FIRST INSTANCE JUDGMENT
25 The primary judge noted that Mr Van Den Bergh was paid $185,338.50 by Discovery Africa on 9 April 2014. On the same day, Mr Nichol was paid $274,005.78. They then resigned from their offices with the company.
26 Discovery Africa contended (and still maintains) that the payments were made in contravention of s 200B(1) of the Act because the payments constituted benefits in connection with their respective retirements from managerial or executive office where no member approval under s 200E for the giving of the benefits was obtained. The payments were made swiftly in light of an imminent boardroom spill. That is not to say that the payments were not otherwise due, but the question at first instance and in these applications is whether summary judgment should be given in circumstances where there was a failure to obtain member approval for the payments.
27 As the primary judge noted, by cl 12.2, except where the Baru Consultancy Agreement was terminated due to cl 12.3, on termination by Discovery Africa:
(a) Discovery Africa had to pay to Baru Singapore an amount equivalent to 12 months' services fees; and
(b) Baru Singapore had to cause the resignation of Mr Nichol from the Board of Discovery Africa unless agreed otherwise in writing between Discovery Africa, Baru Singapore and Mr Nichol.
28 Further, by cl 7.3(c), upon termination of the Baru Consultancy Agreement, Discovery Africa was obliged to pay Baru Singapore a pro-rata amount for unclaimed "Break Days" (as defined in the agreement). By cl 5.3 of the Baru Consultancy Agreement, Baru Singapore was liable to Mr Nichol for any employee entitlements in relation to the provision of the services under the agreement and indemnified Discovery Africa in respect of those entitlements. By cl 2.2 and cl 7.1 of the Nichol Employment Agreement, the Agreement could be terminated by either party giving one month's notice, and if Baru Singapore terminated the agreement it could pay Mr Nichol salary in lieu of notice. By cl 7.5, if the Nichol Employment Agreement was terminated because the Baru Consultancy Agreement was terminated and Baru Singapore was entitled to be paid and was paid an amount equal to 12 months' service fees payable under that agreement, Baru Singapore was obliged to pay Mr Nichol an amount equivalent to 12 months' salary.
29 In short, termination of the Baru Consultancy Agreement would have triggered Discovery Africa's obligations to make certain payments to Baru Singapore and for Baru Singapore to cause Mr Nichol's resignation. Termination of the Nichol Employment Agreement would have triggered Baru Singapore's obligations to make certain payments to Mr Nichol.
30 On 8 April 2014, the directors of Discovery Africa, with Mr Nichol not voting, resolved that, subject to receiving a signed resignation letter from Mr Nichol, he be paid amounts in line with the draft deed of release tabled at the meeting. It was also noted that the draft deed of release, subject to final review, would be executed by Discovery Africa.
31 On the following day, the board, again without Mr Nichol voting, resolved to execute a deed of release between Discovery Africa, Baru Singapore and Mr Nichol. The Nichol Deed of Release was executed during the course of that directors' meeting.
32 The primary judge noted that the key terms of the Nichol Deed of Release were as follows (at [24(a)-(g)]):
(a) Discovery Africa terminated the Baru Consultancy Agreement with immediate effect (cl 4.1(a));
(b) Baru Singapore terminated the Nichol Employment Agreement with immediate effect (cl 4.1(b));
(c) Baru Singapore directed Discovery Africa to pay to Nichol the Termination Payment (as defined) in discharge of Discovery Africa's obligations under the Baru Consultancy Agreement and, thereby, Baru Singapore discharged its obligations under the Nichol Employment Agreement (cl 4.2).
(d) The Termination Payment was defined to mean the payment to Nichol by or on behalf of Baru Singapore on, in effect, termination of the Nichol Employment Agreement as set out in the Schedule (cl 1.1).
(e) The Schedule set out the Termination Payment as the amount of $274,005.78 comprised of:
(i) $198,814.00 for termination;
(ii) $56,858.45 for leave entitlements; and
(iii) $18,333.33 in lieu of notice;
(f) Discovery Africa and Baru Singapore represented and warranted to Nichol, amongst other things, that:
(i) they had capacity unconditionally to sign and deliver and comply with its obligations under the Nichol Deed of Release (cl 8.1(b));
(ii) they had taken all necessary action to authorise the unconditional signing and delivery of and compliance with its obligations under the Nichol Deed of Release (cl 8.1(c));
(iii) the Nichol Deed of Release was enforceable against Discovery Africa in accordance with its terms and was not void or voidable (cl 8.1 (d));
(iv) any information that it had given to Nichol in connection with the Nichol Deed of Release was true and accurate in all material respects and not misleading in any material respect (including by omission) as at the date of the document (cl 8.1(g));
(v) the Termination Payment correctly reflected the amount for which Baru Singapore was liable to pay Nichol under the Nichol Employment Agreement, including the amount payable under cl 7.5 of that agreement (cl 4.2 of the Nichol Deed of Release);
(g) Discovery Africa and Baru Singapore acknowledged that Nichol had entered into the Nichol Deed of Release in reliance upon the representations and warranties made by Discovery Africa and Baru Singapore in clause 8.
33 On 9 April 2014, after execution of the Nichol Deed of Release, Mr Nichol provided his letter of resignation, thereby retiring from his office and/or position of employment with Discovery Africa and its wholly owned subsidiary, Baru Singapore. Pursuant to cl 4.2 of the Nichol Deed of Release, Discovery Africa transferred to him $274,005.78. By that resignation letter, Mr Nichol noted that he was receiving the payment as "a termination benefit and [by reason of] loss of office."
34 After discussing the principles pertaining to summary judgment and the relevant statutory framework, which we have set out above and will consider further below, the primary judge went on to examine the matters which Discovery Africa was required to prove in order to establish that neither Mr Van Den Bergh, nor Mr Nichol, had any reasonable prospects of defending the claim that the payments made to each of them were in contravention of s 200B(1) of the Act. His Honour noted (at [36(a)-(g)]) that Discovery Africa was required to establish the following matters:
(a) Discovery Africa is an "entity" within the meaning of s 200B(1AA);
(b) Discovery Africa gave a "benefit" within the meaning of s 200AB(1);
(c) the benefit must have been "in connection with a person's retirement from an office, or position of employment";
(d) the "retirement" must have been from Discovery Africa itself or a related body corporate;
(e) the "retirement" must be in respect of an office or position which is "managerial or executive office" within the meaning of ss 200AA and 200A(1)(f);
(f) the "benefit" was not approved by members of Discovery Africa under s 200E; and
(g) the "benefit" was not exempt, relevantly, pursuant to s 200F(2)(a)(ii) in that:
(i) it was not given to the person under an agreement made between the company and the person before the person became the holder of the office or position as a consideration, or part of the consideration, for the person agreeing to hold the office or position; and
(ii) the value of the "benefit" exceeds the prescribed minimum calculated under either subs 200F(3) or subs 200F(4), whichever is applicable.
35 It was accepted by Mr Nichol that Discovery Africa was an "entity" and that by his resignation as a director he retired from a "managerial or executive office" for the purposes of s 200B(1), but the balance of the matters were put in issue at first instance. Mr Nichol submitted that he had an arguable defence to the claim by reason of estoppel and cross-claimed for damages based on contraventions by Discovery Africa of s 18 of the Australian Consumer Law (ACL) (Competition and Consumer Act 2010 (Cth), Sch 2) (ACL Claims) and/or breaches of warranties and other terms of the Nichol Deed of Release.
36 Mr Van Den Bergh argued that the Van Den Bergh Deed of Release could be pleaded as a bar to the claim against him; secondly, Discovery Africa had not established that he held a managerial or executive office; and, thirdly, that the termination payment made to him was not made "in connection with" his retirement from Discovery Africa.
37 The primary judge referred to the meaning of "benefit" under the Act, which expressly includes a payment. However, Mr Nichol submitted that the economic and commercial substance of the parties' conduct was that Discovery Africa paid Baru Singapore the termination payment and Baru Singapore paid Mr Nichol the termination payment. Put another way, Baru Singapore gave Mr Nichol the benefit of Discovery Africa's obligation to Baru Singapore in discharge of Baru Singapore's obligations to Mr Nichol. On that basis, he contended, it was Baru Singapore, not Discovery Africa, which gave him the benefit for the purposes of s 200B(1). He further contended that the transfer did not "flow from" his resignation as a director of Discovery Africa, but rather from the termination of the Nichol Employment Agreement.
38 Mr Nichol also argued that even if Baru Singapore may have a claim against him, Discovery Africa did not have such a claim against him.
39 The primary judge rejected these arguments, referring to s 200 of the Act which emphasised that in determining whether a benefit was given there was to be a broad interpretation to benefits being given, even if criminal or civil penalties may be involved, and, secondly, the economic and commercial substance of the conduct was to prevail over its legal form.
40 His Honour said (at [49]) that the legal form and the contractual route by which the moneys travelled was subsidiary to the "economic and commercial substance of the conduct". That substance reflected benefits given to Mr Nichol by Discovery Africa. His Honour also noted that the objective of the provisions is to protect shareholders and creditors from unapproved golden handshakes. "That these provisions could be avoided by interposing other entities and a chain of interwoven agreements would be antithetical to those objectives."
41 The primary judge then considered the submission for Mr Nichol that, upon a detailed analysis of the contractual relationships and the respective obligations of Mr Nichol, Baru Singapore and Discovery Africa, none of the payments were made to him "in connection with" his retirement as Managing Director of Discovery Africa. Mr Nichol contended that the proper characterisation of the transferred sum after the execution of the Nichol Deed of Release is that it was a "payment" made by Baru Singapore to him in discharge of Baru Singapore's obligations to him for termination of the Nichol Employment Agreement without notice. He submitted that Discovery Africa transferred the sum to him in consideration for Discovery Africa's obligations to pay Baru Singapore that amount upon termination of the Baru Consultancy Agreement and that Discovery Africa gave Baru Singapore that "valuable consideration" in connection with the termination of the Baru Consultancy Agreement; it was not consideration given in connection with Mr Nichol's resignation. His Honour concluded (at [61]) that Mr Nichol's submissions put form above the substance of what occurred, which was that the payment to him was, within the broad meaning of the phrase, one made "in connection with" his retirement as Managing Director.
42 Mr Van Den Bergh focussed on a more succinct argument. (That succinct argument is repeated before the Full Court.) For similar reasons the primary judge rejected arguments advanced by Mr Van Den Bergh as to the effect of the interposition of a different corporate entity, noting that the submissions raised on behalf of Mr Nichol and Mr Van Den Bergh simply echoed arguments rejected at first instance and by the Full Court in Renshaw v Queensland Mining.
43 Mr Van Den Bergh argued that Discovery Africa could not establish that he held a managerial or executive office with Discovery Africa. He relied upon s 200AA(1) of the Act which provides that for a company to which s 300A applies for the previous financial year, "a person holds a managerial or executive office in the company during the current financial year if the person's details were included in the directors' report for that previous financial year for the company". He was not referred to in the report for the financial year prior as he occupied the office in that year only between November 2013 and April 2014. His contention was that, at least arguably, that point was determinative of the question. Particularly so when regard was had to the fact that s 200AA(3), which showed a distinction, it was submitted, between a public listed company and a "non-public listed company" (which the primary judge took to be a reference to an unlisted public company) and different definitions of when a person would be said to have held a "managerial or executive office" in the company in the case of the latter.
44 The primary judge rejected this argument, saying (at [81]-[85]):
81 [Mr Van Den Bergh's] construction of the provision would lead to the absurd result that someone who held a managerial or executive office would not be regarded as holding such office during their first year in the position and until such time as their details were included in the Director's report for that year.
82 I do not accept that s 200AA(1) is determinative of the question. The question is one of fact. I do not regard s 200AA(1) as an exhaustive and exclusive provision for establishing whether a person in a publicly listed company holds a managerial or executive office. It is but one means of establishing the fact.
83 As Discovery Africa submits, ss 200B and 200J are intended to apply to officers who hold their position within a company for only part of a year. Section 200F, as outlined below, exempts benefits from s 200B where, under certain conditions, the value of the benefit does not exceed amounts calculated under the relevant formulae. These formulae expressly contemplate periods of holding office of less than one year: s 200F(3). This is also supported by reg 2D.2.01 of the Corporations Regulations 2001 (Cth), which contemplates a period of office of less than one year for the purposes of calculating a person's base salary for the purposes of the Act.
84 The Van Den Bergh Employment Agreement expressly provided that Van Den Bergh would perform the duties and responsibilities of the Executive Chairman of Discovery Africa and would, subject to the direction of the Board of Discovery Africa, have day to day control of the responsibility for managing Discovery Africa's affairs (cl 6(a)). Van Den Bergh, for obvious reasons, does not argue that his role was not of a managerial or executive function.
85 I am satisfied that at the time of his retirement Van Den Bergh held a managerial or executive office with Discovery Africa, for the purposes of s 200B.
45 The primary judge also rejected an argument for Mr Nichol that the termination payments were exempt under s 200F(2). The primary judge reasoned that no exemption was available, his Honour noting (at [90]-[93]):
90 Neither the submissions by Nichol or Discovery Africa are persuasive. Section 200F(2)(a)(ii), in this case, contemplates that the benefit given to Nichol was under an agreement made between Discovery Africa and Nichol before he became Managing Director in 2012 as consideration, or part consideration, for his agreeing to hold that office.
91 There is no such agreement. Nichol was not employed by Discovery Africa. He was employed by Baru Singapore under a written employment agreement dated 22 January 2013. His entitlement to receive payments was as an employee of Baru Singapore under cl 7.5 of his employment agreement. His entitlement was to receive an amount equivalent to 12 months' salary. The entitlement was conditioned by two prior events: the termination by Discovery Africa of the Baru Consultancy Agreement and the payment by Discovery Africa to Baru Singapore of an amount equal to 12 months' service fees.
92 Discovery Africa assumed no obligation to pay Nichol any monies, whether as Director fees or salary.
93 Accordingly, no exemption arises under s 200F(2)(a)(ii) in respect of the benefit given to Nichol.
46 Mr Nichol relied upon s 200H (and s 200AB(2) and r 2D.2.02(2)(d) of the Corporations Regulations 2001 (Cth)) to argue that the termination payment to him included amounts by way of leave and payments in lieu of notice entitlements that did not constitute a "benefit" for the purpose of s 200B(1). The primary judge held that Mr Nichol's submissions in this respect failed at the outset, as he was never an employee of Discovery Africa and it had no obligations to pay Mr Nichol payments in lieu of notice or untaken annual leave. The primary judge's construction of ss 200H and 200AB and r 2D.2.02(2)(d) of the Regulations falls for consideration on Mr Nichol's appeal.
47 The primary judge noted (at [117]) that, by reason of his conclusion that s 200F(2)(a)(ii) of the Act was not engaged, it was unnecessary to consider whether the payment made to Mr Nichol exceeded the relevant threshold.
48 There was consideration and rejection of an argument Mr Nichol also pursues on appeal to the effect that the correspondence with Discovery Africa's solicitors before the 8 and 9 April 2014 directors' meetings and the terms of the Nichol Deed of Release drafted by those solicitors was to represent to him for and on behalf of Discovery Africa that he was lawfully entitled to receive $274,005.78 upon Discovery Africa terminating the Baru Consultancy Agreement and Baru Singapore terminating the Nichol Employment Contract. Mr Nichol also argued that he relied upon those representations and entered into the Nichol Deed of Release and resigned as a director of both companies in reliance on such. If he is in fact not lawfully entitled to all or part of the sum, he says the representation made would be false, misleading or deceptive or likely to mislead or deceive. It would also be a breach of warranties.
49 Mr Nichol claimed an entitlement to a set-off in respect of any liability by virtue of the cross-claim in damages that he would have against Discovery Africa.
50 This argument was also rejected by the primary judge (at [133]-[141]) who noted that the receipt of a benefit in contravention of s 200B(1) is a strict liability offence: s 200D(2). Such a recipient is taken to hold the payments received on trust for the giver: s 200J(1)(a). Thus, Mr Nichol holds the payments made to him on trust for Discovery Africa. Moreover, the recipient must "immediately" repay the amount of the benefit to the giver. The amount is a statutory debt due to the giver and may be recovered in a court of competent jurisdiction. These provisions collectively underscore, his Honour said, the policy objective of the legislature to protect members of companies from unapproved benefits being given to officers of companies in connection with their retirement. The creation of contraventions as strict liability offences and the statutory requirement that the benefit be held on trust and be immediately repayable are telling: see also Commonwealth 'Parliamentary Debates', House of Representatives, 24 June 2009, 6969-6970 (The Hon. Chris Bowen MP).
51 The primary judge held that Mr Nichol had no arguable basis to be able to set-off claims for damages against a statutory obligation upon him to repay immediately the monies which are taken to be held by him on trust for Discovery Africa. His Honour said the statutory obligation to repay immediately the monies taken to be held on trust by him implicitly excludes any equitable set-off upon the statutory debt: see e.g. James v Commonwealth Bank of Australia (1992) 37 FCR 445 (at 459). His Honour said that Mr Nichol's argument that Discovery Africa was contractually required to put the benefit to members in the general meeting for approval in order to give Mr Nichol the benefit of the Nichol Deed of Release, was rejected at first instance in Renshaw (at [178(b)-(c)] and [179]-[182]).
52 As to estoppel, the primary judge said (at [140]) that Mr Nichol's assertions of entitlements to an estoppel, whether by convention or representation, also fail. His Honour noted that in Renshaw at first instance that Perry J (at [168]) said:
[I]t is clear from the language and purpose of Div 2 of Part 2D.2 of the Act that no estoppel could be raised against the express prohibition on the payment of benefits without shareholder approval and the obligation to repay such moneys enforceable by the giver. In so providing, Div 2 is not concerned merely with the interests of the giver and the recipient, but with protecting the interests of the public generally and of shareholders as a section of the public against excessive termination payments or "golden handshakes" as they are colloquially known. The public nature of that concern is reinforced, among other things, by the fact that a breach of s 200B is a criminal offence. In short, as QMCL submitted, if correct, the Renshaw defendants' construction "would mean that Division 2 of Part 2D.2 is a dead letter: the requirement for shareholder approval of termination benefits could be bypassed by agreement between the company and executive. That would be an extraordinary result, and would permit companies and executives to do with impugnity the very thing the provisions in Division 2 are designed to prevent." There is nothing that the Renshaw defendants pointed to in the decision of the High Court in Commonwealth v Verwayen (1990) 170 CLR 394 that detracts from these principles.
53 There was also a claim by Mr Van Den Bergh, not pursued on appeal, that the claim against him was statute barred. That argument was also rejected. Summary judgment was awarded in favour of Discovery Africa in respect of both the payment to Mr Nichol and the payment to Mr Van Den Bergh.