Pleash (Liquidator), in the matter of SFG Relocations Pty Ltd v Fourie

WW WAREHOUSE SERVICES PTY LTD (ACN 640 073 169) Second Defendant

WATCHMAN HOLDINGS PTY LTD (ACN 632 703 336) (and another named in the Schedule) Third Defendant

order made by: STEWART J DATE OF ORDER: 5 June 2024

1. The first defendant, third defendant and fourth defendant sign all documents and do all things necessary to convey the trade marks numbered 798878, 1385432 and 1994788 (the Trade Marks) to SFG Relocations Pty Ltd (in liq) (the Company) within 28 days of the date of these orders.
2. In default of the defendants or any of them complying with order 1 above, a Registrar of the Court be authorised and empowered to execute all such documents and do all things in the name and on behalf of the defaulting defendant as necessary to convey the Trade Marks to the Company.
3. The first, third and fourth defendants jointly and severally pay the plaintiff's costs of the proceeding on the "trade mark questions" as defined in the orders of 13 May 2022.
4. Liberty to apply for consideration of declarations if still sought by the plaintiff and for orders for compensation in the event that the Trade Marks are not or cannot be transferred to the Company as provided for above. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 The Wridgways brand is associated with a removalist business operated in Australia with roots that can be traced back to its founder, Ernest Wridgway, in 1892. The brand has considerable residual value despite the demise of the business in Australia. This case arises because of that enduring value. 2 The plaintiff is the liquidator of one of the companies in the group that formerly operated the Wridgways business, namely SFG Relocations Pty Ltd. The plaintiff was appointed as liquidator on the day the company was wound up in insolvency by order of the Supreme Court of Queensland under s 459A of the Corporations Act 2001 (Cth), namely 9 July 2021. Until a few days earlier, namely 6 July 2021, the company was named Wridgways Australia Pty Ltd. It had that name from when it was incorporated in 1997. It was placed in administration on 8 July 2021, the day before it was wound up. Having regard to the many different companies that include the name Wridgways, I shall for convenience refer to the company as WAUS. 3 The plaintiff's claims concern the transfer of three trade marks out of the ownership of WAUS, and their onward transfer from the initial transferee to a subsequent transferee. 4 The first transfer, which occurred in May 2019, was from WAUS to Watchman Holdings Pty Ltd, the third defendant. 5 The second transfer, which occurred in June 2021, was from Watchman to EW1892 Pty Ltd, the fourth defendant. 6 The plaintiff seeks return of the trade marks to WAUS for the benefit of its creditors or, failing that, equitable compensation or damages for the value of the trade marks. It is not in dispute that the value of the trade marks over the relevant period, namely from 2019 to the present, is about $1.895 million. That value was proved by way of the unchallenged expert evidence of Adam Giliberti, which I accept, as did the first defendant, Sarel Jakobus (Kobus) Fourie (T99:22, 101:1). 7 Mr Fourie was a director of WAUS from 15 May 2018 until the company was wound up. He was the sole director of the company from 29 May 2021. Mr Fourie was one of two directors of WAUS at the time of the first transfer in May 2019, the other director being George Thomas Johannes Koen. Mr Fourie was the only director of WAUS, Watchman and EW1892 at the time of the second transfer in June 2021. He was also, indirectly, the sole shareholder of Watchman and EW1892 at the times of the transfers to each of those companies. Mr Fourie appeared in person at trial, although he did have legal representation at earlier stages of the proceeding. 8 Watchman was wound up in insolvency on 22 September 2023. On 4 March 2024, I gave leave to the plaintiff pursuant to s 471B of the Corporations Act to proceed with the claims against Watchman: Pleash (Liquidator), in the matter of SFG Relocations Pty Ltd v Fourie (No 2) [2024] FCA 182. The liquidators of Watchman did not appear to oppose final relief in the proceeding. 9 EW1892 did not appear. As will be seen, the shares in EW1892 are owned by a company that is in turn, directly or indirectly, owned by Mr Fourie. That is to say, the company that presently owns the trade marks is owned by Mr Fourie. 10 Some time after judgment was reserved, I relisted the matter on the application of the plaintiff. That was because EW1892 had been wound-up in the intervening period. The plaintiff applied for leave to continue the proceeding against EW1892. On the basis that the matter had already gone to trial and judgment was not only reserved but close to being ready to be delivered, Mr Fourie did not oppose leave being granted and the liquidator of EW1892 recorded that they neither consented to nor opposed leave being granted, I granted leave. I also granted leave to reopen the plaintiff's case for the tender of recent ASIC reports on Watchman and EW1892, which Mr Fourie did not oppose. 11 The originally cited second, fifth and sixth defendants are no longer parties to the proceeding. They were cited in relation to a dispute about access to documents that was separately resolved. No more need be said about them. 12 The three trade marks in question are the following: (1) The word mark WRIDGWAYS bearing number 798878 which was registered from 1 July 1999 in respect of goods and services in classes 35, 36, 37 and 39 - the details of the descriptors within the classes are not relevant; (2) The word mark WRIDGWAYS BUSINESS RELOCATIONS bearing number 1385432 which was registered from 24 September 2010 in respect of goods and services in the same classes; and (3) The word and image mark "WW" bearing number 1994788 which was registered from 8 March 2019 in respect of goods and services in class 39. The image itself is not relevant and need not be reproduced here. 13 Although there were a number of other marks registered and owned by different companies in the Wridgways Australian removal business, none is presently relevant. 14 In no particular order, the plaintiff asserts the following alternate causes of action against the remaining defendants. 15 First, it is contended that the transfer of the trade marks from WAUS to Watchman constituted breaches by Mr Fourie of his director's duties under ss 180 (care and diligence), 181 (good faith) and/or 182 (improper use of position). It is also contended that the transfer was effected by Mr Fourie in breach of his fiduciary duties owed to WAUS under the general law. 16 Secondly, the plaintiff claims that Watchman received the trade marks knowing that they had been transferred to it by Mr Fourie in breach of his duties. On that basis, it is said that Watchman held the trade marks on constructive trust for WAUS (and now the plaintiff) and breached its obligations as a fiduciary by transferring the trade marks to EW1892 for no or inadequate consideration. 17 Thirdly, the plaintiff claims that EW1892 was also a knowing recipient of the trade marks and holds them on trust for the plaintiff. The plaintiff contends that he is entitled to trace the trade marks into the hands of EW1892, and is entitled to orders that effect the return of the trade marks to WAUS. 18 Finally, the plaintiff contends that the first and second transfers are unreasonable director-related transactions as defined in s 588FDA of the Corporations Act which are voidable under s 588FE(6A) as having occurred during the four years ending on the relevant relation-back days. 19 Although it was pleaded that the first transfer was "an uncommercial transaction", presumably intended to be with reference to s 588FB of the Corporations Act, that claim was not pressed at trial.

The history 20 As mentioned, the Wridgways business in Australia can be traced back to the 19th century. There is no need to go back that far for present purposes. The story can be picked up in 2011 when the Danish Santa Fe Group A/S acquired the Australian Wridgways business. Thereafter, the Australian business was conducted by a consolidated group of companies that were all owned, directly or indirectly, by Santa Fe Holdings Australia Pty Ltd (ACN 146 265 894) which was in turn owned by Santa Fe Group A/S. Those companies included WAUS. 21 Mr Fourie, who had previously worked elsewhere in the world, was appointed as Managing Director of Santa Fe in Australia in August 2017. 22 With effect from 10 January 2019, Santa Fe Group A/S sold its shares in Santa Fe Holdings Australia Pty Ltd to a company indirectly owned by Mr Fourie, KCCT Holdings Pty Ltd, in a management buyout (MBO). The purchase consideration was $1, but there was also a loan from Santa Fe of about €3 million for which Santa Fe took security over the immigration services (IMMS) part of the Australian business until it was later sold to a third party. 23 Following the MBO, Mr Fourie effectively owned and controlled the consolidated group of Wridgway companies. He set about restructuring and streamlining the Australian business to return it to profitability. The restructuring and streamlining included the two impugned transfers of the relevant trade marks. 24 Mr Fourie explained that before the MBO, WAUS was a non-trading entity within the consolidated group. He was challenged on that with reference to a balance sheet that on its face shows that as at December 2018 WAUS had total assets of $4,897,297. However, the company's profit and loss statement for the same date shows no trading activity over the previous 12 months. There is also no apparent trading activity in the profit and loss statement for the six months ending 30 June 2019, although the balance sheet as at that date shows a substantial increase in assets and liabilities, the former including trade and other receivables of $638,157 and the latter including trade and other payables of $4,504,152. Those figures tend to show that there was significant trading in that period, and the profit and loss statement and balance sheet seem to be inconsistent. 25 It seems to me that the discrepancies are explained by the fact that the accounts in question were recreated after the fact as part of the "restructuring and streamlining" process. There does not appear to be anything solid on which to gainsay Mr Fourie's evidence that WAUS was not a trading entity within the group prior to the MBO. It did, however, hold the relevant trade marks.

The first transfer 26 Watchman was incorporated on 3 April 2019 with Mr Fourie as director. All the shares in Watchman were owned by KCCT2 Pty Ltd in which Mr Fourie owned all the shares. 27 On 10 May 2019, the registration of the three trade marks was transferred from WAUS to Watchman by way of letters of assignment dated 9 May 2019 and signed by Mr Fourie. The solicitors attending to the transfer of the registration at IP Australia were Hope Earle Lawyers. 28 From 31 May 2019, Sante Fe Holdings Australia Pty Ltd changed its name to Wridgways Pty Ltd. 29 On 13 June 2019, James Hope of Hope Earle sent an email to Mr Fourie which attached a draft letter of offer to purchase the trade marks by Watchman to WAUS and a draft intellectual property licence agreement by which Watchman would licence Wridgways Pty Ltd to use the trade marks for a licence fee. Mr Hope stated that, as Mr Fourie was aware, the transfer of the trade marks had already occurred and the documents were "simply to document the previous transactions". That was a reference to what had occurred approximately a month earlier as detailed in the preceding paragraph. 30 Although the draft letter of offer to purchase recorded a purchase consideration of $10,000 excluding GST, Mr Hope's email sought the transfer of $30,000 plus GST by way of purchase consideration. The letter of offer to purchase was dated 22 April 2019 and recorded that the transfer date of the trade marks would be on or about 1 May 2019. It also confirmed an agreement to offer back to WAUS or a related body corporate a non-exclusive licence to use the trade marks. That was a reference to the intellectual property licence agreement. 31 On 18 June 2019, Mr Fourie returned the signed documents by email to Mr Hope. The email confirmed the purchase consideration as $30,000 plus GST. 32 In evidence, Mr Fourie explained that the figure of $10,000 in the letter of offer to purchase was a typographical error. I accept that explanation. It is confirmed by the email exchange. 33 It is also corroborated by two payments ($25,000 and $8,000) that were made on 24 and 25 June 2019 totalling $33,000 (ie $30,000 plus GST) by Watchman to an account in the name of "Wridgways Pty Ltd". Although the plaintiff challenges whether those payments relate to the transfer of the trade marks because the account was in the name of Wridgways Pty Ltd and not WAUS, I reject that challenge. First, Mr Fourie explained, and I accept, that all the "legacy" companies in the group used the same current account with relevant ledger entries being made to the inter-company loan accounts. None of the many bank statements adduced in evidence throw doubt on that explanation. 34 Secondly, the reference recorded in the bank statement adjacent to the credit entries for the payments is the invoice number of the invoice from WAUS to Watchman for the trade marks (ie "Inv WWL 19 201"). 35 Thirdly, there is a payment instruction by Watchman to ANZ Bank to make the $25,000 payment to "Wridgways Australia Pty Ltd" but giving the account details of the Wridgways Pty Ltd account to which the payments were made. The payment instruction has the same invoice number reference. 36 In short, all the evidence is one way on the question at issue. It shows that the payments were indeed for the trade marks. 37 The intellectual property licence agreement was signed by Mr Fourie on behalf of all the parties to it. They were Watchman as licensor, Santa Fe Holdings Australia Pty Ltd (ie Wridgways Pty Ltd but using its previous name) as licensee, and KCCT Holdings Pty Ltd, Wridgways Pty Ltd and WAUS as guarantors. The "Related Entities" listed in the license agreement included a number of companies in the group. They are companies that conducted the Wridgways business. 38 The essential terms of the license agreement were as follows: (1) The licensee would pay the licensor the "Royalty Fee", save that if the licensee was not in breach of the agreement and neither the licensee nor any of its "Related Entities" suffered or caused an "Adverse Reputation Event" the licensee would only be liable to pay to the licensor the "Licence Fee". (2) The Royalty Fee was 5% of the gross combined annual turnover of the licensee and its Related Entities, whereas the Licence Fee was only $10,000 per calendar year. (3) Adverse Reputation Event was defined as a long list of different events, including the appointment of an administrator or liquidator and the breach of any term of the license agreement. (4) The guarantors jointly and severally guaranteed to the licensor the due and punctual performance by the licensee of all its obligations under the license agreement. (5) The license agreement commenced on the day the last party executed the agreement or on 1 July 2019, whichever occurred first and continued for a period of one year. 39 As the license agreement was signed on or about 18 June 2019, that is the date that it commenced. 40 To summarise, WAUS transferred the three trade marks to Watchman for the purchase consideration of $30,000 plus GST, and Watchman by the intellectual property licence agreement acquired the rights to the license fee of $10,000 for the first year or 5% of the gross combined annual turnover of the related entities in the event that any of them suffered or caused an Adverse Reputation Event. 41 It goes without saying that the transfer of ownership of assets with a value of approximately $1.9 million for only $30,000 raises obvious questions about detriment to the vendor and its creditors. I will return to these. The on-licensing of the use of the trade marks to a different company does not detract from the obviousness of those questions.

The second transfer 42 A business sale agreement dated 23 December 2020 was concluded between a number of companies. A company referred to in the agreement as Wridgways Pty Ltd with ACN 065 419 712, which confusingly is the ACN of the company then named Relocation Logistics Australia Pty Ltd, was recorded as owning all the shares in WAUS, which was in turn recorded as owning all the shares in WW Warehouse Services Pty Ltd. Under the agreement, all the shares in the first named company and all the shares in WAUS were to be acquired by KCCT3 Pty Ltd, another company owned by Mr Fourie. 43 The business sale agreement recorded that the trade marks in use by the company referred to as Wridgways Pty Ltd in respect of the business the subject of the agreement (ie the removalist and relocation business and associated assets operated by Wridgways Pty Ltd and its subsidiaries) were "licensed from a third party". That is presumably a reference to the trade marks being owned by Watchman and being licensed to Wridgways Pty Ltd under the first transfer arrangements. 44 Thereafter, in April 2021, there were negotiations between Mr Fourie and Wayne Kent of Kent Relocation Group Pty Ltd with regard to the potential sale of the business, or aspects of the business. There is in evidence a heads of agreement between three of Mr Fourie's companies as vendors and Kent as purchaser dated 10 May 2021 with regard to a "proposed transaction". The heads of agreement is signed on behalf of the purchaser, but not on behalf of the vendors. The proposed transaction was to include the sale of the trade marks. 45 In the meanwhile, Mr Fourie was also negotiating with other parties, notably Michael and Tony Oro of Asporo Pty Ltd. On 31 May 2021, Mr Hope sent an email to Michael and Tony Oro setting out "the final position from our discussions this afternoon". That "position" included the establishment of a new company to which all the digital assets would be transferred, which reference included the trade marks then owned by Watchman. 46 On 3 June 2021, Watchman and Asporo concluded a binding heads of agreement on the terms of the "position" set out in Mr Hope's preceding email. That included, as mentioned, the transfer of Watchman's trade marks to a new company to be incorporated. [CB 2634] 47 EW1892 was incorporated on 9 June 2021 with Mr Fourie as the director and secretary. The sole shareholder was recorded as Wolfram Pty Ltd. Mr Fourie was the director and secretary of, and the sole shareholder in, Wolfram. 48 The evidence shows that EW1892 was incorporated as the new corporation envisaged by the heads of agreement with Asporo. By the heads of agreement, once further conditions had been satisfied and against payment of the balance of the purchase price, 51% of the shares in EW1892 would be transferred to Asporo. A shareholder agreement to effect the share transfer was drafted. 49 A business sale agreement dated 15 June 2021 was signed on behalf of EW1892, Watchman and Bayliss Services Pty Ltd. It recorded that Watchman operated the "Business" and that in consideration of entering into a deed of release and security, EW1892 would acquire the "Business" and "Assets" and lease the "Physical Assets" from Watchman on the terms and conditions of the business sale agreement. It was also recorded that Bayliss employed certain staff who were essential to the business and their employment would be transferred to EW1892. 50 The "Assets" included the three trade marks that are claimed by the plaintiff in this case but excluded the "Physical Assets". The Physical Assets were defined as "those physical assets (personal property) which are the subject of the Deed of Lease and Security". The agreement provided that Watchman, as the beneficial owner of the Business and the Assets, sold to EW1892, and EW1892 bought from Watchman, the Business and the Assets. 51 The business sale agreement recorded that the parties agreed to contemporaneously enter into a deed of lease and security, and that "the entering into of the Deed of Lease and Security is full and complete consideration for this agreement". 52 By deed of release and security signed on behalf of Watchman and EW1892 also dated 15 June 2021, EW1892 warranted that it was the owner of the "Assets" which it agreed to lease to Watchman for the sum of $20,455 per annum commencing on 1 July 2021 and expiring on 1 June 2028 (ie a total sum of about $143,185). EW1892 granted a security interest over the Assets as security for its performance. The schedule which was supposed to have listed or identified the "Assets" was apparently inadvertently left blank and the physical assets were not otherwise identified. However, with reference to the draft heads of agreement with Kent, it may be that the physical assets were those that Watchman "currently has on the books at the value of $170,466". 53 On 22 June 2021, EW1892 was registered as the owner of the relevant trade marks, having taken an assignment from Watchman on 9 June 2021. That was obviously achieved pursuant to the business sale agreement dated one week earlier. 54 In the meanwhile, Mr Fourie had on 7 June 2021 informed Mr Kent that "the Brand" was removed from the potential deal with Kent. Mr Kent expressed disappointment with that in an email dated 18 June 2021.

The music stops 55 On 9 July 2021, Mr Hope sent a letter to the solicitors for Asporo asserting that the heads of agreement had been repudiated by the latter and claiming forfeiture of the deposit of $360,000 that had already been paid. It will be recalled that that is the same day that WAUS was liquidated. 56 On 13 July 2021, the solicitors for Asporo wrote to Mr Hope asserting that his letter of 9 July was a repudiation on behalf of Mr Fourie's companies, accepting the repudiation and claiming repayment of the deposit. 57 It follows that from 13 July 2021 it was common ground between the parties to it that the heads of agreement with Asporo had come to an end, although there remained a dispute about who was entitled to the deposit. The steps that had been taken on Mr Fourie's side of the deal nevertheless remained in place. Those included the incorporation of EW1892 and the sale of the trade marks by Watchman to EW1892. However, as explained by Mr Fourie in evidence, because the Deed of Lease and Security was executed in order to satisfy the requirements of the deal with Asporo, when that deal fell through, the Deed was not implemented and Watchman received no payments from EW1892 (T108:38-109:18). 58 In other words, when the Asporo deal fell through the transfer of the trade marks to EW1892 remained but Watchman received no benefit for that transfer. It had contracted to lease the unidentified "Physical Assets" to EW1892 for seven years for $143,000. Even if those were very favourable lease terms for assets with a book value of $170,466, which they may have been although it's not possible to say, they cannot have been sufficient to give Watchman adequate compensation for the transfer of the trade marks valued at approximately $1.9 million. Once again, the transfer of the trade marks for apparently very inadequate compensation raises questions about detriment to Watchman.

The unreasonable director-related transaction claims 59 It is convenient to begin with the unreasonable director-related transaction claims under s 588FDA of the Corporations Act. 60 The first transfer occurred on or about 10 May 2019 and the second transfer occurred on or about 9 June 2021. Those are accordingly the relevant dates for the purpose of identifying the applicable statutory provisions. Although it has since been amended, at both those times s 588FDA of the Corporations Act was relevantly in the following terms: 588FDA Unreasonable director-related transactions (1) A transaction of a company is an unreasonable director-related transaction of the company if, and only if: (a) the transaction is: (i) a payment made by the company; or (ii) a conveyance, transfer or other disposition by the company of property of the company; or (iii) the issue of securities by the company; or (iv) the incurring by the company of an obligation to make such a payment, disposition or issue; and (b) the payment, disposition or issue is, or is to be, made to: (i) a director of the company; or (ii) a close associate of a director of the company; or (iii) a person on behalf of, or for the benefit of, a person mentioned in subparagraph (i) or (ii); and (c) it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to: (i) the benefits (if any) to the company of entering into the transaction; and (ii) the detriment to the company of entering into the transaction; and (iii) the respective benefits to other parties to the transaction of entering into it; and (iv) any other relevant matter. The obligation referred to in subparagraph (a)(iv) may be a contingent obligation. Note: Subparagraph (a)(iv) - This would include, for example, granting options over shares in the company. (2) To avoid doubt, if: (a) the transaction is a payment, disposition or issue; and (b) the transaction is entered into for the purpose of meeting an obligation the company has incurred; the test in paragraph (1)(c) applies to the transaction taking into account the circumstances as they exist at the time when the transaction is entered into (rather than as they existed at the time when the obligation was incurred). (3) A transaction may be an unreasonable director-related transaction because of subsection (1): (a) whether or not a creditor of the company is a party to the transaction; and (b) even if the transaction is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency. 61 At the relevant times, "close associate" of a director was defined in s 9 of the Corporations Act as meaning a relative of the director or a relative of a spouse of the director. "Benefit" was defined as including any benefit, whether by way of payment of cash or otherwise. Also, by s 2C of the Acts Interpretation Act 1901 (Cth), "person" in s 588FDA(1)(b)(iii) includes a company or corporation. 62 There can be no doubt that the transfers of the trade marks from WAUS to Watchman and then from Watchman to EW1892 amounted to the "transfer or other disposition … of property of the company" in each case within the meaning of s 588FDA(1)(a)(ii). 63 In each case, the transfer of the trade marks was effected by Mr Fourie as director of the transferor company to a company in which Mr Fourie was the sole shareholder. That raises the question whether an indirect benefit of that nature is a "benefit" to Mr Fourie within the meaning of s 588FDA(1)(b)(iii) referring back to sub-para (i). That is to say, was the disposition in each case a disposition made to the transferee "for the benefit of" Mr Fourie as director of the transferor? 64 There are some cases in the NSW Supreme Court that gave a narrow interpretation to the phrase "for the benefit of" so as to exclude an indirect, or derivative, benefit that the director of the transferor gets as a shareholder of the transferee company: Ziade Investments Pty Ltd (in liq) v Welcome Homes Real Estate Pty Ltd [2006] NSWSC 457; 57 ACSR 693 per Gzell J at [86]-[89] and Re Great Wall Resources Pty Ltd (in liq) [2013] NSWSC 354 per Brereton J at [46]. However, the Court of Appeal of the Supreme Court of Victoria took a broader view in Vasudevan v Becon Construction (Australia) Pty Ltd [2014] VSCA 14; 41 VR 445 at [19] and [26]-[31] per Nettle JA, Beach JA and McMillan AJA agreeing. The Court reasoned that a derivative benefit such as that of a shareholder is captured by the provision, but in that case there was in any event a direct benefit so the reasoning as to indirect benefit was obiter. 65 The approach in Vasudevan was followed by Rangiah J in Pearce v Gulmohar Pty Ltd [2017] FCA 660 at [381] and Gleeson J in Re IW4U Pty Ltd (in liq) [2021] NSWSC 40; 150 ACSR 146 at [85]. Williams J followed IW4U in Re Bryve Resources Pty Ltd [2022] NSWSC 647; 163 ACSR 310 at [94]. Halley J took a similarly wide view in Tang v Roths Holdings Australia Pty Ltd, AXL Financial Pty Ltd (in liq) [2023] FCA 492 at [39]. Not only am I not satisfied that the wider approach is clearly wrong, I am satisfied that it is correct. That is for the reasons given in Vasudevan and IW4U. 66 In the circumstances, s 588FDA(1)(b)(iii) is satisfied. 67 Turning now to s 588FDA(1)(c), it is to be observed that in respect of the first transfer WAUS received only $30,000 for the trade marks that were valued at nearly about $1.9 million. Mr Fourie said that the price of $30,000 for the disposition of the trade marks from WAUS to Watchman was an "arbitrary" figure - "we just picked an arbitrary figure … it could have been anything" (T134:25). No attempt was made by Mr Fourie to justify the figure as not being detrimental to WAUS and against its interests. 68 Mr Fourie explained that after the MBO a number of "serious liabilities" in the group became apparent. A "risk-averting strategy" was embarked on because of the "potential risk" of claims, particularly from the ATO, which included putting the "legacy companies" that had the liabilities "to one side" and starting "afresh" with a number of "clean companies". The legacy companies included WAUS. The strategy included safeguarding the assets, including the relevant trade marks. I infer that that is why the trade marks were transferred from WAUS to Watchman. (See T90:9-100:19.) 69 I should mention that Mr Fourie went to some lengths to show that the trade marks had been impaired in the books of WAUS and that there was justification for that impairment. That is, however, not to the point for present purposes because he accepted that Mr Giliberti's valuation of the trade marks at the relevant times (May 2019, June 2021 and the time of trial) was correct. He also accepted, as mentioned, that the consideration for the transfer to Watchman was arbitrary. 70 In the result, I am satisfied that, within the meaning of s 588FDA(1)(c), a reasonable person in WAUS's circumstances would not have entered into the transaction that transferred the trade marks from WAUS to Watchman - they were transferred away for a pittance to WAUS's evident substantial detriment. It was accordingly an unreasonable director-related transaction within the meaning of s 588FDA. 71 Turning now to the second transfer, Watchman disposed of the trade marks to EW1892 in return for a right to receive payments amounting to a total of $143,185 over seven years for the lease to EW1892 of unidentified physical assets. However, because the Asporo deal fell through, the deed of lease and security was never implemented and Watchman received no payments under the deed. 72 I am satisfied that the deal by which Watchman transferred the trade marks to EW1892 was substantially to Watchman's detriment because what it reasonably anticipated receiving was very substantially less than the value of the trade marks. There is also no compelling explanation of the commercial purpose of the transaction from the perspective of Watchman. The transfer is not a transaction that a reasonable person in Watchman's circumstances would have entered into. It is accordingly an unreasonable director-related transaction within the meaning of s 588FDA of the Corporations Act. 73 Mr Fourie's evidence, which I accept, is that each transaction was entered into as part of a larger series of transactions aimed at enhancing the interests of the group of companies as a whole. There is no suggestion in the evidence that the particular interests of the transferor company were separately considered on each occasion. There is also no reliance sought to be placed on s 187 of the Corporations Act which provides some protection to a director who purports to act in the interests of the holding company rather than the wholly-owned subsidiary of which they are the director provided that certain conditions are met. Not only is that provision not relied on, but the evidence does not allow me to be satisfied that the requisite conditions were met. It follows that Mr Fourie as director of the subsidiary was in respect of each transaction bound to act in the interests of the subsidiary and not only with an eye to the interests of the group as a whole. See Walker v Wimborne [1976] HCA 7; 137 CLR 1 at 6 and Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 148. 74 In the circumstances, both the first and second transfers were unreasonable director-related transactions within the meaning of s 588FDA. Under s 588FE(6A) such a transaction is voidable if it was entered into, or an act was done for the purpose of giving effect to it, during the four years ending on the relation-back day. 75 By item 1 of the table in s 91 of the Corporations Act, read with s 513C(a), the relation-back day for WAUS was the day that it entered administration, ie 8 July 2021. The transfer of the trade marks to Watchman in June 2019 was well within the stipulated four year period. 76 As mentioned, Watchman was wound up in insolvency by court order on 22 September 2023. That was pursuant to a proceeding filed on 14 July 2023 which is accordingly the relation-back day: s 91, item 14. The second transfer in June 2021 was therefore well within the preceding stipulated period of four years. 77 The result is that both the transfers are voidable transactions. 78 Section 588FF provides for what orders can be made in relation to voidable transactions. They include orders for the transfer to "the company" (ie WAUS in this case in respect of the first transaction and Watchman in respect of the second) of property that the company has transferred under the transaction and orders for the payment of money in an amount that, in the court's opinion, fairly represents some or all of the benefits that the person has received because of the transaction. 79 Those provisions justify orders for the transfer of the trade marks from EW1892 back to WAUS (ie the plaintiff as liquidator of WAUS) and, failing that, for the payment of the value of the trade marks by Mr Fourie who is the person who has, through his shareholding in EW1892, received the benefit of the trade marks: Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd (in liq) [2022] NSWSC 394. 80 The liquidator in this case seeks declarations and orders for the transfer of the trade marks to WAUS and for liberty to apply for an order for compensation in the event that the trade marks are not transferred to WAUS. Such orders are supported by the evidence, as explained. 81 In light of my conclusions on the unreasonable director-related transactions claims, the alternative claims can be dealt with relatively briefly.

Section 180 - care and diligence 82 At the relevant times, being the times of the impugned transactions in May 2019 and June 2021 respectively, s 180(1) of the Corporations Act relevantly provided that a director of a corporation "must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise" if they were a director of a corporation in the corporation's circumstances. Section 180(2) relevantly provided that a director who makes a "business judgment" is taken to meet the requirements of subsection (1), and their equivalent duties at common law and equity, in respect of the judgment if they: (a) make the judgment in good faith for a proper purpose; and (b) do not have a material personal interest in the subject matter of the judgment; and (c) inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and (d) rationally believe that the judgment is in the best interests of the corporation. 83 In s 180(3), "business judgment" is defined to mean any decision to take or not to take action in respect of a matter relevant to the business operations of the corporation. 84 There can be no doubt that Mr Fourie's decisions as director of WAUS and then as director of Watchman to transfer the trade marks from WAUS and then from Watchman were, in each case, business judgments. Also, because in each case Mr Fourie was the shareholder of the transferee, he had a material personal interest in the subject matter of the judgment. Mr Fourie cannot therefore avail himself of the protection otherwise offered by s 180(2). 85 Returning to s 180(1), as already explained, a reasonable person in the position of the transferor would in each case not have made the transfer - it was highly detrimental because there was vastly inadequate consideration. The corollary of that conclusion is that a director of the transferor acting reasonably would not have caused the company to make the transfer. As I have explained, Mr Fourie had his eye on the benefit to the group as a whole and in the process acted detrimentally to the interests of the individual companies. 86 In those circumstances, I am satisfied that Mr Fourie was in breach of his obligations under s 180 as director to each of WAUS and Watchman, respectively, when he caused each of them to transfer the trade marks out of their own ownership.

Section 181 - Good faith 87 Section 181(1) of the Corporations Act at the relevant times relevantly provided that a director of a corporation must exercise their powers and discharge their duties (a) in good faith in the best interests of the corporation and (b) for a proper purpose. I do not understand the plaintiff to be relying on the proper purpose requirement in s 181(1)(b) so I can confine myself to considering s 181(1)(a). 88 As stated by the learned authors of LexisNexis, Austin & Black's Annotations to the Corporations Act (online) at [2D.181]: Acting in good faith in the best interests of the corporation means, as the general law cases have explained, subjectively setting out to identify and pursue the corporation's best interests rather than some extraneous or personal interests, for otherwise good faith is missing. If the directors' conduct is not in fact aimed at pursuing the corporation's best interests, as objectively ascertained by the court, a question of fact arises as to whether the directors have discharged their duty of good faith. If their conduct departs so far from the corporation's interests that no reasonable directors acting in the corporation's interests could have engaged in it, the court is likely to conclude, notwithstanding the directors' protestations, that they were not in fact acting bona fide in what they perceived to be the corporation's interests. 89 The trouble in the present case is that Mr Fourie, as explained, was concerned with the best interests of the group as a whole. There is no evidence that he separately considered the interests of the relevant individual corporation, namely WAUS in respect of the first transfer and Watchman in respect of the second. It follows that notwithstanding my satisfaction that Mr Fourie's intention was to act in the best interests of the group as a whole, it cannot be concluded that he acted in good faith in the best interests of the individual corporations in effecting the transfers of the trade marks. 90 I am accordingly satisfied that Mr Fourie acted in contravention of s 181(1) in respect of both transfers.

Section 182 - use of position 91 Section 182(1) of the Corporations Act at the relevant times relevantly provided that a director of a corporation must not improperly use their position to gain an advantage for themselves or cause detriment to the corporation. It has been explained that an objective standard is to be applied in determining what amounts to an improper use of position, and impropriety is established by a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by a reasonable person with knowledge of the duties, powers and authority of the position in the circumstances of the case: R v Byrnes & Hopwood [1995] HCA 1; 183 CLR 501 at 514-515. An officer may act improperly with no intention of acting dishonestly or otherwise than in the best interests of the company as a whole: Chew v R [1992] HCA 18; 173 CLR 626 at 640. However, contravention of the provision does require that the relevant person believed that the intended results of the relevant conduct would be an advantage to themselves or some other person or a detriment to the corporation: Chew at 633. 92 In the present case, I am not satisfied that Mr Fourie believed that the transfers of the trade marks would be a benefit to himself or a detriment to the transferor corporation. I am therefore not satisfied that there was a contravention of s 182(1).

Appropriate relief 93 Sections 180 to 182 are civil penalty provisions with the result that if the Court is satisfied that there has been a contravention it must make a declaration to that effect: Corporations Act, s 1317E(1). Section 1317E(2) specifies what must be included in the declaration. 94 Section 1317E(3) provides that ss 181 to 182 are "corporation/scheme" civil penalty provisions. Under s 1317H(1), a court may order a person to compensate a corporation for damage suffered by the corporation if the person has contravened a "corporation/scheme" civil penalty provision. The order must specify the amount of the compensation.

Fiduciary duties and breach of trust 95 It is uncontroversial that the relationship of a director and the corporation of which they are a director is an established category of fiduciary relationship which is sometimes referred to as a relationship of trust and confidence: Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; 156 CLR 41 at 96 per Mason J. As his Honour explained: The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. 96 As was explained in Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; 200 FCR 296 at [242] and [244], where a director of a company has knowledge of fiduciary or trust wrongdoing which can be imputed to the company, and the wrongdoing affects a transaction or dealing involving the company, the company is regarded as having participated in the breach of fiduciary duty or breach of trust which can render that person accountable in equity as a "constructive trustee". 97 For the same reasons as given in relation to ss 180 and 181, Mr Fourie acted in breach of his fiduciary duties to WAUS and then Watchman in transferring the trade marks from them to the evident detriment of those companies. In effecting the first transfer, Mr Fourie was also a director of Watchman. Mr Fourie as the person effecting the transaction had full knowledge of its details, the knowledge of which is imputed to Watchman. In the circumstances, Watchman was in knowing receipt of the trade marks in breach of constructive trust. The same applies to the second transfer in that Mr Fourie was a director of EW1892 in effecting the transfer in breach of his fiduciary duties as director of Watchman. EW1892 was thus in knowing receipt of the trade marks in breach of constructive trust. This is an application of the principles in Barnes v Addy (1874) LR 9 Ch App 244. 98 Additionally in respect of the second transfer, Watchman as constructive trustee was in breach of trust in transferring the trade marks to EW1892: Super 1000 v Pacific General Securities [2008] NSWSC 1222; 221 FLR 427 at [204]. 99 By the remedy of tracing, the plaintiff can trace the trade marks to EW1892 and recover them: Grimaldi at [562].

Conclusion 100 In the result, it should be ordered that the trade marks be returned to WAUS and that Mr Fourie, Watchman and EW1892 do all things necessary to effect that transfer. I will grant liberty to apply against the eventuality that for some reason the trade marks are not transferred to WAUS, in which event the liquidator can seek orders for compensation. 101 The liquidator has also sought a long list of declarations, essentially declaring each of the alleged breaches and voidable transactions. For the present, I do not see any purpose in such declarations. My reasons for judgment identify what my findings are, and the requisite operative relief is the transfer of the trade marks to WAUS. However, if the liquidator wishes to press for declarations, I will hear counsel on why declarations should be made. 102 The costs should follow the event. That is to say, Mr Fourie, Watchman and EW1892 should jointly and severally pay the liquidator's costs of suit in relation to what has been referred to as the "trade marks questions" but not the "documents questions" which were separately resolved following orders made on 13 May 2022. I certify that the preceding one hundred and two (102) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.

SCHEDULE OF PARTIES NSD 817 of 2021 Defendants Fourth Defendant: EW1892 PTY LTD ACN 650 887 942