A: I probably didn't think a lot of it. Graeme and I have been friends for a long time and I thought maybe if he was leaving the business he wanted to have our private emails. I really can't see any explanation for it and I probably didn't think anything of it. For private friendships and things like that I would easily give my home email address to a friend if they were leaving the company. "
63 I do not accept this explanation. As at 2 December 2004, Lynam had not learnt that Graeme Love was to be made redundant. McCartney, Petros and Nguyen were all working at Bronson & Jacobs.
64 Petros gave no evidence as to why he understood Graeme Love had asked for his private email address or why he provided it. He was not cross-examined about it.
65 In the absence of a credible alternative explanation, Graeme Love's request for the other four individuals' private email addresses and his offer to create such private email addresses if they did not already have them, corroborates Monahan's evidence of McCartney's expressing his intention to assist Graeme Love, Nguyen and Petros to set up a competitive business if Orica did not honour their representations that Bronson & Jacobs' business would continue as usual. There is no doubt that by this time, McCartney believed and asserted that Orica had not honoured that representation.
66 Because the thrust of Monahan's evidence is corroborated by the evidence of Ianniello and Rennie and by Graeme Love's email of 2 December 2004, because he was not shaken in cross-examination, and because I do not accept the challenge to his credibility based upon the alleged failure of the plaintiffs to adduce evidence to corroborate his denial of recent invention, I accept his evidence, notwithstanding the denial of it by McCartney, Love and Petros and the denial by Nicols of having made the representation which Monahan attributed to McCartney. In reaching that conclusion, I also take into account my rejection (later in these reasons) of important parts of the evidence of McCartney, Love and Petros, which affects the credibility of their denial of Monahan's evidence.
67 I conclude that by 2 December 2004, McCartney had made it known to Graeme Love, Petros, Nguyen and Lynam that he would support the establishment by them of a rival business.
Transfer of Mobile Phones
68 Bronson & Jacobs paid for four mobile phones used by McCartney and his family. McCartney had two mobile phones which he used in connection with Bronson & Jacobs' business in dealing with customers and suppliers. They had their distinctive phone numbers. O'Connor gave evidence, on which he was not cross-examined, that in about December 2004 or January 2005, he asked McCartney to make arrangements to transfer his wife's and daughter's mobile phones. McCartney said he would do so. O'Connor did not indicate that the two phones used by McCartney in the Bronson & Jacobs business should be transferred. At the time of the conversation, McCartney was engaged as a consultant in the Bronson & Jacobs business.
69 McCartney said that he was asked in September or October 2004 by the then IT manager of Bronson & Jacobs, Mr Frost, to transfer all of his mobile phones from Bronson & Jacobs to himself. He deposed that he asked Graeme Love to do that for him. Graeme Love gave evidence that he filled out the appropriate forms at that time and sent them to Optus for the transfer of the four mobile phones from Bronson & Jacobs to McCartney. According to Graeme Love, Optus did not act on those forms. Those forms were not produced and there was no evidence to corroborate Graeme Love's version of events. McCartney said that in a telephone conversation in December 2004, O'Connor told him that his mobile phones were still on the company account and being paid for by Bronson & Jacobs and that, as he was a contractor, they should be his responsibility. According to McCartney, he then contacted Graeme Love to enquire what had been done as Optus had not actioned the transfer. In January 2005, he met Graeme Love at the Optus store at Rhodes. According to McCartney and Love, Love had a copy of the original forms which, according to him, he had previously sent to Optus. The store assistant then filled in the new forms and all four phones were transferred into McCartney's name. McCartney and Love signed the transfer forms on 31 January 2005. Love signed purportedly on behalf of Bronson & Jacobs. At that time, as McCartney knew, Graeme Love no longer held any position with Bronson & Jacobs. He had no authority to sign on Bronson & Jacobs' behalf.
70 In March or April 2005, Graeme Love arranged for the transfer of the four mobile phones from McCartney's name to Ingredients Plus. He did so to obtain a saving by having eight phones on the one account. McCartney reimbursed Ingredients Plus for the cost of the phones on Ingredients Plus' account with Optus.
71 I accept O'Connor's evidence that he only asked McCartney to transfer the mobile phones of his wife and daughter. The effect of the arrangements implemented by McCartney and Graeme Love was that suppliers or customers who had done business with McCartney using his mobile phone numbers were able to continue to reach him on the same telephone numbers. McCartney denied that this was the purpose of the arrangements. I do not accept that denial. The fact that Love signed documents purportedly on behalf of Bronson & Jacobs when he was no longer employed by Bronson & Jacobs, and both he and McCartney must have known that his authority had been revoked on the termination of his employment, shows that the transaction was not above board. It was done at a time McCartney was still engaged as a consultant to Bronson & Jacobs. Graeme Love had established Ingredients Plus. Their conduct evidences their having a common purpose that McCartney should retain his links with suppliers and customers, and with Graeme Love, without Bronson & Jacobs receiving the detailed records of telephone calls which appear on the statements of account for the mobile phones.
Enticement of Bronson & Jacobs' Employees
72 There is no direct evidence of McCartney's having suggested to any employee of Bronson & Jacobs that she or he resign and take up employment with Ingredients Plus.
73 However, I have accepted Monahan's evidence that on a number of occasions prior to May 2004, McCartney told Graeme Love and Petros that he would support them in the establishment of a rival business. I have accepted that by 2 December 2004, McCartney had made this known also to Nguyen and Lynam. I conclude that this was a material cause of Lynam's decision to resign and to take up employment with Ingredients Plus. She believed that McCartney could guarantee her wages.
74 The defendants did not read an affidavit sworn by Nguyen. It appears that she has now left Ingredients Plus' employment. That is not a sufficient explanation for not calling her as a witness. In the light of the defendants' failure to call her, I can readily draw the inference that she was encouraged by McCartney's promise of support to Ingredients Plus to change her employment, although I also accept Petros' evidence that she was dissatisfied with changes made by Orica.
75 Petros' position is more difficult. He was upset that Monahan obtained the position of General Manager of Bronson & Jacobs. He was upset with the changes which Orica implemented. He deposed that at the time Graeme Love was made redundant, he was still looking to make a success of his position at Bronson & Jacobs, and had no plans to join him. He was upset by numerous complaints received from customers following the changes Orica implemented. This increased his workload. He deposed that he had to work long hours to fix the new problems and that a depressing atmosphere was created. He deposed that in about November or December 2004, he began to think of moving on.
76 Petros deposed that at that time, McCartney encouraged him to stay at Bronson & Jacobs, although he told McCartney he was no longer happy. He felt that Orica had placed him in an untenable position with one of his suppliers, Su Heung. He deposed that in January 2005 he was invited by Graeme Love to join Ingredients Plus, take up shares in the company and become a director of it.
77 Petros deposed that in early February 2005, he told McCartney he was thinking of leaving, but McCartney said "I don't want to lose you. Hold in there and it will get better."
78 Petros said that the catalyst for his leaving was that in mid-February 2005, his role at Bronson & Jacobs was changed to one of finding new products and markets rather than servicing his existing clients. He tendered his resignation on 15 March 2005 after a further run-in with McCann over the new Orica procedures.
79 This evidence was not challenged in cross-examination. It was not put to Petros that he was enticed to leave Bronson & Jacobs by anything done or said by McCartney.
80 I have concluded that Petros was aware that McCartney would provide financial support to Ingredients Plus. This must have been material to his decision to join Ingredients Plus. I have also accepted Rennie's evidence that Lynam told her in December 2004 that she, Petros and Graeme Love would be starting a new business.
81 However, I would not be justified in rejecting Petros' unchallenged evidence as to what prompted him to leave, or his unchallenged evidence that in about December 2004 and early February 2005, McCartney encouraged him to stay with Bronson & Jacobs whilst the difficult adjustment phase was working itself out.
82 It is possible to reconcile this evidence. Petros knew that McCartney would support Graeme Love. He had discussions with Graeme Love in December 2004 or January 2005 in which Graeme Love pressed him to join Ingredients Plus. Lynam was told that Petros would be joining Ingredients Plus, but not necessarily by Petros. Petros decided to leave Bronson & Jacobs because of his difficulties with the new Orica management. McCartney provided no further encouragement for him to do so, and asked him to stay to see if things got better. When Petros decided to leave, he joined Ingredients Plus because of his association with Nguyen and Graeme Love, but also, as I find, because he was aware that McCartney was providing financial backing.
Provision of Working Capital for Ingredients Plus
83 Ingredients Plus entered into a lease of premises at 8/9-11 South Street, Rydalmere. Graeme Love provided security of $104,000 for the lease. He paid that sum from his own funds, most of which came from his termination package from Orica. On 31 January 2005, Lynam started work for Ingredients Plus.
84 Graeme Love estimated that he needed $200,000 in working capital to generate $1,000,000 in initial sales. He gave evidence that he asked his father to lend him the money and his father arranged for Sanquhar to pay $200,000 to Ingredients Plus. According to both Graeme and Thomas Love, Graeme Love suggested that Thomas Love borrow the moneys from McCartney. McCartney and Thomas Love were friends.
85 Thomas Love and McCartney both gave evidence to the effect that Thomas Love did not tell McCartney why he wanted to borrow the money. McCartney said that some months previously, Thomas Love had told him that another son of his had got into difficulties by investing with a rogue property developer. McCartney said that he thought that that might have been why Thomas Love wanted the loan. However, he did not inquire about the purpose of the loan and Thomas Love did not volunteer the information. These discussions occurred in February 2005. McCartney said he was not concerned about the purposes of the loan or any risk to him in making the loan because Thomas Love was an old friend of his and he knew him to be independently wealthy. According to both Thomas Love and McCartney they agreed that the loan would be at interest of 10% per annum. McCartney said that it was agreed that the term of the loan would be two years. The agreement was not documented.
86 In his affidavit, Thomas Love swore:
" I would add that I could have easily arranged this $200,000 from other sources. For one thing, I could have sold shares. I annex and mark 'B' a copy of the shares that Sanquhar owns, which were worth about $400,000 as at 30 June 2005. Some of these shares have been held since prior to 1985, and so are CGT exempt. For that reason I did not want to sell them. I could have mortgaged any of my properties, including the Terrigal house which as I have said is unencumbered and worth about $3,000,000. But the simple fact was, Bill's money was a phone call away with no paperwork involved. No application forms, no waiting for any credit department to assess credit issues, just an immediate cheque. That was the reason I borrowed from him, not because he is the secret owner of Ingredients Plus, as Orica alleges in these proceedings. "
87 Earlier, he had deposed that the timing of Graeme Love's requirement for working capital was not the best. He said:
" In January 2004, I had bought another property at … Roseville for $1.15 million. I borrowed about $900,000 and used cash on hand of about $300,000. So I did not have $200,000 to just write out a cheque which I would have done had I not made this purchase. "
88 According to Thomas Love and McCartney, Thomas Love borrowed a second amount of $200,000 from McCartney in April 2005. Again, according to them both, McCartney did not ask the purpose of that loan and Thomas Love did not say what the money was for. Thomas Love deposed that he told McCartney "Bill, I need to borrow $200,000." In oral evidence, he said that was the fact. The second payment of $200,000 was on-lent to Ingredients Plus.
89 The problem with Thomas Love's evidence is that he did not need to borrow money from McCartney to make either of the loans to Ingredients Plus. Nor did he need to sell shares, or grant mortgages over real property, or apply to a credit department at a bank, or fill out any paperwork to draw the cheque.
90 On 15 February 2005, $200,000 was withdrawn from Rawlo International's account (TB 3864). The withdrawal was made by a cheque dated 14 February 2005, signed by McCartney and drawn in favour of Sanquhar Investments (TB 771). Those funds were deposited to the account of Sanquhar Investments with Westpac on 15 February 2005 (TB 773). On that day, Thomas Love drew a cheque on Sanquhar Investments in favour of Ingredients Plus for $200,000. Those moneys were deposited to Ingredients Plus' account on 17 February 2005 (TB 772; 3981).
91 Thomas Love had an account in his own name with the ANZ Bank called an Interest Saver Account. He described this account as an offset account. As a result of a deposit made to that account on 17 February 2005, that account was in credit as at that date in an amount of $365,295.12. It remained in credit in amounts over $300,000 up to 15 April. As a result of a further deposit of $177,911.15 on 15 April, it was in credit in amounts over $475,000 up to the end of April. It then remained in credit in amounts over $400,000 until 20 June 2005 when the credit balance was reduced to $224,000 by a payment of $200,000 made by Thomas Love to Ingredients Plus on that day.
92 The deposit of $300,000 on 17 February 2005 was a repayment of funds advanced by Thomas Love to assist his son-in-law's mother, a Mrs Walker, in a property development. Although he said he did not recall it, he accepted that he would have known in advance of 17 February that those funds were going to be received (T376.40; 374.52). On the clearance of those funds, he had cash resources of $200,000 to advance to Ingredients Plus simply by drawing a cheque. Likewise, he had cash resources at the time of the second advance on 19 April 2005 from which to lend $200,000 to Ingredients Plus simply by drawing a cheque. He did not need to borrow moneys at 10% interest from McCartney to make the loans. I do not accept his explanation as to why he borrowed the moneys from McCartney.
93 Under cross-examination, Thomas Love initially asserted that he was keeping the cash for some other purpose, although he could not recall what it was (T377.50-57). He then said that, because the account was an offset account, "Whatever credit there was in these funds wasn't money which was available to me. It was just an offset against the $900,000 I borrowed from the bank to purchase the unit." (T378). I had the distinct impression that Thomas Love was searching around for a credible explanation having realised that the explanation given in his affidavit had been shown to be untrue. However, this further explanation he gave in cross-examination was not true. He acknowledged that he was free to withdraw the funds in which he was in credit with the ANZ bank, and that he regularly did so. He could just as readily have drawn the moneys down from his interest saver account with the ANZ to lend to Ingredients Plus as borrow those moneys from McCartney. He did exactly that on 20 June 2005. He acknowledged that the interest rate of 10%, to which he said he had agreed with McCartney, was higher than the rate trading banks would charge (T369.47). There is no plausible explanation as to why he would borrow funds at a higher rate of interest from McCartney than by drawing down from his interest saver account with the ANZ.
94 Thomas Love justified the borrowing on the ground that Sanquhar Investments would oncharge interest to Ingredients Plus at the same rate as the rate at which he was borrowing from McCartney. Ingredients Plus has not paid interest on the loans to it from Sanquhar Investments. But if it were the fact that Sanquhar Investments was to charge interest on a loan made by it to Ingredients Plus, that does not explain why Thomas Love would borrow the money at 10% interest from McCartney and Sanquhar Investments charge that amount to Ingredients Plus, rather than Thomas Love borrowing the moneys at a lower rate by drawing down on his credit balance with the ANZ and Sanquhar Investments charging a lower rate to Ingredients Plus.
95 A difficulty with Thomas Love's and McCartney's evidence that Thomas Love borrowed two amounts of $200,000 from McCartney at 10% interest was that neither the interest nor the principal has been paid or repaid. That is so notwithstanding that, according to McCartney, the loan was due to be repaid after two years. Hence the first instalment of $200,000 was due to be repaid by 17 February 2007. McCartney's explanation for this was that he understood that the effect of legal advice he obtained was that he should not accept any such payment or repayment because of undertakings which he gave in July 2005. I do not accept that evidence. McCartney did not give undertakings which would have precluded his accepting repayment of a loan from Thomas Love or Sanquhar Investments. He tendered legal advice which he received in August 2005. Nothing in that legal advice was to the effect that he should not accept payment of interest or repayment of principal. Rather, it was in terms that "We would strongly advise that you do not provide any funding to Ingredients Plus, whether directly or indirectly, including by providing funding or loans to a third party (such as Thomas or Graeme Love) who may direct those funds for the benefit of Ingredients Plus." I do not accept that McCartney understood that that was advice that he should not accept repayment of loans he had made to Thomas Love or Sanquhar Investments.
96 Thomas Love gave evidence that he offered to pay interest. He said:
" I remember discussing with (McCartney) towards the end of the financial year 2005 whether I should pay the interest and suggested to him that, if I drew the cheque and sent it on 29 December (sic) he would probably receive it about 2 February (sic) and that would give a deduction in one year on the tax payable in the next. He indicated to me that he had had legal advice that there was to be - that there should not be any further activity in respect of this $200,000 or a further $200,000, which made a total of $400,000, and, on the basis of that advice which he had received, he would prefer not to have the interest paid at that stage. "
97 I consider that this evidence was detail Thomas Love provided to add verisimilitude to his evidence that he had borrowed the moneys at interest from McCartney. The evidence quickly got him into trouble. Initially, he accepted that because a financial year for tax purposes ends on 30 June, the conversation he had with McCartney must have occurred before 30 June 2005. The problem with that explanation was that Orica's proceedings were not commenced until July 2005 and McCartney had no legal advice about the subject before 30 June 2005. After a luncheon adjournment, Thomas Love corrected his earlier evidence and said that the conversation must have occurred at some time before 30 June 2006. He was asked why he did not pay interest to McCartney in 2005 to get the tax advantage he proposed. He then said, contrary to his earlier evidence, that the interest was not to be paid until the principal was repaid. If that were so, there was no reason why he would have raised the question of paying interest at the end of either the 2005 or the 2006 financial years. This evidence only further diminished Thomas Love's credibility.
98 The fact that no interest has been paid on the alleged loans and that the alleged loans have not been repaid, together with the inherent implausibility that the loans would have been made at all when there was no occasion for Thomas Love to borrow, together with the inherent implausibility of the loans being made without any discussion as to their purpose, leads me to reject the evidence of both Thomas Love and McCartney.
99 McCartney's evidence on the topic was also inconsistent with his dealings with another loan to Graeme Love. It was common ground that on 21 June 2005, he lent $200,000 to Graeme Love which Graeme Love advanced to Ingredients Plus, and that Graeme Love repaid that loan on 24 August 2005. The fact that the loan to Graeme Love was repaid, notwithstanding the commencement of proceedings on 8 July 2005, is inconsistent with McCartney's evidence that the reason his alleged loans to Thomas Love were not repaid was because of the pendency of the proceedings, or the undertakings which he gave in the proceedings, or the advice which he received about those undertakings.
100 It was suggested in final submissions that there was no such inconsistency because it was not until a statement of claim was filed on 6 September 2005, after the repayment of the loan, that the loans were the subject of attack. But that is not so. On or about 29 July 2005, Messrs Deacons, McCartney's solicitors, forwarded to McCartney a facsimile from Malleson Stephen Jaques, in which that firm said "We refer to the undertaking given to the Court by Mr McCartney on 27 July 2005. We hereby put Mr McCartney on notice that our clients regard any future funding of Ingredients Plus Pty Ltd by Mr McCartney or any entity controlled by him, whether directly or indirectly through third parties to be a breach of his undertaking to the Court." The undertaking given by McCartney to the Court on 27 July 2005 was given in the same terms as the covenant in his Share Sale Agreement. Deacons advised that whilst they did not necessarily agree with Malleson's interpretation of the scope of the undertaking, they were of the view that any response that no specific undertaking about providing funding was proffered might provoke a further application to the Court. Nonetheless, they strongly advised against his providing any funding to Ingredients Plus in terms set out above in these reasons in paragraph [95].
101 Hence, McCartney's acceptance of the repayment of the principal of Graeme Love's loan could not have been because at the time it was repaid, the plaintiffs had not attacked the propriety of McCartney making such loans. Nor did McCartney say that that was the reason he accepted the repayment. He said the reason he told Thomas Love not to repay the loans made to Thomas Love was because of the legal advice he received. That evidence was not credible. His acceptance of repayment of the loan to Graeme Love was inconsistent with his having read Deacons' advice in that way.
102 I do not accept the two payments of $200,000 made by Rawlo International on McCartney's direction on 17 February and 19 April 2005 were made as loans to Sanquhar Investments (as McCartney deposed), or were loans to Thomas Love, as Thomas Love deposed. Rather, Sanquhar Investments was a conduit to disguise the fact that those funds were provided to Ingredients Plus by McCartney's company.
103 The mobile phone records for McCartney and Graeme Love show that between 15 and 17 February 2005, McCartney called Love on ten occasions and Love called McCartney on eight occasions. Neither Graeme Love nor McCartney accepted that in any of the calls did they discuss Ingredients Plus or its business. Graeme Love denied even thanking McCartney for providing an advance to his father which provided Ingredients Plus' initial working capital. I find this quite implausible. Whilst a rejection of their evidence in this respect does not prove the opposite, I can infer from the objective circumstances that they did discuss Ingredients Plus' requirements for working capital. That arises from the fact that McCartney had previously said that he would provide such finance, from the fact that he did so, and the fact that he did so indirectly through Thomas Love.
104 My conclusion that McCartney provided working capital to Ingredients Plus is also corroborated by email correspondence from Graeme Love to a Mr Cho of Su-Heung and "blind copied" to McCartney. I deal with this evidence below at paragraphs [134]-[162].
105 In May 2005, Graeme Love was actively seeking further investors for Ingredients Plus from third parties.
$200,000 Payment of 3 May 2005
106 Clos d'Aguzon appointed Ingredients Plus as its exclusive distributor for essential oils and aromatic raw materials in Australia and New Zealand on 7 March 2005.
107 Shortly before 2 May 2005, Graeme Love wrote to Bontoux. He said:
" Just wanted to make you aware we are arranging payment for several outstanding invoices. The invoices were due today, however, the funds are coming out of a term deposit that matures on Monday 2 May. We were planning to transfer funds on Tuesday 3 May, and hope that this does not cause you any problem! We greatly appreciate the 60-day terms and will ensure all future payments are made when they fall due. "
108 In fact Ingredients Plus did not have funds on term deposit needed to pay the outstanding invoice to Clos d'Aguzon.
109 The email went on to outline an investment proposal for the setting up of an Ingredients Plus in Hong Kong and Indonesia. Bontoux was invited to consider providing an interest-free loan of $250,000 for two years to acquire a 10% share in the business. Although McCartney was not shown as an addressee of the email, the email was forwarded (that is, "blind copied") to him. Ingredients Plus owed Clos d'Aguzon US$155,575.05.
110 On 3 May 2005, McCartney gave instructions for the Australian dollar equivalent (A$199,910.11) to be paid by Rawlo International to Clos d'Aguzon.
111 According to McCartney, in March 2005, Graeme Love told him that he was short of funds until he could sell his house. McCartney indicated that he was interested in buying some of Graeme Love's shares in LEAP. He gave evidence that after a meeting with a Mr Christian Beck in late April 2005, "I organised to purchase $200,000 worth of LEAP shares from Mr Love, and Mr Beck said he would arrange the necessary share transfers. At Mr Love's request I transferred the $200,000 consideration for those shares to an account nominated by him."
112 There was no documentation of the alleged agreement to buy $200,000 worth of LEAP shares from Graeme Love at that time. The account nominated by Graeme Love was the account of Clos d'Aguzon.
113 McCartney implausibly denied having any conversation with Graeme Love in late April or early May 2005 about the purpose of the payment of $200,000 made by Rawlo International to Clos d'Aguzon (T170.53). However, as he had received a copy of the email from Graeme Love referred to above, it is plain that he must have known that the payment was made to meet a debt owed by Ingredients Plus to Clos d'Aguzon.
114 That is not necessarily inconsistent with the payment being consideration for the transfer of shares by Graeme Love to him, with Graeme Love directing the payment to Clos d'Aguzon. If that were the arrangement at the time, one would expect that the accounting records of Ingredients Plus would show Graeme Love as a creditor of Ingredients Plus for the $200,000 which Graeme Love would have advanced to Ingredients Plus in that way. No documents were tendered by the defendants to show how Ingredients Plus accounted for the payment.
115 McCartney was unable to give any plausible explanation as to why Graeme Love sent the email addressed to Bontoux to him. McCartney surmised that Graeme Love might have been trying to show McCartney how good he was, but he could not say how the email demonstrated that. This evidence was implausible.
116 The "LEAP shares" were sixty shares held by Graeme Love in companies called LEAP Development Pty Ltd and LEAP Disbursement Management Pty Ltd. Beck deposed in his affidavit that in or around May 2005, Graeme Love attended the Roseville RSL Club and told him that cashflow was a pain when starting a business. According to Beck, he advised Graeme Love to try to sell $200,000 worth of his shares to McCartney and still keep some of his interest in LEAP. According to Beck, "sometime after our meeting at the Roseville RSL Club" he was contacted by Love who had informed him that he had arranged to sell some of his shares in the LEAP Group to McCartney. He deposed that "I subsequently contacted the external accountant to the LEAP Group to arrange the share transfer documentation for Mr McCartney and Graeme Love. On 25 June 2005, Mr McCartney completed the purchase of sixty shares in the LEAP Group from Graeme Love."
117 In oral evidence, Beck swore that his conversation with Graeme Love at the Roseville RSL Club occurred at least a week before a lunch he attened with Love and McCartney on 12 May 2005, but couldn't say how much longer.
118 The documentation for the transfer of shares was prepared by Beck's accountant. The accountant was not called. Share transfer forms were prepared which bore a typed date of 25 June 2005. They provided for the transfer of sixty shares in each of LEAP Development Pty Ltd and LEAP Disbursement Management Pty Ltd from Graeme Love to Rawlo International. They were both signed by Graeme Love and McCartney and a handwritten date of 25 July 2005 was inserted on the forms. New share certificates were issued for Rawlo International Pty Ltd for sixty shares in each of the companies. The share certificates were dated 25 June 2005.
119 These proceedings were commenced on 8 July 2005.
120 On 19 July 2005, LEAP Developments and LEAP Disbursement Management lodged forms with ASIC giving details of the change to the register of members. The forms were certified by Mr Beck. He notified that the register of members had been changed by reducing Graeme Love's shareholding and increasing Rawlo International's shareholding by sixty. The form recorded the date 25 June 2005 as the "earliest date of change".
121 Mr Beck was asked in chief about the typewritten date of 25 June 2005 on the share transfer forms and the handwritten date of 25 July 2005 on the forms. He said (T343):
" I am pretty sure - what sort of happened was - it always takes a while to get these transfers done, … it took me a bit of a while to get organised. When I took it to the accountant to be done - to be honest, the issue is, when I put the date in the past, when it did happen, ASIC fined you for kind of if it is over a month later after you - if you lodge the form over a month later, you get a fine. So I think the accountant suggested that we put that 25th of the sixth, we had it in the correct financial year, but it was still fast enough to get it lodged before the fine applied. "
122 I take it from that evidence that the share transfer form was not prepared until July 2005. He later said:
"I would have just gone to the accountant and said ' We need a transfer done here '. He would have said ' What date? ' I would have said ' Well, it was done in April/May ', and he would have said ' Well, if you do that, it's a bit late now. If you do that there will be a fine ', and I think he said ' What about if we just put the 25th of the sixth, the same financial year? ', so I would have just said 'Y eah, OK '."
123 This is a most implausible explanation for this backdating. The form required to be lodged with ASIC was a form notifying changes to the members' register, that is, changes to the shareholding in the companies. If, as at early July, as Beck, Love and McCartney claimed, Graeme Love had agreed to sell his shares in the two LEAP companies to McCartney and had received payment of the $200,000, there was no need to backdate any document in order to avoid fines from ASIC. At that stage, there had been no change of shareholders. Nothing had to be lodged with ASIC to record a change in beneficial ownership of the shares.
124 Beck said that he understood that there was a period of one month available in which to lodge the appropriate form with ASIC recording the change in shareholding. When asked from when he understood that period of one month started to run, he said "Well, what I understood it to be was that there was a date, and I'm not really sure what that date is supposed to be to be honest, but there's a date on the transfer form and then that's supposed to be lodged within a month of that date." He said, implausibly, that he understood that the share transfer form had to be lodged with ASIC. Even if Beck had the understanding which he deposed to, namely, that he had to lodge the share transfer form with ASIC within a month of its being signed, that was no reason for him to backdate the documents. The share transfer forms were not signed until July and he was well within that one-month period.
125 Eventually, he conceded that his evidence in his affidavit that McCartney completed the purchase of sixty shares in LEAP on 25 June 2005 was wrong. It was palpably wrong. Nothing happened on 25 June 2005. One naturally asks why, if there were an agreement to buy and sell shares for $200,000 entered into in April or very early May 2005, and the consideration for that transfer was paid on 3 May 2005, no share transfer was prepared or executed at the same time? One asks why duty was not paid on the transaction at that time and why steps were not then taken to have the share transfers registered. In the absence of corroboration, I would not accept Beck's evidence. There was no corroboration that he instructed his accountant in about May 2005 to prepare the necessary documentation.
126 I think it more probable that no agreement was made as at 3 May 2005 for Love to sell his shares in the LEAP companies to McCartney. Instead, once proceedings were commenced on 8 July 2005, Love and McCartney sought to document arrangements that would justify the $200,000 payment of 3 May 2005. Beck sought to say (at T354) that the share transfer was completed in late April or early May 2005, even before any share transfer was prepared or signed or share certificate issued. I do not accept that evidence.
127 On 13, 16 and 17 July 2005, Love made a number of calls to Beck on his mobile phone. On 19 July 2005, Beck sent a letter by fax to McCartney stating:
"The original purchase of shares was around April 2004. Let me know if you need an exact signing date.