Multitecfbm (Asia Pacific) Pty Ltd v Seong Myeon

3902 of 2007 MULTITEC FBM (ASIA PACIFIC) PTY LTD v SEONG MEON HAN & ANOR JUDGMENT 1 HIS HONOUR: The plaintiff is an importer of print finishing and mailing equipment. It has sued the first defendant, who was formerly employed as a project manager by the plaintiff, and the second defendant, a company controlled by the first defendant. 2 The plaintiff's pleaded case is that the first defendant, at about the time he resigned from his position with the plaintiff, "diverted" $86,900 from the plaintiff's bank account to that of the second defendant. The plaintiff also claims that the first defendant removed certain confidential customer information and used that information to set up a business in competition with the plaintiff. PROCEDURAL BACKGROUND 3 On 3 August 2007, the plaintiff applied for ex parte interim preservation orders in relation to certain property said to be held by the defendants. The orders were made and the matter was stood over until 6 August 2007. On that date, orders by consent were made for the defendants to pay the disputed amount into a trust account and to deliver up computer and electronic storage devices for inspection by an expert. 4 The plaintiff's ex parte application was supported by an affidavit sworn by Mr P R A Coombe. Mr Coombe swore that he was the general manager of the plaintiff and that he had full knowledge of the facts and circumstances surrounding the day-to-day conduct of the plaintiff's business. 5 The plaintiff's case is currently pleaded in an amended summons filed on 24 August 2007. The first defendant has filed both a defence to the amended summons and a cross-claim. 6 The defence admits the diversion of moneys, but alleges that the first defendant was authorised to transfer the funds in order to satisfy, in part, the debt due to him by the plaintiff. The defence denies other allegations made in the amended summons. The cross-claim alleges that the cross-defendant (the plaintiff) owes the first defendant some $177,865 (exclusive of the "diverted" moneys to which the first defendant claims to be entitled). 7 Paragraph 14 of the defence pleads an answer to the whole of the amended summons, as follows: "(a) The proceedings herein had not been authorised by the Plaintiff. (b) Further and/or in the alternative, the proceedings are not maintainable by reason of public policy and contraventions of the Corporations Act 2001 [(Cth)] in relation [to] the institution and maintenance of [these] proceedings. (c) The solicitors for the Plaintiffs are not validly retained by the Plaintiff. (d) The instructions for the proceedings have been given on behalf of the Plaintiff by [Mr] Coombe who has been since 8 November 2006 a disqualified person pursuant to [ss] 206A and 206D of the Corporations Act 2001. (e) At all material times, the Plaintiff has been aware of the disqualification of the said [Mr] Coombe. (f) The plaintiff has accepted instructions or has accepted communications or wishes from [Mr] Coombe knowing that by accepting such communications, instructions or wishes the Plaintiff was being knowingly concerned in the commission by [Mr] Coombe of offences against [s] 206A of the Corporations Act 2001. " 8 On 24 January 2008 an order was made by consent pursuant to Uniform Civil Procedure Rules 2005 ("UCPR") r 28.2 for the separate determination of the "matters contained in" par 14 of the defence. The consent orders did not identify the relief sought by the defendants should some or all of the arguments foreshadowed in par 14 of the defence succeed. However, on 27 November 2008, the defendants filed a motion specifying the relief sought by them. The relief includes: * a declaration that the plaintiff's solicitors "have not been at any time retained in the proceedings"; and * an order that the amended summons be dismissed or struck out. Mr Cox, who appeared for the plaintiff, was content to proceed on the basis that the motion should be addressed at the same time as the separate question for determination identified in the consent orders. THE DISQUALIFICATION 9 The evidence establishes that the Australian and Securities Investments Commission ("ASIC") disqualified Mr Coombe from managing a corporation for a period of five years, commencing on 8 November 2006. The disqualification was imposed by ASIC pursuant to s 206F(1) of the Corporations Act 2001 (Cth) ("Corporations Act"), which relates to the conduct of an officer of two or more corporations which have been wound up and in respect of which the liquidators have lodged reports under s 533 of the Corporations Act about the corporations' inability to pay their debts. ASIC duly served notice on Mr Coombe of his disqualification on 6 November 2008. DEFENDANTS' CONTENTIONS 10 The defendants contended that Mr Coombe contravened s 206A of the Corporations Act at the time the current proceedings were instituted. Section 206A(1) of the Corporations Act provides as follows: "A person who is disqualified from managing corporations under this Part commits an offence if: (a) they make, or participate in making decisions that affect the whole, or a substantial part, of the business of the corporation; or (b) they exercise the capacity to affect significantly the corporation's financial standing; or (c) they communicate instructions or wishes … to the directors of the corporation; (i) knowing that the directors are accustomed to act in accordance with the person's instructions or wishes; or (ii) intending that the directors will act in accordance with those instructions or wishes". 11 The defendants seemed to suggest in argument that Mr Coombe had contravened s 206A(1)(a) in two respects. First, in August 2007 he acted as the general manager of the plaintiff and, in that capacity, made or participated in making decisions that affected a substantial part of the plaintiff's business. Secondly, he gave instructions to the plaintiff's solicitors in August 2007 to institute and maintain the proceedings against the defendants, thereby making a decision that affected a substantial part of the plaintiff's business. 12 The defendants submitted that the plaintiff itself had also contravened s 206A(1)(a) of the Corporations Act, in that it had aided, abetted or procured the commission of the offence by Mr Coombe. This submission relied on s 11.2(1) of the Criminal Code 1995 (Cth) which provides that: "A person who aids, abets, counsels or procures the commission of an offence by another person is taken to have committed that offence and is punishable accordingly". 13 In consequence of these contraventions, so the defendants argued: * the plaintiff's solicitors had not been validly retained because Mr Coombe purported to give the necessary instructions to the solicitors at a time when he was incapable of acting on behalf of the plaintiff; and * the plaintiff, by reason of the contraventions by Mr Coombe and by the plaintiff itself of s 206A(1)(a) of the Corporations Act, was precluded from instituting and maintaining proceedings against the defendant. FACTS 14 Mr Coombe has never been a shareholder or a director of the plaintiff, although he has apparently occupied a management role in the company since at least 1991. The evidence shows that Mr A E Preston has been the major shareholder in the plaintiff, holding beneficially all 100 ordinary shares and all 50 "A" class shares. Mr Preston was the sole director of the plaintiff from 12 September 2003 to 22 November 2007 and occupied that position when these proceedings were instituted on 3 August 2007. Mr Preston also appears to have been the secretary of the plaintiff since 2003. 15 The current directors of the plaintiff are Mr I Paterson (who gave evidence) and Ms J M Vlietstra (who did not). Both were appointed on 12 November 2007. 16 Mr Paterson has been employed by the plaintiff since 1991. He is a shareholder in the plaintiff, holding all 25 "B" class shares. At all relevant times he was principally responsible for the engineering side of the business. His evidence was that at one point Mr Coombe and his wife were the "dual owners of the company", but that had changed with the appointment of Mr Preston as the director in 2003. From that time, according to Mr Paterson, Mr Preston was the managing director of the plaintiff and Mr Coombe's role was confined in substance to the sales side of the plaintiff's business. Mr Paterson and Mr Coombe discussed their respective functions and the affairs of the plaintiff, but Mr Paterson did not report to Mr Coombe. According to Mr Paterson, his understanding was that Mr Preston, during the period of his directorship, was the managing director of the plaintiff. Although Mr Preston was not frequently at the plaintiff's place of business, he was the person ultimately responsible for the conduct of the business. Mr Paterson's evidence was imprecise in some respects but I see no reason to reject it. 17 Mr Coombe gave instructions, purportedly on behalf of the plaintiff, to the plaintiff's current solicitors to institute the present proceedings against the defendants. As I have noted, the first step in the proceedings was the ex parte application for urgent interim relief heard on 3 March 2007. 18 Mr Coombe swore an affidavit on 3 March 2007 in respect of the plaintiff's application for urgent interim relief. In that affidavit, as I have noted, he described himself as "the general manager" of the plaintiff and stated that he had: "full knowledge of the fact[s] and circumstances surrounding all aspects of the day to day conduct of [the plaintiff's] business including the financial and business management". Mr Coombe's affidavit makes it clear that he regarded the first defendant, while employed by the plaintiff, as answerable to him (Mr Coombe). The first defendant, at the time he left the plaintiff's employment, held all 25 "C" class shares in the plaintiff. 19 Mr Quintiliani, a partner in the firm of solicitors representing the plaintiff, gave evidence. Mr Quintiliani agreed that his firm had taken instructions concerning the litigation initially from Mr Coombe. On 9 August 2007, shortly after the plaintiff had obtained urgent interim relief, Mr Quintiliani sent or caused to be sent a "Standard Costs Agreement" to the plaintiff at its business address. Clause 2 of the agreement stated that it was capable of acceptance in any case of three ways, namely by signing and returning the document, by oral acceptance of its terms or by giving the firm instructions in connection with the litigation after receiving the document. 20 Mr Coombe signed the Standard Costs Agreement, in the section designated 'Notification of acceptance", on 14 August 2007. He did not specify the capacity in which he signed the document, although he presumably purported to do so on behalf of the plaintiff. 21 Within a week of the commencement of the proceedings, Mr Quintiliani had discussions with Mr Preston concerning the litigation. Mr Preston told Mr Quintiliani that his firm should take instructions from Mr Coombe as he (Mr Coombe) was involved in the matters concerning the first defendant. Mr Preston also told Mr Quintiliani that both he (Mr Preston) and the plaintiff would be responsible for meeting the firm's costs of acting on behalf of the plaintiff in the litigation. 22 On about 13 September 2007 Mr Quintiliani sent a Standard Costs Agreement, identical in form to the one signed by Mr Coombe, addressed to the plaintiff and Mr Preston. The document was apparently sent to the addressees at the plaintiff's business address. The agreement was never signed by Mr Preston or by anyone else on behalf of the plaintiff, but Mr Quintiliani's firm continued to receive instructions relating to the litigation. The instructions were conveyed by Mr Coombe to Mr Quintiliani and to a solicitor employed by Mr Quintiliani's firm. However, Mr Quintiliani spoke to Mr Preston on numerous occasions concerning the litigation. 23 Mr Quintiliani was cross-examined as to his understanding of the roles performed, respectively, by Mr Coombe and Mr Preston. Mr Quintiliani denied that he understood Mr Coombe was the principal decision-maker within the plaintiff. On the contrary, his understanding was that Mr Coombe was the plaintiff's general manager of sales but that Mr Preston was the more senior officer of the company. Mr Quintiliani rejected the suggestion that he understood Mr Coombe to be responsible for running the plaintiff's business. The reason Mr Coombe gave instructions to Mr Quintiliani, as the latter understood it, was that Mr Coombe knew what had transpired between the plaintiff and the first defendant. I accept Mr Quintiliani's evidence. 24 Mr Paterson and Ms Vlietstra held a meeting of directors of the plaintiff on 30 July 2008. They passed a resolution in the following terms: "To send letter and any other document to confirm the company's engagement of its lawyers Kells initially in the proceedings to confirm their ongoing instructions to act on behalf of the company. For I Paterson to swear affidavit". 25 On 6 August 2008, Mr Paterson, in his capacity as a director of the plaintiff, wrote to the plaintiff's solicitors as follows: "I refer to our discussions concerning your firm's retainer by this company progress [sic] of the proceedings against [the first defendant]. In response to these discussions, I advise that a director's [sic] meeting was held on 30th of July 2008 where the directors resolved to again confirm your retainer. I confirm that Kells The Lawyer [sic] are instructed to advise and represent [the plaintiff] in the Supreme Court proceedings commenced by this company against [the first defendant]". 26 A further meeting of the directors took place on 2 December 2008, three days before the hearing. The minutes record the "Item for Discussion" as follows:

for Ian Paterson to take all steps necessary, including the provision of further correspondence or further affidavit to communicate this resolution. " The resolution was drafted by the plaintiff's solicitors and, I infer, was passed by the directors on the advice of the solicitors. PLAINTIFF'S CONTENTIONS 27 The plaintiff submitted that the evidence did not establish, to the standard required by s 140 of the Evidence Act 1995 (NSW), that Mr Coombe, much less the plaintiff, contravened s 206A(1)(a) of the Corporations Act in the manner suggested by the defendants. Even if the evidence did satisfy me that a contravention had occurred, the plaintiff contended that:
- any defect in the retainer of the solicitors was cured by the directors' resolution of 30 July 2008 or, alternatively, the resolution passed on 2 December 2008;
- s 206A(1) of the Corporations Act, on its proper construction was not intended to prevent the plaintiff instituting and maintaining proceedings against the defendants; and
- in any event, even if (as the defendants submitted) the proceedings had somehow been tainted by illegality, the directors' resolutions were effective to ratify the institution of proceedings and cure any such illegality. The Solicitors' Retainer Principles 28 If one party alleges that the solicitors for another party have not been retained by a person with authority to act on behalf of the other party, the first party may challenge the validity of the retainer: Harry S Bagg's Liquidation Warehouse Pty Ltd v Whittaker (1982) 44 NSWLR 421, 429-430 per Powell J. The legal onus is on the party seeking to establish that there is no valid retainer in existence, although the evidentiary burden may shift on particular factual issues: Hawkesford v Hawkesford [2005] NSWSC 463 at [55] per Campbell J. If the challenge to the retainer succeeds, the appropriate order may be to dismiss the proceedings: Harry S Bagg's at 430-431 per Powell J. If an order dismissing the proceedings is made, the solicitor who has acted without a proper retainer may (but not necessarily will) be held liable to pay the successful party's costs: Hillig v Darkinjung Pty Ltd (No 2) [2008] NSWCA 147 at [47]-[52] per McColl JA (with whom Beazley and Giles JJA agreed). 29 It is well established that, although an action commenced by a solicitor without authority can properly be described as a "nullity", it is nonetheless open at any time to the purported plaintiff to ratify the unauthorised act of the solicitor and to adopt the proceedings: Danish Mercantile Co Ltd v Beaumont [1951] Ch 680 at 684-685 per Jenkins LJ (with whom Hodson LJ agreed). The ordinary doctrine of ratification applies, so that ratification of the unauthorised act is deemed to be equivalent to antecedent authority: Danish Mercantile v Beaumont at 686; Harry S Bagg's at 430 per Powell J. The Challenge to the Retainer 30 The written submissions prepared by Mr Young, who appeared on behalf of the defendants, did not make clear the precise basis of the challenge to the solicitors' retainer. In particular, it was not entirely clear whether the challenge was wholly dependent on alleged contravention by Mr Coombe of s 206A(1)(a) of the Corporations Act, or whether the challenge was also intended to be independent of any allegation of illegal conduct. 31 After hearing oral argument, my understanding was that the defendants' challenge to the retainer rested on the proposition that Mr Coombe could not validly instruct the solicitors to institute and maintain the proceedings, because to do so involved him or the plaintiff in a contravention of s 206A(1)(a). However, if I have not understood Mr Young's submissions correctly, I should make it clear that, independently of any question of illegality, the evidence supports the conclusion that Mr Coombe was authorised to retain the solicitors for the purpose of the instituting and maintaining proceedings on behalf of the plaintiff against the defendants. 32 Mr Coombe himself gave instructions on behalf of the plaintiff to Mr Quintiliani to seek urgent relief against the defendants. However, Mr Quintiliani was in contact with Mr Preston, the sole director of the plaintiff, shortly after the proceedings were instituted and received instructions from Mr Preston to continue the litigation. There is nothing in the evidence to suggest that Mr Coombe acted outside the scope of the authority conferred on him by Mr Preston when he (Mr Coombe) gave instructions to Mr Quintiliani to seek urgent relief against the defendants. Neither Mr Quintiliani nor Mr Paterson was asked questions in cross-examination suggesting that Mr Coombe had lacked actual authority from the plaintiff to retain solicitors to conduct the litigation. Of course, the absence of any such questions is hardly surprising, since the defendants' position was that Mr Coombe was effectively the controller of the plaintiff. 33 The defendants' contention therefore seems to be that Mr Coombe, by reason of his conduct allegedly in contravention of s 206A(1)(a) of the Corporations Act lacked lawful authority to retain the solicitors for the purpose of conducting the litigation on the plaintiff's behalf. If I have followed Mr Young correctly, the defendants' alternative contention is that the plaintiff itself, by reason of its own contraventions of s 206A(1)(a) of the Corporations Act, could not validly enter into a retainer with the solicitors. 34 It is not clear to me why, assuming Mr Coombe contravened s 206A(1)(a) by participating in making decisions that affected a substantial part of the plaintiff's business, he would be unable to give instructions on behalf of the plaintiff to solicitors. In Harry S Bagg's at 424, Powell J held that although the statutory prohibition on a disqualified person acting as a director created a criminal offence, it did not render such a person incapable of being validly appointed or acting as a director. 35 By parity of reasoning, if Mr Coombe did contravene s 206A(1)(a), he would be exposed to criminal liability for his actions, but the contravention would not mean that every act by him purportedly on behalf of the plaintiff would be deprived of legal effect. If that were the consequence of his contravention, third parties with no reason to suspect any illegality in their dealings with a corporation, might find themselves without any remedy against the corporation arising out of the dealings. 36 Similarly, it is difficult to see why the plaintiff would be precluded from validly retaining solicitors to commence proceedings against the defendants simply on the basis that it aided, abetted or procured Mr Coombe's contravention of s 206A(1)(a) of the Corporations Act. Even if the very act of authorising Mr Coombe to instruct solicitors constituted aiding and abetting Mr Coombe's breach of s 206A(1)(a), it does not follow that the retainer would be invalid. The case pleaded against the defendants does not rely on any conduct by the plaintiff or Mr Coombe that is said by the defendants to have been unlawful. Whatever the effect of s 206A(1)(a) of the Corporations Act when read together with s 11.2(1) of the Criminal Code, it could not invalidate instructions given by a corporation to solicitors to institute proceedings against third parties, when the proceedings are founded on a cause of action which can be pleaded without reference to any contravention of s 206A(1)(a). 37 In any event, whatever defects there may have been in the initial retainer of the solicitors by the plaintiff, they were cured by one or both of the acts of ratification in July 2008 and December 2008 (if not by Mr Preston's instructions to Mr Quintiliani in September 2007). Mr Young resisted this conclusion on the ground, as I followed his argument, that neither resolution expressly adverted to Mr Coombe's involvement in the institution of proceedings. Mr Young conceded that a properly worded directors' resolution would overcome the invalidity or ineffectiveness of the initial retainer. Indeed, he accepted that such a resolution could be passed at any time by the directors, even now. But he maintained that any resolution would have to acknowledge the nature of the defect in the original retainer in order to effectively cure the defect. 38 Mr Young did not explain why a resolution would have to be so worded. There was no dispute that the resolutions of 30 July 2008 and 2 December 2008 were each passed by the directors at a duly convened meeting. At the time each of the directors' resolutions was passed, the directors were aware that the defendants claimed Mr Coombe, because of his disqualification, could not retain solicitors on behalf the plaintiff and thus the solicitors had not been validly retained. It is clear that both resolutions were designed, among other things, to overcome any defects in the original retainer flowing from Mr Coombe's disqualification and to confirm the retainer. The wording of the resolution of 30 July 2008 was perhaps not legally sophisticated, but the intention was clear. The second directors' resolution was framed in more precise terms and put the position beyond doubt. 39 The challenge to the retainer of the plaintiff's solicitors fails. ILLEGALITY 40 The defendants argument that the contraventions of s 206A(1)(a) of the Corporations Act warranted dismissal of the proceedings, independently of any question of the validity of the solicitors' retainer, presupposed that the evidence establishes that Mr Coombe had contravened s 206A(1)(a) and that the plaintiff had aided, abetted or procured his commission of the offence. 41 Section 140 of the Evidence Act 1995 (NSW) provides that in determining whether a case has been proved on the balance of probabilities, it is necessary to take into account "the gravity of the matters alleged": s 140(2)(c). This provision does not change the standard of proof in civil proceedings (that is, on the balance of probabilities), but reflects the perception that members of the community do not ordinarily engage in serious misconduct: Director General of Department of Community Services; Re Sophie [2008] NSWCA 250 at [50] per Sackville AJA and authorities cited there. Nonetheless, it must be borne in mind that the defendants have alleged that Mr Coombe and the plaintiff have each committed a serious criminal offence. 42 Mr Coombe's affidavit in support of the urgent application strongly suggests that he acted as the managing director of the plaintiff at the time these proceedings were instituted. Mr Coombe not only described himself as the "managing director" of the plaintiff in the affidavit, but also attached a copy of an email to the first defendant, dated 27 July 2007, which he signed as "Ron Coombe Managing Director". His statement that he had full knowledge of the plaintiff's day to day business is more equivocal in establishing a contravention of s 206A(1)(a), but it tends to reinforce the inferences that can be drawn from other parts of the affidavit. It is clear from Mr Coombe's affidavit that he regarded himself as authorised to give instructions to the first defendant. 43 If this evidence stood alone, it might well have been sufficient to satisfy me that in August 2007 Mr Coombe was discharging the functions of the managing director of the plaintiff and thus making decisions of the kind referred to in s 206A(1)(a) of the Corporations Act. The absence of Mr Coombe from the witness box also tends to reinforce the obvious inference that Mr Coombe would not have sworn an affidavit in these terms if he were not in fact the managing director. 44 However, there was other evidence. The records of the plaintiff show that at the relevant times Mr Preston was its major shareholder and sole director and that Mr Coombe was neither a shareholder nor a director. Mr Paterson gave evidence that Mr Preston was the managing director during the relevant period and that he (Mr Paterson) did not take instructions from Mr Coombe. Mr Paterson also rejected the suggestion that Mr Coombe actually managed the company and maintained that the latter's role was in relation to sales. Mr Paterson was not asked in any detail about decisions that Mr Coombe may have made on behalf of the plaintiff. Nor was he asked about the nature and extent of the plaintiff's business, its turnover, decision-making processes and the like. 45 Mr Quintiliani's evidence also suggests that despite what Mr Coombe said in his affidavit, Mr Quintiliani did not understand Mr Coombe to be the principal decision-maker within the plaintiff. On the contrary, Mr Quintiliani's understanding was also that Mr Coombe was responsible only for the sales side of the plaintiff's activities. Although Mr Coombe gave the initial instructions for the plaintiff's urgent application, the instructions were soon confirmed by Mr Preston, with whom Mr Quintiliani continued to have dealings. 46 In this state of the evidence, while there are undoubtedly grounds for suspicion that Mr Coombe may have contravened s 206A(1)(a) of the Corporations Act in or about August 2007, I am not satisfied that Mr Coombe committed an offence by participating in decisions affecting a substantial part of the plaintiff's business. In the absence of evidence about particular managerial decisions made by Mr Coombe or evidence (beyond Mr Coombe's own affidavit) casting doubt on Mr Paterson's account of the role Mr Coombe played in the plaintiff's affairs, I am not prepared to find, on the civil standard informed by s 140(2)(c) of the Evidence Act, that he has committed a serious criminal offence. 47 I do not accept the defendants' alternative submissions that Mr Coombe's conduct in instructing solicitors to commence the proceedings constituted, of itself, a contravention of s 206A(1)(a) of the Corporations Act. I am prepared to assume, without deciding, that in certain limited circumstances giving instructions to a solicitor might constitute making a decision affecting a substantial part of a corporation's business. But the evidence in this case does not allow any such conclusion to be drawn. Mr Coombe's affidavit in support of the plaintiff's application for interim relief, was plainly designed to demonstrate to the Court that urgent intervention was required. I do not think that the affidavit demonstrates that the decision to instruct solicitors or, for that matter, to institute proceedings was one that affected the whole or a substantial part of the plaintiff's business. To be satisfied that the decision was of that character, it would have been necessary for the defendants to adduce evidence about the nature of the plaintiff's business and the significance of the litigation to the conduct of that business. 48 It follows that I am not satisfied the plaintiff itself aided, abetted or procured any offence by Mr Coombe: R v Goldie; Ex parte Picklum [1937] HCA 65; 59 CLR 254. It is therefore not necessary to explore whether, if Mr Coombe did contravene s 206A(1)(a), his actions, of themselves, could suffice to establish the plaintiff's complicity in the offence: cf Hamilton v Whitehead [1988] HCA 65; 166 CLR 121; Mallan v Lee [1949] HCA 48; 80 CLR 198 at 215-216 per Dixon J. 49 In view of the conclusion I have reached, it is not necessary to consider the position had I found that Mr Coombe and the plaintiff contravened s 206A(1)(a) of the Corporations Act. Nonetheless, I think it appropriate to record my view that if such findings had been made they would not have justified an order dismissing or striking out the amended summons. 50 Mr Young referred to three authorities said to support the defendants' submission: Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; 139 CLR 410; Nelson v Nelson [1995] HCA 25; 185 CLR 538; Fitzgerald v FJ Leonhart Pty Ltd [1997] HCA 17; 189 CLR 215. In two of the cases (Yango and Fitzgerald) a contract was said to be illegal by statute and therefore unenforceable. In the third case (Nelson), a party was said to be prevented from rebutting the presumption of advancement because to do so would have served an illegal purpose (obtaining moneys from the Commonwealth on the basis of false representations). In none of the three cases did the defence of illegality or illegal purpose prevail (although in Nelson the party seeking to rebut the presumption of advancement was required, as a condition of relief, to refund the moneys obtained from the Commonwealth). Mr Young did not explain how any of these decisions assisted the defendants' argument. 51 In Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355, the High Court considered circumstances in which an act done in breach of a statutory provision will be held to be invalid. The joint judgment rejected the traditional dichotomy between 'mandatory" and "directory" statutory requirements: 194 CLR at [93] per McHugh, Gummow, Kirby and Hayne JJ. Instead their Honours said (at [93]) that the test: "is to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid… In determining the question of purpose, regard must be had to the language of the relevant provision and the scope and object of the whole statute". (Citation omitted). 52 Section 206A(1) of the Corporations Act makes it an offence for a person disqualified from managing a corporation to engage in certain conduct. In particular, s 206A(1)(a) provides that it is an offence for such a person to participate in making decisions that affect the whole or a substantial part of the business of the corporation. The prohibition in s 206A(1)(a) is directed to a person who is disqualified. It is not directed to the corporation. The provision says nothing about the consequences that flow from a disqualified person participating in making decisions of that kind. Specifically, the section gives no indication that any decision in which the disqualified person has participated will be invalid or unenforceable, nor that any actions taken by the corporation to implement such a decision will be invalid or unenforceable. Unlike a provision which, for example, prohibits a corporation from making a particular kind of contract, there is no textual basis for concluding that a contravention of s 206A(1)(b) leads to the invalidity of a "tainted" decision or its sequelae. 53 It is quite possible for a disqualified person to play a role within a corporation without the disqualification coming to the attention of other office holders or shareholders of the corporation. A fortiori a disqualified person can participate in the making of decisions by the corporation which affect third parties, without the third parties necessarily having knowledge or the means of knowledge of the disqualification. It is therefore hardly surprising that the legislation contains no express provision purporting to invalidate or render unenforceable any decision in which a disqualified person has participated in an impermissible way. 54 Mr Young did not suggest that there was anything in the scope and object of the Corporations Act justifying the conclusion that an act by a disqualified person which contravenes s 206A(1) should be held invalid and thus incapable of constituting an act performed on behalf of a corporation. Much less did he suggest that the scope and object of the legislation justified the conclusion that an act by a disqualified person, which is not itself a contravention of s 206A(1) but which is performed by that person in the course of contravening conduct, should be held invalid. 55 I have not been able to discern anything in the legislation that would lead to the conclusion that Mr Coombe could not validly instruct solicitors or initiate litigation on behalf of the plaintiff. As I have pointed out, the plaintiff's pleaded case against the defendants does not allege any conduct that would involve the plaintiff in a contravention of the Corporations Act. It is difficult to see what policy would be served by preventing the plaintiff enforcing such rights as it may have against the defendants. 56 The defendants' position is not improved even if it is assumed that the plaintiff aided and abetted Mr Coombe's breach of s 206A(1) and thus itself committed an offence under that section. The general prohibition in aiding and abetting the commission of an offence exposes the plaintiff, on the assumption I have made, to criminal penalties. However, neither the text nor the scope or object of the legislation lead to the conclusion for which the defendants contended. CONCLUSION 57 The defence pleaded in par 14 of the defence is not made out. I shall make an order dismissing the defendants' motion filed on 27 November 2008. The defendants must pay the plaintiff's costs of the separate determination ordered on 24 January 2008 and of the motion filed on 27 November 2008. **********

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