction and Background 1 The appellant (Mr Moss) is a solicitor. For reasons that are not presently relevant, he decided to invest in timber and walnuts. The result has not been a happy one. 2 The vehicles for the investments were six managed investment schemes, operated by Gunns Plantations Ltd (GPL). The funds for the investments were obtained by loans from the respondent (Gunns Finance): four loans for timber schemes; and two loans for walnut schemes. In 2013, Mr Moss defaulted under the timber schemes loans. When Gunns Finance commenced a recovery proceeding, Mr Moss denied liability and cross-claimed alleging, amongst other things, that Gunns Finance had engaged in misleading conduct by reason of representations conveyed in the relevant product disclosure statements. In 2015, Mr Moss defaulted under the balance of the loans relating to the walnut schemes, resulting in a further proceeding in which he made similar claims in resisting liability for repayment. Summary judgment in the latter proceeding was entered against Mr Moss. 3 The following year, while the first of the two recovery proceedings was still on foot in the District Court of New South Wales, Mr Moss executed an authority under s 188 of the Bankruptcy Act 1966 (Cth) (Act) and proposed a personal insolvency agreement (PIA). Gunns Finance submitted a proof of debt for $654,466.03 (later updated to $666,268.57) to the controlling trustees (trustees), being the total amount claimed to be outstanding to it by Mr Moss. 4 In order for the PIA to be approved, it was necessary that the offer by Mr Moss be accepted by special resolution at a creditors' meeting (meaning the majority of those present voting in favour of the offer, personally or by proxy, and that those voting in favour must represent 75 per cent of the money owed to those taking part in the vote). Such a resolution was purportedly carried, requiring Mr Moss to execute the PIA. Gunns Finance voted against the resolution but had only been admitted for part of its claim (being $61,326.45, the amount of the judgment obtained summarily by Gunns Finance). The remainder of its proof relating to the timber schemes (Gunns Woodlot debt), was admitted for only $1 for voting purposes. This decision in relation to the proof was determinative, in that if Gunns Finance proof had been admitted in full, it is not disputed that the special resolution would have failed to pass. 5 It was in these circumstances that Gunns Finance made two applications to the Federal Circuit Court: the first was to apply to set aside the PIA under s 222(1) of the Act (PIA Application); and the second was for orders reversing the trustees' decision not to admit the proof in full under either s 104 or s 178 of the Act (Proof of Debt Application). 6 The proceedings before the Federal Circuit Court were heard over four days and, in August 2017, the primary judge made the following relevant orders, in respect of which Mr Moss brings his appeal: (1) The Personal Insolvency Agreement of the First Respondent, Stephen John Moss dated 9 September 2016 be set aside. (2) A sequestration order be made against the estate of Stephen John Moss pursuant to section 222(10) of the [Act]. 7 Although the PIA was set aside, no order was made in relation to the Proof of Debt Application. As will be explained below, this omission and the way in which the primary judge approached the determination of the two distinct stages of the PIA Application has caused some confusion. This appears to have been the result of the unstructured way submissions were put to the primary judge by the parties, a phenomenon mirrored in the way in which the initial argument was presented in this Court. Additionally, the resolution of the appeal has been made more complicated than it ought to have been by a prolix and repetitive notice of appeal which initially (and remarkably) contained 62 grounds. 8 The balance of these reasons will be divided into the following headings: B The Nature of the Application and the Statutory Task C How the Primary Judge Approached his Decision D The Substance of the Appeal and Notice of Contention E Consideration of the Appeal Grounds F Consideration of the Notice of Contention G Conclusion

[12]

B.1 PIA Application 10 Section 222 of the Act relevantly provides that a PIA may be set aside by a creditor if the court is satisfied that either: (1) the terms of the PIA are unreasonable or not calculated to benefit the creditors generally (s 221(1)(d)); or (2) for any other reason, the PIA ought to be set aside (s 221(1)(e)). 11 If the court reaches a level of satisfaction in relation to either of these matters (thus allowing it to exercise the discretion to set aside the PIA), then the court is to consider whether it ought to make any ancillary orders (s 222(8)) and also, if a sequestration order is sought (as was the case here), whether such an order should be made (s 222(10)). 12 As to the state of satisfaction required by s 222(1)(d), in assessing whether a PIA is unreasonable or not calculated to benefit creditors, regard can be had to a variety of factors. Some of these factors which have present relevance include: first, the relative size of the debts owing and the proposal; secondly, the nature of the relationship between the debtor and the creditors who voted in favour of the PIA: Hingston v Westpac Banking Corporation [2012] FCAFC 41; (2012) 200 FCR 493 at 505 [58] (Greenwood, McKerracher and Nicholas JJ); and thirdly, whether the circumstances call for a greater opportunity to inquire into the debtor's affairs and the closeness of the creditors' vote, particularly if influenced by creditors who were not at arm's length from the debtor: Osborne v Gangemi [2011] FCA 1252; (2011) 9 ABC (NS) 257 at 268 [47]. Fourthly, the inadequacy of a return may also constitute sufficient basis to set aside the PIA, especially so when other factors point in favour of setting it aside: Bendigo and Adelaide Bank Ltd v Clout [2016] FCA 119; (2016) 14 ABC (NS) 46 at 54 [46]. 13 As to s 222(1)(e), given the width of the notion that the Court has power to set aside the PIA if it reaches the state of being satisfied that it is appropriate to do so "for any other reason", there are no particular limits circumscribing the discretion under this sub-section: see New Age Constructions (NSW) Pty Ltd v Etlis [2013] FCA 884; (2013) 11 ABC (NS) 542 at 554 [61].

[14]

C How the Primary Judge Approached his Decision 17 At [8], the primary judge summarised his conclusions as to why "an order should be made setting aside the PIA". The reasons were fourfold: (1) the Gunns Woodlot debt was wrongly admitted for only $1 and should have been admitted for its full claimed value; (3) the return to creditors under the PIA is negligible and there was little risk to creditors if it was set aside; (4) the trustees ought to have been circumspect in relation to debts owed to friendly creditors who voted for the PIA but did not stand to benefit under it; and (5) further investigation was required in relation to the affairs of the debtor in particular in relation to the property owned by his wife. 18 In relation to the Proof of Debt Application, as noted above, although no order was made by the primary judge, his Honour made three findings relevant to its determination: (1) despite being required to do so, the trustees failed to decide for themselves the true value of the Gunns Woodlot debt: at [168]; (2) Mr Moss did not establish that Gunns Finance was acting as an agent for GPL or that Gunns Finance is fixed with a liability in respect of any alleged misrepresentation contained in any product disclosure statement and accordingly, for this reason, "the cross-claim fails": at [187]; (3) the calculation of interest and indemnity costs which form a substantial part of the Gunns Woodlot debt was not successfully impugned: at [193]. 19 It will be necessary to return to these aspects of the primary judge's reasons below, but two important preliminary comments should be made. 20 First, although a Points of Claim document was before the Court, it did not specify, with any particularity, how Gunns Finance put the PIA Application case under s 222(1)(d) or s 222(1)(e) of the Act. This lack of precision did not assist the primary judge delineating between matters relied upon under each subsection of s 222(1) and the interrelationship between the individual findings summarised at [17] above. The reasoning of the primary judge as to the PIA Application is best viewed as comprising two parts. At [70]-[105], the primary judge considered what his Honour identified were the grounds for setting aside the PIA pursuant to s 222(1)(d) of the Act; and at [106]-[163], the primary judge considered what his Honour identified as being the s 222(1)(e) ground. 21 Accordingly, it seems to us that the better view of his Honour's reasons insofar as a s 221(1)(d) conclusion was reached, is that his conclusion is based on the findings that: (a) the return to creditors under the PIA was negligible and there was little risk to creditors if set aside; (b) the trustees ought to have been circumspect in relation to debts owed to friendly creditors who voted for the PIA but did not stand to benefit under it; and (c) further investigation was required. 22 It follows (as is reflected in the heading beneath [105] of the primary judge's reasons), that insofar as a s 221(1)(e) conclusion was reached that "for any other reason, the agreement ought to be set aside", this was based on the finding that the Gunns Woodlot debt was not admitted for its full claimed value. 23 Secondly, a necessary component of any consideration as to whether the Court is satisfied that the PIA was unreasonable or did not benefit the creditors or otherwise ought to be set aside is understanding, with specificity, what was owed to creditors and whether the special resolution was passed in circumstances which reflected the intentions of creditors who represented 75 per cent of the money owed. In these circumstances, the logical point of commencement is consideration as to whether Gunns Finance was a creditor in the amount it claimed and whether the trustees' determination in admitting the Gunns Woodlot debt for $1 should be set aside and/or whether Gunns Finance was entitled to a declaration of right that it ought to have been admitted in the full amount of the Gunns Woodlot debt. The primary judge was distracted by the parties' approach of inviting his Honour to "determine" the cross-claim proceeding, a task logically and legally distinct to the role with which the primary judge was concerned, being the determination of certain issues raised in the cross-claim which were necessary to be resolved in order to determine whether the Gunns Woodlot debt should have been admitted in full (and the consequences of this for the PIA Application). As will become evident, at least some issues raised by the cross-claim were necessary to be resolved, since, in the event the issues were determined in favour of Mr Moss, Gunns Finance would not be able to prove their debt for the full amount for the purposes of the PIA. 24 Having identified these preliminary points, it is appropriate to now turn to the bases upon which Mr Moss contends the primary judge erred.

[16]

D.1 The Substance of the Appeal 25 The 62 initial grounds of appeal were reduced to 11 grounds in an amended notice (ANOA). After proper attention was directed to the arguments, at the time submissions were filed by Counsel on behalf of Mr Moss, the written outline reduced the alleged errors into eight grounds, which can be conveniently grouped into six headings. Mr Wells, who appeared on behalf of Mr Moss, agreed at the commencement of oral argument, that these were the grounds that were pressed. They are as follows: (1) The primary judge erred in determining the cross-claim and erred in finding that Gunns Finance should not have been admitted for $1 for voting purposes with regard to the Gunns Woodlot debt (Admission of Gunns Woodlot Debt Grounds). (2) The primary judge erred "in connection with the quantification of interest and costs and the measure of the debt owed to Gunns Finance was erroneous" (Quantification Ground). (3) The primary judge failed to appreciate the effect of bankruptcy on Mr Moss and erred in finding that Mr Moss "would earn significantly more than $50,000" per annum and ought to have found that Mr Moss' employment at Slater & Gordon would be terminated and that his earnings would be less than $50,000 (Consequence of Bankruptcy Ground). (4) The primary judge erred in finding that setting aside the PIA and making the sequestration order was in the interests of creditors (Interests of Creditors Ground). (5) The primary judge erred in finding that further investigation was warranted into the transfer to Mr Moss' wife of a property at Woollahra by a company associated with him and his wife (Amalfi Estates Pty Ltd) on the basis of the circumstances of the transaction and Mr Moss' interest in it (No Further Investigations Warranted Ground). (6) The primary judge erred in failing to find that the notice to creditors required by Rule 10.04 of the Federal Circuit Court (Bankruptcy) Rules 2016 was defective for failure to specify an address from which creditors could obtain copies of material (Notice to Creditors Ground). 26 Each of these grounds are considered separately in Section E below.

[17]

D.2 Notice of Contention 27 Prior to considering the arguments advanced as to why the primary judged erred, something should be said about how Gunns Finance defended the reasoning of the primary judge. 28 Initially, Gunns Finance did not accept that the primary judge had failed to make any order in relation to the Proof of Debt Application. Indeed, it was submitted that what his Honour did was to make "such order in the matter as it thinks just and equitable" under s 178 in setting aside the PIA. It was also suggested that his Honour "was required to determine the cross-claim and Mr Moss had [the] burden of establishing it". As to the first of these arguments, it not possible to read the primary judge's orders as amounting to an exercise of power under s 178. The primary judge was quite plain that the order setting aside the PIA was made for the reasons he identified which, his Honour found, enlivened power under s 222 of the Act. As to the latter, as already explained, this misstates the role of a Bankruptcy Court which is to form its own view as to those facts relevant to the statutory tasks before it, not performing some sort of roving role in resolving District Court litigation. 29 On the second and final day of the hearing of the appeal, Gunns Finance embraced the notion that the orders made by the primary judge should be affirmed on grounds other than those relied on by his Honour. A notice of contention was articulated as follows: 1. The primary judge: (a) ought to have held that the controlling trustees' error in deciding to admit for $1 (for voting purposes) that part of first respondent's proof of debt as was concerned with the "Woodlot loans" was an "other reason" within the meaning of section 222(1)(e) of the [Act]; and (b) ought to have made: (i) an order setting aside the decision; and (ii) a declaration or other order that the controlling trustees should have admitted the proof of debt in full for voting purposes. (2) The primary judge ought to have held that the appellant's proposed further "amended cross claim statement of cross claim" failed to disclose a cause of action against the first respondent (Proposed Pleading). (3) The primary judge ought to have held that the appellant had not proved that he had suffered any loss or damage by reason (sic) the conduct of the first respondent, set out in the Proposed Pleading. 30 Both Ground 1 and Ground 2 of the notice of contention were not opposed and leave to raise these grounds was granted. Proposed Ground 3 fell into a separate category, and the question of leave was reserved. Mr Wells submitted that it raised a new matter which had not been addressed in the submissions on appeal and was not dealt with in detail in either the primary judgment or the hearing below. There is no reason why Ground 3, which does raise a discrete issue, could not have been advanced at an earlier time during the course of the appeal. It would require attention to be given to detailed matters not addressed in the written submissions. In the circumstances, we consider that the objection of Mr Moss to a grant of leave to raise it belatedly is well founded. Accordingly, leave to raise Ground 3 is refused.

[18]

E.1 Admission of Gunns Woodlot Debt Grounds (Ground 2 ANOA) 31 The primary judge's conclusion that Gunns Finance's proof was wrongly admitted for only $1 and should have been admitted in full (at [8(a)], [134]) had two aspects: first, the controlling trustees had not properly considered Gunns Finance's claim (see [106]-[147]); and secondly, a conclusion that the underlying merits were such as to require that the proof be admitted in the full amount (see [164]-[187]). The latter conclusion was expressed, as explained above, in the finding that Gunns Finance established its claim, and Mr Moss' "cross-claim failed" (at [187]). 32 Mr Moss challenges both these findings. The first aspect can be dealt with shortly. Although the primary judge reasoned that the trustees failed in their duty to make their own judgment about the prospects of the litigation between Gunns Finance and Mr Moss (see [141]-[147]), this has no enduring consequence. The controlling trustees may determine any question as to the entitlement of a person to vote, but the Court has power to determine whether or not persons were in actual fact entitled to vote: see Forshaw v Thompson (1992) 35 FCR 329 at 339-340 (Lockhart J with whom Black CJ and Sweeney J agreed); Zantiotis v Andrew (1987) 80 ALR 23, 26-27 (Beaumont J); Re Dingle; Westpac Banking Corporation v Worrell (1993) 47 FCR 478, 485 (Full Court). As the Full Court noted in Re Dingle; Westpac v Worrell at 90, "once the matter came to Court, the course taken by the trustee became irrelevant", as did the conduct or opinion of the trustees. 33 Another matter which on a proper analysis is of no enduring significance, is the assertion of Mr Moss that the recovery proceeding itself could not be "properly determined in the absence of a trial of the District Court proceeding". Mr Moss contends the cross-claim (including the issue of the authority of Mr Uittenbogaard, an employee of GPL) could not be determined "in the absence of a trial" and the "usual pre-trial steps" (such as discovery, subpoenas, notices to produce). It follows, it is said, that the primary judge erred in finding that his Honour was determining the cross-claim. For reasons that have already been remarked upon, this submission of Mr Moss may be accepted so far as it goes. The problem for Mr Moss is that it does not go very far at all. 34 In determining the entitlement issue itself, the primary judge was required, on the evidence the parties placed before his Honour, to determine whether Gunns Finance, being the person claiming to be entitled to vote is "a creditor of the debtors and, if so, in what amount": see Re Dingle; Westpac v Worrell at 490-491. Where the debtor (here, Mr Moss) has a cross-claim, the Court's task will involve forming a view as to whether it has merit and, if so, its worth: Re Dingle; Westpac v Worrell at 489-490. In Re Dingle; Westpac v Worrell at 491, the Full Court noted that where there is a cross-claim, this necessarily "involved a trial of all of the issues, including the cross-claim". This does not mean a hearing of the proceeding itself, but rather, forming a view and making findings as to the issues raised by the cross-claim (in contradistinction to determining the cross-claim proceeding per se). Although complex issues of fact and law may be involved, this is a matter to be dealt with by appropriate procedural directions: see Musolino v Sidiropoulos (1991) 101 ALR 235, 244 (Full Court) and Beard v Prestige Banking Industries (1981) 52 FLR 384, 405-406 (Fox J), both cited with approval in Re Dingle; Westpac v Worrell at 487-8. 35 It follows that it was necessary for the primary judge to form a view as to the issues, being the entitlement to relief based upon representations allegedly contained in the product disclosure statements (PDSs) or representations allegedly made by Mr Uittenbogaard. It was up to the parties to adduce in the court below, such evidence as was necessary to sustain their submissions on these issues. In deciding that the cross-claim "failed", the primary judge held that Gunns Finance was not liable for the relevant conduct (at [187]). He concluded that the PDSs were published by GPL, and Gunns Finance could not be liable for them (at [180]-[184], [187]). He also found that the evidence did not support the allegation that Mr Uittenbogaard was an agent of Gunns Finance (at [185]-[187]). 36 Obviously enough, Gunns Finance had the burden of proving it was a creditor and the amount it was owed (given its claim was based on a judgment and loans, this was a relatively straightforward task); Mr Moss had the burden of persuading the primary judge that this amount should not be regarded as owing and that Gunns Finance was not a creditor in the amount of the judgment and the loans. There is no substance in any procedural fairness issue raised now by Mr Moss. The characterisation of the Court "determining" the cross-claim may be apt to confuse but the forensic battleground was delineated, and prior to the hearing Mr Moss was entitled to gather such evidence and invoke such of the "usual pre-trial steps" as he thought appropriate. 37 The real issue on appeal is whether his Honour's conclusion that the underlying merits were such as to require that the proof be admitted in the full amount, was erroneous for the reasons identified by Mr Moss. It is to this topic to which we now turn. 38 The issues raised by the cross-claim were: (a) whether the PDSs were misleading (or, as alleged in the draft amended cross-claim, "defective"); (b) whether the representations made by Mr Uittenbogaard were misleading; (c) whether Mr Uittenbogaard or GPL were agents of Gunns Finance; and (d) the extent of Mr Moss' losses. 39 As noted above, the primary judge concluded that GPL and not Gunns Finance was responsible for the PDSs, and that Mr Uittenbogaard was not an agent of Gunns Finance, and hence it was unnecessary for his Honour to reach a concluded view about whether the PDSs were in fact "defective" or as to quantum of loss allegedly suffered by Mr Moss (including the no doubt potentially complex question of benefits of any income tax deductions claimed). 40 Although the principal argument advanced in the written submissions was that the primary judge "should have found that the cross-claim, including the question of agency, could not be properly determined in the absence of a trial", the focus of Counsel for Mr Moss in his oral submissions was whether the conclusion by the primary judge that Gunns Finance could not be attributed with any liability for any alleged contravening conduct was erroneous. This was repeatedly characterised by the parties in submissions as simply an argument as to whether GPL or Mr Uittenbogaard was an "agent" for Gunns Finance, but framing the issue in this way is incomplete. As Lord Wilberforce said in Morgans v Launchbury [1973] AC 127 at 135, to describe a person as the agent of another, is to express a conclusion, rather than to state a reason for such a conclusion. It is necessary to have regard to: (a) what the concept "agent" means in the present context; (b) why the agency was said to arise; and (c) what was alleged to be the scope of the alleged agency. There is also the distinct issue, (d) whether GPL or Mr Uittenbogaard are to be taken to have made representations on behalf of Gunns Finance, a notion which is best described as one of legal attribution rather than one of agency. 41 As to (a), the parties agreed that what the term "agent" connoted was an authority in one person (GPL or Mr Uittenbogaard) to create legal relations between a person occupying the position of principal (Gunns Finance) and a third party (Mr Moss). This is the way the often misused term "agent" is best understood: see Gummow J in Scott v Davis [2000] HCA 52; (2000) 204 CLR 333 at 408 [227]. 42 As to (b), (c) and (d), it is necessary to have regard to those matters alleged by Mr Moss in the court below. This was done by reference to material put into evidence before the primary judge, being a copy of an amended cross-claim and statement of cross-claim (cross-claim) that had been served but had not yet been filed in the District Court Proceeding 2015/3568 (Woodlot proceeding). 43 The cross-claim sought the following relevant relief: 6 An Order that the First Loan Agreement, Second Loan Agreement, Third Loan Agreement and Fourth Loan Agreement as pleaded in the Statement of Claim are unenforceable as against the Cross-claimant pursuant to: (a) s 12GM of the Australian Security and Investments Commission Act 2001 (ASIC Act); (b) s 1022C of the Corporations Act 2001; (c) s 1325 of the Corporations Act 2001; and/or (d) s 7 of the Contracts Review Act 1980. 7 Alternatively to 6 above, damages in an amount equal to the amount of any liability of the Cross-claimant to the Cross-defendant in respect of the claims pleaded in the Statement of Claim, including damages pursuant to: (a) s 12GF of the ASIC Act; and/or (b) s 1022B of the Corporations Act 2001. 8 An Order that the Cross-defendant refund all moneys paid to it by the Cross-Claimant under the First, Second, Third and Fourth Loan Agreements. 9 Alternatively to 8 above, damages in an amount equal to the amount of the moneys paid by the Cross-claimant to the Cross-defendant under the First, Second, Third and Fourth Loan Agreements, including damages pursuant to: (a) s 12GF of the ASIC Act; and/or (b) s 1022B of the Corporations Act 2001. 10 Alternatively to the above, damages. 44 It was alleged at paragraph 2 of the cross-claim that Gunns Finance "by its authorised representative, Mr John Uittenbogaard offered to [Mr Moss] an investment in [the various Woodlot projects] and finance for such investment as included in the PDS provided by Gunns Finance". 45 This pleading was in relation to the "Gunns Plantations Ltd Woodlot Project 2006" but the same allegations are made in cognate paragraphs in relation to the three other projects. It is convenient to treat the Gunns Plantations Ltd Woodlot Project 2006 pleading as representative of the allegations made in relation to the three other projects. The passing reference in the reply submissions of Mr Moss that there was some error in his Honour not dealing with the issues raised in relation to each year is not only inconsistent with the way the case was framed in the cross-claim, but also how the case was argued below. In any event, the particulars to the allegation in paragraph 2 were in the following form: (a) the offer was partly oral and partly in writing; (b) the writing comprised the PDS for Woodlot Project 2006 (which included the First Loan Agreement as defined in the Statement of Claim) and the Cross-claimant relies on the said document as if the same were fully set out herein. (c) the oral part was through conversations between Mr Uittenbogaard on behalf of Gunns Finance and the Cross-claimant. 46 It was then contended (in paragraph 3) that Gunns Finance and/or Mr Uittenbogaard "as its representative completed all relevant aspects of the application form" for Mr Moss to acquire his interest. By paragraph 4, various written representations were pleaded arising from the PDS. By paragraph 5, it was said that Mr Uittenbogaard, "on behalf of Gunns Finance" made a number of verbal representations. 47 In the following paragraph, it was alleged that: Gunns Finance, by reason of the issue of the said 2006 Project PDS which included the First Loan Agreement and/or the said First Loan Agreement and/or the 2006 Written Representations pleaded above and/or the 2006 Verbal Representations pleaded above, engaged in conduct which was misleading or deceptive or likely to mislead or deceive in that [a number of matters are then set out explaining why the representations amounted to contravening conduct]. 48 Reliance on the representations was pleaded by paragraph 7 and then various matters were set out as to why the written and verbal representations had no reasonable basis. 49 The cross-claim then set out the following: 10 The 2006 Written Representations and/or the 2006 Verbal Representations were representations made by or alternatively on behalf of Gunns Finance: (a) in trade or commerce; and (b) in relation to financial services for the purposes of Part 2, Division 2 of the ASIC Act. 11 Further, the 2006 Written Representations and/or the 2006 Verbal Representations were representations as to future matters for the purposes of section 12BB(1) of the ASIC Act. 12 By reason of the matters pleaded above, Gunns Finance has engaged in unconscionable conduct in contravention of section 12CB of the ASIC Act, and the purported enforcement of the said First Loan Agreement by Gunns Finance is unconscionable conduct in contravention of Section 12CB of the ASIC Act and the unwritten law. 13 Alternatively, by reason of the matters pleaded above, Gunns Finance engaged in conduct which was misleading or deceptive, or likely to mislead or deceive, in contravention of section 12DA of the ASIC Act. 14 Alternatively, by reason of the matters pleaded above, Gunns Finance by the issue of the First Loan Agreement and the PDS it was part of has engaged in misleading conduct in contravention of Section 12DB of the ASIC Act. 15 Alternatively, by reason of the matters pleaded above, Gunns Finance by the issue of the First Loan Agreement and the PDS it was part of has engaged in conduct in contravention of Section 12DC of the ASIC Act. 16 As a consequence of the unconscionable and misleading or deceptive conduct of Gunns Finance pleaded above, and/or the fact that such conduct contravened the ASIC Act as pleaded, the Cross-claimant says that the First Loan Agreement ought be varied pursuant to s 12GM of the ASIC Act such that: (a) the moneys claimed by Gunns Finance are not recoverable under the said Loan Agreement; and/or (b) the said Loan Agreement is not enforceable as against the Cross-claimant; and/or (c) Gunns Finance ought refund all moneys paid by the Cross-claimant under the said Loan Agreement; and/or pay damages to the Cross-claimant pursuant to s 12GF of the ASIC Act. 50 As noted above, a similar pattern exists in respect of the Second Loan Agreement, the Third Loan Agreement and the Fourth Loan Agreement. 51 There are a number of fundamental problems with the pleading, but a patent defect is the lack of identification of the facts, matters and circumstances relied upon to aver that GPL relevantly created legal relations between the alleged principal (Gunns Finance) and a third party (Mr Moss) or, more specifically, as to how GPL or Mr Uittenbogaard (either on behalf of GPL or on his own account) are to be taken as having made representations on behalf of Gunns Finance. Indeed, what is pleaded, in a conclusory way, is that Gunns Finance and/or Mr Uittenbogaard acted as an "authorised representative" of GPL or Mr Uittenbogaard acted "on behalf of Gunns Finance". To adapt the words of Lord Wilberforce, what has been expressed are some conclusions, rather than the reasons for such conclusions. 52 Perhaps recognising this difficulty, moving away from the pleading, Mr Moss now contends that there were "a number of things that point to GPL being the agent of Gunns Finance". A number of matters were relied upon in the written submissions of Mr Moss, but none of them taken individually or collectively, is sufficient to establish that GPL was authorised to create legal relations between Gunns Finance and Mr Moss. 53 First, it is said that Gunns Finance and GPL were both wholly-owned subsidiaries of Gunns Limited. This is correct, but is not to the point. Each corporation had a separate existence, both from other subsidiaries and their common parent. Secondly, and connected to the first point, common directorship is relied upon but of course this is insufficient to provide the requisite authority even in a scheme arrangement of the current type: see Clarke v Great Southern Finance Pty Ltd (in liq) [2010] VSC 473; (2010) 243 FLR 451 at 463-464 [32] (Croft J). Thirdly, a number of communications were pointed to in the affidavit material said to demonstrate "interchange of GPL staff as agents for [Gunns Finance]". Fourthly, Gunns Finance is said to have only had four employees. Fifthly, it was said that GPL suggested to Mr Moss that in order to obtain finance from Gunns Finance, he should contact GPL; and sixthly all relevant loan application forms were submitted to GPL. These submissions illustrate well the lack of proper development of the "agency" or attribution argument. Administrative arrangements to allow employees of a related company to perform tasks on behalf of Gunns Finance may exist, but that is the beginning rather than the end of an argument that the representations pleaded made by GPL and/or Mr Uittenbogaard were made on behalf of Gunns Finance so as to mean that Gunns Finance is to be attributed with responsibility at law for the impugned conduct. The primary judge was entitled to determine the issues relevant to the task before him by reference to how those issues were advanced in the cross-claim and he did so without error. 54 Similarly, as to the question of Mr Uittenbogaard's authority, none of the four factors to which Mr Moss points are sufficient to establish that he was an agent of, or had authority to act for, Gunns Finance: (1) Although Mr Uittenbogaard was authorised to engage in communications with third parties on behalf of GPL, this does not make him an agent of Gunns Finance. Some letters from Mr Uittenbogaard used the GPL letterhead but, as the primary judge pointed out, the evidence was that Gunns Finance had its own letterhead, on which it (and not Mr Uittenbogaard) wrote to Mr Moss about his loans (at [186(g)]). (2) As noted above, the cross-claim alleged that Mr Uittenbogaard was Gunns Finance's "authorised representative"; this allegation was at best meaningless. To the extent that it constituted a reference to the legal concept of an "authorised representative", it was incorrect. It was common ground that Gunns Finance did not hold an Australian Financial Services Licence and hence Mr Uittenbogaard could not (as defined in s 761A of the Corporations Act 2001 (Cth) (CA)) be a person authorised to provide a financial service on behalf of Gunns Finance as a financial services licensee (where a "financial services licensee" is a person who holds an Australian Financial Services Licence). (3) Mr Uittenbogaard's own description of his role is not evidence that he was an agent or representative or was authorised to make representations on behalf of Gunns Finance. It is trite that assertions by an agent cannot prove the existence of an agency. As noted above, lacking here was any identification of those matters relied upon to constitute a holding out by the principal (see Quikfund (Australia) Pty Ltd v Prosperity Group International Pty Ltd (in liq) [2013] FCAFC 5; (2013) 209 FCR 368, 387-388 [79]), or the identification of the facts upon which Gunns Finance had legal responsibility for Mr Uittenbogaard's conduct (or was relevantly "involved in" the conduct in an accessorial sense). (4) Mr Moss placed emphasis upon the fact that Mr Uittenbogaard completed documentation and waived a fee on behalf of Gunns Finance but this does not demonstrate he was an agent of Gunns Finance for the purpose of making representations on behalf of Gunns Finance as pleaded, nor some broader allegation of an agency sufficient to create legal obligations generally on behalf of Gunns Finance which was the way in which the cross-claim put the case. 55 We are further fortified in our conclusion that the primary judge was correct in rejecting the contention that the issues raised by the cross-claim established a reason why the proof ought not to have been admitted in the full amount, by a further issue which was not addressed until it was raised during the oral hearing before the Full Court. That is the non-availability of the statutory claims advanced by Mr Moss. On day two of the appeal, counsel for Mr Moss accepted that the relief sought in the cross-claim under the Australian Securities and Investments Commission Act 2001 (Cth) and the Contracts Review Act 1980 (NSW) were unavailable and could be put to one side. What was pressed were claims of Mr Moss said to arise under: (a) s 1022B of the CA; (b) the general misleading or deceptive conduct provisions in the CA; and (c) for misrepresentation under the general law. 56 What was not advanced (and is notable for its absence) is any pleading whereby it was alleged that Gunns Finance was "involved in" (see s 79 of the CA) any contravention by GPL, for example, because GPL knew of information about a significant risk associated with an investment in the Projects within the meaning of s 1013D(1)(c) of the CA, or information that might reasonably be expected to have a material influence on the decision of a reasonable person, as a retail client (including Mr Moss) to invest in the Projects within the meaning of s 1013E of the CA or of the failure by GPL to take steps which meant that the relevant PDSs were defective within the meaning of s 1022A(1) of the CA). 57 Liability for a defective PDS is governed by s 1022B of the CA. The section relevantly provides that, if a person suffers loss and damage by reason of having been given a "disclosure document" (here, a PDS) that is defective, the person may recover the amount of the loss or damage by action against a "liable person": s 1022B(2). Gunns Finance was not a "liable person" because it was GPS who was the person "by whom, or on whose behalf, the disclosure document or statement was prepared" (s 1022B(3)(b)(i)); and Gunns Finance was not a "person involved in the preparation of the disclosure document or statement who, directly or indirectly, caused the disclosure document or statement to be defective or contributed to it being defective ..." (s 1022B(3)(b)(ii)). It is not sufficient that Gunns Finance be somehow a part of the "scheme" in a general sense, what needed to be alleged and proved if such a case was to be advanced was that Gunns Finance had caused the document to be defective, either through the inclusion of a positive misleading statement or through some act or positive decision leading to the omission of a matter required to be included in the PDS: see Clarke v Great Southern Finance Pty Ltd (Receivers and Managers Appointed) (in liq) [2014] VSC 516 at [396]-[399]. 58 It suffices to note that the cross-claim (relied upon before the primary judge as articulating the claim of Mr Moss) was deficient in identifying a claim for statutory compensation against Gunns Finance and, more particularly, that Mr Moss did not attempt to plead facts going to, let alone identify before the primary judge, how Gunns Finance was "involved in the preparation" of the PDSs, or how that caused or contributed to them being "defective".

[19]

General misleading or deceptive conduct provisions in the CA 59 To the extent that there was reliance on the "general" prohibition of misleading or deceptive conduct in relation to the PDSs pursuant to s 1041H, such reliance is misplaced. Section 1041H(3) provides that conduct "in relation to a disclosure document or statement within the meaning of section 1022A" is excluded from s 1041H(1). 60 As Judd J explained in Woodcroft-Brown v Timbercorp Securities Ltd (No 2) [2011] VSC 526 at [14]: The Act contains a comprehensive scheme to prescribe and regulate the disclosure obligations of a responsible entity such as Timbercorp Securities. The scheme prescribes what a Product Disclosure Statement must and need not contain; and the ongoing disclosure obligations of the issuer of such a statement. The scheme has created a self-contained external legal context to the alleged representations and conduct. There would seem little scope for claims of misleading or deceptive conduct falling outside the scheme. That implicit, and entirely logical, limitation upon the scope of such claims is given statutory force in s 1041H(3)(c), which provides that 'conduct in relation to a disclosure document or statement within the meaning of s 1022A does not contravene' the prohibition on misleading or deceptive conduct in relation to a financial product in s 1041H(1). 61 To the extent that there was reliance on the "general" prohibition of misleading or deceptive conduct in relation to other pleaded representations (that is, not relating to the PDSs) this argument was difficult to follow. This case seemed to relate to verbal representations allegedly made by Mr Uittenbogaard on behalf of Gunns Finance, but when examined, these verbal representations do seem to relate, at least in large part, to repeating written representations made in the PDSs (see, for example, the cross-claim at [5]) or are otherwise flawed by reason of the premise that the representations should be attributed to Gunns Finance, a contention not properly pleaded in the cross-claim and correctly rejected on the material before the Court by the primary judge.

[23]

E.3 Consequence of Bankruptcy Grounds (Ground 5 ANOA) 67 Mr Moss contends that the primary judge failed to appreciate the effect of bankruptcy on him. Specifically, he contends that his Honour erred in finding that Mr Moss would earn "significantly more than $50,000 per annum" if bankrupted and ought to have found that Mr Moss' employment at Slater & Gordon would be terminated and that his earnings would be no more than $50,000. This figure was relevant because Mr Moss gave evidence that he may be able to obtain full-time employment with a company called Lucky Drink Pty Ltd as a China Liaison Officer on an annual salary of $50,000 and if this was his salary as a result of bankruptcy, the return to creditors would be less than under the PIA. 68 As is evident at [80]-[81] of the primary judge's reasons, what his Honour did was: first, to proceed on the basis that Mr Moss' employment with Slater and Gordon would be terminated in the event of a sequestration order being made; but secondly, to reject the notion, notwithstanding the loss of his employment, that Mr Moss' income would be limited to $50,000 or that the loss of his income of $240,000 as an employed solicitor would mean that his creditors would be significantly worse off in the event of bankruptcy as opposed to under the PIA. 69 In doing so, the primary judge referred to the business experience of Mr Moss (as disclosed in his statement of affairs provided to the trustees). This experience was very extensive (at [81]): … he has been a director of more than 21 companies and has established and worked in businesses in the horseracing and brewing industries (for example, Lucky Drink Pty Ltd). Mr Moss had also been the director of companies involved in gaming machine manufacture (Aruze Gaming Australia Pty Ltd), property development (Dragon Developments Holdings Pty Ltd and GRE Property Management Pty Ltd), marketing (Ginger Marketing Pty Ltd), horse supplements (Ranvet Pty Ltd) and labour hire (Rosscarbery Holdings Pty Ltd). 70 Reports from his trustees stated that Mr Moss "works extensively as an advisor in the gaming and racehorse industries"; as his range of directorships indicated, Mr Moss had conducted various businesses including: breeding and training racehorses; "pinhooking" (buying and training racehorses for resale); a consultancy in the gaming industry; and various other ventures in the gaming industry. 71 Mr Moss was cross-examined and gave extended (and in some respects combative) evidence. The primary judge had ample opportunity to assess his quick wittedness and acumen. 72 Although Mr Moss had given evidence that he did not believe he would obtain employment as a solicitor as a bankrupt given the "sort of work" that he did and his feelings of embarrassment in having to disclose his bankruptcy to potential employers, his Honour "assumed" there would be a demand for his skills as an employed solicitor (albeit without the ability to deal with trust monies). A fair reading of the reasons of the primary judge, however, is that the relevant finding as to his ability to obtain remuneration in the event of bankruptcy rested on the overall assessment of Mr Moss as being someone with evident skills and experience in commercial activity which included but transcended his role as a solicitor. 73 The background of Mr Moss emerging from the evidence was not one of a business naïf and it was open to the primary judge to form the view that, as "an experienced solicitor and businessman", it was likely that Mr Moss would earn significantly more than $50,000. 74 There is no basis for the contention that the trial judge "substantially underestimated" the "catastrophic effect on reputation and earnings potential, particularly on legal practitioners" of bankruptcy. As the reasons reveal, Mr Moss was more than just a solicitor and his Honour was alive to the likely consequence (which later occurred) that Mr Moss would lose his job with a publically listed law firm and that he could not continue as a solicitor if he dealt with trust monies. No error has been demonstrated in his Honour's finding.

[24]

E.4 Interests of Creditors Ground (Grounds 3, 6 and 7 ANOA) 75 Connected to the Consequence of Bankruptcy Ground with which we have just dealt and the No Further Investigations Warranted Ground, which we deal with in Section E.5 below, Mr Moss raised three further miscellaneous contentions which were also connected to the assertion that the orders setting aside the PIA and the sequestration order were not in the interests of creditors. The first two can be dealt with shortly. 76 First, Mr Moss pointed to the fact that a housing benefit would not be payable as no such benefit is payable unless Mr Moss is earning more than $130,000 per annum. This point goes nowhere given the primary judge's finding as to the likely ability of Mr Moss to earn more than that sum. 77 Secondly, although it was not entirely clear why it mattered, issue was taken with the finding made by the primary judge at [91] that the votes of two creditors, Mr Gregory Moss (the brother of Mr Moss) and Mr Carlo Brattoni (a business associate of both Mr Moss and Mr Gregory Moss) were such "as to dominate the vote". This was because it could not be said that these related creditors could "dominate" the meeting if their voting power was such as to "not reach the level required to pass a special resolution". Nothing turns on this. The use of the word "dominate" was one the primary judge evidently took from the submissions of Gunns Finance. The point being made was, in effect, that these two related creditors represented 57.62% of the total votes cast and approximately 69.25% of votes in favour of the PIA. We will return to this matter below. 78 The third point built on matters with which we have already dealt, but then went further. It was submitted by Mr Moss: …that if proper consideration is given to all of these matters and also the difference to creditors of bankruptcy when compared to the terms of the personal insolvency agreement, it is clear that: (a) the terms of the personal insolvency agreement were not unreasonable; (b) there was no real prospect of achieving a better result in a bankruptcy scenario; and (c) it was not in the interests of creditors to set aside the personal insolvency agreement and make a sequestration order. 79 At least two of the premises upon which this argument is based are flawed: the lack of error in the primary judge's findings that it was likely that Mr Moss would earn significantly more than $50,000 and the lack of error in the judge reaching the conclusion that a further and more detailed investigation of the affairs of Mr Moss was warranted (which we deal with in the context of assessing the No Further Investigations Warranted Ground in Section E.4 below). 80 It could hardly be said that a dividend of less than 2.49 cents on the dollar, or total indebtedness of more than $2.5 million (taking into account all creditors) or $1,562,016 (taking into account unrelated creditors) was a result which demanded a conclusion that the PIA was reasonable in all the circumstances. The primary judge's evaluation at [8] that "the return to creditors under the PIA is negligible and there is little risk to creditors if it is set aside" was plainly open, all the more so in circumstances where the primary judge thought further investigations were warranted. This finding was important because if a return is negligible and the discrepancy with the debtor's total indebtedness is substantial this can form a basis for setting aside a PIA: see Westpac Banking Corporation v Hingston (No 2) [2010] FCA 1116; (2010) 117 ALD 552 at 568 [97]. 81 It was not necessary to establish on the balance of probabilities that the creditors will achieve a better dividend in a bankruptcy: Augustyn v Putnin (1988) 83 ALR 514 at 521 per French J. The relevant inquiry was the one to which the primary judge appropriately had regard, that is, whether there was "a prospect or possibility of economic advantage to creditors": Augustyn at 515 per Jenkinson J. 82 No error is evident in his Honour's finding with regard to the interests of creditors.

[25]

E.5 No Further Investigations Warranted Ground (Ground 4) 83 This ground as developed was focussed on the finding that investigation was warranted into the transfer, in December 2012, to Ms Goodyer (the wife of Mr Moss) of a residential property in Woollahra, New South Wales (Woollahra Property) from a company associated with him and his wife (Amalfi Estate Pty Ltd (Amalfi)). Mr Moss contends that the circumstances of the transfer, and his potential interest in the Woollahra Property, do not warrant further investigation. 84 The primary judge, at [53] made reference to a letter from the solicitors for Gunns Finance to the trustees of 10 August 2016, which made a number of points including a contention that the transfer was potentially a voidable transaction because of the following: ... Ms Goodyer purchased the Woollahra property in December 2012 from Amalfi Estates Pty Ltd ('Amalfi Estates'). The Trustees appear to have accepted advice from the accountant for Ms Goodyer that Ms Goodyer paid "sufficient consideration" for the Woollahra property. However, we note that Amalfi Estates purchased the Woollahra property in February 2011 for 5.85 million. At the time the Woollahra property was purchased, Mr Moss and Ms Goodyer were equal shareholders in Amalfi Estates, they remained as such until 29 December 2014, well after the Woollahra property was purchased by Ms Goodyer. Therefore Mr Moss had a 50% share in the Woollahra property at the time it was sold to his wife. The Woollahra property was sold to Ms Goodyer in December 2012 for $4.8 million, which is $1.05 million less than the price paid for the property almost two years earlier. The receivers consider that further investigations are warranted into whether the sale of the Woollahra property is a voidable transaction given that it appears to have been sold for less than its market value. 85 What the evidence reveals is that although it had been asserted that Mr Moss was the holder of 50% of the issued shares of Amalfi, the correct position was that Mr Moss had a 1/43,000th interest. 86 Mr Moss asserts that there can be no suggestion that the transaction could be voidable because the consideration of $4,800,000 was consistent with a valuation dated 13 December 2012 by a registered land valuer. To an even moderately interested observer of property prices in the Eastern Suburbs of Sydney, it might be thought somewhat counter intuitive that the market value of the Woollahra Property materially fell between early 2011 and late 2012. Having said that, it is hardly surprising that a commercial solicitor would arrange their affairs in a way to ensure assets are held beneficially by a spouse. Moreover, the evidence was that Ms Goodyer was a successful real estate agent when the Woollahra Property was first acquired in 2011. Even more importantly, if it was assumed that the market value at the time of transfer of the Woollahra Property was $7.6 million, the 0.002% interest of Mr Moss in Amalfi on 19 December 2012 would have had the derisory value of $152 (see primary judgment at [58]). 87 In our view, commercial considerations would seem to dictate that further investigations of the transfer of the Woollahra Property would be difficult to justify. 88 If this was the only matter that could be the subject of investigation then Mr Moss may have a point. But the primary judge went further than to focus on a single transaction. What his Honour found was that the affairs of Mr Moss were complex, as his controlling trustees acknowledged (at [158]) and that the trustees had limited time to investigate (at [159]). Again the evidence supported these findings. 89 An expert, Mr David Lombe of Deloitte, had given evidence that: Mr Moss' interest in related companies and trusts is complex and ambiguous and it is unclear whether sufficient investigations have been performed to identify whether Mr Moss holds any beneficial or equitable interests in assets of associated trusts and companies or whether there are any antecedent transactions available to a trustee in bankruptcy. 90 Although Mr Lombe gave evidence that the sale of the Woollahra Property had not been satisfactorily reviewed (being an opinion about which, for reasons we have explained, we have misgivings), he went on to identify other matters warranting investigation, including as to Mr Moss' self-managed superannuation fund, the sale, transfer and gift of assets in the five years prior to the trustees' appointment, the need to review corporate and trust interests, the fact that financial statements for various entities had not been provided, and that no adequate investigation was undertaken into several other companies associated with Mr Moss which he had advised were now dormant. 91 In cross-examination Mr Lombe was asked whether he had changed his opinion after reviewing materials since the preparation of his report (such as a bulky affidavit of Mr Gary Pertile from the Australian Financial Security Authority (AFSA) which sets out AFSA's involvement including dealings with the trustees and investigations conducted by AFSA). Although he conceded this material was relevant and filled in some gaps and provided some additional information, he appeared to adhere to his opinion that further investigations were needed as identified in his report. What is notable is that counsel then appearing below, in a very short cross-examination, did not put to Mr Lombe directly that aspects of his report were wrong or attempt to confront him with specifics as to why particular aspects of the AFSA materials undermined identified conclusions as set out in his report. It is fair to say the cross-examination was at a very high level of generality (except as it related to the Woollahra Property). 92 The finding at [160] is worth setting out in full: In my view, given the limitations on the Trustees' ability to fully investigate the affairs of Mr Moss prior to the final meeting of creditors, the Applicant has established that his affairs warrant further investigation, in particular in relation to the transfer of the Woollahra property to his spouse. 93 This was related to the finding that "a trustee in bankruptcy has a greater capacity to investigate the affairs of Mr Moss and, when viewed in combination with the other matters which support the setting aside of the personal insolvency agreement", was another factor weighing in favour of setting aside the PIA (at [163]). 94 Although we consider it was open for his Honour to conclude that a more detailed investigation into the affairs of Mr Moss was appropriate in the circumstances we doubt, in and of itself, this consideration would have justified the setting aside of the personal insolvency agreement. It is clear, however, that the primary judge did not consider this factor to be determinative and no error is established in taking into account that a further and more detailed investigation of the affairs of Mr Moss was warranted. If we are wrong and the finding made by the primary judge is undermined by an erroneous view taken as to the particular need to investigate the Woollahra Property, for reasons explained, such an error did not undermine the ultimate conclusion to which we have already made reference that setting aside the PIA was in the interests of creditors which was also based on the other findings relevant to forming the state of satisfaction required by s 221(1)(d) (see [21] above). Moreover, it does not undermine the further point that the trustees' error in deciding to reject part of the proof of debt was an "other reason" for setting aside the PIA within the meaning of s 222(1)(e) of the Act.

[27]

F Consideration of the Notice of Contention 99 Given the views we have formed as to the grounds of appeal it is strictly unnecessary for us to deal with those parts of the notice of contention which we have allowed to be advanced. In particular, at [63] above, in the context of examining the Admission of Gunns Woodlot Debt Grounds, we noted that: (a) no error is demonstrated in the primary judge's conclusion that the Gunns Woodlot debt should have been admitted; and (b) the decision to set aside the PIA on this basis alone under s 221(1)(e) has not been shown to be erroneous. Having said this, it is appropriate to deal with the notice of contention. 100 For reasons we have explained above, the Court's function was to determine, in the light of the material before it, whether the applicant for review was entitled to succeed and to make any order considered just and reasonable. Irrespective as to how precisely the order was framed (for example by declaration), the arguments advanced by Mr Moss seeking to impeach the debt claim were properly rejected and it is clear the proof including the Gunns Woodlot Debt should have been accepted. The next question was whether this constituted a reason to set aside the PIA as found by the primary judge. For reasons additional to those expressed by the primary judge, we consider it did. 101 Fundamental to the process provided for in Part X of the Act (which is commenced by the debtor signing a s 188 authority), is the involvement of properly informed and properly identified creditors. The obligation of the controlling trustee is to call a meeting of creditors and ensure for the provision of a draft PIA, and a Statement of Affairs outlining all known assets and liabilities of the debtor to these creditors and identifying, among other things, the debtor's property and how it is available to pay creditors' claims. In addition, the trustee is required to issue a report to creditors regarding investigations and containing a statement as to whether or not the PIA proposal is in the best interests of creditors. 102 At the meeting convened to consider the proposal, creditors may resolve that the debtor be required to execute a PIA. A reflection of the importance of ascertaining not only the identity of the creditors but the proper assessment of the value of their claims, is the requirement of a special majority for a PIA to be accepted. Obviously enough, whether the proposal is accepted or whether the creditors resolve that the debtor file for bankruptcy can only proceed in accordance with the legislative scheme if the controlling trustee has performed properly the critical role of identifying creditors and the correct value of their claims. 103 This is not a case where the error did not affect the outcome of the resolution. 104 The relevant creditors' meeting was held on 8 September 2016. The result recorded was 83.2% in favour of the resolution, and 16.8% against. Mr Greg Moss voted in favour of the resolution, notwithstanding that he was not entitled to prove under the PIA. If his vote had been excluded, the result would have been 76.36% for and 23.61% against. 105 More importantly, if Gunns Finance had been properly admitted to vote for the whole of its claim ($666,268.57), the result would have been 53.88% for and 46.11% against (if Greg Moss' vote was included) and 43.28% for and 56.72% against (if Greg Moss' vote was not included). 106 The primary judge found that the admission of Greg Moss to the extent of $320,842.77 as the third highest debt ranking behind Mr Brattoni and Gunns Finance raised real questions as to the reasonableness of the PIA when the evidence showed a commercial relationship between the three men and that they could not be described as "arm's length" creditors. Indeed, the conclusion at [8] that the Trustees ought to have been circumspect in relation to debts owed to friendly creditors who voted for the PIA but did not stand to benefit under it, was one of the matters taken into account by the primary judge in reaching the conclusion that the terms of the PIA were unreasonable or were not calculated to benefit the creditors generally within the meaning of s 221(1)(d): see [104]. 107 Irrespective of the position of related creditors, the fact is that the special resolution would simply not have passed if the proper view had been taken in relation to the proof of debt. The result did not reflect the will of creditors who represented 75 per cent of the money owed to those taking part in the vote. This is the fundamental difficulty with what occurred and requires that the PIA ought be set aside under s 221(1)(d).

At a glance

Court

Decision date

Before

Source

Judgment (28 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (25)

Cited By (3)