Wollongong Coal Ltd v Gujarat NRE Properties Pty Ltd

EQUITY - Equitable remedies - Equitable compensation - Where plaintiff company sought equitable compensation against two defendant directors for breach of fiduciary obligations; plaintiff also sought equitable compensation against its former subsidiary company which received the plaintiff's funds with knowledge of the breach by the defendant directors - Where plaintiff later converted the debt owed to it by the subsidiary into further equity in the subsidiary and then sold all of its shares in the subsidiary to a third party for $3.75 million - Consideration of the causation test applicable to equitable compensation, including the Privy Council's decision in Brickenden v London Loan & Savings Co concerning the kind of counterfactual scenarios courts can consider in determining causation - Consideration of distinction advanced between substitutive compensation and reparative compensation - Held: defendant directors held liable to pay equitable compensation to the plaintiff for all of the loss that would not have happened but for the breach (less the $3.75 million from the share sale) plus interest. Plaintiff's claim for equitable compensation against the subsidiary refused on discretionary grounds because it was inconsistent with the sale of shares in the subsidiary to a third party. Legislation Cited: Civil Procedure Act 2005 (NSW) Corporations Act 2001 (Cth) Evidence Act 1995 (NSW) Cases Cited: Adler v ASIC [2003] NSWCA 131; (2003) 179 FLR 1 Aequitas Ltd v AEFC Leasing Pty Ltd [2001] NSWSC 14; (2001) 19 ACLC 1,006 Agricultural Land Management Ltd v Jackson (No 2) [2014] WASC 102; (2014) 48 WAR 1 Amaltal Corporation Ltd v Maruha Corporation [2007] NZSC 40 Aneve Pty Ltd v Bank of Western Australia Ltd [2005] NSWCA 441 ASIC v Adler [2002] NSWSC 171; (2002) 168 FLR 253 Attorney-General v Bowman (1792) 2 Bos & P 532n Attorney-General v Radloff (1854) 10 Exch 84; (1854) 156 ER 366 Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 Barnes v Addy (1874) LR 9 Ch App 244 Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1 Bishopsgate Investment Management Ltd (in liq) v Maxwell [No 2] [1994] 1 All ER 261 Blackmagic Design Pty Ltd v Overliese [2011] FCAFC 24; (2011) 191 FCR 1 Blendell v Byrne; The Estate of Noeline Joan Blendell [2019] NSWSC 583 Bond v Larobi Pty Ltd (1992) 6 WAR 489 Breen v Williams [1996] HCA 57; (1996) 186 CLR 71 Brickenden v London Loan & Savings Co [1934] 3 DLR 465 Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 Carapark Holdings Ltd v Commissioner of Taxation (Cth) [1967] HCA 5; (1967) 115 CLR 653 Citibank Ltd v Liu; ABN Amro Bank Ltd v Liu [2002] NSWSC 886 Commonwealth Bank of Australia v Smith (1991) 42 FCR 390; (1991) 102 ALR 453 Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 Coyte v Norman [2016] NSWSC 1242; (2016) 115 ACSR 523 Crossman v Sheahan [2016] NSWCA 200; (2016) 115 ACSR 130 Darvall v North Sydney Brick & Tile Co Ltd (No 2) (1989) 16 NSWLR 260 Day v Mead [1987] 2 NZLR 443 Duncan v Independent Commission Against Corruption [2016] NSWCA 143 Eclairs Group Ltd v JKX Oil and Gas plc [2015] UKSC 71; [2016] 3 All ER 641 Everist v McEvedy [1996] 3 NZLR 348 Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 Fulton v Fulton [2014] NSWSC 619 Furs Ltd v Tomkies [1936] HCA 3; (1936) 54 CLR 583 Gemstone Corporation of Australia Ltd v Grasso (1994) 62 SASR 239 Gerard Cassegrain & Co Pty Ltd (in liq) v Cassegrain [2013] NSWCA 455; (2013) 305 ALR 687 Gray v New Augarita Porcupine Mines Ltd [1952] 3 DLR 1 Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296 Gujarat NRE India Pty Ltd v Wollongong Coal Ltd [2018] NSWSC 1459; (2018) 130 ACSR 133 Gwembe Valley Development Co Ltd (in receivership) v Koshy (No 3) [2003] EWCA Civ 1048; [2004] 1 BCLC 131 Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60 Halpin v Lumley General Insurance Ltd [2009] NSWCA 372; (2009) 78 NSWLR 265 Hancock Family Memorial Foundation Ltd v Porteous [2000] WASCA 29; (2000) 22 WAR 198 Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL [1968] HCA 37; (1968) 121 CLR 483 Harpley Nominees Pty Ltd v Jeans [2006] NSWCA 176 Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 Hodgkinson v Simms [1994] 3 SCR 377 Hodgson v Amcor Ltd [2012] VSC 94; (2012) 264 FLR 1 Hordern v Hordern [1910] AC 465 Hyland v Hyland (1971) 18 FLR 461 In re Exchange Banking Company (Flitcroft's case) (1882) LR 21 Ch D 519 John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Krakowski v Eurolynx Properties Ltd [1995] HCA 68; (1995) 183 CLR 563 Krupace Holdings Pty Ltd v China Hotel Investments Pty Ltd [2018] NSWSC 862 Latimer v Day [2015] NSWSC 11 Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 Lewis Securities Ltd (in liq) v Carter [2018] NSWCA 118; (2018) 334 FLR 9 Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 Maio v Sacco (No 2) [2009] NSWSC 742 March v E & MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 Markus v Provincial Insurance Co Ltd (1983) 25 NSWCCR 1 Mavrideros v Mack (1998) 45 NSWLR 80 Mendel v State of New South Wales [2019] NSWDC 146 Mills v Mills [1938] HCA 4; (1938) 60 CLR 150 Nadinic v Drinkwater [2017] NSWCA 114; (2017) 94 NSWLR 518 New South Wales v Avery [2016] NSWCA 147; (2016) 92 NSWLR 141 Nolan v Nolan [2004] VSCA 109 O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187; (1994) 14 ACSR 109 Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 Prasad v AMP Life Ltd [2012] NSWSC 1076 Premium Real Estate Ltd v Stevens [2009] NZSC 15; [2009] 2 NZLR 384 Re Colorado Products Pty Ltd (in liq) [2014] NSWSC 789 Re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211 Re O'Neil, Deceased [1972] VR 327 Re Purcom No 34 Pty Ltd (In Liq) (No 2) [2010] FCA 624 Re Wan Ze Property Development (Aust) Pty Ltd [2012] NSWSC 722; (2012) 90 ACSR 593 Robins v Incentive Dynamics Pty Ltd (in liq) [2003] NSWCA 71; (2003) 175 FLR 286 Short v Crawley [No 30] [2007] NSWSC 1322 Simmons v NSW Trustee and Guardian [2014] NSWCA 405; (2014) 17 BPR 33,717 Swindle v Harrison [1997] 4 All ER 705 Target Holdings Ltd v Redferns [1995] UKHL 10; [1996] AC 421 Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1; [1972] AC 153 Thomas v Arthur Hughes Pty Ltd [2015] NSWSC 1027; (2015) 16 ASTLR 252 Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125 Viro v The Queen [1978] HCA 9; (1978) 141 CLR 88 Watson v Foxman (1995) 49 NSWLR 315 Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 44 WAR 1 White v Illawarra Mutual Building Society Ltd [2002] NSWCA 164 Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285 Wollongong Coal Ltd v Gujarat NRE India Pty Ltd [2019] NSWCA 135 Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 Texts Cited: Conaglen, Matthew, "Brickenden" in Simone Degeling and Jason N. E. Varuhas (eds), Equitable Compensation and Disgorgement of Profit (Hart Publishing, 2017) Conaglen, Matthew, "Equitable Compensation for Breach of Fiduciary Dealing Rules" (2003) 119 Law Quarterly Review 246 Elliott, S. and C. Mitchell, "Remedies for Dishonest Assistance" (2004) 67 The Modern Law Review 16 Glister, J., "Breach of Trust and Consequential Loss" (2014) 8(3) Journal of Equity 235 Gummow, Hon Justice W., "Compensation for Breach of Fiduciary Duty" in T. G. Youdan (ed), Equity, Fiduciaries and Trusts (Carswell, 1989) Hamilton, John, et al (eds), NSW Civil Procedure Handbook 2019 (Thomson Reuters, 9th ed, 2019) Harder. S., "Is a Defaulting Fiduciary Exculpated by the Principal's Hypothetical Consent" (2008) 8(1) Oxford University Commonwealth Law Journal 25 Heydon, J. D., "Causal Relationships Between a Fiduciary's Default and the Principal's Loss" (1994) 110 Law Quarterly Review 328 Heydon, J. D., Cross on Evidence (LexisNexis Butterworths, 10th ed, 2015) Heydon, J. D., M. J. Leeming and P. G. Turner, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2015) Mitchell, C., "Equitable Compensation for Breach of Fiduciary Duty" (2013) 66 Current Legal Problems 307 Tilbury, M. and G. Davis, "Equitable Compensation" in Patrick Parkinson (ed), The Principles of Equity (Thomson Lawbook Co, 2nd ed, 2003) Ward, Hon Justice J., "Equitable Compensation - An Overview" in Simone Degeling and Jason N. E. Varuhas (eds), Equitable Compensation and Disgorgement of Profit (Hart Publishing, 2017) Category: Principal judgment Parties: Wollongong Coal Ltd (Plaintiff) Gujarat NRE Properties Pty Ltd (First Defendant) Mr Arun Jagatramka (Second Defendant and Cross Claimant) Mrs Mona Jagatramka (Third Defendant) Mr Sanjay Sharma (First Cross Defendant) Mr Andrew Firek (Second Cross Defendant) Mr Michael Anghie as the Executor of the Estate of the Late Maurice Anghie (Third Cross Defendant) Representation: Counsel: Mr A. Coleman SC with Mr N. Riordan (Plaintiff) Mr D. Pritchard SC with Mr A. Macauley (Second and Third Defendants) Mr E. Hyde (First to Third Cross Defendants)

Solicitors: Thomson Geer (Plaintiff) Gillard Consulting Lawyers (Second and Third Defendants) Hall & Wilcox (First to Third Cross Defendants) File Number(s): 2014/175645 Publication restriction: Nil

Judgment

1. The Plaintiff, Wollongong Coal Ltd ("WCL"), by its Further Amended Statement of Claim ("FASTOCL"), sues Gujarat NRE Properties Pty Ltd ("Properties" - formerly known as Gujarat NRE Koyola Pty Ltd) and two former directors of WCL, namely Mr Arun Jagatramka (the Second Defendant) and his wife, Mrs Mona Jagatramka (the Third Defendant), in connection with a property known as 64 Cliff Road Wollongong NSW ("Cliff Road"). WCL was previously known as Gujarat NRE Coking Coal Ltd. There was a Fourth Defendant, Gujarat NRE India Pty Ltd ("GNI"), but that claim was previously resolved.
2. There were at all relevant times two other directors of WCL, Mr Andrew Firek ("Mr Firek") and Mr Maurice Anghie ("Mr Anghie"). Mr Sanjay Sharma ("Mr Sharma") was at all relevant times between 2008 and 2013 company secretary of WCL and a director of Properties, and he was also chief commercial officer and a member of the audit committee of WCL. Mr and Mrs Jagatramka were also directors of Properties between these dates.
3. WCL is (and has been since July 2007) a publicly listed company on the Australian Stock Exchange ("ASX"). The major shareholders of WCL until 2013 were subsidiaries of the Gujarat Group of companies, based in India, of which Mr Jagatramka's family held the preponderance of shares. The ultimate shareholder was Gujarat NRE Coke Ltd ("GNCL"). In 2013 the major shareholder in WCL became Jindal Steel & Power (Mauritius) Ltd ("Jindal"), a company unconnected with the Jagatramkas.
4. WCL operates two mines, one called NRE 1 at Russell Vale ("Russell Vale Colliery") and the other called Wongawilli Colliery. Both produce coking coal for use in making steel. The Russell Vale Colliery sits on the edge of a residential area of Wollongong.
5. The essence of the claims brought by WCL against Mr and Mrs Jagatramka is that, in breach of duties owed by them as directors to WCL, they caused approximately $10 million to be spent by WCL on the purchase of Cliff Road, demolition of the existing house and on construction of a new house in which they would reside rent-free on an exclusive, indefinite and continuous basis: see FASTOCL paragraphs 36 and 72. The new house can be seen in the photographs in Exhibit D3 and its location in the photographs in Exhibit C.
6. Mr and Mrs Jagatramka deny any breach of duties owed to WCL. Mr Jagatramka has cross claimed against Mr Firek, Mr Anghie and Mr Sharma, seeking contribution from them should he, contrary to his Defence, be found liable to WCL, it being asserted that they are equally liable for any loss suffered by WCL as a result of the matters pleaded against Mr Jagatramka.
7. The purchase of Cliff Road was not effected directly by WCL. Rather, WCL utilised a dormant shelf company owned by NRE Resources Pty Ltd, which became Properties, to purchase Cliff Road. WCL owned all the shares in Properties. The WCL Board resolution is found at CB A2:476-477 and 481. The resolutions by which WCL acquired the shares in Properties are found at CB A2:484, 485 and 534. The transfer to Properties is found at CB A3:562. WCL purchased the shares in Properties and lent money to Properties so that Properties could pay the deposit, the balance of the purchase price and all of the demolition and construction costs. The contract for the purchase of Cliff Road is found at CB A2:436-470. For convenience, in the balance of these reasons I shall refer to the purchase of Cliff Road as comprehending the purchase by Properties and the purchase of shares in Properties by WCL to achieve that end. Properties had no income and no assets other than Cliff Road, but it was at all relevant times from June 2008 until July 2013 a wholly owned subsidiary of WCL and utilised solely for the Cliff Road purchase. Its three directors were Mr and Mrs Jagatramka, and Mr Sharma. No interest was ever charged by WCL, nor any security obtained, for the loans made to Properties. In June 2013 the Board of WCL resolved to convert the debt owed by Properties to WCL (at the time, $9,353,000) into equity in Properties, and WCL then sold all of the shares in Properties to Happy Mining Pty Ltd ("Happy Mining") for $3.75 million. Happy Mining was a shareholder of WCL and its director was Mr Rajat Sharma. There is no suggestion that Mr Sanjay Sharma and Mr Rajat Sharma are related. Happy Mining's sole shareholder is Gujarat Metallic Coal and Coke Ltd ("GMCC"): CB A8:2473. Happy Mining assigned its rights to Basant International Pty Ltd ("Basant"), and Basant became the owner of all of the shares in Properties. Basant's sole shareholder and director is Mr Kunal Chandak. WCL did, in July 2013, receive $3.75 million from sale of its shares in Properties to Basant and it used those funds to pay $2 million to Wonga Coal, $550,000 to Gujarat NRE Pty Ltd ("GNPL") and $1.158 million to GNI.
8. There are three components to WCL's claim. WCL seeks to impugn: 1. The decision to purchase Cliff Road (albeit through Properties) ("The First Component"). 2. The funding of the expensive demolition and construction costs for Cliff Road (again, through Properties) ("The Second Component"). 3. The debt to equity swap and sale of shares in Properties to Happy Mining (with Happy Mining's rights under the share sale later assigned to Basant) ("The Third Component").
9. WCL claims that the purchase and construction of Cliff Road and the sale to Happy Mining/Basant were all engineered by Mr and Mrs Jagatramka, and their actions amount to: 1. Breach of the fiduciary duties owed by them to WCL as directors. 2. Breach of their statutory duties as directors, namely ss 180-182 of the Corporations Act 2001 (Cth) ("Corporations Act"). WCL also claims that Properties, by the knowledge of Mr and Mrs Jagatramka as directors, was aware at all relevant times of the breach of duties by the Jagatramkas and are thus accessorily liable for those breaches, thereby entitling WCL to a constructive trust over Cliff Road or equitable compensation from Properties.
10. WCL's June 2008 circular resolution (so called because it was not signed at a meeting at which all directors were physically present) was in the following terms: "By this circular resolution, we the undersigned, being all of the Directors of Gujarat NRE Minerals Ltd (The Company), hereby resolve that in accordance with the provisions of Section 248A of the Corporations Act 2001: A. That the Company is hereby authorized to purchase entire shareholding, being 10,000 fully paid ordinary shares, of Gujarat NRE Koyala Pty Ltd from NRE Resources Pty Ltd for a total consideration of Aus $10,000 ($1.00 per share). B. That Mr. Sanjay Sharma be and is hereby authorized to do all such acts, deeds and things that may be deemed necessary, incidental and ancillary towards attainment of the aforesaid resolutions. Note: Board was informed that the Company has been offered with a rare opportunity to acquire a property at 64 Cliff Road, Wollongong, NSW 2500. It is one of the most exclusive addresses in Wollongong and perfectly suitable for a development of accommodation facilities for executives of NRE Groups. The cost of acquisition of property was estimated around $5,000,000 plus taxes and stamp duties. It was further anticipated that Company may incur additional $3,000,000 to $4,000,000 for the development of aforesaid accommodation facilities. The Board agreed that the above mentioned property would be most suitable for proposed development and for strategic reasons suggested to acquire the offered property in one of its wholly owned subsidiaries. It was brought into Board's knowledge that the Company may acquire Gujarat NRE Koyala Pty Ltd, which is a dormant company at present, from NRE Resources Pty Ltd for the purpose of acquiring and developing the above-mentioned property and accommodation facilities. The Board agreed and approved on same." I shall in the balance of these reasons refer to this resolution as "the 2008 resolution".
11. Mr Anghie died last year and his executor Mr Michael Anghie was substituted as Cross Defendant.
12. Mr A. Coleman SC with Mr N. Riordan appears for WCL. Mr D. Pritchard SC with Mr A. Macauley appears for Mr and Mrs Jagatramka. Mr E. Hyde of Counsel appears for Mr Firek, Mr Michael Anghie and Mr Sharma. Properties has never appeared in the proceedings.
13. At the hearing I received, in addition to extensive oral submissions, detailed written submissions on behalf of the parties, which I set out below: 1. On behalf of WCL: 1. Plaintiff's Closing Submissions ("PCS"). 2. Plaintiff's Submissions on Jones v Dunkel. 3. Plaintiff's Response to the Defendants' Schedule of Non-Pleaded Claims. 1. On behalf of the Jagatramkas: 1. Defendants' Closing Submissions ("DCS"). 2. Defendants' Schedule of Non-Pleaded Claims. 3. Second and Third Defendant's Salient Responsive Points to the Closing Submissions of the Plaintiff ("SRP"). 4. Defendants' Specific Response to the Matters Relied upon in Support of the Finding of Fact [sought by the Plaintiff] ("the Defendants' Specific Response"). I will refer to the Defendants' submissions collectively as "the Jagatramkas' submissions". 1. On behalf of the Cross Defendants: 1. The Cross Defendants' Closing Submissions ("CDCS").
14. Following the hearing and in accordance with directions made by consent on the last day of the hearing, I received on 25 November 2019 the Plaintiff's Further Written Submissions on the issue of the relief available ("PFWS"), and then on 2 December 2019 I received the Defendants' Further Written Submissions in Reply ("DSR").

Some Preliminary Matters

1. This case was originally listed to be heard in August 2018 and it commenced before me on 27 August 2018. WCL sought on that day to file a further amended statement of claim on the first day of that hearing and a question arose as to who on behalf of WCL had given instructions to the solicitors to file that document, since Mr Anghie and Mr Firek had not done so and they were not aware of any meeting having been called to authorise such a step. This led to WCL seeking an adjournment of the proceedings to enable a meeting of shareholders to be held, and I indicated that the hearing would have to be commenced afresh after that step had been taken. Mr Withers of Counsel, who then appeared for WCL, sought postponement of the hearing and agreed to conditions for the adjournment, including that: "Plaintiff not be allowed to adduce any further evidence absent special circumstances being demonstrated, other than 2 folders of documents to be provided to the other parties by 5 pm, 29 August 2018, and any other document from material produced by Gokani & Associates and Wollongong City Council in answer to a subpoena" (see Exhibit 2 on the voir dire of 6 November 2019).
2. The reference to "the 2 folders" was to documents that Mr Withers said "had not been printed by the time this case started and that I wanted to add to the bundle."
3. Those two folders became Exhibits A8A and A8B in the current hearing.
4. On the third day of the current hearing (which commenced on 4 November 2019) shortly before closing WCL's case, Mr Coleman sought leave to rely on an Affidavit of Mr Richard Norman Welsh of 6 November 2019.
5. Mr Welsh is a private investigator who was hired to undertake surveillance of Cliff Road between 23 and 25 August 2018. According to his report, annexed to his Affidavit, Mr Welsh observed and photographed a young adult male who was identified by Mr Sharma, for the purposes of consideration of the report's admissibility, as Mr Ayush Jagatramka, the son of Mr and Mrs Jagatramka.
6. The report was prepared before the hearing on 28 August 2018. It was never provided, either alone or as an annexure to Mr Welsh's Affidavit, to the Defendants or Cross Defendants. It was not included in the "2 folders" to which Mr Withers referred, and it was not included in the recently prepared Court Book.
7. Mr Coleman's explanation for not making the report and affidavit available to the Defendants' solicitors was that his predecessor and he wanted to keep the report away from Mr Jagatramka until his cross examination. To disclose the report early would permit Mr Jagatramka an opportunity to tailor the evidence he would give in cross examination. This theme is similar to that seen in cases such as Markus v Provincial Insurance Co Ltd (1983) 25 NSWCCR 1, Halpin v Lumley General Insurance Ltd [2009] NSWCA 372; (2009) 78 NSWLR 265, Prasad v AMP Life Ltd [2012] NSWSC 1076 and Latimer v Day [2015] NSWSC 11, although they are all cases where a party has sought an order from the Court that it not be required to provide potentially relevant material before hearing.
8. Mr Pritchard contended that cases such as Halpin are all cases where a defendant seeks to hold back material not where a plaintiff seeks to hold back. In Mendel v State of New South Wales [2019] NSWDC 146 the principle was applied in favour of a plaintiff and I do not see any logical reason for limiting its operation to applications by defendants.
9. There clearly was an expectation on the part of those advising WCL that Mr Jagatramka would attend for cross examination, he having served an affidavit in the proceedings which was included in the Court Book. When it became increasingly obvious that he was not going to attend, or at least that that was a real prospect, Mr Coleman on the second day of the hearing sought leave to serve a Notice to Admit Facts and have time abridged, requiring answers by 2:00 pm that day, an application which was resisted by Mr Pritchard and which I refused.
10. I do not have any difficulty accepting that there were sound tactical reasons for not wanting Mr Jagatramka to see the report or the photographs until he was cross examined, but the fact is that, contrary to WCL's expectation, he did not attend for cross examination, with the consequence that his Affidavit was not read. The issue then before the Court was not whether Mr Coleman could deploy the report for the purpose of cross examination but whether he could simply tender it.
11. Mr Pritchard objected to such a course on a number of grounds, namely: 1. WCL obtained an adjournment on terms which precluded advancing any new evidence absent special circumstances. 2. The evidence involved Mr and Mrs Jagatramka's son not them, and it was accepted by Mr Coleman that the son was, as of Thursday 6 November 2019, in India (see T409.44). 3. The decision to hold back the report and affidavit, made for forensic reasons, did not constitute special circumstances. 4. If the evidence were admitted, Mr Pritchard would need to subpoena Mr Welsh's employer and possibly the contracting party with Mr Welsh's employer (to ascertain the period over which surveillance had taken place), and would need an adjournment to take instructions from his clients on the matters raised and to obtain evidence from their son. 5. The evidence that the son was present at Cliff Road in August 2018 would be of limited significance and weight in any event. 6. In a case where there has already been an adjournment on the application of the Plaintiff, the Plaintiff should not be permitted to tender material on the third day of the hearing prejudicial to the Defendants, which was not provided to the Defendants until the day before and with which the Defendants could not fairly deal without an adjournment.
12. I indicated to the parties on 6 November 2019 that I would not permit WCL to rely on the Affidavit of Mr Welsh. It was agreed by Counsel that I should provide the reasons for that decision within these reasons.
13. I am inclined to think that, particularly having regard to what occurred on 27 and 28 August 2018, it was incumbent on WCL to make a Halpin application prior to the hearing in order to establish "special circumstances" which would dispense with the need for WCL to serve material on which it proposed to rely, but it did not do this. Whether or not it was open to WCL, notwithstanding the absence of any such application, to cross examine Mr Jagatramka on the matters contained in the report, and whether or not such cross examination would prove to be of value in impugning his credit, the fact of the matter is that he was not called in his own case and WCL's reason for not producing the report earlier has been found to be misplaced. I do not think it is open to WCL to then seek to use the material as evidence in its case when it has not provided it to the Defendants before the hearing, and the Defendants are not in a position to deal with evidence made available to them on the third day of a hearing fixed in May 2019.
14. Moving on to other matters, WCL called only one witness, Mr Sharma. The Jagatramkas did not give evidence and called no witnesses. Mr Firek, Mr Sharma and Mr Anghie all put on affidavits in defence of Mr Jagatramka's Cross Claim and their affidavits were read. Mr Sharma and Mr Firek were cross examined at length by Mr Pritchard. That Mr Sharma was both the Plaintiff's only witness and a Cross Defendant, who put on one affidavit on behalf of WCL and one in support of his Defence to the Cross Claim brought by Mr Jagatramka (but not Mrs Jagatramka), and that Mr Firek remains a director of WCL (but who was not called in WCL's case against the Jagatramkas), produces a rather intriguing forensic situation to which I shall return.
15. As previously noted, Properties has never appeared in these proceedings. There is evidence of service of the original proceedings upon it: see Affidavit of Service of Matthew Wilkinson dated 21 August 2018 at CB A9, Tab 21, and see also Tab 22. Properties' failure to appear is quite striking given that it owns Cliff Road and WCL asserts a constructive trust over that property and claims that Cliff Road constitutes traceable proceeds of the share purchases and loans for the purpose of acquiring and developing Cliff Road, and Basant is the sole shareholder in Properties, having paid $3.75 million for those shares. Mr and Mrs Jagatramka have, through the submissions of their Counsel, resisted WCL's claim to recover Cliff Road from Properties. Mr Coleman challenges the Jagatramkas' right to do so because they ceased to have any connection with Properties when they resigned as directors of that company in June 2013: see PCS 2.7. Transfer of Cliff Road to WCL, as WCL seeks, would reduce the amount of the liability of the Jagatramkas to WCL if that were established, and yet curiously the Jagatramkas vigorously contend that WCL is not entitled to that relief against Properties.

Cliff Road

1. When the property was purchased for $5 million the existing house was described in a report made soon after purchase as dilapidated and at "the end of its economic life": see CB A2:512. That house was demolished and between 2009 and 2011 a new two storey house was built in its place. It was finished in September or October 2011 and a party was held in October 2011 to mark its completion. Cliff Road is situated opposite the small harbour of Wollongong and has extensive views over the Tasman Sea: see Exhibit D3.
2. The house at Cliff Road was designed by an architect of Indian heritage (Mr Lalit Mital) with Indian architectural features said to be in the "Vastu" style. There is a dining room, family room, master bedroom, three other bedrooms, a prayer room and what is described as "a guest room" downstairs. It has a lounge/entertainment room and a rumpus room, two kitchens and a lift: see CB A5:1266. It has a turntable in the garage on the ground floor: CB A6:1538. The house has marble finishes, expensive fixtures and fittings, and a glass balustrade.
3. It is clear from the correspondence that it was Mrs Jagatramka who selected all finishes for Cliff Road and whose requirements were being met. Although Mr Mital's contract was with Properties (see CB A3:586-587, A4:954 and A5:1378-1381), he clearly believed that Mr and Mrs Jagatramka were effectively the clients, and that understanding came at least in part from Mr Sharma at CB A3:721, A4:934, 937, 949, and from Mrs Jagatramka who in her email to the architect described herself as the client: see CB A4:947. Mr Jagatramka instructed the architects not to do anything in relation to the building work without first clearing it with him or Mrs Jagatramka. Mr Sharma, who was both secretary of WCL and a director of Properties, was a conduit for much of the information and instructions, but he did not actually make any decisions himself. No one else from WCL or Properties was involved in any decisions or the giving of instructions in respect of Cliff Road.
4. Mrs Jagatramka had no qualifications pertinent to the work being carried out but she had the experience of having a house built for her in Ahmedabad (which is the Jagatramkas' home in India, and which she must have arranged for Mr Mital to see: CB A4:947). Cliff Road was never used by anyone other than Mr Jagatramka and his family: T167. When overseas visitors came to Wollongong after the construction of Cliff Road they were accommodated in local hotels: see aide memoir summarising evidence handed up by Mr Coleman and paragraph 82 of Mr Sharma's first Affidavit.
5. In 2013 it became clear that WCL was in dire financial circumstances. Creditors were pressing for payment and the auditors of WCL expressed the view to ASIC that the company might be insolvent. WCL's Board resolved to sell non-core assets and steps were taken to sell an apartment at 4 Bank Street Wollongong ("Bank Street"), shares in Rey Resources Pty Ltd and Cliff Road. There is no dispute between the parties that this was necessary and appropriate. Cliff Road, however, was not owned directly by WCL. Rather, WCL had lent Properties all of the funds to buy the property and build the new house, and WCL owned all of the shares in Properties.
6. The Boards of WCL and Properties resolved to convert the approximately $9.5 million debt owed by Properties to WCL to further equity in Properties and then to sell all of the shares in Properties to Happy Mining for $3.75 million. Mr and Mrs Jagatramka did not vote on the resolution relating to the debt to equity swap but did vote on the sale of the shares: CB A6:1559-1560. The share sale deed to Happy Mining is found at CB A6:1572-1582. That purchase required Foreign Investment Review Board ("FIRB") approval (as had Properties' original purchase in 2008) and, apparently due to the difficulty of obtaining FIRB approval (CB A6:1666), it was decided that Happy Mining's agreement to buy the shares from WCL would be assigned to Basant. Happy Mining had already paid the $3.75 million to WCL and the payment was treated as a payment by Basant and the shares were duly transferred to Basant. Basant, which subsequently changed its name to Bhanu Properties Pty Ltd (although, for convenience, I will continue to refer to the company as Basant) remains the owner of all of Properties' paid up capital. Basant has not been made a party to these proceedings and WCL has not sought to set aside the sale of shares in Properties to Happy Mining or Basant.
7. Shortly before the sale of the shares in Properties to Happy Mining/Basant, WCL obtained a valuation of Cliff Road from Opteon (South East Regional NSW) Pty Ltd ("Opteon") dated 13 May 2013: CB A6:1533-1547. The value ascribed to Cliff Road was $3 million for the land and $750,000 for the improvements, i.e. a total of $3.75 million. It will be recalled that the cost of improvements to Cliff Road exceeded $4 million.
8. It will be readily apparent that the amount paid for all of the shares sold to Happy Mining/Basant is precisely equivalent to the value ascribed to Cliff Road by the valuation report. Properties' only asset was Cliff Road. It will also be apparent that a property which cost Properties approximately $10 million ($5 million in 2008 and approximately $5 million in demolition and construction costs) sold for only $3.75 million five years later. WCL does not contend that Cliff Road was worth more than $3.75 million in 2013 when the shares in Properties were sold to Basant. It has put on no evidence to show that the $5 million paid in 2008 for Cliff Road exceeded its real value at that time. WCL's case is not that Cliff Road was purchased at an inflated price. On WCL's case, it is the purchase of Cliff Road in 2008 (through the medium of shares in Properties) and the commitment to spend (and later actual expenditure of) considerable amounts in constructing and fitting out Cliff Road that was not in the interests of WCL and was achieved because Mr and Mrs Jagatramka did not reveal that they wanted the house built exclusively for themselves and gave two other reasons for the proposed purchase.
9. After Basant took over the shares in Properties, Properties leased Cliff Road to NRE Resources Pty Ltd for a period of two years: see Mr Jagatramka's answer to interrogatories at CB A9, Tab 18. The interrogatories were answered on 1 February 2018. On the basis of those answers, the Jagatramkas' involvement with Cliff Road ceased in April 2015. The Jagatramkas' son continued to live there during the course of his university studies in Wollongong (T254.10) - that the son lived there after April 2015 is not established. Mr Jagatramka was a director of NRE Resources Pty Ltd at all relevant times and at least up until 2 March 2015, and Mrs Jagatramka was a director as at July 2013 and until 25 March 2014: see CB A8:2264-2267. Gujarat NRE Mineral Resources Ltd was a substantial shareholder in NRE Resources (CB A8:2267).

Bank Street

1. In 2005, WCL, with Mr Jagatramka's involvement, purchased Bank Street for $850,000. It was a four bedroom apartment with ocean views. It was used by Mr and Mrs Jagatramka (mainly Mr Jagatramka) between 2005 and 2011 when Mr Jagatramka visited Wollongong: see Mr Sharma's first Affidavit at paragraph 77-82, CB A1:157-158. It was not used by any officer or executive of WCL other than the Jagatramkas. The unit was sold in 2013 at about the same time as the shares in Properties were sold to Basant in order to help stem WCL's financial crisis.

Mr Jagatramka's Role in WCL

1. Mr Jagatramka and his family were, through Gujarat NRE Mineral Resources Ltd, the ultimate controllers of the principal shareholders in WCL, i.e. Gujarat NRE Pty Ltd, GNCL and Wonga Coal Pty Ltd. A director and non-executive chairman from October 2004, Mr Jagatramka (the son of the founder of the Gujarat Group) was very active in organising funding for a very significant expansion of the two mines which were owned by WCL. According to a document of WCL prepared when Mr Jagatramka was in control, Mr Jagatramka is a qualified chartered accountant and as at 2008 had 11 years' experience in the production of coal and coke; he was the managing director of GNCL, said to be the largest independent producer of metallurgical coke in India. He was said by Mr Firek to be adept at building confidence in WCL and its image and he was able to secure $130 million of bank loans for WCL at a time of global financial crisis by means of support from the Gujarat Group of which his family were substantially in control.
2. When Mr Jagatramka first became involved with WCL in 2005 the two mines were not operational (see T97.28 and T101.22). Under previous management the mines had run into difficulties a number of times and, according to Mr Firek, the local trades community and suppliers were not well disposed to the mines. In addition, as he understood it, previous employees had not been treated well.
3. In the period 2004 to 2011, Mr Jagatramka would only visit Wollongong for short periods because, at least in part, he had only a visitor's visa.
4. In September 2011 Mr Jagatramka was appointed as executive director of WCL. In that connection, he and WCL entered into an Executive Services Agreement ("ESA"), by which Mr Jagatramka was to be paid $1 million a year in superannuation and to be provided with a "fully furnished residential property of an appropriate standard" for himself and his family, two cars and two domestic helpers. What constituted "appropriate standard" was not specified in the ESA: see CB A5:1223. At about the time the ESA was executed, Mr Jagatramka was granted a "457 Visa" which enabled him to visit Australia and spend as long as he wanted here. The grant of the 457 visa also coincided with the completion of Cliff Road. WCL originally alleged that the entry by WCL into the ESA also involved a breach of duty by Mr Jagatramka, but this claim was abandoned during opening submissions: T22.13-23.
5. Mrs Jagatramka resigned as a director of WCL in July 2013 and Mr Jagatramka resigned in February 2014. They resigned as directors of Properties following the sale of shares to Happy Mining/Basant in June 2013. Effective control of WCL passed to Jindal in October 2013: CB A1:149, Mr Sharma's first Affidavit at paragraph 32.

Pre-Purchase Discussions

1. Mr Sharma's evidence in his first Affidavit of 3 March 2015 is that the idea for purchase of Cliff Road was introduced by Mr Jagatramka in the presence of a real estate agent named Steve Cicekdag, from Hot Properties International, as follows (CB A1:158-159): "Second Defendant: 'Steve has informed me about a property at 64 Cliff Road, which is available for sale. He claims it would be suitable for our purpose. Do you have any idea about this property?' I said: 'I heard a little bit about it in the news, that it's for sale and it's an expensive piece of land and it's got a very old house on it.' Mr Cicekdag: 'Yes the house is quite old and of course you would have to remove it and build another one.' I said: 'What's the price they're asking for?' Mr Cicekdag: '$5,000,000.00.' […] Second Defendant: 'Sanjay, what do you think about this property?' I said: 'If it is 64 Cliff Road, then it is definitely a prominent location, but the asking price seems to be a bit high. But I'm not into real estate business so I may not know.' Second Defendant: 'Would somebody else buy this land at $5,000,000?' I said: 'Individuals may not, but a developer may look at building a complex with a few floors and penthouse and make money out of it.'" According to Mr Sharma, Mr Jagatramka also said: "'[t]his is the most spoken-about property in the local region. If [the Plaintiff] buys it then we will be making a statement that I am not just another foreign investor trying to make quick money and vanish.'" (CB A1:159)
2. Mr Jagatramka had told Mr Sharma in late 2007 that he thought that WCL needed to purchase a larger property (i.e. larger than Bank Street) "to accommodate senior executives of Gujarat [WCL] and other Indian companies within the group… when they are visiting Australia": see paragraph 18 of Mr Sharma's second Affidavit. Bank Street was only used for the accommodation of the Jagatramkas: see Mr Sharma's first Affidavit at paragraph 82.
3. In a conversation with Mr Sharma in June 2008 (before the resolution) Mr Jagatramka said to Mr Sharma (see paragraph 29 of Mr Sharma's second Affidavit): "Shortly after this discussion, but still in June 2008, I had another discussion with Mr Jagatramka during which he said words to the following effect: 'Purchasing this property will give us free publicity and will help to improve our image in the community and would have a tangible commercial benefit for the company. In buying the property we will make a solid statement that we are here for good. It can also be used as a company guesthouse for the executives who are vesting from India. In addition, it can be used for corporate functions for stakeholders and others.'"
4. Mr Sharma also said (CB A1:159-160): "[90] The Second Defendant explained to me in the discussions that followed shortly afterwards (but still in or about June 2008) that by purchasing such a prestigious property, the Plaintiff would be able to capitalise on the publicity it was already enjoying due to the Second Defendant's local and international celebrity status. The Second Defendant did, on more than one occasion, remark to me that the Cliff Road Property would improve the Plaintiff's image in the local Wollongong community, and that this would result in tangible commercial benefits for the company. [91] For example, in or about May 2008, whilst I was in the Second Defendant's office discussing the Cliff Road Property, the Second Defendant said words to me that were to the following effect: 'It took us more than two years to restore confidence of suppliers and employees, who in past were burnt by previous owners of this mine. Even now some believe that we are here for the short term. I believe by acquiring this Property, it will fetch free publicity for our Company and make a statement that we are here for a permanent establishment.'"
5. In his Affidavit (see CB A1:198), Mr Firek says that in early to mid-2008 (or even late 2007) Mr Jagatramka said to him: "Mr Jagatramka: 'We are looking at buying a house which is for sale in Cliff Road, Wollongong. It would help to solidify our presence in the community and garner community support. There are also quite a few Indian executives who visit Australia quite frequently who we would entertain and accommodate there.' Me: 'I think that's a good idea' Arun or Me: 'It would save money.'"
6. Mr Firek said in his Affidavit that when he signed the resolution approving the purchase of shares in Properties: 1. He did not know that Mr Jagatramka "intended to reside" at Cliff Road and that Mr Jagatramka did not intend for Cliff Road to be used primarily as a guest house for officials and guests of WCL. 2. Had he known of those matters he would not have voted to approve the resolution. He also says that Mr Jagatramka or WCL had purchased Bank Street where "Mr Jagatramka would stay and reside whenever he was in Wollongong for company business".
7. Mr Anghie in his Affidavit of 31 October 2016 said that he had conversations with Mr Jagatramka about a guest house. According to Mr Anghie, Mr Jagatramka said in April or May (see paragraphs 12-13): "'We are going to buy a property in Wollongong to be used as a guest house for executives and directors who are coming to visit Wollongong.' […] 'It will also help the company to get community support because it will show that we are here for the long run.'" Later Mr Jagatramka told him he had identified the property WCL was to acquire at Cliff Road. Mr Anghie explained his thinking about this at paragraph 15 of his Affidavit (CB A1:188): "At the time of my conversations referred to in paragraphs 12 to 14 above, I considered that a guest house was an appropriate asset for WCL to purchase due to the significance of guesthouses in Indian company culture and the number and frequency of guests who regularly visited Wollongong from India in relation to work conducted for WCL. I am aware that most large Indian companies have guesthouses that are available for visiting executives, directors and other dignitaries, and I have stayed at such guesthouses when visiting Indian companies in India and elsewhere in the world. As such, I did not think there was anything unusual about the proposal by Mr Jagatramka."
8. Mr Anghie said at paragraph 18-19 of his Affidavit that he did not know that Mr Jagatramka intended to reside at Cliff Road and did not intend for Cliff Road to be used primarily as a guest house for guests and officials of WCL. He says that he understood Mr Jagatramka or WCL had purchased a residential unit in Wollongong where Mr Jagatramka stayed and resided whenever he was in Wollongong for company business, and "it did not occur to me that Mr Jagatramka would need to use another property for this purpose."
9. Mr Anghie said he would not have voted for the resolution authorising purchase of Cliff Road had he known of the matters set out above.
10. Mr Sharma in his second Affidavit dated 2 November 2016 says the following: 1. He notes that before Mr Jagatramka became Executive Chairman, WCL was relying on Mr Jagatramka to provide funding for the company. 2. He says that before Cliff Road was mentioned, Mr Jagatramka said to him (CB A1:207): "A larger property needs to be acquired to accommodate senior executives of Gujarat [WCL] and other Indian companies within the group [the Gujarat NRE Group, an inter-related group of public and proprietary companies of which WCL was a member until around November 2013 (Gujarat Group)], when they are visiting Australia." 1. In one of the conversations around late 2007, Mr Jagatramka said to him (at CB A1:209): "'We need to get a larger property so we can also accommodate the senior executives visiting from India. During these conversations, Mr Jagatramka would refer to the property as 'the company's guesthouse'." 1. In June 2008 Mr Jagatramka said to Mr Sharma in relation to Cliff Road: "Purchasing this property will give us free publicity and will help to improve our image in the community and would have a tangible commercial benefit for the company. In buying the property we will make a solid statement that we are here for good. It can also be used as a company guesthouse for the executives who are visiting from India. In addition, it can be used for corporate functions for stakeholders and others." 1. Mr Sharma says (at paragraph 32, CB A1:210) that he did not know that Mr Jagatramka intended to reside at Cliff Road (except from time to time when visiting Australia for work undertaken with respect to WCL from his place of residence in India) and did not intend Cliff Road to be used primarily as a guest house for guests and officials of WCL. Mr Sharma says had he known those matters he would not have drafted the resolution in the form it was drafted and he would have required those matters to have been disclosed. Furthermore, he would have advised Mr and Mrs Jagatramka to abstain from attending or voting on the proposed resolution.
11. In relation to the decision to purchase Cliff Road, it appears that the use of Properties was simply the means or vehicle by which WCL acquired Cliff Road. On the issue of the purchase of Cliff Road and other matters, Mr Sharma's cross examination revealed: 1. He was not part of the selection process for Cliff Road: T89.25. 2. He did not, as a director of Properties, have a concern about the purchase in 2008 or the construction works: T90.1-47. 3. He understood Mr and Mrs Jagatramka to exercise proper skill and care in the performance of their duties: T93 - T94. 4. He was told by Mr Jagatramka to report to Mrs Jagatramka concerning the construction of the house, which he did: T94.45. 5. He had no concerns as a director of Properties in relation to what Mrs Jagatramka told him or did regarding construction: T95.24. He had no concern that Mrs Jagatramka was the person giving him instructions (she being a director of Properties and WCL). 6. He did not consider whether it was appropriate for Cliff Road to have an Indian flavour but was aware that it was going to have such (T96.33 - T97.8). 7. The Russell Vale (or No 1) mine is close to a residential area of Wollongong and there were constant complaints about noise and dust from the operation of the Russell Vale mine: T109.25. The more trucks there were driving through the suburb, the more likely it was that there would be complaints: T109.39. 8. There was increased production and plans to substantially increase production in 2008: T111.40. 9. WCL's capital expenditure in 2008 was $128 million: T113.45. 10. Mr Jagatramka was chairman of WCL from 2004-2011: T136.11. 11. No buyers' agent was used in relation to the purchase of Bank Street: T137. 12. It was Mr Sharma's understanding that it was not uncommon for large corporate entities in India to have company guest houses: T138.9. 13. Mr Sharma understood that Mr Jagatramka, if he wanted, would be one of the persons who would be using Cliff Road when he visited Australia for work connected with WCL (T143.40-50), and that from time to time his wife and family would come with him: T144.1-10 and see T243.25 - T244.40. 14. Mr Sharma understood that it would be Mr Jagatramka who would decide who else would stay there: T144.25. 15. Mr Jagatramka did not agree to anybody else using Cliff Road when it was built: T144.25. When he or his family were not staying at Cliff Road (which was "pretty much full time": T254.10) it was locked and, to his knowledge, no guest ever stayed there: T167.20-25. 16. There was a lot of public interest in Cliff Road before WCL purchased it: T146.45. 17. Mr Sharma knew that the house at Cliff Road was quite old and would have to be removed and a new one built: T147.12-15. 18. He understood that Cliff Road was in one of the most highly prized residential areas of Wollongong at the time of purchase: T149.10-12. 19. Mr Sharma understood Mr Jagatramka's statements that if WCL bought Cliff Road "we will be making a statement that I'm not just another foreign investor trying to make quick money and vanish" to be Mr Jagatramka's genuine view and belief: T149.45-49. 20. Mr Sharma believed that the purchase would attract a lot of media publicity for Mr Jagatramka and WCL: T150.27. The mine had had a bad history of four or five owners becoming bankrupt or leaving the mine, suppliers losing their money and employees losing their jobs: T150.43 - T151.37. That was, on his understanding, one of Mr Jagatramka's reasons for buying Cliff Road: T152.4. 21. WCL had no intention to sell or develop Cliff Road (other than as a house): T154.5. 22. Mr Jagatramka was out there in the local community promoting WCL (T155.1-17), a strategy to build the image of WCL in the community: T155.35. 23. Mr Sharma believed the purchase of Cliff Road would help WCL with image development and thinks that this was a rational view: T156.15. 24. It had taken WCL two years to restore the confidence of suppliers and employees (T157.14), and even as at 2008 there were some people in Wollongong who felt that WCL was only there for the short term: T157.30. 25. Mr Jagatramka told Mr Sharma that the purchase of Cliff Road would attract quite some publicity and make a statement that WCL was a permanent establishment, and Mr Sharma believed that (T158.12-45). Mr Sharma thought that it would assist WCL in its dealings with suppliers and the community: T159.10. 26. Mr Sharma did not speak to Mr Anghie or Mr Firek about the purchase of Cliff Road: T159.10. 27. 200 trucks were coming out of Russell Vale each day (T160.39-49) and there was community opposition to the mine. 28. WCL sponsored a local basketball team called the Hawks (T161.22) and entered into a sponsorship agreement with Cricket NSW: T161.40. 29. Wollongong is a fairly close knit community, and word of mouth and personal relationships are important: T162.10. 30. Mr Sharma says that he thought Cliff Road was to be acquired as a guest house for guests and officials of WCL, but the property was not in fact used as a guest house but, rather, as the residence of Mr and Mrs Jagatramka and their family. Mr Sharma says that he only found out the true purpose in October 2011 and thereafter, since no one else other than Mr and Mrs Jagatrampka and their family ever stayed at Cliff Road: T166.45 - T167.35. 31. He did not agree that Mr Jagatramka was given Cliff Road as his permanent accommodation when he became chief executive officer (they had Bank Street which they exclusively occupied: T197.44 - T198.17), but he appeared to accept that Mr Jagatramka did take de facto possession and control of Cliff Road in October 2011: T198.26 - T199.9. 32. He believed as at 2008 that the purchase was within the best interests of Properties: T178.35. 33. Mr Sharma was told that the Board of WCL estimated the construction cost of $3 to $4 million, and he did not know whether that was fair and reasonable: T181.31-38. 34. FIRB approval required demolition of the existing building, construction of a new house (T182.15) and expenditure on that new house of at least 50% of the purchase price of Cliff Road: see CB A2:544. 35. In 2010-11 WCL was doing well and Mr Jagatramka was the driving force behind WCL's turn around: T191.10-24. Both prices of coal and production levels at the mines had improved: T191.24. 36. The ESA was entered into to reflect that Mr Jagatramka was bringing in all the funds. WCL needed his support (T197.20) and he would be spending more time in Australia running WCL, and he was to have the benefit of permanent accommodation whilst in Australia: T197.45. 37. Mr Sharma said that he did not understand that the accommodation for the Jagatramkas would be at Cliff Road because Mr Jagatramka already had permanent accommodation at Bank Street: see T197.48 - T198.35. 38. He said that he understood that when the property was completed Mr Jagatramka and his family could use Cliff Road when they were in Australia: T202.1 and T203.40. 39. Mr Sharma was asked about CB A6:1767, being a resolution of WCL to commence these proceedings that was prepared by WCL's solicitors at Mr Jasbal Singh's request, and which Mr Sharma circulated on the instructions of Mr Singh, who was appointed by Jindal interests. He accepted that he read it and he did not say (or say to anyone else) that the statement in it, namely "the Cliff Road Property was originally provided by the Company for the use of Mr Jagatramka under his remuneration arrangement as the Company's executive chairman", was not correct. 40. Mr Sharma had no reason to doubt the Opteon valuation of $3.75 million for Cliff Road.
12. The following emerged from cross examination of Mr Firek: 1. He understood that as a director of WCL he had a duty to act in good faith, in the best interests of WCL and for a proper purpose (T341.1-4) and to act independently, bringing his own assessment to the task under performance: T341.6-10. 2. By 31 March 2008, WCL was increasing its mine production, $88.4 million had been spent on capital expenditure and a further $41.5 million was planned for the forthcoming year (T346.37-50), a very large sum of money (T347.25) involving significant expansion. 3. WCL was considering purchasing a property for use by guests of WCL attending from overseas and with a view to it being "like a monument to India and the company presence" in Wollongong: T347.42-50. It involved building confidence and acceptance of WCL similar to sponsorship of the basketball team and cricket sponsorship: T348.10. It was to show that WCL was here to say: T353.24-30. 4. Mr Jagatramka was able to obtain funding of about $130 million for capital improvements (T352.20-37), which caused Mr Firek to have a very positive view of him: T353.10-12. 5. It was important for WCL to establish confidence because there was an unwillingness to extend credit because prior owners of the mines had "not done the right thing by employees and contractors": T356.30-35. Mr Firek was aware of negative perceptions in Wollongong and buying Cliff Road was part of the attempt to overcome ill-feeling in the community: T354.11, T354.32 and T356.45. This was one of the reasons he voted for the purchase of Cliff Road: T357.37. It was a high profile property in the community in Wollongong: T357.43. 6. He agreed with Mr Jagatramka's assertion to him that the purchase of Cliff Road would solidify the presence of WCL in the community and garner community support (T359.45 - T360.6), and that it was also to accommodate visiting executives, bankers and consultants and to entertain them: T360.15. 7. He was aware that WCL owned Bank Street and that it was for Mr Jagatramka and his family (T360.35) - Cliff Road was supposed to be for visiting executives: T360.31 - T361.4. 8. Mr Firek in his Defence to the Cross Claim asserted that Mr Jagatramka represented that he, Mr Jagatramka, intended to stay at Cliff Road from time to time "when visiting Australia for work undertaken in respect of [WCL] from his place of residence in India," (as well as representing that the property ought to be acquired and developed as a guest house for guests and officials). Mr Firek's Affidavit does not actually give evidence of such a statement and in cross examination Mr Firek did not agree that he was aware of that prior to or at the time of the June 2008 resolution: see T363.20 - T364.44 and T384 - T386. 9. He always thought that Bank Street would be Mr Jagatramka's residence in Australia: T364.2-12. 10. He did not know that Mr and Mrs Jagatramka were intending to stay in Cliff Road as their exclusive residence when it was acquired and rebuilt: T364-5. He said this at T364.27-44: "Q. You have no doubt, do you, that in the lead-up to June 2008 purchase of the property you were told by Mr Jagatramka that "when the property is finished I'm going to stay there"; correct? A. No. Q. Well, you just said - do you agree he said, "I'm going to stay there on a casual basis"? Is that what he said to you? A. No, in that meeting in 2008 in June he didn't say anything about him staying in that - it was clearly emphasised it would be for visiting guests. Q. I need to press you, sir. How on earth did you come to swear as being true that (v) in your evidence? A. Maybe I misunderstood it but, answering your last question, my understanding and what was told to all of us in June 2008, that we are building a guesthouse for visiting people. There was nothing about staying casually. This later comment just crept in, I don't know at certain stage, in what stage, but in 2008 that was what we were told when we approved the purchase of the property." 1. He did not make any enquiries where Mr Jagatramka was staying after Cliff Road was completed. It did not interest him at all (T365.26-38) and he did not know that Mr Jagatramka had been living there on a regular basis. He knew Mr Jagatramka had the Bank Street unit and understood that that was where he was staying: T365.15. 2. From some point he knew that Mr Jagatramka might stay at Cliff Road from time to time (T370.45), but only Mr Jagatramka not his wife and family, and on a "casual basis", and Mr Firek could not recall being told that before the resolution of June 2008: T370.10 - T371.30. 3. If Mr Jagatramka had told Mr Firek prior to or at the time of the 2008 resolution that when Cliff Road was finished he was going to live there permanently Mr Firek would have said "okay, let's see what other directors think about it." He, for his part, would have said okay (T373.25) and would have voted for the purchase: T373.40. 4. Mr Firek did not know that Mrs Jagatramka was involved in the process of construction or architectural choices: T377.45. He left it to Mr Sharma: T378.34. 5. When the ESA was entered into with Mr Jagatramka in 2011 the contract referred to accommodation of an "appropriate standard". Mr Firek thought that the detail of where the Jagatramkas would reside permanently would be a "matter for others": T382.35. At T381.46 - T382.4 he said he did not understand Cliff Road to be the accommodation referred to in the ESA. At T383.47 he said whether it would be Cliff Road was not something for him to think about. 6. Mr Firek signed the resolution of 14 February 2014 (at CB A6:1769) by which WCL resolved to take action against the Jagatramkas, but he did not agree that the statement: "at all times the Cliff Road property has been occupied by Mr Jagatramka and his family for [his] exclusive use and benefit" (see CB A6:1769), was accurate. Mr Firek did read the contents of the resolution at the time he signed it - he said he must have forgotten that included in the document was a recognition that Mr Jagatramka was provided with Cliff Road as part of his remuneration package. He did not agree that as at February 2014 he thought that Cliff Road was part of Mr Jagatramka's ESA package (T390.05), but he seemed to resile from that: T389.31 - T392.35. 7. He agreed that Mr Singh, who was an appointee of Jindal, said "we've got to get Mr Jagatramka": T385.11. He, Mr Firek, was outraged by the fact that the proceeds of Cliff Road (i.e. $3.75 million) had been used to pay debt owed to Wonga, Gujarat and Wongawilli (T388.1-36) rather than to pay creditors unconnected with the Gujarat Group. 8. WCL needed money at the time of sale in 2013 and the property was worth about $3.75 million: T394.24-27. 9. WCL was under enormous cash flow pressure (T394.45). It was being pressured by important creditors (T395), including the CFMEU and Environmental Resources Management, and the auditors were warning the directors that WCL could be trading while insolvent (T396), and he was very worried personally (T397.7). The Board of WCL decided to sell non-core assets quickly (T398.4-18), including Cliff Road, Bank Street and Rey Resources. 10. Mr Firek saw the valuation of Cliff Road at $3.75 million. He thinks he spoke to WCL's auditor about it, Iain Kemp of Grant Thornton, who he thinks said he was happy with it. 11. Mr Firek knew that Happy Mining was a company interested in purchasing Cliff Road found by Mr Jagatramka: T400.15-20. He did not know that Happy Mining was a substantial shareholder in WCL: T400.15-18. WCL had no choice but to go ahead with the sale (T400.29) and he did not mind who the purchaser was, provided WCL received the $3.75 million in accordance with the valuation: T400.30-33. Mr Firek said: "The issue to the transaction at that stage was to get the money, cash, quickly to our accounts to have it available" (T400.40). He did not want the sale to go on the open market because that might have caused a substantial delay: T401.35-43. 1. Had Mr Jagatramka told him that he knew the owners of Happy Mining, he would still have said "yes" for a quick sale (T402.10), provided the amount to be paid was as per the valuation, and if he had been told that the purchaser was a business associate of Mr Jagatramka, or even that the purchaser was a family member, he would not have liked it but would still have voted in favour of the sale: T402.28 - T403.4. What was important was the need to obtain the money quickly (T403.18), the threatened insolvency of WCL, the fact that Mr Jagatramka was standing behind WCL with guarantees to keep it afloat (T403.35), and the valuation was the most important thing to justify the sale at the price of $3.75 million.

Credit of Mr Sharma and Mr Firek

1. The PCS comment that much of the cross examination of Mr Sharma focused on Mr Sharma's actions, beliefs or concerns as a director of Properties and is irrelevant (see PCS 9.1). Mr Pritchard points out that WCL called only Mr Sharma in its case not Mr Firek or Mr Anghie (when he was alive), who were, in addition to the Jagatramkas, the two other directors of WCL, so there is a certain irony in WCL's submissions on this point.
2. Mr Sharma gave evidence for WCL and in his own defence to Mr Jagatramka's Cross Claim. He was cross examined extensively by Mr Pritchard. His second Affidavit diverged in several respects from his Affidavit filed on behalf of WCL: 1. He withdrew his evidence that Mrs Jagatramka had used the expression "for our kids" when she told him the first floor of Cliff Road needed a main bedroom and three other bedrooms: see paragraph 111 of Mr Sharma's first Affidavit. 2. He sought to downplay the suggestion in paragraphs 26 and 70 of his first Affidavit of the overarching influence of Mr Jagatramka over Mr Firek and Mr Anghie: see paragraph 14. 3. He had said in paragraph 29 of his first Affidavit that Mr Jagatramka's role in WCL did not change after he was appointed Executive Chairman, whereas in his second Affidavit he said that Mr Jagatramka's role did change: see paragraph 15. 4. He did not in his first Affidavit reveal his knowledge of the possibility that Mr Jagatramka might use Cliff Road: see paragraph 32(a) of his second Affidavit and T138.31-46, T140.32-44 and T142.14-23.
3. Mr Sharma remains the secretary of WCL and is the only witness for WCL. Before he was the subject of Mr Jagatramka's Cross Claim, Mr Sharma was effectively supporting WCL's claim that Mr and Mrs Jagatramka had acted inappropriately. Once joined as a Cross Defendant by Mr Jagatramka, Mr Sharma now had an interest in seeing Mr Jagatramka escape liability, since the only liability Mr Sharma could have would flow from Mr Jagatramka being found liable. All of the changes referred to in [58] above were helpful to the Jagatramkas. There were aspects of his evidence which seemed contradictory - his assertion that Mr Jagatramka had not been given Cliff Road as his residence as part of the ESA, yet he had no concerns that the Jagatramkas had moved in on completion of the building (T199.9), and his acceptance that the Jagatramkas "could" use Cliff Road when completed whilst saying that they already had permanent accommodation in Bank Street: T197.44 - T198.16. An attack by Mr Pritchard on his credit on the issue of whether he had discussed the contents of a letter to the FIRB with Mr Jagatramka (CB A3:709) at T208.30 - T209.29 failed to dent his credit and, if anything, strengthened his credibility in my view. He was also taxed with not having referred in his first Affidavit to details of what he knew about guest houses, a matter referred to in paragraph 27 of his second Affidavit: see T138 - T142.35. He explained that it was not a topic that he had been asked about by WCL's lawyers and he said he had not deliberately left it out. I do not think his explanation is implausible.
4. Mr Coleman submitted that Mr Sharma made concessions when appropriate and answered questions forthrightly without any obfuscation, and did not seek to reconstruct when he could not recall, which I accept. Mr Coleman contended that Mr Sharma was an honest and reliable witness. There is no respect in which Mr Sharma was demonstrated to have been untruthful. As I have noted, Mr Sharma resiled to some degree from his previous evidence, which invites some caution, particularly since all the changes assist the Jagatramkas and therefore reduce the prospect of Mr Sharma being held liable. I nevertheless accept Mr Sharma's evidence that he was not, as at June 2008, aware that the Jagatramkas intended to make Cliff Road their exclusive residence, and that he understood that Cliff Road was purchased as a guest house for visiting officials of the Gujarat Group. There was no challenge made to his evidence that he saw benefit to WCL in the guest house purpose and that he thought there was a public relations benefit to WCL in the purchase.
5. Mr Firek, like Mr Sharma, was also in an awkward position in that he was a director of WCL but not called by WCL in its case, and a Cross Defendant to Mr Jagatramka's Cross Claim. He had voted in favour of the 2008 resolution and voted in favour of instituting proceedings against the Jagatramkas.
6. Mr Firek made a number of concessions that were favourable to the case that Mr Pritchard was propounding on behalf of the Jagatramkas. Mr Firek resiled from the assertion in paragraph 28 of his Affidavit that he would not have voted for the 2008 resolution had he known that the Jagatramkas intended to reside at Cliff Road and did not intend Cliff Road to be used as a guest house. He also resiled from the assertion in paragraph 49 of his Affidavit that had he known that Happy Mining was in any way related to Mr Jagatramka he would have required a full and detailed explanation and, if not satisfied, would not have passed the sale resolution. He is clearly an intelligent man with considerable experience in the mining industry but he seemed, if I accept his evidence, to have been somewhat star struck by Mr Jagatramka. However, it was not suggested to him in cross examination that he would have done whatever Mr Jagatramka wanted. He somewhat surprisingly took no interest whatsoever in whether Cliff Road was used by Mr Jagatramka or not: see T382.12 - T383.48. His evidence as to whether he knew, as at 2008, that the Jagatramkas were going to use Cliff Road as their exclusive home was that he did not know this, and he had good reason to believe that they would use Bank Street, as he understood that Bank Street had been purchased for them. Mr Firek's evidence at T384 - T392 in relation to whether he knew as at February 2014 that the Jagatramkas had been using Cliff Road as their exclusive residence and why he agreed to the resolution of 27 February 2014 (CB A6:1767-1769), which referred to Cliff Road as having been part of the ESA arrangements, was confusing.
7. I also take into account that Mr Firek had asserted in his Defence to the Cross Claim (see 16(b)(v)) that Mr Jagatramka had made representations to him about Mr Jagatramka's proposed use of Cliff Road, one of which was not found in his Affidavit, and his answers in cross examination on that topic at T362 and T367 was somewhat opaque, but I nevertheless accept as truthful his evidence that he did not in June 2008 know that Mr Jagatramka wanted Cliff Road bought to be used as his and his family's exclusive residence, and that he (Mr Firek) did not appreciate in 2008 that Mr Jagatramka intended to stay there at all. I comment later on his evidence that he would still have voted in favour of the 2008 resolution had he been aware that the Jagatramkas wanted to use Cliff Road as their exclusive residence and not as a guest house, as WCL contends.

Mr Anghie's Affidavit

1. Mr Anghie's Affidavit was received. Because cross examination was precluded, the question arises as to what weight should be ascribed to his Affidavit. Mr Pritchard contended that "very little" weight should be ascribed to it, not only because Mr Anghie was not able to be cross examined but because Mr Pritchard had obtained concessions from Mr Firek, who had made similar statements to Mr Anghie from which he had resiled during cross examination. Mr Pritchard referred to Blendell v Byrne; The Estate of Noeline Joan Blendell [2019] NSWSC 583, Citibank Ltd v Liu; ABN Amro Bank Ltd v Liu [2002] NSWSC 886 and Re O'Neil, Deceased [1972] VR 327. In Blendell, Hallen J referred to what His Honour had said in Fulton v Fulton [2014] NSWSC 619 at [111]: "However, affidavit evidence, however good, which, for whatever reason, is not subject to cross-examination when cross-examination is required, will always be discounted, as appropriate, if the affidavit is used with leave without cross-examination. The degree to which it will be discounted may depend on various factors, including the circumstances that lead to cross-examination being dispensed with, the nature of the evidence and its centrality and degree of significance to the case. The degree of discount appropriate will be judged according to all the circumstances of the case: Re O'Neil, Deceased [1972] VicRp 35; [1972] VR 327, per Anderson J, at 333-334; Citibank Ltd v Liu; ABN Amro Bank Ltd v Liu [2002] NSWSC 886, per Hamilton J, at [5]."
2. The circumstances here support substantial weight being given to the Affidavit. The nature of the evidence is his recollections of what was said by Mr Jagatramka (with no challenge to those conversations by the Jagatramkas) and what Mr Anghie knew, and, although the period in question was 2008 to 2013, the Affidavit was sworn on 31 October 2016. Mr Anghie is the only person who could attest to what he knew and his reasons for voting for the proposal. If the question of what he would have done had he known what is alleged to be the Jagatramkas' real intentions is admissible (a matter considered later in these reasons), only he could give that evidence. The evidence is potentially very significant, particularly since it is an affidavit filed in answer to Mr Jagatramka's Cross Claim against him and no evidence has been led from the Jagatramkas.

Key Factual Question before the Court

1. The key question in this case, it was agreed (see T445.20), is what was the real intention of Mr Jagatramka as at June 2008 in promoting, and Mr and Mrs Jagatramka voting in favour of, the June 2008 resolution to purchase Cliff Road? WCL contends that their purpose was to have constructed an opulent house in which they would reside exclusively, continuously and indefinitely at no cost to themselves. I shall refer to this alleged purpose as "the exclusive residence intention". The Jagatramkas deny having the exclusive residence intention and say that it was intended that Cliff Road would be a guest house for visiting executives of companies in the Gujarat Group and guests of WCL. I shall refer to this alternative purpose as the "guest house purpose". The Jagatramkas also contend that a second purpose was to make a statement to the people of Wollongong that WCL (or perhaps Mr Jagatramka) was committed to Wollongong for the long term, a purpose which was not reiterated in the minutes of the meeting at which the decision was made, but which Mr Firek and Mr Anghie (as well as Mr Sharma) supported. I shall refer to this second purpose as "the public relations purpose".

Jones v Dunkel

1. The DCS note the following matters of principle in relation to the rule in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298: "a) The unexplained failure to call a witness warrants only: (a) the inference that the uncalled evidence would not have assisted that party's case (but not an inference that such evidence would have been adverse); and (b) the court drawing, with greater confidence, other inferences open on the evidence: see generally Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 at [63]-[64] per the plurality; Manly Council v Byrne [2004] NSWCA 123 at [51] per Campbell J (Beazley JA and Pearlman AJA agreeing); b) Whether such inferences are drawn is a matter of discretion, and not mandatory, and the inference only becomes material where the balance of the evidentiary record is equivocal: Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53 at [79] per Besanko, Perram and Katzmann JJ; Manly Council v Byrne [2004] NSWCA 123 at [52] (no compulsion to draw such an inference); and c) Importantly, the principle "cannot be employed to fill gaps in the evidence, or to convert conjecture and suspicion into inference": J D Heydon, Cross on Evidence (10th Australian ed., 2015) p 40 [1215]; Adler v ASIC (2003) 179 FLR 1 at [649] per Giles JA (Mason P and Beazley JA agreeing). Thus, before an inference can be drawn, "there must first be available to be drawn, on the evidence which has been admitted, an inference against that party": Manly Council v Byrne [2004] NSWCA 123 at [54]."
2. I think this summary accords with what is found in J. D. Heydon, Cross on Evidence (LexisNexis Butterworths, 10th ed, 2015) at [1215] and I shall endeavour to apply these principles to the case at hand.

Briginshaw and other Credit Issues

1. I turn now to another important matter raised by the DCS, the standard of proof required. It is contended that having regard to the serious nature of the claims by WCL that the Jagatramkas informed the other members of the Board that the purpose was to build a guest house (and to garner favour with the local populace) but did not reveal the exclusive residence intention, the principle in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 applies, namely that the Court should only make a finding of wrongdoing if satisfied to a standard that recognises the seriousness of what is alleged - this approach has now been taken up by s 140(2) of the Evidence Act 1995 (NSW) ("Evidence Act"). For cases in which it has been held that the Briginshaw standard applies in cases of breach of fiduciary duty, see: Re Wan Ze Property Development (Aust) Pty Ltd [2012] NSWSC 722; (2012) 90 ACSR 593 per Black J at [34], Hodgson v Amcor Ltd [2012] VSC 94; (2012) 264 FLR 1, Coyte v Norman [2016] NSWSC 1242; (2016) 115 ACSR 523 per Black J at [187]. This standard was not disputed by WCL and it is appropriate that WCL be required to meet that standard here.
2. The DCS made other general submissions concerning issues of credit: 1. The conversations of which Mr Sharma gave evidence occurred a long time ago and regard should be had to the warning about the reliability of evidence of conversations and the passage of time found in Watson v Foxman (1995) 49 NSWLR 315 (a case dealing with misleading and deceptive conduct based on conversations). 2. The Jagatramkas are of good character: DCS 31. 3. Why would Mr Jagatramka not have disclosed his true intention if he had the exclusive residence intention?
3. I make the following comments on the submissions above using the same subparagraph numbering: 1. It is true that the conversations occurred a long time ago but Mr Sharma's evidence has not been contradicted by Mr and Mrs Jagatramka (and nor has that of Mr Firek and Mr Anghie). It is not the Jagatramkas' case that they did tell Mr Sharma, Mr Firek or Mr Anghie that they had the exclusive residence intention. Rather, their case is that they deny having that intention. What is written in the document containing the resolution of June 2008 is not in contest. 2. With few exceptions, good character is generally not relevant in civil proceedings (Attorney-General v Radloff (1854) 10 Exch 84 at 97; (1854) 156 ER 366, Attorney-General v Bowman (1792) 2 Bos & P 532n, and see Cross on Evidence (supra) at [19165]). I accept that evidence of good character is relevant in relation to the Briginshaw principle in a case where a director is alleged to have acted dishonestly: see Aneve Pty Ltd v Bank of Western Australia Ltd [2005] NSWCA 441 per Hodgson JA at [60], with whom Santow and Bryson JJA concurred. The Jagatramkas themselves have given no evidence as to their good character and, although the witnesses in this case gave evidence consistent with the Jagatramkas being generally of good character, nothing ultimately turns on this issue, as in my view even strong evidence of the Jagatramkas' good character would not have altered the key factual findings I make in this case, in light of the whole of the evidence before me. 3. An answer to the question posed is that they may well have understood that they should not have voted, and they feared that the proposal would be rejected by reason of one or other, or both, of Mr Firek and Mr Anghie voting against it if the exclusive residence intention replaced the guest house proposal.

The First and Second Components: The Purchase of Cliff Road and Construction of a New House

1. I think the first two components should be considered together because the decision to construct a new house at considerable expense was part of the plan. The resolution in June 2008 anticipated an expenditure of between $3-4 million (and, at the time, at least $2.5 million was required to be spent in accordance with FIRB approval: CB A2:544). As the PCS recognise, the loans for purchase and construction were part of a continuing course of conduct set in motion in June 2008. To the extent that the FASTOCL is critical of expenditure on Cliff Road at a time of losses by WCL, Mr Sharma and Mr Firek conceded that significant expansion was in progress which led to positive profits in 2011 and 2012. No expert evidence was called to support WCL's contention, effectively rejected by Mr Firek and Mr Sharma, that expenditure on Cliff Road was inappropriate because of WCL's financial position.
2. From the evidence of Mr Sharma, Mr Firek and Mr Anghie there can be no doubt that the decision to purchase Cliff Road was based upon acceptance of the proposition advanced by Mr Jagatramka that: 1. It would be advantageous to WCL to buy a property to be used as a guest house by visiting officials and executives of the Gujarat Group. 2. The purchase would assist WCL's image in the public's eye in Wollongong (with, according to Mr Firek, potential flow on for improved relations with suppliers and reduced opposition to mining activities). This second reason was mentioned prior to the purchase but it was not referred to in the document of June 2008 recording the background and the resolution. There was also a suggestion that Cliff Road could be used for corporate functions, but this did not feature prominently and Mr Sharma could only recall having heard of a couple of functions being held at Cliff Road after it was constructed: T144.30-34.
3. Whether the first proposition at 73 had any real merit or advantage has not been effectively challenged by WCL's evidence in these proceedings - indeed, Mr Sharma is WCL's own (and only) witness and he agreed with Mr Jagatramka's rationale, as did Mr Firek and Mr Anghie. Mr Sharma also agreed that the second proposition was reasonable. Mr Firek and Mr Anghie also agreed with the second proposition and did not oppose the expenditure of almost $8-9 million (and, as it turned out, approximately $10 million) on the project. WCL's assertion that the purchase of Cliff Road could have had no justification has not been made out. The DCS also assert that WCL's contention in the PCS that the Jagatramkas failed to ensure that WCL would not be "over capitalising and at risk of loss if it spent $10 million acquiring land and building a luxury home at Cliff Road expecting if there was subsequently a downturn in the property market" is not found in WCL's FASTOCL (see paragraphs 145, 153-154 of the FASTOCL).
4. No expert evidence was called by WCL to say that such a large expenditure on Cliff Road was misconceived or inappropriate, and even though there would appear to be scope for such a contention, all of the witnesses who gave evidence contradicted such a case. If there was no breach in relation to the purchase of Cliff Road then I do not consider an attack can be made on the amount spent on construction of a new house per se, which cost was, to a large degree, anticipated at the time of the 2008 resolution.
5. It might appear as distinctly possible that in June 2008 Mr and Mrs Jagatramka wanted a house built for their own use, told the Board that is what they wanted and the Board acquiesced because the Jagatramkas' corporate interests held a clear majority of the shares and were organising additional funds for the benefit of the company, and that in accordance with that resolution Cliff Road was bought and the new house built to the Jagatramkas' specifications. It needs to be borne in mind, however, that the scenario to which I have just adverted is not advanced by either WCL or the Jagatramkas. The Jagatramkas say they did not have the exclusive residence intention and WCL assert that they did but did not reveal it. WCL says that the other Board members, Mr Firek and Mr Anghie, were not aware of the exclusive residence intention. The Jagatramkas assert that even if the other Board members had been informed of the exclusive residence intention they would nevertheless have voted for the proposal to purchase and develop Cliff Road.
6. Before considering the absence of evidence from the Jagatramkas, it is necessary to consider what their evidence could have dealt with. As I have noted, it is not their case that they obtained fully informed consent to the exclusive residence intention; rather, they deny that they had such an intention.
7. Mr Jagatramka gave the guest house purpose as one of two reasons for purchasing Cliff Road (on Mr Sharma's second Affidavit, and on Mr Firek and Mr Anghie's Affidavit). What the Jagatramkas' evidence would have been relevant to is the question of whether they really did have the exclusive residence intention. Evidence might have been led, for example, of how the design for the house came to be what it was in 2008-2009 and the reasons for the Jagatramkas' instructions to Mr Mital, the architect; why they gave the instructions that they did regarding access; what their intentions were so far as obtaining a 457 Visa, and how it came about that Cliff Road became their home in 2011 and was never utilised by anyone other than themselves, and why no alternative guest house to replace Cliff Road was considered from that point on. Mr Jagatramka could also have given evidence as to the arrangements made for his and his family's residence at Cliff Road after he and Mrs Jagatramka ceased to be directors of WCL, how the sale to Happy Mining and the assignment to Basant came about, his connections with the shareholders and directors of Happy Mining and Basant, and how he came to give instructions on behalf of Properties to register the change of name on behalf of Properties when he was no longer a director of that company.
8. I note that in Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187; (1994) 14 ACSR 109 at 228, Ipp JA regarded it as significant that a number of the defendant directors in that case failed to give evidence and to answer the questions which arose. Recognising that the most important factual question for the Court is whether Mr and Mrs Jagatramka did have the exclusive residence intention in 2008, the failure of the Jagatramkas to give evidence seems to me to be of critical significance, since they were the persons best able to give evidence of their true intentions. I infer that their evidence would not have assisted their defence.
9. The DCS (at paragraphs 106-141) put forward the following to support the contention that the Jagatramkas have not breached their duty or caused a loss to WCL in relation to the First Component: 1. The decision to purchase Cliff Road was not rushed, and Mr Jagatramka had a number of discussions with Mr Sharma about it. 2. In connection with the purchase, WLC retained a "reputable and experienced buyers' agent", so there was no imprudence in the acquisition, and WCL obtained a dilapidation report. 3. The decision to acquire Cliff Road and advance the purchase monies was made by circular resolution of 16 June 2008 and signed by the Jagatramkas, Mr Firek and Mr Anghie. The resolution referred to the Board of WCL having been informed that Cliff Road was "one of the most exclusive addresses in Wollongong and perfectly suitable for development of accommodation facilities for executives of NRE groups". The $5 million purchase price (plus taxes and stamp duties) and the estimated $3-4 million building costs were referred to. 4. Mr Sharma said he understood that executives of the Gujarat Group included Mr and Mrs Jagatramka. Mr Firek said he understood that Mr Jagatramka might stay at Cliff Road from time to time "casually" but not on a permanent basis: T364 - 369. 5. Both Mr Angie and Mr Firek said in their Affidavits (at paragraphs 15 and 22 respectively) that they believed that acquiring and constructing a high-end residence to house visiting corporate executives was appropriate. 6. Mr Sharma agreed with the idea of a guest house. 7. Mr and Mrs Jagatramka deny that they were motivated in approving the purchase of Cliff Road and construction of a new house by an intention to obtain a luxury residence in which they could live rent-free with their children: Second Defendant's Defence at paragraphs 28-29 and Third Defendant's Defence at paragraphs 28-29. They were not permanent residents of Australia at the time: T183.29-31. 8. Mr Jagatramka was the managing director of GNCL at the time, the largest independent metallurgical coal producer in India, and he had significant responsibilities and duties in India. Their visas were only granted in September 2011. 9. How the Jagatramkas came to stay at Cliff Road after its completion is explained, it is asserted, by the ESA. This was supported by a resolution of the Board of 14 September 2014 (by which it was resolved by the Board to launch proceedings against the Jagatramkas) which stated: "the Cliff Road Property was originally provided by the Company for the use of Mr Jagatramka under his remuneration arrangement as the Company's executive chairman."
10. I shall comment on each of these matters as follows (using the same subparagraph numbering as [80] above): 1. I do not see how this fact supports the denial. It is consistent with a scrutiny of the Wollongong market with a view to Mr and Mrs Jagatramka finding a location they liked. 2. There is no evidence in respect of the buyers' agent's reputation and experience but, in any event, his reputation and experience are irrelevant. It is relevant that WCL has not sought to establish that the amount paid for Cliff Road was more than its market value. The absence of any valuation, however, is relevant as a fact in support of the contention that the Jagatramkas had an interest in purchasing the property without a concern as to its real value. The dilapidation report was obtained only after the resolutions were passed and the property purchased. 3. The use of "accommodation facilities" in the memorandum is consistent with the guest house purpose of which Mr Firek and Mr Angie were informed. 4. Mr Sharma conceded that he understood that the "executives" who it was proposed would use Cliff Road included the Jagatramkas. Mr Sharma in his evidence at T143.10 - T144.14 considered that the Jagatramkas "could" stay at Cliff Road, but he did not as at 2008 understand that Cliff Road would be exclusively for Mr Jagatramka and his family. The DCS seek to construct an argument along these lines: 1. Mr Jagatramka said that WCL should buy a property to be used as a guest house for visiting executives of the Gujarat Group. 2. Mr and Mrs Jagatramka are executives of the Gujarat Group and could therefore stay at Cliff Road. 3. Therefore, Mr Firek and Mr Anghie (and Mr Sharma) knew that Mr and Mrs Jagatramka intended to stay at Cliff Road. There are a number of problems with this: 1. Mr Sharma was not entitled to vote and did not vote on the resolution. He also did not discuss the Cliff Road proposal with Mr Firek or Mr Anghie: see T159 - T160. 2. There is in the evidence no statement by Mr Jagatramka in 2007 or 2008 to any of Mr Firek, Mr Anghie or Mr Sharma that he wanted to or intended to stay at Cliff Road himself. 3. His statement recorded at [49] above that "There are also quite a few Indian executives who visit Australia quite frequently who we would entertain and accommodate there" is not suggestive of him intending to use Cliff Road for himself (and his wife and family). 4. He and his wife did not state at the time of the resolution in June 2008 that they intended to use Cliff Road, once built, when they were in Australia. 5. Even if Mr Sharma deduced at the time that since Mr and Mrs Jagatramka were directors they "could" stay at Cliff Road, that is not what Mr and Mrs Jagatramka (on the evidence of the conversations given by Mr Sharma, Mr Firek and Mr Anghie), were declaring was their intention to him or to Mr Firek and Mr Anghie. I do not think that the reference to "executives of NRE Groups" in the resolution could be understood to include the Jagatramkas. If it were so intended by the Jagatramkas (as to which there was no evidence), it may have been deliberately ambiguous and would likely have been a subject of cross examination. 6. The exclusive residence intention was most certainly inconsistent with the guest house purpose. 7. The exclusive residence intention was most certainly not disclosed - the Jagatramkas deny that they had such an intention. 8. Mr and Mrs Jagatramka, and Mr Firek and Mr Anghie, knew as at June 2008 that the Jagatramkas had exclusive use of Bank Street. It if was intended that the Jagatramkas would use Cliff Road when it was constructed, the sale of Bank Street would have been an additional reason to support the purchase of Cliff Road, but no mention was made of it. 9. If the Jagatramkas intended that Cliff Road would be utilised by them as accommodation in place of Bank Street they should not have voted on the resolution since they would personally benefit from its purchase and construction, and would both breach their fiduciary obligations and s 195 of the Corporations Act. 1. Whilst it is true that both Mr Angie and Mr Firek said that they thought that the guest house idea was a good one: 1. Mr Firek and Mr Anghie as at June 2008 understood that Mr Jagatramka or WCL had purchased a residential unit in Wollongong (i.e. Bank Street) at which Mr Jagatramka would reside whenever he was in Wollongong (see paragraph 27 of Mr Firek's Affidavit and paragraphs 18-19 of Mr Anghie's Affidavit) and did not know that Mr Jagatramka intended Cliff Road to be his exclusive residence, to be used only by him and his family whenever they were in Wollongong. 2. If the Jagatramkas had in mind the exclusive residence intention, Cliff Road would not be used as a guest house for visiting executives and other visitors at all. Since Mr and Mrs Jagatramka contend that they did not have the intention that WCL purchase Cliff Road as their exclusive residence, there is no reason to doubt Mr Firek and Mr Anghie's evidence on this point, and see Mr Firek's evidence at T360.30-39. 1. Whilst their Defences contain the denials to which reference is made, the Jagatramkas have given no evidence to support their denials. 2. Mr Jagatramka has given no evidence setting out what his duties in India were and, in any event, even if he was busy in India he must have contemplated at some time seeking an extended visa, because that is what he in fact did. Only he could tell the Court when he formed the view that he should do so and what he and Mrs Jagatramka discussed in relation to this. The evidence relating to the design and construction of the house from shortly after August 2008 (see paragraph 110 of Mr Sharma's first Affidavit) supports the conclusion that they had already formed the intention by that date and, when coupled with Mr Jagatramka's endeavours to progress the purchase and put the proposal to the Board with Mrs Jagatramka's support by voting in favour of the resolution, most likely well before that date. 3. The resolution of February 2014 at CB A6:1767-1769 records various matters: 1. The DCS rely on the following as an admission by WCL that Cliff Road was provided to Mr Jagatramka under the ESA: "The Cliff Road Property was originally provided by the Company for the use of Mr Jagatramka under his remuneration arrangement as the Company's executive chairman." 1. The DCS maintain that it demonstrates that the occupation of Cliff Road was not a manifestation of an earlier improper motive as WCL contends but, rather, demonstrates that their occupation was a product of changing circumstances arising from Mr Jagatramka's appointment as executive chairman. 2. Mr Firek did not accept that the statement about Cliff Road being part of Mr Jagatramka's remuneration was correct. There are matters recorded in the same preamble to the resolution that make clear that the directors regarded the purchase of Cliff Road as "ill-advised, improper and unlawful" with the Jagatramkas "favouring their personal interests and not those of the Company." 3. A dispute arose as to whether the Jagatramkas could rely on one part of the preamble without having to accept another part of it. I do not think it is necessary to resolve the dispute even though I do not think it is clear that the Jagatramkas were authorised by the Board to use Cliff Road as their exclusive residence. Assuming that they were authorised, that was the position after Cliff Road had been purchased for $5 million and after more than $4.5 million had been spent on the construction of the new house. That exclusive use of Cliff Road was granted to Mr Jagatramka in October 2011 does not establish why Cliff Road was purchased in 2008, which is the question for determination in these proceedings. There is no evidence of any change in the plan of the house prior to 2011 or in 2011. The house was obviously suitable to the Jagatramkas as their exclusive residence, not only because they had been the source of so many of its details but also because, after they had ceased to be directors of Properties and WCL, they continued to reside there. 1. I accept that the evidence supports the conclusion that the reason no one else used Cliff Road between October 2011 and July 2013 was because it had become the Jagatramkas' exclusive residence, and most likely as a consequence of the ESA. However, even if the ESA explains the Jagatramkas' residence at Cliff Road from September or October 2011, it does not justify the decision in 2008 and the fact that arrangements were made in late 2011 for the Jagatramkas to take up exclusive residence at Cliff Road is consistent with WCL's claim that the Jagatramkas had always intended that to occur once the new house was completed.
11. The DCS (at paragraph 119) assert that there was nothing clandestine about the decision to allot Cliff Road to Mr Jagatramka under the ESA. I do not accept that characterisation. Indeed, I think it is most surprising that the ESA referred to accommodation of an "appropriate standard" without specifying what in fact was intended if Cliff Road was the proposed accommodation. No document is in evidence noting the abandonment by WCL of the expressed reason for purchasing Cliff Road in the original 2008 decision. There is no evidence of how WCL came to agree that Cliff Road would be granted as the accommodation of an "appropriate standard", although, as I have said, I infer that WCL must, by some means, have accepted that it was.
12. DCS 120-128 point out that the acquisition of Cliff Road took place in a context where WCL was spending, and planning to spend, a great deal of money developing and expanding its coal mining operations in Wollongong. The DCS also attack the suggestion that because WCL was operating at a significant loss in 2008 ($8 million) the purchase of Cliff Road even as a guest house could not be justified. Mr Firek and Mr Anghie accepted that the purchase of Cliff Road might assist WCL to obtain community acceptance in Wollongong (along with other expenditure, such as sponsorship of a basketball team and cricket) with advantages to WCL in its dealings with suppliers and the public, and they both confirmed that WCL was planning to expend considerable amounts in increasing mine production. There is no evidence from Mr Jagatramka himself that he believed that such an expenditure was warranted or justified as a public relations exercise, and there is no evidence that establishes that expenditure on Cliff Road had any effect on WCL's coal mining operations or helped WCL achieve a profit in 2011 or 2012. Indeed, WCL's losses reached $76.6 million in 2013: see CB A5:1458-1459 and MFI 1, which, it was agreed, summarises evidence found in the Court Book.
13. I have already noted that the public relations purpose was not referred to in the 2008 resolution, which suggests that it was not, for the Board's purposes, as significant a reason for the purchase of Cliff Road as the guest house purpose. In his Affidavit Mr Firek described the public relations aspect as an "additional important consideration" in his support for the resolution. Mr Anghie in his Affidavit (see paragraphs 12-14, 17 at CB A1:188) described Mr Jagatramka as saying an additional reason for the purchase of a property was: "It will also help the company to get community support because it will show that we are here for the long run."
14. It seems then that there were two reasons for the decision to approve the purchase of Cliff Road - one of them being the guest house purpose and the second being the public relations purpose. In relation to the latter purpose, whilst it might be thought remarkable that the directors could have viewed the expenditure of such a large amount of money as appropriate, particularly since WCL already owned Bank Street, both Mr Anghie and Mr Firek agreed that that was a reason to support the purchase. I shall return to the dual purpose or "mixed motives" issue later in these reasons.
15. In the DCS at paragraphs 144-153 and the Defendants' Specific Response, there are detailed submissions as to why WCL's claims in relation to the acquisition and development of Cliff Road should be rejected. I note at the outset that I do not regard the failure of WCL to require Properties to provide security or to pay interest to WCL as being of any significance. Properties was a wholly owned subsidiary of WCL. In this same context, I do not accept WCL's contention that, as directors of Properties, the Jagatramkas (or Mr Sharma) were in a position of conflict vis-a-vis WCL - WCL provided the funding to Properties to enable it to do what WCL wanted it to do, i.e. purchase Cliff Road, demolish the existing structure, build a new house and make it available to WCL, which is what Properties did.
16. The DCS at paragraphs 144-145 make the point that there is a fine distinction between the Jagatramkas having an intention to stay at Cliff Road with their family when they were in Australia and having a present, fixed and "entirely undisclosed intention" in June 2008 to cause WCL to fund the acquisition and development of Cliff Road "so that they could reside there with their children on a permanent and exclusive basis when the construction of the new dwelling was completed". The DCS assert that the evidence WCL relies upon to support the latter proposition is consistent with and demonstrative of the former. As I have already endeavoured to demonstrate (see 80 above), the DCS introduces a false comparison - the guest house purpose is not the Jagatramkas having an intention to stay at Cliff Road with their family when in Australia. The comparison of purposes is, rather, between the guest house purpose and the exclusive residence purpose.
17. The DCS offer explanations for why Mrs Jagatramka was significantly involved in the design and construction of Cliff Road, including that she had relevant qualifications (which I do not accept, since she had at most a degree in "home science", see T94.19, and she has not given any evidence of her qualifications), but the DCS do not explain why what was being designed and constructed on Mrs Jagatramka's instructions had the appearance of a residence suitable for the Jagatramkas and their children rather than the guest house suitable for visiting executives or officers of the company. DCS 147 seeks to present those instructions as consistent with the intention that Cliff Road would be used as a guest house for visiting executives, including the Jagatramkas, but I am not persuaded that this is so. It is true (see DCS 148) that no precise time is identified for when Mr Jagatramka gave instructions to Mr Sharma that the upper level (with the bedrooms) needed to be locked when he was away (see T81), but it was before completion of the house and before the ESA, and there were instructions given concerning the essential features of the house in August 2008 (see paragraphs 110-111 of Mr Sharma's first Affidavit) and extensive instructions in 2009. There was a theme in the Jagatramkas' submissions that nothing could be made of Mrs Jagatramka's involvement in the construction since "someone had to do it." If the real purpose had been a guest house for visiting executives, there was no reason why that task could not have been assigned to Mr Sharma to liaise with an architect, notwithstanding the fact that he had not been involved in the construction of a house before. But, in any event, it is not merely that Mrs Jagatramka was involved; it is the style and nature of the house which she and Mr Jagatramka ensured was constructed that is significant.
18. I do not accept the Jagatramkas' submission that there is no evidence that the Bank Street property was not leased out when Mr and Mrs Jagatramka moved in to Cliff Road: see paragraph 82 of Mr Sharma's first Affidavit.
19. The question which remains is whether WCL has established that the Jagatramkas had the exclusive residence intention as at the time of the resolution in June 2008, having regard to the need to be satisfied of these matters and taking into account the seriousness of the finding that WCL contends for. In coming to a view on this, I have had regard to the complete absence of evidence from the Jagatramkas to contest the evidence that has been put forward by WCL.
20. Based on the evidence of Mr Firek, Mr Anghie and Mr Sharma and the documents in evidence, I make the following findings of fact: 1. The idea for the Cliff Road purchase came from Mr Jagatramka. 2. Mr Jagatramka contacted the estate agent, Mr Cicedak, who appears to have been a buyer's agent, and who located Cliff Road for Mr Jagatramka. 3. Cliff Road was proposed by Mr Jagatramka as a property to "accommodate senior executives of Gujarat and other Indian companies within the group when they are visiting Australia." He did not say to anyone that he intended to be one of those senior executives who would use Cliff Road. 4. At the time of proposing the idea, Mr Jagatramka and his family had been using Bank Street, a four bedroom unit with ocean views, purchased in 2005 by WCL for use as his and his family's exclusive residence when in Australia. 5. Mr Jagatramka selected Cliff Road as the property to be purchased without any valuation of the property being obtained, and no valuation was sought prior to purchase. 6. Mr Jagatramka determined that a new company should be formed to hold Cliff Road, the shares in which were to be owned by WCL and the directors of which were to be himself, his wife and Mr Sharma. No reason has been advanced for the decision to use Properties as the purchaser. The reference to "strategic reasons" in the preamble to the resolution has not been explained. 7. Although Mr Jagatramka did say to Mr Anghie that the new property would be used as a guest house "for executives and directors who are coming to visit Wollongong," I do not treat the reference to "directors" as including himself, since he said (see [49] above) that they were executives "who we would entertain and accommodate there". He was already using Bank Street and he did not mention the intention that he would use Cliff Road, and nothing was said to Mr Firek or Mr Anghie about selling Bank Street. 8. If Mr Sharma was told by Mr Jagatramka in 2007 that he thought that WCL should upgrade Bank Street, that is not what Mr Firek and Mr Anghie were told. There is no evidence of any discussion as to the sale of Bank Street and Bank Street was not sold when Cliff Road was completed. 9. Mr Firek and Mr Anghie believed as at June 2008 that Mr Jagatramka or WCL had purchased a residential unit in which he would reside whenever he was in Wollongong: see paragraphs 12-19 of Mr Anghie's Affidavit and paragraph 27 of Mr Firek's Affidavit, and see Mr Firek's evidence at T360.20-38 where Mr Firek said that the unit was at Bank Street and owned by WCL. 10. The only purpose of the loans by WCL to Properties was to permit Properties to purchase Cliff Road and to pay for demolition and construction costs. 11. In the preceding financial year to 31 March 2008 when WCL purchased Cliff Road it had suffered a loss of $8 million (see CB A2:368-369) and in the following year suffered a loss of $9 million: CB A3:619-620, summarised in MFI 1. WCL was intending to spend $88 million in the 2009 year on expansion of the mine (and in fact spent a total of $129.9 million in that year). 12. It was Mr and Mrs Jagatramkas' intention as at June 2008 to have WCL (through Properties) buy and build a house at Cliff Road that would be used as a residence by them and exclusively by them, and they did not intend Cliff Road to be used as accommodation for visiting dignitaries or officials from India. I explain my reasons for this conclusion below. 13. Neither Mr nor Mrs Jagatramka informed Mr Firek or Mr Anghie that it was their intention that WCL would purchase a property, on which a new house was to be built, in which they and their family would reside in Australia exclusively.
21. The conclusion that Mr and Mrs Jagatramka intended that Cliff Road would be built as a residential home for themselves and not as accommodation for visiting executives and dignitaries is based on a number of matters, none of which taken alone would be conclusive, but which, when looked at together, lead me to that conclusion. The "links in the chain" reasoning is an available method of drawing conclusions from a set of facts: see Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125, 128-129, in which it was held that the trial judge had erred in not finding that the insured had set fire to the insured premises: "In cases of circumstantial evidence each proven fact may gain support from the others and, although each, considered in isolation, might not provide a sound basis for inferring the ultimate fact to be proved, a combination of all facts might provide a compelling basis from which to draw that inference… The task of the learned judge was to consider the weight of the combination of facts proved to his satisfaction and then to determine whether the combined weight of those facts and circumstances supported the inference, as a matter of probability, that the respondent lit the fire. The onus of proof is only to be applied at the final stage of the reasoning process. It is, erroneous to divide the process into stages and, at each stage, apply some particular standard of proof. To do so destroys the integrity of circumstantial case…" In Nolan v Nolan [2004] VSCA 109 at [120], Chernov and Eames JJA adopted what had been said in Longmuir and commented on the need for the trial judge in a circumstantial case to consider the combined and cumulative effect of the evidence. The proceedings before me are clearly a circumstantial case, there being no evidence of any admissions by the Jagatramkas as to their intentions in either of their Defences or in any document relied on by WCL.
22. In considering these links in the chain I have regard to matters occurring both before and after the 2008 resolution. As the NSW Court of Appeal said in Hyland v Hyland (1971) 18 FLR 461 at 467 per Asprey JA, with whom Sugerman ACJ concurred: "In order to determine a person's intention at a given time it is well established that regard may be had not only to conduct and acts before and at the time, but also to conduct and acts after the time, assigning to such conduct and acts their relative and proper weight and cogency: Re Grove; Vaucher v. Treasury Solicitor (1888) 40 Ch. D. 216, at p. 242., per Lopes L.J." See also the reference to Re Grove in Carapark Holdings Ltd v Commissioner of Taxation (Cth) [1967] HCA 5; (1967) 115 CLR 653 at 660-661.
23. The links in the chain are these: 1. The fact that it was Mr Jagatramka who first promoted the idea of purchasing a grand property and then selected Cliff Road without obtaining a valuation. 2. Mr and Mrs Jagatramka, together with Mr Sharma, were appointed as directors of Properties, a company created at the time of the purchase of Cliff Road and solely for that purpose. Its only asset between 2008 and 2013 was Cliff Road. 3. The instructions concerning the house were given by the Jagatramkas to the architect at a very early stage: see paragraphs 82 and 110 of Mr Sharma's first Affidavit. 4. There is no evidence that Mr and Mrs Jagatramka ever indicated that the style, design or fit out of Cliff Road needed to change because of Mr Jagatramka's entry into the ESA, i.e. to reflect that it should be changed in style from a guest house to a house suitable for the Jagatramkas to reside in. There is no evidence that the design of the house changed prior to or during construction. 5. Mr Jagatramka had the sole use of Bank Street at the time he proposed that WCL should buy a property - which he described to Mr Sharma in terms of an "upgrade": see T144.43 and Mr Sharma's second Affidavit at paragraphs 17 and 18. 6. There are features of Cliff Road's design and emphasis that are inconsistent with a corporate guest house, such as: 1. A "master bedroom with ensuite" and three smaller bedrooms. 2. A rumpus room. 3. An elaborately fitted out home entertainment room. 4. Two kitchens - one being described as a corporate kitchen on the ground floor. 5. The reference by Mrs Jagatramka to "Kavita's room", (Kavita being the Jagatramkas' daughter): see Mr Sharma's first Affidavit at paragraph 121. 6. The emphasis on Mr and Mrs Jagatramka's personal tastes and needs: for example, expensive statues of birds with focus lights, marble and faucets that had to be imported from India. 7. The fact that one of the rooms (on the ground floor) was described as a "guest bedroom": CB A4:922. 8. The expenditure of in excess of $100,000 on entertainment equipment: see CB A4:953-955, 960, 962 and 965. 9. A car turntable. 1. Mrs Jagatramka in August 2008 referred to the need for a "guest bed room": see Mr Sharma's first Affidavit, paragraph 111. I accept WCL's submission that a requirement for a "guest bedroom" is consistent with a residential home not a guest house. 2. The choice of an architect of Indian background who Mrs Jagatramka thought would "be better to understand 'our taste' and 'Vastu' requirements for the house": see Mr Sharma's first Affidavit at paragraphs 110-111. "Vastu" apparently refers to an Indian system of design and layout. 3. The instruction that Mrs Jagatramka (who lived in India until late 2011) was to be consulted on all elements of design and fit out, and have the final say (CB A3:882, 895), including on the colour scheme: CB A3:883, 897-898, 901. It is not surprising that Mr Mital saw Mr and Mrs Jagatramka as the client and that Mrs Jagatramka saw herself as the client (see CB A3:721, A4:937-938, 941, 947 and A5:1379-1381), although the contract was with Properties. 4. The extensive involvement of Mrs Jagatramka in the design and fit out, and the reference by Mrs Jagatramka to her house in Ahmedabad as a guide for the architect: see CB A2:494. Her concern over details (such as balcony pillars and focus lights) bespeaks a connection with the property that is not consistent with the guest house concept. 5. There is no evidence that the architect was ever told that Cliff Road was to be used as a guest house and should be designed with that purpose in mind. The project was described as a "residence" by Mr Jagatramka on behalf of Properties (CB A3:852), and the architect understood that he was involved in designing a "home" (see CB A3:721) and referred to "your prestigious house project" in a letter to the Jagatramkas (see CB A4:949). 6. Mr Jagatramka's instructions to Mr Sharma some time after June 2008 but before the house was finished and the ESA was entered into. Mr Jagatramka said to Mr Sharma: "The first floor of the building must be able to be locked so that it can't be accessed while we are away. We need two kitchens. A corporate kitchen on the ground floor and a domestic kitchen on the first floor." 1. The fact that after Mr and Mrs Jagatramka ceased to be directors of WCL they continued to reside in Cliff Road albeit under a lease entered into between Properties and NRE. Their son continued to live at Cliff Road for the course of his university studies in Wollongong at least until April 2015: T254.10. 2. The fact that when the Jagatramkas moved into Cliff Road there was no proposal or suggestion from them that WCL obtain a new property to use as a guest house for visiting officers and dignitaries and no later use by such persons of Bank Street or Cliff Road. The evidence is that no official or visiting dignitaries ever stayed at Bank Street or Cliff Road after the new house was constructed. 3. The fact that the ESA refers to accommodation of an "appropriate standard" but does not identify Cliff Road, notwithstanding that it must have been clear by the date of the ESA that that is where Mr and Mrs Jagatramka intended to reside. 4. The fact that the Jagatramkas occupied Cliff Road from October 2011 on an exclusive, continuous basis.
24. Mr Jagatramka found a purchaser of the shares in Properties (i.e. Happy Mining) with whom he had a connection, which connection he did not disclose. He also had a connection with the owner of Basant, which he also did not disclose, and with whom he was able, on behalf of NRE Resources Pty Ltd, to negotiate a lease which enabled him to stay on living at the property. Mr Jagatramka organised the proposed sale price and caused a draft deed to be prepared for the resolution of 18 June 2013. He has given no evidence of how these steps were undertaken, and how Happy Mining came to be the purchaser and how Basant came to be the assignee. These matters and the fact that Mr Jagatramka was the person who acted on behalf of Properties to register NRE's change of name at the Land and Property Information office (see CB A7:2095-2108), a subject about which he has given no evidence, together with the other matters detailed below in relation to the sale to Happy Mining/Basant, supports the view that the Jagatramkas, as at mid-2013, had sufficiently strong attachment to Cliff Road as to warrant taking steps that would ensure that it remained available to them after they had ceased involvement with WCL and Properties, and reinforces my view that they had, in 2008, the exclusive residence intention.
25. The Jagatramkas' submissions contended that I should consider their positions separately. I accept that Mrs Jagatramka is not to be treated as tainted with Mr Jagatramka's knowledge or intentions, nor he with hers, simply because they are married. However, it seems that Mr and Mrs Jagatramka had a common purpose as at 2008 - they were both directors and both benefited by the purchase of Cliff Road, and whilst Mr Jagatramka was the main spokesperson for their aims, Mrs Jagatramka was clearly on board from 2008 with the plan to build a large house in which they and their children could live at no cost to themselves. Since the separate responsibility and roles of Mr and Mrs Jagatramka could only be fully determined by consideration of what each said to the other concerning the proposal, their failure to provide evidence about this topic leads to the inference that the evidence of neither of them would assist their respective defences.
26. In coming to the conclusion that the Jagatramkas had intended in 2008 that Cliff Road would be for their exclusive use, I have taken into account that it does not follow that because someone does something in 2011 that they intended to do that same thing in 2008. However, the cumulative effect of the evidence, coupled with the absence of any evidence from Mr and Mrs Jagatramka, leads me to conclude that their later actions (from August 2008 onwards) are a guide to what they had always intended would occur. The question of whether, Cliff Road having been built, it was appropriate in 2011 that the Jagatramkas be permitted to reside there because of the ESA is a quite different question to the ones I am called on to answer here, which are: was the Board misled by the Jagatramkas as to their true intention, should the Jagatramkas have refrained from taking part in the decision-making in June 2008, and have the Jagatramkas breached their statutory and fiduciary duties and obligations to WCL?

Whether Corporations Act and Fiduciary Duties Breached

1. It is clear that if, as I have held, the Jagatramkas did have the exclusive residence intention: 1. They did not advise Mr Firek or Mr Anghie of that intention. 2. They were not entitled to vote on the resolution because the decision to be made was one which advanced their personal interests and to vote would involve a breach of their fiduciaries duties, and also because s 195 of the Corporations Act prohibits a director of a public company from voting on a resolution in respect of which the director has a personal interest or even being present at the meeting while the matter is considered. 3. The votes of the two other directors were obtained by a positive representation that Cliff Road would be used as "development of accommodation facilities for executives of NRE Group": see [10] above - the only expressed basis for the resolution. That expressed purpose, i.e. the guest house purpose, is inconsistent with the exclusive residence intention.
2. WCL placed reliance on s 181(1) of the Corporations Act (the duty to act in good faith and for a proper purpose), s 182(1) (the duty not to use one's position improperly to gain an advantage for oneself or cause detriment to the company), s 180(1) (the duty of reasonable care and diligence), the equitable duty to similar effect, the fiduciary duty to act in good faith and for a proper purpose, the fiduciary duty to avoid conflicts of interest, and the fiduciary duty not to take profits or advantage from the company's property or funds for oneself or some other person.
3. The Corporations Act provisions relied on are in the following terms: "180 Care and diligence--civil obligation only Care and diligence--directors and other officers (1) A director or other officer 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: (a) were a director or officer of a corporation in the corporation's circumstances; and (b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer. […] 181 Good faith--civil obligations Good faith--directors and other officers (1) A director or other officer 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. […] 182 Use of position--civil obligations Use of position--directors, other officers and employees (1) A director, secretary, other officer or employee of a corporation must not improperly use their position to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. […]."
4. There was a large measure of agreement on the legal principles relevant to these duties set out in 8.1 - 9.6 of the Plaintiff's Opening Submissions and see DCS 37.
5. There was agreement that in relation to the obligation on a director to act only for proper purposes the question is to be determined objectively, i.e. not on the basis of whether the director believed it was for a proper purpose: see Re Colorado Products Pty Ltd (in liq) [2014] NSWSC 789 at [421]; (2014) 101 ACSR 233 per Black J, and see Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 44 WAR 1 at [1988] per Drummond AJA. On the issue of a breach of the duty of good faith there is, as both sets of submissions made clear, a division of opinion in the case law on whether the subjective opinion of the director is sufficient to establish good faith: see, for example, Westpac v Bell at [1979]-[1988] per Drummond AJA. Even accepting that it is, the Jagatramkas have given no evidence of their subjective opinion and they have not established that they acted in good faith.
6. In ASIC v Adler [2002] NSWSC 171; (2002) 168 FLR 253 at [735], Santow J (as His Honour then was) set out the following principles (which were not challenged in the Court of Appeal, see Adler v ASIC [2003] NSWCA 131; (2003) 179 FLR 1 at [539] and [543] per Giles JA): "(1) A director (as a fiduciary) is under an obligation not to promote his personal interest by making or pursuing a gain in circumstances where there is a conflict or a real or substantial possibility of a conflict between his personal interests and those of the company: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 103 per Mason J. This is both at general law and by statute (s 181 and as applicable ss 182 and 183). Such promotion would not be to act in good faith in the best interests of the corporation, or for proper purposes (s 181). If the director has improperly used his position or information to gain such advantage ss 182 and 183 respectively are breached. (2) In order to assess whether or not there is a real sensible possibility of conflict one must adopt the position of the reasonable person looking at the relevant facts and circumstances of the particular case: Boardman v Phipps [1967] 2 AC 46 at 124 per Lord Upjohn; Queensland Mines Ltd v Hudson (1978) 52 ALJR 399. (3) Nonetheless, a director may act with a personal interest even though the director has not freed his or her mind of that personal interest when acting provided that this personal interest was not the actuating motive rather than some bona fide concern for the benefit of the company as a whole or for fairness as between members: Mills v Mills (1938) 60 CLR 150 at 164-165 per Latham CJ. (4) In certain circumstances, such as a director in ''a position of power and influence'' over the board, mere disclosure of a conflict between interest and duty and abstaining from voting is insufficient to satisfy a director's fiduciary duty. The director may also be under a positive duty to take steps to protect the company's interest such as by using such power and influence as he had to prevent the transaction going ahead: Permanent Building Society (In Liq) v McGee (1993) 11 ACSR 260 at 289 per Anderson J. Here neither Mr Adler nor Mr Williams, and failing them Mr Fodera did anything to have the following reach the investment committee or the board; that is, payment of the $10 million, the formation of AEUT and its investment in HIH. This allowed the subsequent unlisted investments and loans to be made with no properly approved mandate permitting this and no specific approval or ratification within a reasonable time thereafter. (5) What action, beyond disclosure, the director must take will depend on matters such as the degree to which the director has been involved in the transaction, and the gravity of possible outcomes for the company: Fitzsimmons v The Queen (1997) 23 ACSR 355 at 358 per Owen J. Here Mr Adler was intimately involved in all aspects of the transactions, while Messrs Williams and Fodera were involved to the lesser degrees earlier identified, with Mr Fodera least involved and the outcomes for HIH and HIHC were clearly adverse, in terms of ultimate loss. (6) A director of a company (here Mr Adler) who is also a director of another company (here Adler Corporation) must not exercise his or her powers for the benefit or the gain of the second company without clearly disclosing the second company's interests to the first company and obtaining the first company's consent: R v Byrnes (at 517) per Brennan, Deane, Toohey and Gaudron JJ at 517 (which here was never effectively given by HIH or HIHC)."
7. The fiduciary duty to act in good faith, to not take profits or advantage from the company's property or funds for oneself (or some other person), and to act for a proper purpose, covers the same ground. There is also an equitable duty and a statutory duty to exercise reasonable care. WCL's pleading relies on that as well but, for reasons which I have already touched on (see [37], [72]-[74] above), I do not think that this claim has been substantiated due to the absence of evidence.
8. A further important equitable duty is the duty to avoid a conflict of interest. In Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165, 199, the High Court (per McHugh, Gummow, Hayne and Callinan JJ) said: "In particular, the fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is 'a conflict or a real or substantial possibility of a conflict' between personal interests of the fiduciary and those to whom the duty is owed." See also Breen v Williams [1996] HCA 57; (1996) 186 CLR 71, 93 per Dawson and Toohey JJ. In this regard, the Jagatramkas' promotion of the purchase of Cliff Road with the intention that it be their exclusive residence clearly entailed a conflict of interest. That it did so is amplified, in my view, by the fact that it was not stated to be a reason for the proposal. The Jagatramkas could not have been confident that, had they disclosed their purpose, the decision would have been approved - indeed, the guest house proposal was inconsistent with that unstated purpose. Mr Sharma says that, had he known of the exclusive residence intention, he would not have drafted the resolution in the way that he did and would have advised the Jagatramkas to abstain from attending and voting on it: see paragraph 33 of Mr Sharma's second Affidavit. As the Full Federal Court held in Blackmagic Design Pty Ltd v Overliese [2011] FCAFC 24; (2011) 191 FCR 1 at [105]-[109], the fiduciary is required not to place himself in a position of conflict - compliance requires not so much disclosure but avoidance of the conflict; disclosure, assuming it leads to the principal's informed consent, is better understood as a defence, rather than as part of the duty itself.
9. In the DCS attention is drawn to the decision of Wheeler in which Ipp J (with whom Malcolm CJ and Seaman J agreed) set out the principles in relation to the requirement of s 181(1) of the Corporations Act. The Jagatramkas rely on this case to support the contention that the Court should consider the question of whether the directors would have voted in favour of the proposal had they known of the exclusive residence intention. At 218 of Wheeler, Ipp J said: "The principles applicable in determining whether directors of a company have acted for an improper purpose and in abuse of their powers are well settled. Relevantly, as regards the issues that arise in this case, it may be said that those principles are: a) Fiduciary powers and duties of directors may be exercised only for the purposes for which they were conferred and not for any collateral, or improper purpose. b) It must be shown that the substantial purpose of the directors was improper or collateral to their duties as directors of the company. The issue is not whether a management decision was good or bad; it is whether the directors acted in breach of their fiduciary duties. c) Honest or altruistic behaviour by directors will not prevent a finding of improper conduct on their part if that conduct was carried out for an improper or collateral purpose. Whether acts were performed in good faith and in the interest of the company is to be objectively determined, although statements by directors about their subjective intentions or beliefs will be relevant to that inquiry. d) The court must determine whether but for the improper or collateral purpose the directors would have performed the act impugned. See Carter v Drake (1992) 9 WAR 82 at 94-95, per Malcolm CJ; Darvall v North Sydney Brick & Co Ltd (1989) 16 NSWLR 260; Mills v Mills (1938) 60 CLR 150 at 185; Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 at 292; Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 at 838." (Emphasis added) In Darvall v North Sydney Brick & Tile Co Ltd (No 2) (1989) 16 NSWLR 260, one of the cases to which Ipp J referred, Kirby P in discussing the principle said at 281: "…In common with other decision making, directors may have multiple purposes for reaching a particular decision. This is especially so in a collegiate body such as a board of directors. Therefore, a task of characterisation is required of the court. The court must determine whether the complainant has shown that the substantial purpose of the directors for the conduct impugned was improper or collateral to their duties as directors of the company: Mills v Mills (1938) 60 CLR 150 at 185. This task of characterisation has been assisted by the provision of a rule of thumb, suggested by the High Court, for classification of the facts as they emerge in evidence. By that rule, it is necessary for the court to determine whether but for the allegedly improper or collateral purpose, the directors would have performed the act which is impugned: Ngurli Ltd v McCann (1953) 90 CLR F 425 at 445 and Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 at 292."
10. In determining whether or not a particular motive was a proper motive and whether or not the director acted in abuse of power, the question of whether the impugned motive was a significant factor in the decision is not the same question as whether the breach of fiduciary duty caused loss to the company, although if the impugned motive was a minor factor, or of no significance, then there would be no need for further enquiry. If the motive was material and significant then the company does not need to establish that the impugned motive was the only motive: see [111] and [115] below. The Full Court in Wheeler agreed with the trial judge that Mr Hamilton (the fifth defendant) was not aware of the improper purpose known to Mr Wheeler and three other defendants. The case against Mr Hamilton, therefore, was that he had breached his duty to exercise reasonable care. Ipp J drew a distinction between the causation test applicable in cases of, on the one hand, an alleged failure to exercise reasonable care and, on the other, breach of the duty to act for a proper purpose and the duty to avoid a conflict of interest: see 243-248 of Wheeler.
11. In this case, the impugned motive - i.e. the exclusive residence intention - was inconsistent with the guest house purpose, and the guest house purpose could not have been approved conjointly with it. The impugned motive was not, however, inconsistent with the public relations purpose.
12. The question of how the Court is to deal with a situation where there are "mixed" motives is not without its difficulties. In Eclairs Group Ltd v JKX Oil and Gas plc [2015] UKSC 71; [2016] 3 All ER 641, Lord Sumption (with whom Lord Hodge agreed) reached a conclusion that the other members of the Court (Lords Neuberger, Clarke and Mance) were not prepared to endorse. Lord Sumption said at [17]: "But what if there are multiple purposes, all influential in different degrees but some proper and others not? An analogy with public law might suggest that a decision which has been materially influenced by a legally irrelevant consideration should generally be set aside, even if legally relevant considerations were more significant: R (on the application of FDA) v Secretary of State for Work and Pensions [2012] EWCA Civ 332, [2012] 3 All ER 301, [2013] 1 WLR 444 (at [67]-[69]) per Lord Neuberger MR. In some contexts, such as rescission for deceit or breach of the rules relating to self-dealing, equity is at least as exacting. But the proper purpose rule, at any rate as applied in company law, has developed in a different direction. Save perhaps in cases where the decision was influenced by dishonest considerations or by the personal interest of the decision-maker, the directors' decision will be set aside only if the primary or dominant purpose for which it was made was improper." (Emphasis added)
13. Later in his judgment, Lord Sumption referred to what Dixon J (as His Honour then was) had said in Mills v Mills [1938] HCA 4; (1938) 60 CLR 150, 186: "But if, except for some ulterior and illegitimate object, the power would not have been exercised, that which has been attempted as an ostensible exercise of the power will be void, notwithstanding that the directors may incidentally bring about a result which is within the purpose of the power and which they consider desirable."
14. Lord Sumption also referred to obiter dicta in Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285, 294 per Mason, Deane and Dawson JJ: "As a matter of logic and principle, the preferable view would seem to be that, regardless of whether the impermissible purpose was the dominant one or but one of a number of significantly contributing causes, the allotment will be invalidated if the impermissible purpose was causative in the sense that, but for its presence, 'the power would not have been exercised'…"
15. In Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL [1968] HCA 37; (1968) 121 CLR 483, the High Court (per Barwick CJ, McTiernan and Kitto JJ) said in respect of an attack made on an allotment of shares (at 493-494): "But if, in making the allotment, the directors had an actual purpose of thereby creating an advantage for themselves otherwise than as members of the general body of shareholders, as for instance by buttressing their directorships against an apprehended attack from such as Harlowe, the allotment would plainly be voidable as an abuse of the fiduciary power, unless Burmah had no notice of the facts."
16. Accepting that the public relations purpose was a legitimate purpose (because WCL's own witness Mr Sharma, as well as Mr Firek and Mr Anghie, said that it was), I find that it was not the dominant motive, and I do so for the following reasons: 1. Mr Anghie said it was put by Mr Jagatramka as an additional reason (see paragraphs 12, 14 and 17 of Mr Anghie's Affidavit). 2. Mr Firek did not say that it was his principal reason for voting in favour of the resolution. 3. The resolution did not refer to the public relations purpose. 4. The public relations purpose did not require the construction of an Indian style residence. 5. The effort made by the Jagatramkas in relation to the construction of the residence to achieve a grand Indian style home is reflective of the exclusive residence intention, as I have explained. 6. Neither Mr nor Mrs Jagatramka has given evidence of their intention in voting in favour of the resolution, and I infer that their evidence would not have supported the contention that the resolution would have been put forward and passed solely for the public relations purpose. I deal further with this question at [171]-[173].
17. Cliff Road was a non-core asset not required for any coal mining work or core business purpose of WCL and in 2013 it was sold along with Bank Street and Rey Resources. I do not think that Cliff Road would have been purchased in 2008 if the Jagatramkas had not proposed and supported the proposal. I doubt they would have had any interest in promoting the purchase if they did not think Cliff Road would be available to them as their exclusive residence when completed.
18. In the language of Whitehouse, the exclusive residence purpose was causative because the 2008 resolution would not, on the balance of probabilities, have been advanced if the exclusive residence purpose could not be achieved. In the highlighted passage from Lord Sumption's speech in Eclairs, His Lordship excepts cases of dishonest considerations or personal interest of the decision makers in formulating the dominant purpose test, and I think that as long as the improper motive was one of the significant motives it is not necessary to determine if it was the dominant one. In any event, in my view the exclusive residence purpose was the Jagatramkas' dominant purpose in voting for the 2008 resolution.
19. On the basis of my factual findings, Mr and Mrs Jagatramka by voting on the 2008 resolution and advancing the guest house purpose when they in fact held the exclusive residence intention (which they did not disclose), improperly used their position to gain a benefit for themselves (which they did not declare) in breach of their fiduciary duties to WCL, including the duty to avoid a conflict of interest and the duty to act in good faith in the interests of the company and for a proper purpose. The Jagatramkas also breached the duties imposed on them by ss 181(1) and 182(1) of the Corporations Act.

The Third Component

1. WCL's attack on the debt to equity swap and sale of shares in Properties had several limbs: 1. That Happy Mining and Basant were connected with Mr Jagatramka, a fact not disclosed. 2. That the payments to GNI, GMPL and Wonga Coal (or at least one of them) were tainted, not being for a proper purpose or in the interests of WCL. 3. That the sale of shares in Properties, rather than a sale by Properties on the open market, was designed to keep Cliff Road available for the Jagatramkas and their family.
2. WCL abandoned its contentions in relation to 117.
3. The following facts emerged about this transaction: 1. WCL was under enormous financial pressure. There was not only pressure from significant creditors (see CB A8B:3198, 3200, 3204 and 3209) but WCL's auditors had expressed concern to ASIC that the company might be trading whilst insolvent: see CB A8B:3215. 2. There was a need to sell non-core assets and obtain funds to pay debt owed by WCL as rapidly as possible. One of those non-core assets which needed to be sold was Cliff Road (owned through the medium of Properties). 3. WCL had bought $810,000 worth of shares in Properties (see Mr Sharma's first Affidavit paragraphs 100-105) and it had assisted Properties with expenditure on Cliff Road by loaning Properties $9.353 million. Given that Cliff Road had been valued at $3.75 million and was Properties' only asset, WCL could only recover its expenditure in Properties through sale of Cliff Road, and only up to the amount (less expenses of sale) realised. 4. WCL resolved to exchange the debt owed to it for equity in Properties, thus rendering 100 per cent of the shares in Properties worth $3.75 million, i.e. the value of its single asset. 5. The shares in Properties were sold for $3.75 million to Happy Mining. Happy Mining therefore paid exactly what Cliff Road (and hence, inferentially, the shares in Properties) had been valued at. Basant then had Happy Mining's interest assigned to it for consideration. 6. The $3.75 million received by WCL from the sale of shares in Properties to Happy Mining/Basant was used to pay debt owed by WCL to companies within the Gujarat Group. Not only is there no evidence that the debts were not owing but, indeed, in a subsequent case WCL has claimed that it should be given credit for the payment of approximately $2.1 million, which includes $1,158.52 paid on 4 July 2013 to GNI and two other amounts in July and August 2013, and which Robb J took into account in determining WCL's liability: see Gujarat NRE India Pty Ltd v Wollongong Coal Ltd [2018] NSWSC 1459; (2018) 130 ACSR 133 at [456]-[457] per Robb J and see Order 2 of His Honour's orders. The case went on appeal and was overturned on a different point: see Wollongong Coal Ltd v Gujarat NRE India Pty Ltd [2019] NSWCA 135. 7. Although the $3.75 million was used to pay debt, it was not used to pay the pressing debts owed to creditors unconnected with the Gujarat Group, examples of which were in evidence, undermining somewhat the supposed need for such haste in selling Cliff Road by a private sale of shares instead of a public auction. 8. There is no case now advanced by WCL (see T394.1-18) by which WCL maintains that payment of any of the debts to which the $3.75 million was applied were not legitimate payments of pre-existing debts. 9. It follows that WCL has received fair value for its shares in Properties based on fair value for Cliff Road. 10. Basant is not a party to these proceedings and WCL has not sought to rescind the sale to Happy Mining or Basant. 11. Mr Jagatramka identified the purchaser and the proposed price of the share sale, and had a draft share sale deed with Happy Mining prepared in advance of the meeting of 18 June 2013 at which the Board of WCL resolved to sell WCL's shares in Properties to Happy Mining. 12. Mr Firek gave evidence that he would have voted for the sale of the shares in Properties for $3.75 million even if he had known that the purchaser (or the assignee) was connected in some fashion with the Jagatramkas: see T400.31-37, T402.27 - T403.14. Mr Anghie's evidence is that he specifically asked Mr Jagatramka "Are you going to sell it to an arms-length person?", to which Mr Jagatramka replied "Yes" (see paragraph 45, CB A1:192), and that had he known of any association between Happy Mining and Mr Jagatramka or WCL he would have sought further clarification and, if not satisfied, would have determined not to pass the resolution: see paragraph 52 (CB A1:193). 13. Happy Mining is wholly owned by GMCC: CB A8:2471-2473 and CB A8A:3002, 3017. 14. GMCC was a substantial shareholder in WCL: see PCS 13.15, CB A8A:3057 and SRP 31. 15. Mr Ramesh Chandra Bajoria, who is Mrs Jagatramka's father, was the chairman of GMCC in 2004 when GMCC was founded: CB A8A:2599, 2995. As at 2011, Mr Dinesh Bajoria was the managing director of GMCC (CB A8A:3013), and he is a relative of Mr Ramesh Bajoria (see CB A8A:3049) and, hence, of Mrs Jagatramka. 16. The shareholders of GMCC have not been identified. The PCS asserted that Mr Jagatramka was a shareholder based on "CB A8B:3430A" but that document was removed from the Court Book during the hearing: T309.5. 17. Happy Mining was a shareholder in WCL: see T228.26-39, CB A3:634, 688 and CB A8:2473. 18. Mr and Mrs Jagatramka removed themselves from the meeting on 18 June 2013 and did not vote on the debt to equity swap, but they did vote on the resolution by WCL to sell all its shares in Properties to Happy Mining: see CB A6:1559-1560. 19. Happy Mining's director in 2013 was Mr Rajat Sharma: A8A:2471. Happy Mining's subsidiary, Avondale Resources Pty Ltd ("Avondale") was a company that had as its directors at different times prior to 2013 Mr Rajat Sharma, Mr Sanjay Sharma, Mr Jagatramka and Mr Kunal Chandak: CB A8B: 3432-3434. 20. Avondale was until 2007 an entity within the Gujarat Group of companies (see CB A8B:3437 and A8A:2635). 21. Basant was incorporated on 5 July 2013 (a few days before Happy Mining's rights under the share sale agreement were assigned to it): CB A8:2447. Basant was wholly owned by Mr Kunal Chandak who was the sole director and secretary of Basant: CB A8:2449. 22. The deed of assignment from Happy Mining to Basant was dated 9 July 2013 and was executed by Mr Chandak on behalf of Basant, Mr Rajat Sharma on behalf of Happy Mining, and Mr Jagatramka and Mr Sanjay Sharma on behalf of WCL. 23. There is no evidence that Mr Anghie and Mr Firek (or Mr Sanjay Sharma) were ever told of the proposed assignment to, and the substitution of, Basant in place of Happy Mining. 24. Mr Jagatramka and Mr Chandak had at different times served as directors of Avondale, and Mr Chandak and Mr Jagatramka had attended functions together: see T260-261 and CB A5:1211. 25. Mr Chandak and Dinesh Bajoria were together on the Board of Avondale (CB A8A:2746-2747), as were Mr Chandak and Mr Rajat Sharma. 26. Mr Chandak and Mr Dinesh Bajoria have been directors together on the Board of Century Satellite Pty Ltd: CB A8B:3448. 27. There is no dispute that $3.75 million was paid by Happy Mining to Properties on 4 July 2013. There is, however, no evidence that Basant paid that money to Happy Mining. 28. On 1 November 2013, NRE Resources Pty Ltd entered into a lease of Cliff Road with Properties as the landlord: see CB A6:1725. NRE Resources was a company of which Mr Jagatramka was a director and it was part of the Gujarat Group: see CB A6:1754. 29. Mr Jagatramka in an answer to interrogatories says that his residence at Cliff Road, after he left WCL, was part of his remuneration package with NRE Resources: CB 9, Tab 18. 30. There was an executive services agreement between Mr Jagatramka and NRE Resources which was in similar form to the ESA: CB A6:1736-1754. There is no evidence of what the activities of NRE Resources were in Australia and what Mr Jagatramka's duties were on behalf of that company. 31. In April 2014 Mr Jagatramka gave instructions (to which his daughter was copied in) to Maguire & McInerney, the solicitors previously retained by Properties, to change the name of Properties on the registered certificate of title and it appears he paid the fee for the change: see CB A7:2099-2103. Mr Jagatramka had ceased to be a director of Properties, yet he was giving instructions on its behalf and appears to have arranged for the original certificate of title for Cliff Road to be provided to Maguire & McInerney (CB A7:2102). Mr Pritchard submitted that Mr Jagatramka had an interest in ensuring that the lessor's name on the lease matched the name on the certificate of title, but that does not explain why Properties, now ostensibly under the control of Basant, was leaving it to Mr Jagatramka to ensure this occurred.
4. On the subject of the transfer of shares from WCL to Basant rather than to Happy Mining, there is no evidence from Mr and Mrs Jagatramka as to how the deed of assignment came about.
5. The sale of shares in Properties to persons with whom the Jagatramkas or their family had connections, rather than a sale of Cliff Road on the open market (by Properties), has enabled the Jagatramkas to continue living at Cliff Road at least until April 2015 and, although there is no evidence that they have occupied the property since that date, if the Jagatramkas are correct in their contention that Cliff Road should not be transferred to WCL, there is nothing to indicate that Cliff Road will not be available to them in the future as well. These are matters in respect of which extensive cross examination would have been likely had they given evidence. In my view, the opaque circumstances of the sale to Happy Mining and transfer to Basant, when added to the admitted use of Cliff Road from November 2013 to April 2015, supports the conclusion that, as at June and July 2013, the Jagatramkas viewed Cliff Road as their permanent residence in Australia, the use of which they were keen to retain, and this reinforces the conclusion that they saw Cliff Road as their permanent residence in Australia from the start and not simply because Cliff Road was, it appears, provided to them by WCL as part of Mr Jagatramka's remuneration package between October 2011 and November 2013.
6. Neither Mr Firek nor Mr Anghie was informed that the purchaser of the shares in Properties was a shareholder in WCL and of the connections between Mr Jagatramka and the directors and shareholders of Happy Mining and Basant. WCL, however, does not assert that sale of the shares in Properties was at an under value and Mr Firek's evidence was that, even had he known of the connections, he would still have approved the sale to Happy Mining/Basant.
7. The evidence points to WCL being, as at June 2013, in a desperate position, which required the sale of non-core assets, of which Cliff Road (or the shares in Properties) was one. Whether the circumstances justified a private sale of shares in Properties, as opposed to a public sale of Cliff Road by Properties and repayment to WCL, was hotly disputed in submissions, but if WCL had not sold the shares and required Properties to sell Cliff Road on the open market so that WCL's debts could be reduced, it has not been established that this would have produced more than the $3.75 million which was obtained and which enabled WCL to repay $3.75 million of its debts to others. Whilst significant questions arise as to the conduct of Mr Jagatramka in relation to the debt to equity swap and sale of Cliff Road to Happy Mining and Basant, including whether Happy Mining could be described as "as arms-length person", and whether sale of shares in Properties to a purchaser organised by Mr Jagatramka on the terms of the sale of shares (as opposed to sale of Cliff Road on the open market) was appropriate or desirable, WCL has not established that any breach by the Jagatramkas in not disclosing the connection with Happy Mining/Basant, and in selling the shares to Happy Mining/Basant, has led to any loss to WCL. Given this conclusion, I do not think it is necessary to resolve the question of whether the Jagatramkas breached duties owed to WCL by reason of the Third Component.
8. It follows that any claim against the Jagatramkas and Properties for equitable compensation must focus on the entry into the Cliff Road purchase not the sale of Cliff Road (done through the medium of selling the shares in Properties).
9. To recover against Properties WCL must establish that the Jagatramkas acted in breach of their duties to WCL: see Lewis Securities Ltd (in liq) v Carter [2018] NSWCA 118; (2018) 334 FLR 9 at [183]-[187]. I proceed in considering this aspect of the case upon the basis that: 1. The loans to Properties and the issue of shares to WCL in Properties involved a breach of duty owed by Mr and Mrs Jagatramka to WCL. I have already indicated my conclusions on that issue. 2. That Properties, through Mr and Mrs Jagatramka's knowledge as two of the three directors of Properties, was aware of the Jagatramkas' breach of trust: see Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296 at [244], Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1; [1972] AC 153, Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 and see Krakowski v Eurolynx Properties Ltd [1995] HCA 68; (1995) 183 CLR 563, 582-583.
10. It follows that Properties was aware, as at June 2008 and following, of each of the breaches of fiduciary duty of the Jagatramkas within the rule of Barnes v Addy (1874) LR 9 Ch App 244, and that Properties is therefore an entity against whom WCL may seek relief as a "knowing recipient": Simmons v NSW Trustee and Guardian [2014] NSWCA 405; (2014) 17 BPR 33,717 at [86]-[91]. For reasons which I shall explain below, however, I do not think that WCL is entitled to relief as against Properties.

Relief

1. A number of the heads of relief found in the FASTOCL, such as damages, equitable damages and account of profits, were not pressed in WCL's closing submissions. As against Properties, WCL seeks to propound a constructive trust over Cliff Road. As against the Jagatramkas, WCL seeks orders for compensation under s 1317H of the Corporations Act and for equitable compensation. Equitable compensation is sought against Properties as well. WCL appears to now accept that it cannot succeed in obtaining orders rescinding the allotments and loans made by it to Properties, as sought by the FASTOCL, but it asserts that the advances and loans to Properties were improper and unauthorised disbursements of company property, which the Jagatramkas came under an immediate obligation to make good: PFWS 1.2.
2. The Jagatramkas' submissions challenge WCL's claims to relief, even assuming that the Jagatramkas are found to have had the exclusive residence intention and to have breached their statutory and fiduciary duties.
3. There are some important matters to reiterate and bear in mind: 1. WCL paid for shares in Properties and lent money to Properties, which funds Properties used to purchase Cliff Road and construct the new house. 2. As at June 2013, WCL agreed to Properties converting debt owed to WCL of $9.353 million into equity in Properties and it then sold all of its shares in Properties to Happy Mining/Basant. 3. WCL received, in July 2013, $3.75 million for all of the shares in Properties. 4. WCL has not sought to rescind the sale of its shares to Happy Mining/Basant. 5. WCL accepts that it cannot rescind the resolutions that led to the payments and loans to Properties: PFWS 2.3. Having regard to that concession, the relief sought at paragraph 8A of the relief claimed in the FASTOCL seems to have been implicitly abandoned. 6. This is not simply a case in which rescission is not possible but one in which the reason why rescission is not possible is that the company to whom the fiduciary duty was owed (and breached) itself made rescission impossible and, as part of those steps, has received some compensation for the loss in respect of which it now claims.

Constructive Trust

1. As the Jagatramkas' submissions point out, WCL's claim to Cliff Road, based on a constructive trust, is based on the assertion that the advances made to Properties were not authorised and yet it retains the benefit from the shares received as a result of those advances, a benefit which translated into receipt of $3.75 million from Basant. WCL accepts that the allotment of shares and the loans cannot be rescinded because restitutio in integrum is not possible as a result of the sale of the shares to Happy Mining/Basant, and WCL does not seek to rescind the sale of shares to Happy Mining/Basant.
2. In Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143, the NSW Court of Appeal (per McLelland AJA, with whom Priestley and Meagher JJA agreed) said at 153: "In general, where there is a contract for the sale of property by A to B made in breach of a fiduciary duty owed to A by B (or by C in whose breach B knowingly participated), pursuant to which the legal title to the property has been transferred from A to B, the transaction is in equity voidable at the instance of A, who may (if necessary) obtain an order for rescission setting it aside. Unless and until A effectively avoids the transaction and (if necessary) obtains an order for rescission, B's property rights as a result of the transaction remain unaffected. However if A does effectively avoid the transaction and (if necessary) obtain an order for rescission, the parties will be treated in equity as if the transaction had never been effected; in other words equity will treat B as if he had held the property in trust for A, that is, as a constructive trustee, ab initio. A constructive trust arises in such circumstances as a consequence of the effective avoidance or rescission of the transaction. Where, for whatever reason, the transaction has not been and cannot be effectively avoided and rescission is unavailable, it remains effective and no constructive trust can arise: see generally Daly y Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 386-390, per Brennan J." This statement was cited in Robins v Incentive Dynamics Pty Ltd (in liq) [2003] NSWCA 71; (2003) 175 FLR 286 at [73] per Mason P (with whom Stein JA and Giles JA agreed, and see [82] per Giles JA) in support of the conclusion that rescission: "…is essential for cases (like the present one) where the loan transaction is at best voidable for breach of fiduciary duty or an analogous statutory duty". The statement is also consistent with the requirement that for rescission to be ordered a Court of Equity must be able to achieve, in a broad fashion, restitutio in integrum: see Nadinic v Drinkwater [2017] NSWCA 114; (2017) 94 NSWLR 518 at [27]-[32]. The Full Court of Western Australia in Hancock Family Memorial Foundation Ltd v Porteous [2000] WASCA 29; (2000) 22 WAR 198 affirmed the approach in Greater Pacific and Robins. The Full Court of the Federal Court in Grimaldi, whilst raising doubt as to the appropriateness of the rule, accepted that it was the current law in Australia: see [275]-[281], as did White J (as His Honour then was) in Thomas v Arthur Hughes Pty Ltd [2015] NSWSC 1027; (2015) 16 ASTLR 252 at [67].
3. The PFWS at paragraph 4.3 accepted that I may be bound by authority to reject its proprietary claim, but sought to construct an argument that appears to be an attempt to contend that Greater Pacific is wrong and ought not to be followed. I am, however, constrained as a matter of precedent to follow Greater Pacific, and argument as to the correctness of Greater Pacific (as to which I express no view) will have to await reconsideration by the NSW Court of Appeal.
4. I conclude, therefore, that WCL cannot succeed on its claim to a constructive trust of Cliff Road by reason of its inability to rescind the transactions between 2008 and 2011, and its failure to seek rescission of the 2013 transactions. I do not need to consider whether, as the Jagatramkas contend, it is not open to WCL to seek both a constructive trust over Cliff Road and equitable compensation from them: see DSR 14-16. Nor do I need to consider whether the discretionary considerations relevant to the claim for equitable compensation against Properties (discussed below) are applicable here too.

Equitable Compensation

1. The object of equitable compensation "is to restore persons who have suffered loss to the position in which they would have been if there had been no breach of the equitable obligation…": per Spigelman CJ in O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 272; (1998) 29 ACSR 148.
2. This can be seen as making restitution to the trust estate (see Re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211, 214 per Street J, as His Honour then was, cited in M. Tilbury and G. Davis, "Equitable Compensation" in Patrick Parkinson (ed), The Principles of Equity (Thomson Lawbook Co, 2nd ed, 2003) 797 at 805) or the return of money to a company when a director has disposed of company property for an improper purpose: see O'Halloran at 277. In Westpac v Bell, Lee AJA said at [884]: "…where there has been a breach in a fundamental respect of the pledge by the fiduciary (in a fiduciary relationship) to act in the best interests of another that occasions loss or detriment, equitable compensation should follow. Thus, where exercise of care and diligence in management of the affairs of a corporation has been pledged by a director and relied on by a corporation, it would be consonant with principle for a breach of that obligation (by unreasonable conduct by a director that amounts to gross or culpable negligence and loss or detriment has resulted to a corporation), to be treated as a breach of a fiduciary duty in that fiduciary relationship."
3. As Tilbury and Davis point out in their chapter (supra, at 806), the remedy of equitable compensation is quite distinct from an account of profits or the imposition of a constructive trust, and there has been some confusion created by a failure to distinguish between these different remedies.
4. In Re Purcom No 34 Pty Ltd (In Liq) (No 2) [2010] FCA 624 at [23], Gordon J summarised the relevant principles relating to equitable compensation: "A number of principles are worth restating: 1. It is a "cardinal principle of equity" that the remedy is "fashioned to fit the nature of the case and the particular facts": Warman International Limited v Dwyer (1995) 182 CLR 544 at 559; see also Hill v Rose [1990] VR 129 at 143. 2. Where a breach of fiduciary obligation occurs, compensation is available in equity to make good the loss (Nocton v Lord Ashburton [1914] AC 932) and the plaintiff must elect between the remedy of equitable compensation and account of profits: Nocton [1914] AC 932 at 956-957; Warman 182 CLR 544 at 558; R Meagher, D Heydon, M Leeming, Equity: Doctrines & Remedies (4th ed, 2002) at 837. 3. Equitable compensation is assessed at the time of trial, with the full benefit of hindsight and common sense, not at the date of breach: Youyang Pty Limited v Minter Ellison Morris Fletcher (2003) 212 CLR 484 at [35]; Re Dawson (deceased); Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211 at 216; O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 273 and 276. 4. The objective of equitable compensation is compensatory - to restore the principal to the position it was in prior to the breaches and to make good any loss caused by the fiduciary's wrongful conduct: see [75] of the Reasons; Nocton [1914] AC 932 at 952; Re Dawson (deceased) [1966] 2 NSWR 211; O'Halloran 45 NSWLR 262 at 272-273. No element of penalty is involved: R Meagher, D Heydon, M Leeming, Equity: Doctrines & Remedies (4th ed, 2002) at 837-839. 5. Unlike common law damages, equitable compensation is not limited or influenced by common law principles of remoteness of damage, forseeability or causation: Hill v Rose [1990] VR 129 at 144; Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 at 556; O'Halloran 45 NSWLR 262 at 273. 6. However, there does have to be some causal connection between the breach of fiduciary obligation and the loss for which compensation is recoverable. It is necessary for the plaintiff to establish that the loss would not have occurred but for the breach: O'Halloran 45 NSWLR 262 at 275-6. The necessary enquiry is whether the loss would have happened had there been no breach, not whether the loss was caused by or flowed from the breach: O'Halloran 45 NSWLR 262 at 276-277." See, also, Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1 at [432].
5. The following questions arise, as against the Jagatramkas: 1. Has WCL suffered loss by reason of the Jagatramkas voting on the purchase/construction resolutions, failing to advise the Board of the exclusive residence intention and in promoting to the Board the guest house purpose in breach of their fiduciary duties, and in having WCL commit to expending initially $8-9 million (and, as it turned out, spending effectively $10.153 million) for the purchase and construction of Cliff Road. The $10.153 million is derived from $810,000 that WCL paid for shares in Properties and $9,353 million that WCL loaned to Properties for the purchase of Cliff Road and for building costs. Included in the total expenditure are legal fees and stamp duty. 2. Whether it is open to the Jagatramkas to contend that no loss was suffered by WCL by reason of a breach of duty owed to WCL because the resolutions, it is asserted, would have been passed even if the exclusive residence intention had been advanced and even if the Jagatramkas had not voted ("the disclosure counterfactual"). 3. If it is open to the Jagatramkas to so contend, do they bear the onus of establishing that the resolution would have been passed ("the onus point"). 4. If the answer to (3) is yes, have the Jagatramkas discharged the onus. 5. If the answer to (3) is no, and the onus is on WCL, then has WCL established that the resolution would not have passed.
6. WCL's case is that the loss which WCL incurred was the purchase and development of Cliff Road for $10.153 million as expenditure which should not have been incurred. WCL accepts that the $3.75 million it received from the sale of the shares in Properties must be taken into account - the loss then, it asserts, is $6.403 million plus interest.
7. Before attempting to answer the questions posed, I need to make reference to the fact that WCL puts its claim to recover from the Jagatramkas (and Properties) on two bases. The first is that the resolution in June 2008 was unauthorised because the Jagatramkas should not have voted on it by reason of their conflict of interest and because the remaining directors were induced to vote in favour of it due to the guest house purpose being put forward and the exclusive residence intention not being advanced. Thus, WCL assert a claim to recover the funds paid out to Properties on the basis of a misuse of WCL's company assets. The second alternative basis is that loss has been caused to WCL by reason of the expenditure of approximately $10.153 million on Cliff Road, of which, as matters have transpired, only $3.75 million has been recouped (from the sale of WCL's shares in Properties). The first claim could be described as a claim for "substitutive" compensation and the second a claim for "reparative" compensation.
8. As Edelman J explained in Agricultural Land Management Ltd v Jackson (No 2) [2014] WASC 102; (2014) 48 WAR 1 at [349], the phrases "substitutive compensation" and "reparative compensation" which His Honour uses, are drawn from the writings of Dr Steven Elliott and Professor Charles Mitchell: see, e.g., C. Mitchell, "Equitable Compensation for Breach of Fiduciary Duty" (2013) 66 Current Legal Problems 307 and S. Elliott and C. Mitchell, "Remedies for Dishonest Assistance" (2004) 67 The Modern Law Review 16.
9. I summarise the facts of Agricultural as follows: the Plaintiff ("Agricultural") and Bunbury Centro Pty Ltd ("Bunbury") were both substantially owned by a third company. Jackson and Goff were directors of both Agricultural and Bunbury. Bunbury sold land to Agricultural for $2.25 million and Bunbury also was paid a licence fee of "at least" $1.665 million. The contract was signed by Jackson and Goff for both Agricultural and Bunbury without either company obtaining independent advice. Agricultural then entered into a contract for development of the site as a hotel at a cost of $18.5 million. The hotel was sold five years later for $10.15 million. Edelman J held that Jackson and Goff had breached their duties under s 180 of the Corporations Act and provisions relating to dealings between related parties and management investment scheme compliance. They had a conflict of duty by reason of their position as directors of both Agricultural and Bunbury, and they failed to take all reasonable steps to ensure Agricultural was adequately protected in relation to the purchase. Bunbury was held to have been knowingly concerned in the breaches. His Honour held, however, that Agricultural could not recover against the defendants because, in relation to what His Honour referred to as "substitutive compensation", Agricultural had not rescinded the sale contract with Bunbury (and the case had not been pleaded as a claim for restoration of a trust asset). In relation to what His Honour described as a "reparative" compensation claim, Agricultural failed, because: 1. No loss was proven - there was no evidence that Agricultural had overpaid for the land and licence. 2. The loss (i.e. the difference between the $18.1 million paid for the project and the sale price of $10.5 million) was not proven to have arisen from the breaches. 3. Agricultural had not proven that, but for all or any of the breaches, it would not have entered into the transaction in any event.
10. The breaches which Edelman J found proven were all breaches around the failure to ensure compliance with related party provisions and as a result of a conflict of duties owed to two principals. His Honour rejected any assertion of impropriety: [254] and [299].
11. Agricultural provides support for the Jagatramkas' submissions in relation to the substitutive compensation claim. His Honour said the following was one of three "impassable obstacles to substitutive compensation": "[377] First, the dissipation of funds about which Agricultural complains was made under the Contract. The Contract was executed by Agricultural through two of its directors (and the company secretary). It was never rescinded. Although various matters might have given rise to a claim by Agricultural to rescind the Contract, Agricultural never sought to avoid the Contract. [378] Not only did Agricultural abstain from seeking rescission of the Contract, but the existence of the Contract was essential to its pleaded case. For instance, Agricultural relied upon its conduct in entering the Contract for its claim that a financial benefit was provided to Bunbury Centro under the Contract and it relied on its entry into the Contract as the source of damage which it suffered. [379] It is not possible to say that the payment of the purchase money was unauthorised, or should be treated as unauthorised, when it was paid under a contract which was never rescinded. To do so would require the High Court decisions in Peninsular & Oriental Steam Navigation Co v Johnson and Tracy v Mandalay Pty Ltd to be overturned. The first of those cases is discussed below in relation to reparative compensation." (Footnotes omitted) His Honour also said at [380]-[381]: "[380] Second, as Lord Millett also explained in Libertarian Investments Ltd v Hall, the process of falsification upon the taking of a common account requires the falsification of the whole of a transaction, not merely part of it. Lord Millett said: "If [the defaulting fiduciary] dissipated [the fund] or invested it at a loss, the plaintiff will naturally have the disbursement disallowed and disclaim any interest in the property in which it was invested by treating it as bought with the defendant's own money. If, however, the defendant invested the money at a profit, the plaintiff is not bound to ask for the disbursement to be disallowed. He can treat it as an authorised disbursement, treat the property in which it has been invested as acquired with trust money, and follow or trace the property and demand that it or its traceable proceeds be restored to the trust in specie." [381] A claim for substitutive compensation by Agricultural in the context of this case would require it simultaneously to disallow the disbursement and to authorise the receipt of the Kalgoorlie Property. A substitutive compensation claim cannot operate in that way." (Footnotes omitted)
12. The Jagatramkas also seek to rely on Agricultural to defeat WCL's contention that, because the resolution in 2008 was not validly passed, WCL's claim is to be treated as though it is for restoration of an asset (see PFWS) and also to support their contentions relating to causation in this area.

Has WCL suffered loss?

1. In June 2008 WCL by a resolution of its Board decided to purchase Cliff Road and develop the property for prospective expenditure of $8-9 million, with an actual expenditure of $10.153 million. On my findings: 1. The Jagatramkas should not have taken part in the vote because they had a conflict of interest. 2. Mr Jagatramka, with the acquiescence of Mrs Jagatramka, misrepresented that the purpose of the purchase and development was the guest house purpose. 3. The Jagatramkas did not reveal the exclusive residence intention. 4. The exclusive residence intention was not made known to Mr Firek and Mr Anghie and was inconsistent with the guest house purpose. 5. WCL expended $10.153 million on Cliff Road and has only recovered $3.75 million.
2. The Jagatramkas do not contend that there was informed consent for the exclusive residence intention. To establish that fully informed consent has been given it is necessary that all matters relevant to the issue have been put before the directors voting on the proposal: Duncan v Independent Commission Against Corruption [2016] NSWCA 143 at [438] per Bathurst CJ and [483] per Beazley P; Gray v New Augarita Porcupine Mines Ltd [1952] 3 DLR 1 at 14, Short v Crawley [No 30] [2007] NSWSC 1322 at [997]-[1009] and Krupace Holdings Pty Ltd v China Hotel Investments Pty Ltd [2018] NSWSC 862 at [79]. Rather, the Jagatramka's case is that they did not have the exclusive residence intention.

Causation and the Disclosure Counterfactual

1. The Jagatramkas adopt the substitutive/reparative classification from Agricultural and assert that WCL cannot succeed on its substitutive compensation claim, leaving WCL with only a reparative compensation claim, which, they assert, is to be assessed on a different basis to a substitutive compensation claim. The Jagatramkas assert that the onus rests on WCL to establish that if the Jagatramkas had fully disclosed the exclusive residence intention WCL would not have advanced the loans and allotment monies to Properties. As Mummery LJ said in Swindle v Harrison [1997] 4 All ER 705 at 733, "[t]here is no equitable by-pass of the need to establish causation," a passage approved by the High Court in Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 at [44]. WCL asserts that it is not required to prove anything beyond the fact that the decision to purchase Cliff Road was taken by WCL without proper authorisation in circumstances where the Jagatramkas had a conflict of interest and pretended that the purpose was the guest house purpose, and that the decision led to WCL suffering a loss of $10.153 million over three years, of which only $3.75 million has been recouped. WCL relies, inter alia, on Brickenden v London Loan & Savings Co [1934] 3 DLR 465, New Augarita at 15, O'Halloran and Wheeler.
2. In Brickenden, Lord Thankerton (delivering the judgment of the Judicial Committee of the Privy Council) said at 469: "When a party, holding a fiduciary relationship, commits a breach of his duty by non-disclosure of material facts, which his constituent is entitled to know in connection with the transaction, it cannot be heard to maintain that disclosure would not have altered the decision to proceed with the transaction, because the constituent's action would be solely determined by some other factor, such as the valuation by another party of the property proposed to be mortgaged. Once the Court has determined that the non-disclosed facts were material, speculation as to what course the constituent, on disclosure, would have taken is not relevant."
3. WCL also contends that, if it were open to investigate the disclosure counterfactual, the onus is on the Jagatramkas to establish that the resolution would not have been passed, and that they have not done so, and, further, that WCL has in any event established that the 2008 resolution would not have been passed.
4. The questions of causation and what I have labelled the disclosure counterfactual have excited much attention and interest in the field of equitable remedies, and have been the subject of expositions from learned academics and judges with considerable knowledge in the field. I have had regard to a number of such essays and texts, including: the Hon Justice W. Gummow, "Compensation for Breach of Fiduciary Duty" in T. G. Youdan (ed), Equity, Fiduciaries and Trusts (Carswell, 1989) 57; Matthew Conaglen, "Brickenden" and the Hon Justice J. Ward, "Equitable Compensation - An Overview" in Simone Degeling and Jason N. E. Varuhas (eds), Equitable Compensation and Disgorgement of Profit (Hart Publishing, 2017); J. D. Heydon, M. J. Leeming and P. G. Turner, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2015) at [23-450]-[23-500]; J. D. Heydon, "Causal Relationships Between a Fiduciary's Default and the Principal's Loss" (1994) 110 Law Quarterly Review 328; Matthew Conaglen, "Equitable Compensation for Breach of Fiduciary Dealing Rules" (2003) 119 Law Quarterly Review 246; S. Harder, "Is a Defaulting Fiduciary Exculpated by the Principal's Hypothetical Consent" (2008) 8(1) Oxford University Commonwealth Law Journal 25; J. Glister, "Breach of Trust and Consequential Loss" (2014) 8(3) Journal of Equity 235.
5. Detailed consideration of the issue of causation in the field of equitable compensation can be found, inter alia, in: Re Dawson, Beach Petroleum, Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, Youyang, Agricultural, O'Halloran and New Augarita. In Re Dawson, Street J said, in the context of a claim against a trustee who had improperly paid out trust funds, that the form of relief: "…is couched in terms appropriate to require the defaulting trustee to restore to the estate the assets of which he deprived it." Street J went on to say: "consideration of causation, foreseeability and remoteness do not readily enter into the matter." Furthermore, it has been said that the inquiry is not whether the loss was caused by or flowed from the breach, but rather, as Street J said in Re Dawson: "…the inquiry in each instance would appear to be whether the loss would have happened if there had been no breach." This is reflected in point six of Gordon J's principles set out [137] above.
6. Judicial views have differed as to the current status of Brickenden, and as to what its status should be: see, for example, Kirby J in Maguire, Edelman J in Agricultural at [395]-[396], and Spigelman CJ in Beach Petroleum and O'Halloran. In O'Halloran, Priestley JA expressed the view that Brickenden should be followed unless and until the High Court says otherwise; see, also, Gwembe Valley Development Co Ltd (in receivership) v Koshy (No 3) [2003] EWCA Civ 1048; [2004] 1 BCLC 131 at [146]-[147] and [159], an English Court of Appeal decision which provides support for an approach inconsistent with Brickenden, as does Agricultural at [397]-[399] at least in some cases of equitable compensation, and see Heydon, "Causal Relationships" (supra), Everist v McEvedy [1996] 3 NZLR 348. In his chapter "Brickenden", Professor Conaglen highlights various contradictory ways in which Brickenden has been viewed over the years: see 119-122, 134-140. In another of Professor Mitchell's articles, "Equitable Compensation for Breach of Fiduciary Duty" (2013) 66 Current Legal Problems 307, he contends that there has been confusion in the case law between substitutive compensation and reparative compensation. He is critical, for example, of the analysis in Target Holdings Ltd v Redferns [1995] UKHL 10; [1996] AC 421 and O'Halloran: see 323-324, 325. Although the substitutive/reparative taxonomy certainly has its adherents, Edelman J being an obvious Australian example, it should be noted that at [23-610] of Meagher, Gummow and Lehane's Equity: Doctrines and Remedies, the learned authors say of the substitutive/reparative terminology: "Too many decisions of courts, including the ultimate appellate and intermediate appellate courts of several jurisdictions, have worked out the principles incompatibly with the terms 'substitutive compensation' and 'reparative compensation', so defined, for the courts to find these terms to be of any assistance." (Footnotes omitted)
7. To a significant degree, I think that the controversy in this domain centres upon the question of whether, in a claim for equitable compensation against a fiduciary, causation and loss should be determined in accordance with the principles applicable to common law negligence or whether they should be determined in accordance with separate equitable principles derived from, and closer to, a strict approach applicable to a trustee who, in breach of trust, removes funds from the trust (of which Re Dawson is a classic example). Wrapped up in that question is the issue of whether the test includes consideration of what would have happened if the fiduciary had not breached his duty (and/or had disclosed what, in breach of duty, he did not disclose) and whether the less strict approach should apply to only some species of breach of fiduciary duty and not others.
8. I do not think any purpose is served in attempting a detailed review of all these cases and articles, but there follows a number of aspects which appear to me to be of significance: 1. What we are currently dealing with is a case of directors causing funds of the company (and a publicly listed one at that) to be spent on a purchase that was, on my findings, designed to benefit them and on which proposal they both voted. 2. Directors, because they control the assets of the company, are to be regarded as custodial trustees rather than as non-custodial: see O'Halloran at 277C - 278G and Aequitas Ltd v AEFC Leasing Pty Ltd [2001] NSWSC 14; (2001) 19 ACLC 1,006. 3. Cases where the allegation is that the fiduciary has not acted with the required degree of care and skill may be in a separate category, as Wheeler demonstrates. It was on the basis that Hamilton had breached a duty to act with reasonable care (as opposed to what Ipp JA described as a "true" fiduciary duty) that His Honour held that Brickenden was not applicable to the claim against him. 4. The question of assimilation of the measure of compensatory damages in equity with that applicable to tort and contract was the subject of comment by the High Court in Youyang at [38]-[40]. At [39] the Court (Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ) said: "However, there must be a real question whether the unique foundation and goals of equity, which has the institution of the trust at its heart, warrant any assimilation even in this limited way with the measure of compensatory damages in tort and contract. It may be thought strange to decide that the precept that trustees are to be kept by courts of equity up to their duty has an application limited to the observance by trustees of some only of their duties to beneficiaries in dealing with trust funds." 1. The critical question, at first instance, is to what degree has the matter of causation and the disclosure counterfactual been determined by appellate courts, particularly the High Court, the New South Wales Court of Appeal and the Privy Council prior to 1986. On the issue of precedent in relation to Privy Council decisions, see Viro v The Queen [1978] HCA 9; (1978) 141 CLR 88 at 119 per Gibbs J, 136-137 per Mason J and 151 per Jacobs J, and also Mavrideros v Mack (1998) 45 NSWLR 80 at 107F in which Sheller JA (with whom Priestley and Beazley JJA agreed) described a Privy Council decision (Hordern v Hordern [1910] AC 465) as being binding on the trial judge. 2. The passage in Brickenden set out earlier refers to "material facts" (this is highlighted in Beach Petroleum at [440], as set out below), which of itself introduces an important causative element. 3. It is important to note that what Brickenden said could not be maintained by a fiduciary in breach of his duty of disclosure was the contention that the constituent (i.e. the principal or the party to whom the duty was owed) would have done what he (or it) did even if the fiduciary had disclosed the non-disclosed fact. 4. Commonwealth Bank of Australia v Smith (1991) 42 FCR 390 at 395; (1991) 102 ALR 453 per Davies, Sheppard and Gummow JJ, and Gemstone Corporation of Australia Ltd v Grasso (1994) 62 SASR 239 at 243, 245, 252; (1994) 13 ACSR 695 per Matheson, Prior and Olsson JJ, are decisions of intermediate appellate courts in which Brickenden (and, in Gemstone, New Augarita) was treated as authoritative. In White v Illawarra Mutual Building Society Ltd [2002] NSWCA 164 at [144]-[145] Hodgson JA noted that Brickenden was a case of conflict of duty and interest, and held that it did not apply to cases of conflict of duty and duty (although, as Hodgson JA noted, the Court in Beach Petroleum referred to CBA v Smith and Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 as two cases of conflict between duty and duty in which Brickenden was applied: see [145]). 5. I refer to the following passages from the judgment of Spigelman CJ in O'Halloran (with whom Meagher JA agreed and with whom Priestley JA, in large measure, agreed) as particularly significant: 1. At 273F - 274E, His Honour expressed the view that the power exercised by a director over the assets of a company is one which must be exercised solely for the purpose for which it was conferred and to exercise the power for another purpose is a breach of fiduciary duty. 2. At 274E-F, His Honour observed that where assets are transferred improperly and the transfer caused the loss, the necessary causation is established, citing Hoffmann LJ in Bishopsgate Investment Management Ltd (in liq) v Maxwell [No 2] [1994] 1 All ER 261 at 265-266; [1993] BCLC 1282. 3. At 272D-E Spigelman CJ said: "It has long been established that questions of causation of loss said to arise from breach of fiduciary obligation are to be determined in a different way from breach of common law obligations. Specifically, the remedy of equitable compensation differs from damages at common law. It also differs from damages under a statutory regime where the Court is concerned with, and confined by, the construction of the statute. Causation for purposes of s 212 of the Corporations Law will not involve the same analysis of causation as is required for breach of a fiduciary obligation." At 272-273, the Chief Justice approved of what had been said by the House of Lords in Target Holdings and by McLachlin J in Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 that are set out at (11)(c) below. His Honour then said at 276-277: "In the case of a trustee dealing with trust property, the law has proceeded beyond the invocation of the formulaic "common sense" approach to causation, by adopting a stringent test to the selection of those events preceding loss which are to be taken as causing the loss. There is a sufficient connection, irrespective of the identification of a separate and concurrent cause, when the loss would not have occurred if there had been no breach of duty… The strict standard applicable to a trustee of a traditional trust with respect to improper application of trust property is based on the vulnerability of beneficiaries with respect to the disposition of property by a trustee who has control over such disposition. This policy applies equally to the case of a director of a company, such as a managing director, (or a group of directors) who has (or have) the power to dispose of company property and who does (or do) dispose of such property for an improper purpose. The analogy of ensuring "restitution" to the estate (in the sense of "restoration") is, in my opinion, an appropriate one. Such a director (or directors) is (are) subject to the same stringent test with respect to the exercise of the fiduciary power to dispose of property, as is the trustee of a traditional trust. It is not necessary to consider the appropriate test for breach by a director of other fiduciary duties. Policy favours a stringent test in the circumstances of this case. It is the vulnerability of a company which places its property in the power of directors, that makes it appropriate to adopt the approach to causation applicable to the trustee of a traditional trust in deciding issues of causation for the contravention by a company director of his or her duty not to exercise the power to dispose of property for an improper purpose. As McLachlin J put it in Canson Enterprises v Boughton (at 154): '… equity is concerned, not only to compensate the plaintiff, but to enforce the trust which is at its heart.'" (Emphasis added) I regard the passages emphasised above as authoritative guidance as to the test for causation in this matter. The policy issue referred to in the last passage in the quote above is also touched upon in the passage from Youyang set out at (4) above and the passage in Maguire set out at [156] below. 1. In Beach Petroleum the Court (Spigelman CJ, Sheller and Stein JJA) said at [432], [440]-[448]: "[432] The authorities on this matter have recently been reviewed in O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 272-273. The law in Australia was there held to be as stated by Lord Browne-Wilkinson in Target Holdings Ltd v Redferns [1996] 1 AC 421 at 439: '… Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and commonsense, can be seen to have been caused by the breach'; and by McLachlin J in Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129 at 163: '… it is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach.' […] [440] It is important to emphasise that the proposition on which reliance is placed refers only to an act of non-disclosure by a fiduciary of 'material facts which his constituent is entitled to know in connection with the transaction'. The central word in the formulation in Brickenden is the word 'material'. Before applying the principle, it is necessary to identify a fact which is 'material' in the requisite sense. Once a fact is so identified, the principle establishes that the defaulting fiduciary will not succeed in an argument that, even with disclosure of this material fact, the transaction would still have gone ahead. [441] Once there has been a breach of the duty not to put oneself in a position where there is conflict of duty and duty, the solicitors become accountable for the "non-disclosure of material facts". Additionally or separately the solicitors may be obliged to advise one client in a way against the interests of the other. Whether this is so and what is material must depend on all of the circumstances of a particular case. [442] In Brickenden itself, the circumstances included the finding by the trial judge accepted by the Privy Council, to the following effect (at 469-470): "I am satisfied on the evidence that at the date of these $13,500 mortgages there was no equity in the properties which they covered, above the prior mortgages, not including Brickenden's $5,000 mortgage, and that on a forced sale at that time not enough could have been realised to pay the prior encumbrances." The reference to the $5,000 mortgage was a reference to an earlier mortgage by Brickenden which was in fact disclosed. Accordingly, the factual finding was to the effect that the other mortgages in favour of Brickenden, which were not disclosed and which were paid out from the new loans, would not otherwise have been met from the sale of the properties. The materiality of a disclosure of the relevant conflict in such circumstances was clear. [443] Under such circumstances, the only alternative causal explanation on which Brickenden could have relied involved breaches of duty by the directors of the lending company of the character identified in the Supreme Court judgment and implicitly accepted by the Privy Council. It was in these circumstances that the Privy Council concluded that "speculation as to what course (the lender)…would have taken on disclosure" (at 469) was said to be irrelevant. [444] Brickenden is not, in our opinion, authority for the general proposition that, in no case involving breach of fiduciary duty, may the Court consider what would have happened if the duty had been performed. The reasoning in Brickenden must now be understood in the light of the House of Lords decision in Target Holdings and the cases which have applied it. [445] We bear in mind the caution raised by Fletcher Moulton LJ in Re Coomber: Coomber v Coomber [1911] 1 Ch 723 at 729 and quoted with approval many times, including in the joint judgment of the High Court in Warman International Ltd v Dwyer (at 559): "Fiduciary relations are of many different types… and the Courts have again and again, in cases where there has been a fiduciary relation, interfered and set aside acts which, between persons in a wholly independent position, would have been perfectly valid. Thereupon in some minds there arises the idea that if there is any fiduciary relation whatever any of these types of interference is warranted by it. They conclude that every kind of fiduciary relation justifies every kind of interference. Of course that is absurd. The nature of the fiduciary relation must be such that it justifies the interference. There is no class of case in which one ought more carefully to bear in mind the facts of the case… than cases, which relate to fiduciary and confidential relations and the action of the Court with regard to them." [446] The actions of a third party may impinge on a fiduciary's responsibility as a matter of causation. Brickenden was concerned with a chain of events in which the alleged default of the fiduciary was a necessary component. The information which the solicitor was obliged to disclose was the very information upon which the third party had to act. It was such an act, necessarily linked to the performance of the fiduciary duty, about which "speculation" was said to be inappropriate. [447] The findings by Rolfe J in the present case are not of this character. His Honour was not concerned with what the directors of Beach would have done if Abbott Tout had declined to act or had given particular advice. Rather, his Honour concluded that the loss would have occurred irrespective of anything Abbott Tout did. This is not speculating on what the directors would have done if Abbott Tout had performed their alleged duty. It is a finding that loss would have occurred whether or not any such duty as alleged had been performed. [448] It was, in our opinion, open to his Honour to find that the fraudulent directors and their associates were determined and able to perpetrate the fraud and nothing would have inhibited them from carrying it to fruition." 1. In Target Holdings consideration was given to a claim by a lender (i.e. Target) for compensation made against Target's solicitors who, in breach of trust, had released the borrower's funds provided by Target prior to completion of the conveyance and execution of charges required to be given by the borrower. There was an underlying allegedly fraudulent scheme, whereby the borrower was paying far less for the purchase than the price of which Target had been informed. The transaction, however, was completed and the charges required to be given by the borrower were later obtained. The property was worth far less than what Target had lent to the borrower and Target claimed that if the fiduciary had not acted in breach of trust the transaction would not have proceeded at all. That factual issue was never determined because the Court of Appeal had given summary judgment. At 432H, Lord Browne-Wilkinson pointed out that the assumption which had to be made (until factual issues were resolved) was that the transaction would have gone ahead even if there had been no breach of trust. On that assumption (which his Lordship said he found difficult to make), Target had suffered no compensable loss for breach of trust (at 440G-H). The speech (in which all of their Lordships concurred) contains the following key points: 1. As the conveyancing transaction had been completed, Target had no right to have a solicitor's client account reconstituted as a "trust fund": 436E. 2. The appropriate time to consider Target's loss was at the trial and not as at the moment that the trust monies had been paid away, thus rejecting the "stopping the clock" approach favoured in the Court of Appeal. 3. In Lord Browne-Wilkinson's words at 439: "Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach." In arriving at that summary, Lord Browne-Wilkinson adopted as good law the views of McLachlin J (in the minority in Canson), which included the proposition that tort and contract law are of little assistance in the area of "compensation at equity" and: "…equitable compensation must be limited to loss flowing from the trustee's acts in relation to the interest he undertook to protect." 1. In Furs Ltd v Tomkies [1936] HCA 3; (1936) 54 CLR 583, 592, Rich, Dixon and Evatt JJ said that the consequences of a conflict of interest and duty "are not discoverable. Both justice and policy are against their investigation." 2. In Wheeler, the Full Court of Western Australia accepted that in respect of breaches of, what Ipp J described as, "true" fiduciary duty (not merely breaches of the duty to act with reasonable skill and care) the principle in Brickenden applies: see 246-248 and see Agricultural at [395]-[396] per Edelman J. 3. I have referred earlier to the substitutive/reparative classification. The proponents of that division accept that there is a different test for causation in substitutive compensation claims than in reparative compensation claims, with the approach of Street J in Re Dawson being relevant to the former but not the latter.
9. In addition, regard must be had to what the plurality said in Maguire at 474 (albeit, a case, in effect, of rescission and involving a non-custodial fiduciary): "Yet the policy of the law to hold the trustee up to the obligation to perform the trust is strongly manifested in cases where loss is occasioned upon breach arising from conflict between duty and interest. What one might call that heightened concern is manifested also, as we have sought to indicate earlier in these reasons, in the treatment of disloyalty by non-trustee fiduciaries. It may be that concern with respect to the apparent rigour of the reasoning in Brickenden reflects what has been seen as a tendency apparent in some recent decisions too readily to classify as fiduciary in nature relationships which might better be seen as purely contractual or as giving rise to tortious liability. Whilst that be so, it is not self-evident that the response should rest in a general denial of the applicability of the reasoning in Brickenden to delinquent fiduciaries, particularly solicitors and other professional advisers." (Footnotes omitted)
10. In his chapter "Brickenden" (supra) at 130, Professor Conaglen notes that a fiduciary faced with a conflict can take one of two courses - avoid the conflict by ceasing to act or eschew any personal interest in the transaction, or make full disclosure and seek the principal's consent. Professor Conaglen therefore contends that there are two possible counterfactuals available for consideration - the first asks what would have happened if the fiduciary had not acted with a conflict, and the second asks what would have happened if full disclosure had been made (hence, the second equates to what I have been referring to as the disclosure counterfactual). If this approach is accepted then there are two possible counterfactuals that might need to be considered, but I am doubtful that Lord Thankerton was considering anything but the disclosure counterfactual. If I am right in this view then strictly there is no conflict between Brickenden and Target Holdings, which might explain why no reference was made to Brickenden in Lord Browne-Wilkinson's speech. As is pointed out in Meagher, Gummow and Lehane's Equity: Doctrines & Remedies at [23-455]-[23-470], there is a real difference between the question of what would have happened had there been no breach of any kind by the fiduciary and what would have happened if the principal had been informed of what had not been disclosed.
11. The comments of Kirby J in Maguire in support of Brickenden focus on a distinct matter of policy in relation to the issue of breach of obligations by fiduciaries. It would seem that to some degree the same matters of policy inform the approach taken in O'Halloran. Kirby J said at 492-493: "The rule in Brickenden has survived a long time. It has been frequently applied, especially in recent years. It contains within its formulation words which adequately meet the need for there to be some connection to the breach so as to exclude events which are too remote. Thus it must be shown that any facts not disclosed by the fiduciary were "material". What is forbidden is "speculation". In my view, the rule in Brickenden can quite comfortably co-exist with the exposition of principle by Street J in Dawson. Facts will not be "material" if the relevant loss would have happened if there had been no breach. Both Lord Thankerton in Brickenden and Street J in Dawson were simply saying that, once a breach of fiduciary duty is shown, the inquiry is not a simple one as to what caused subsequent losses. Equity must strive to repair the breach of fiduciary duty lest the fiduciary in default could be exonerated too easily, the beneficiary suffer a double disadvantage: the courts being seen to wink at wrongdoing." His Honour said, further, at 494-495: "… the rule in Brickenden upholds equitable purposes other than the mere adjustment of the position as between the fiduciary and the beneficiary."
12. Whilst there clearly is a considerable degree of controversy about the issue of causation and loss in the field of equitable compensation, O'Halloran and Beach Petroleum have not overruled Brickenden, and nor has the High Court. Beach Petroleum requires Brickenden to be understood "in the light of Target Holdings and the cases which have applied it" (which I take to mean, in particular, O'Halloran). Target Holdings was approved by the plurality in Maguire at 469. When regard is had to [446]-[448] of Beach Petroleum, I think it is clear that what is required is that the Court must not treat Brickenden as precluding a fiduciary from contending that he is not responsible for loss flowing from a breach of duty if the transaction would have proceeded quite independently of his breach, as was the situation in Beach Petroleum itself, and as was the situation in the assumed facts in Target Holdings. What is precluded by Brickenden, and unaffected by Target Holdings, is the area of inquiry referred to at [447] of Beach Petroleum, i.e. an inquiry as to what would have happened had the fiduciary disclosed what he did not disclose and sought the principal's consent. It is possible to read Beach Petroleum as, in effect, ensuring that Brickenden is not read as precluding the first counterfactual referred to at [157] above, but rather as precluding only the disclosure counterfactual.
13. In my view then, on the current state of authority, the Jagatramkas are entitled to contend that WCL would have entered into the purchase and construction of Cliff Road (and thereby suffered the loss) even if the Jagatramkas had not, in breach of their duties, promoted and supported the project, but they are not entitled to raise as a counterfactual whether, had they disclosed the exclusive residence intention instead of advancing the guest house purpose and had they not voted on the resolution, WCL would have nevertheless entered into the purchase and construction of Cliff Road.
14. The Jagatramkas did not disclose the exclusive residence intention and did not abstain from voting on account of their conflict of interest and, moreover, positively asserted the guest house purpose. The Board voted for the purchase and redevelopment of Cliff Road and the vote is impugned thereby. The Jagatramkas' failure to disclose the exclusive residence intention and their advancement of the guest house purpose brought about the advancement of funds to enable Properties to purchase and develop Cliff Road. The consequence of the purchase of Cliff Road at $5 million and the expenditure of approximately $5 million was an expenditure of approximately $10.153 million. Cliff Road was sold for $3.75 million, making for WCL a loss of $6.403 million.
15. There can only be a small number of logical possibilities as to why WCL suffered a loss of $6.403 million and they are: 1. WCL paid too much for Cliff Road. 2. WCL paid too much for the construction of the new house. 3. The construction of the house was a very significant overcapitalisation of the property or was of a style and nature that was not attractive to prospective purchasers. 4. WCL received too little for Cliff Road when it sold (i.e. when the shares in Properties were sold). 5. The Wollongong property market suffered a significant decline between 2008 and 2013. 6. All, or a combination, of the above.
16. Of these possibilities there is evidence that negates (4), and no positive evidence of (1) and (2). It may be open to infer that (5) was at least a factor, and there is some support for it: see CB A3:710. There is some evidence that supports (3), i.e. the Opteon valuation states that the improvements had a value of $750,000, yet WCL spent over $4 million on them. The individual items of expenditure were not the subject of attention by the Board of WCL or even approval, it seems, but the Jagatramkas were directly responsible for the design and fit out and the transfer of monies from WCL to Properties (see, for example, CB A8A:2809-2812). If the loss was in part caused by a downturn in the property market then the Jagatramkas would still be liable for the loss. WCL is not obliged to demonstrate why WCL incurred a loss of $6.403 million but, rather, that it did in fact incur a loss as a result of the entry by WCL into the purchase and development of Cliff Road. There would have been no loss had WCL not purchased Cliff Road: see O'Halloran at 276-277, Purcom at [23], Wheeler at 248 and Aequitas at [442]-[444]. Even under the common law concept of causation, the fact that other causes may have contributed to the loss or damage does not preclude a finding of a causal connection between the breach and the loss: Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at [97].
17. Looking at the matter now with hindsight and as a matter of common sense (Youyang at [35], O'Halloran at 276-277 and Purcom at [23]), WCL as of now has suffered a loss because of the purchase and development of Cliff Road. Had Cliff Road not been purchased and developed, WCL would not have suffered that loss.
18. I conclude, therefore, that by reason of the breach of fiduciary duties by the Jagatramkas WCL suffered a loss of $6.403 million, i.e. the difference between the moneys paid out to Properties for shares and loans and the amount yielded on sale of the shares in Properties. I shall consider the issue of interest separately below because it too is the subject of dispute.

Onus

1. If the Jagatramkas are entitled to run the disclosure counterfactual, even in a case such as this, it would appear that they bear the onus: see Youyang at [60] where the High Court (per Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ) cited with approval the following passage from the judgment of Hodgson JA in his dissenting judgment in the NSW Court of Appeal: "In my opinion, if a trustee wishes to assert that a breach of trust caused no damage for the reason that the beneficiary would, if asked, have authorised the very action which constituted the breach of trust, then there is at least an evidentiary onus on the trustee to make good that proposition." In Agricultural, Edelman J at [357] saw the High Court as endorsing Hodgson JA's view.
2. Furthermore, even in jurisdictions that have consciously moved away from Brickenden, such as New Zealand and Canada, the defendant fiduciary has been held to have the onus of establishing the counterfactual: for the New Zealand authorities, see Premium Real Estate Ltd v Stevens [2009] NZSC 15 at [85]; [2009] 2 NZLR 384 and Amaltal Corporation Ltd v Maruha Corporation [2007] NZSC 40 at [30]; [2007] 3 NZLR 192, and for the Canadian position, see the discussion in Conaglen, "Brickenden" (supra) at 134-135 and the authorities cited therein, including Hodgkinson v Simms [1994] 3 SCR 377, 441. In Premium Real Estate at [85], the Court endorsed what Tipping J said in Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 687 (which passage was similarly approved by the Court in Amaltal): "… [O]nce the plaintiff has shown a loss arising out of a transaction to which a breach was material, the plaintiff is entitled to recover unless the defendant fiduciary, upon whom is the onus, shows that the loss or damage would have occurred in any event, i.e. without any breach on the fiduciary's part… Policy dictates that fiduciaries be allowed only a narrow escape route from liability based on proof that the loss or damage would have occurred even if there had been no breach."
3. I proceed on the basis that if, contrary to my earlier conclusion, the counterfactual can be advanced, the Jagatramkas bear the onus on that point.

Have the Jagatramkas Discharged the Onus

1. There was no dispute that in order for WCL's Board to have passed a resolution in June 2008 authorising the purchase of Cliff Road as an exclusive residence for the Jagatramkas it would have required both Mr Firek and Mr Anghie to vote in favour of such a resolution.
2. Mr Firek's evidence in cross examination was that he would have voted for such a proposal.
3. The evidence from Mr Anghie is that he would not have voted for the resolution had the exclusive residence intention been made known. Mr Pritchard contended that I should conclude that had he been available for cross examination his position would have been the same as Mr Firek's position was under cross examination. I am unable to accept that contention, firstly and principally because I do not think I can draw the conclusion from cross examination of witness A that witness B would have recanted his evidence in a similar fashion. Secondly, I found Mr Firek's evidence somewhat surprising - i.e. that had he known that the guest house purpose was unattainable, he would still have voted in favour of such a large expenditure which would benefit the Jagatramkas. The mere fact that the Jagatramkas wanted Cliff Road as their residence would not have been a legitimate reason to vote in favour of it. I also think that the question of whether the exclusive residence proposal would have been legitimately approved by the two other directors would need to take into account the existence of Bank Street and its then exclusive use by the Jagatramkas, the high cost of purchase of Cliff Road and required expenditure (the FIRB required expenditure on improving Cliff Road to the value of at least half the purchase price: see CB A2:544) in a context of, as at 2008, WCL's significant excess of expenditure over income, the absence of any valuation of Cliff Road, the precise nature of the residence to be constructed, and the projected amount of time (as at June 2008) that the Jagatramkas would likely spend in Australia and, therefore, likely use the residence.
4. By DSR 23-24, the Jagatramkas seek to persuade me that even on the assumption that they did have the exclusive residence intention (contrary to their primary position) the transaction would nevertheless have gone ahead even if they "had performed their duties". The submission asserts that I should find that Mr Anghie would have voted for the 2008 resolution as it stood because of its "significant merit", both "for providing accommodation for visiting executives and improving WLC's corporate image and reputation." Further, it is submitted that there could, for example, have been additions to the resolution, such as requiring "as a condition to passing the resolution, a notation prohibiting Mr and Mrs Jagatramka from using the Cliff Road Property on an indefinite and exclusive basis", or some other step to preclude them from so doing.
5. I have already indicated that I accept Mr Anghie's evidence in his Affidavit that had he known of the exclusive residence intention he would not have voted for the resolution. His evidence is not qualified in a way that would support the passing of a resolution subject to some conditions or some other guarantees. Further, the Jagatramkas' submission is unrealistic because if it is accepted that the Jagatramkas had the intention that I have found they did they would have had no interest in pursuing the resolution if it did not meet their needs. There is the further point that, as I have mentioned previously, if the Jagatramkas thought that the other Board members would vote for the exclusive residence purpose they would not have needed to promote the guest house purpose.
6. It follows that, if it were open to be considered, the Jagatramkas have not discharged the onus of establishing that the resolutions in June 2008 would have been passed had there been full disclosure and no false statement made of their intentions with respect to Cliff Road. It also follows that WCL has established on the basis of Mr Anghie's evidence that the proposal would not have been passed had the Jagatramkas revealed the exclusive residence intention and abstained from voting on the resolutions.

Discretionary Considerations as Against Properties

1. An award of equitable compensation against a fiduciary, and as against a third party with knowledge, is discretionary: Maguire at 493 per Kirby J and Day v Mead [1987] 2 NZLR 443, 451 per Cooke P. As against Properties there is a significant issue as to whether equitable compensation should be awarded against it, and that derives from the fact that WCL in 2013 entered into the debt to equity swap and sold those shares (and the shares it already held in WCL) to a third party for valuable consideration (i.e. $3.75 million) and WCL has not sought to set that agreement (or those agreements, since the sale was to Happy Mining in the first place) aside. Basant, or at least Happy Mining, has paid $3.75 million for shares in Properties that were, I infer, valued on the basis of Properties' only asset. I have referred to the fact that Properties was served and neither it nor its sole shareholder Basant has sought to be heard in these proceedings. WCL says that it was not required to join Properties' shareholder on the basis of John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1, and that the Jagatramkas do not have standing to make submissions with respect to WCL's claims as against Properties. However, whether that is so or not, the Jagatramkas have raised the points to which I have referred, and even if, as WCL contends, the Jagatramkas do not have standing to raise them and Properties has not itself put forward any submissions, they are matters pertinent to the relief that WCL seeks and which I would need to consider even if Properties was the only Defendant.
2. Whilst it is true that Cliff Road was and remains in the ownership of Properties, I think it would not be a just outcome for Properties to be required to pay any amount to WCL, given that whilst Properties received loans and payments between 2008 and 2011 that it should not have received, WCL has received the benefit of a sale of the shares to Happy Mining/Basant. As against Properties, WCL must, I think, be taken as having effectively forgiven the total value of the debt owed to it by Properties (for loans advanced by WCL) by accepting shares in lieu of the debt, and the claim that WCL is entitled to compensation from Properties because of the payment and loans made by WCL to Properties is inconsistent with its receipt and retention of monies from the sale of those shares (and of those obtained by WCL in 2008) to Happy Mining/Basant. Indeed, WCL warranted to Happy Mining (see CB A6:1578-1579) that there were no facts and circumstances likely to give rise to proceedings against Properties (see cl 6(s)) and Happy Mining's rights were assigned to Basant: CB A6:1659. The situation could also be seen as one in which WCL seeks both to approbate and reprobate. The principle was described by Brennan J (as His Honour then was) in Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394, 421 in the following terms: "A doctrine closely related to election, and sometimes treated as a species of election, is the doctrine of approbation and reprobation. This doctrine precludes a person who has exercised a right from exercising another right which is alternative to and inconsistent with the right he exercised as, e.g. where a person "having accepted a benefit given by him by a judgment, cannot allege the invalidity of the judgment which confers the benefit": Evans v Bartlam [1937] 2 All E.R. at 652 per Lord Russell of Killowen." Here, in effect, WCL, having obtained the benefit of selling the shares in Properties to Happy Mining/Basant at full value, claims against Properties based on the losses incurred by WCL because of the earlier loans and share purchases that enabled the sale to Happy Mining/Basant.
3. WCL could have sought to set aside all of the transactions, including the sale to Happy Mining/Basant once the Jagatramkas had departed, but it has not done so. Had WCL sought to rescind all of the impugned transactions including the allotments and loans, Cliff Road would have remained in the ownership of Properties (not WCL) and WCL would have been able to force Properties to sell Cliff Road to repay the monies wrongly advanced to Properties. It might have been entitled as at June 2013, say, to trace the payments made into Cliff Road, but even assuming that was possible, WCL would not have obtained more than the value of Cliff Road. After the transactions in July 2013, for WCL to take control of Cliff Road it would have had to rescind those transactions and pay back $3.75 million to Happy Mining/Basant, unless it could establish that Happy Mining/Basant had knowledge of the breaches by the Jagatramkas and Properties in relation to the 2008 resolution, of which there is no suggestion. I have previously referred to the question of loss: see [123] above. In some respects, these matters overlap with the considerations relevant to imposition of a constructive trust. I do not think it matters in considering this issue whether WCL's claim against Properties is described as a substitutive claim or a reparative claim, and the conclusion is not based solely on the fact that WCL has not sought to rescind the sale to Happy Mining/Basant but also on the basis that it sold all of its shares in Properties to Happy Mining/Basant for $3.75 million following conversion of the debt then owed to WCL to equity. I accept WCL's submission that In re Exchange Banking Company (Flitcroft's case) (1882) LR 21 Ch D 519 (in which directors who had obtained a resolution to pay dividends by misleading the shareholders were required to repay all dividends to the company, which had been placed in liquidation) supports the contention that the impugned resolution does not have to be rescinded, but that is relevant to the claim against the Jagatramkas, not that against Properties (whose debt to WCL was wiped by the debt to equity swap and all shares in which were sold to Happy Mining/Basant).

Discretionary Considerations as Against the Jagatramkas

1. The discretionary considerations referred to above in relation to Properties do not, however, apply to the Jagatramkas.
2. To the extent that the submissions on behalf of the Jagatramkas seem to assert that the absence of rescission of the loan and allotment arrangements are a bar to a claim for equitable compensation, Greater Pacific and Gerard Cassegrain & Co Pty Ltd (in liq) v Cassegrain [2013] NSWCA 455; (2013) 305 ALR 687 at [177] and [179] per Emmett JA (with whom Meagher JA and Ward JA concurred) hold otherwise. I accept, however, that discretionary considerations can play a part in whether or not equitable compensation should be ordered (Maguire at 493-494 per Kirby J, Day v Mead and see Tilbury and Davis (supra) at [2212]) and that the absence of rescission is a relevant consideration: Crossman v Sheahan [2016] NSWCA 200 at [261]-[262]; (2016) 115 ACSR 130.
3. If the Jagatramkas are to be taken as asserting that Agricultural supports the contention that failure to rescind precludes the reparative claims, I do not accept that it can be read in such a fashion, not least because in dealing with the third reason for rejecting the reparative claim (see [400]-[404]), His Honour focused on the fact that the licence could not be severed from the transaction as a whole - there was a benefit to Agricultural of $1.3 million on the land component that had to be taken into account and which undermined the claim that Agricultural had suffered a loss. I do not read the decision as relying on the absence of rescission per se as a reason for rejecting the claim for reparative relief (unlike the position with substitutive relief).
4. As mentioned, Flitcroft's case also supports WCL's position that rescission is not required to claim the loss suffered by it from the Jagatramkas. In that case, Jessel MR said at 534: "…if directors who are quasi trustees for the company improperly pay away the assets to the shareholders, they are liable to replace them… I am of opinion that the company could in its corporate capacity compel them to do so, even if there were no winding-up." See also Brett LJ at 535 and LJ Cotton who said at 535-536: "But directors are in the position of trustees, and are liable not only for what they put into their own pockets, but for what they in breach of trust pay to others." In Wheeler, the directors who were held in breach of fiduciary duty were held liable for all the losses that flowed from the transaction brought about by their breach (see 248-249) and in O'Halloran the director who had breached his obligations to the company was held liable to it for all losses that flowed from his conduct notwithstanding that a contract which he had engineered to thwart rival shareholders from using the company's voting power was affirmed by the company: see 268B - 269C.
5. I do not regard the fact that WCL converted the debt owed to it and sold all of its shares in Properties, resulting in the sale at $3.75 million (the value ascribed by Opteon to Cliff Road), as a reason to reduce the Jagatramkas' liability for the loss. The sale of the shares in fact reduced the amount of WCL's loss and the Jagatramkas' liability to compensate WCL was thereby reduced. Cliff Road was valued at $3.75 million and was Properties' only asset - on the evidence as to Cliff Road's value, WCL could not have recovered any more than this amount from Properties by requiring Properties to sell Cliff Road and pay back the proceeds in partial reduction of the debt. The Jagatramkas have paid no money for the shares in Properties. There is the further dimension that the Jagatramkas were still directors at the time of the debt to equity swap and sale (and voted on the sale), and Mr Jagatramka was the moving party in organising the sale to Happy Mining/Basant.

Compensation: s 1317H

1. I have referred to the loss suffered by WCL as $6.403 million and I deal with the issue of interest below. Section 1317H of the Corporations Act provides for compensation to be awarded for breaches of the Act. There was agreement that the test in relation to statutory compensation is as set out in Adler v ASIC at [709], namely a causal connection between the damage and the contravening conduct, which is similar to the common sense causation test at common law: March v E & MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506. I have explained why even if the disclosure counterfactual can be investigated it does not assist the Jagatramkas. Having regard to the close overlap of the breaches of fiduciary and statutory duties, I think that an award of equitable compensation obviates the need to impose any separate additional amount pursuant to s 1317H.

Statutory Relief from Liability

1. The Jagatramkas by their Defence seek pursuant to ss 1317S(2) and 1318(1) of the Corporations Act to be relieved from liability for breaches of their statutory and fiduciary duties.
2. Sections 1317S(1) and (2), and 1318(1) are as follows: "1317S Relief from liability for contravention of civil penalty provision (1) In this section: eligible proceedings: (a) means proceedings for a contravention of a civil penalty provision (including proceedings under section 588M, 588W, 961M, 1317GA, 1317H, 1317HA, 1317HB, 1317HC or 1317HE); and (b) does not include proceedings for an offence (except so far as the proceedings relate to the question whether the court should make an order under section 588K, 1317H, 1317HA, 1317HB, 1317HC or 1317HE). (2) If: (a) eligible proceedings are brought against a person; and (b) in the proceedings it appears to the court that the person has, or may have, contravened a civil penalty provision but that: (i) the person has acted honestly; and (ii) having regard to all the circumstances of the case (including, where applicable, those connected with the person's appointment as an officer, or employment as an employee, of a corporation or of a Part 5.7 body), the person ought fairly to be excused for the contravention; the court may relieve the person either wholly or partly from a liability to which the person would otherwise be subject, or that might otherwise be imposed on the person, because of the contravention. […] 1318 Power to grant relief (1) If, in any civil proceeding against a person to whom this section applies for negligence, default, breach of trust or breach of duty in a capacity as such a person, it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default or breach but that the person has acted honestly and that, having regard to all the circumstances of the case, including those connected with the person's appointment, the person ought fairly to be excused for the negligence, default or breach, the court may relieve the person either wholly or partly from liability on such terms as the court thinks fit."
3. Both sections are relied on by the Jagatramkas in their Defence but no substantive submissions were made in the DCS on this point. Since I do not propose to make any order for compensation under s 1317, only s 1318 is potentially relevant. I am not persuaded that the Jagatramkas have acted honestly or that, having regard to all the circumstances of the case, they should be excused. They did not reveal their true intention to the other Board members. Rather, they put up a proposal that was inconsistent with the purpose they actually intended. They lived at Cliff Road from October 2011 until at least April 2015. The arrangements by which they came to reside at Cliff Road from October 2013 until April 2015 are opaque and invite suspicion. In any event, WCL has incurred a significant loss as a result of the purchase. The Jagatramkas were not prepared to give evidence, so again I draw the inference that their evidence would not have assisted them to establish the statutory defences which they assert are available to them.

Interest

1. WCL claims pre-judgment interest, pursuant to s 100 of the Civil Procedure Act 2005 (NSW), on all the monies paid out by WCL in respect of Cliff Road (i.e. the monies lent and paid for shares in Properties), less the $3.75 million received in July 2013. The interest from 19 June 2008 was said by WCL to have been calculated in accordance with the prescribed pre-judgment interest rates for the Supreme Court of NSW (the calculation is annexed to the PFWS). The DSR did not challenge that per se, but the Jagatramkas dispute the amount of interest claimed by WCL because they assert that interest has been calculated as if the proceeds were lost from the day that the monies were paid out. That, they assert, would be appropriate if WCL's claim was a substitutive claim, but it is not appropriate in respect of a reparative claim, which the Jagatramkas say WCL's claim would have to be if it were to succeed at all. The Defendants' submissions (see DSR 37) assert that the focus must be on loss caused by the breach of duty "with any interest only payable on that loss and when it was incurred". The submissions do not provide any further details of how interest is to be calculated in this case and the Jagatramkas have not proposed an alternative figure.
2. WCL's case is that all money paid out by it for the Cliff Road project was a result of the Jagatramkas' breach of duty. I do not accept that the claim must be framed as a claim for substitutive compensation for interest to be payable from the date the funds were disbursed. In my view the usual principle applies, being explained in Maio v Sacco (No 2) [2009] NSWSC 742 at [10] per White J (as His Honour then was): "There is an inherent equitable jurisdiction to award interest in a wide variety of cases where it is necessary to do justice between the parties (State Bank of New South Wales Ltd v Federal Commissioner of Taxation (1995) 62 FCR 371 at 380)."
3. Secondly, s 100(1) of the Civil Procedure Act provides that: "(1) In proceedings for the recovery of money (including any debt or damages or the value of any goods), the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit: (a) on the whole or any part of the money, and (b) for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect." See also the discussion in John Hamilton et al (eds), NSW Civil Procedure Handbook 2019 (Thomson Reuters, 9th ed, 2019) at [100.40] on the general principles applicable to awards of interest, with particular reference to Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60 and New South Wales v Avery [2016] NSWCA 147; (2016) 92 NSWLR 141. WCL's cause of action first arose in June 2008, and each disbursement thereafter for the Cliff Road project represented further loss to WCL.
4. WCL is entitled by way of compensation to recover the monies expended and the loss to it of that money from the time it was expended for a purchase/investment that should not, on my findings, have been made. I, therefore, will award the amount of $5,690,677.95 for interest, as calculated by WCL until July 2019, plus a further amount to be calculated from then to the date of judgment.

The Cross Claim

1. Mr Jagatramka's Cross Claim asserts that if he is found liable then Messrs Sharma, Firek and Anghie are all in breach of their duties as much as he was.
2. Paragraph 221-222 of the DCS contains the detail of the allegations against Mr Firek, Mr Anghie and Mr Sanjay Sharma. Mr Jagatramka contends that these officers have a coordinate liability with him. Since I have made no finding against the Jagatramkas of a breach of the duty to exercise due care and diligence, there is no need to consider the coordinate liability of these Cross Defendants in that respect. In relation to the issue of Mr Sharma's position as secretary of WCL and director of Properties, that need not be considered further because my conclusions in relation to the Jagatramkas are not based on any conflict of interest between their position as directors of WCL and Properties. If the decision to purchase Cliff Road was not impugned then the use of Properties per se has not been shown to involve any breach of duty. In relation to the debt to equity swap and sale of shares in Properties, such breach as occurred has not led to any loss and nor has it been demonstrated that Mr Firek or Mr Anghie were aware of the connections between the Jagatramkas and Happy Mining/Basant, and there is Mr Anghie's evidence that he was told Happy Mining was an "arms-length person". Mr Sharma was not entitled to and did not vote on the debt to equity swap, and all he knew was that Happy Mining was a shareholder of WCL. Arguably, that itself ought to have raised concern but I have rejected the claim against the Jagatramkas in respect of the Third Component due to the absence of any loss being established, so it is not necessary to consider the issue further.
3. The finding against the Jagatramkas is that they advanced their own interests in breach of their duty to WCL to act for proper purposes, to avoid conflict and that they failed to disclose their real interest in the 2008 resolution. Mr Firek and Mr Anghie who voted for the resolution have not been shown to have had any knowledge of the exclusive residence intention as at June 2008. Mr Sharma was not involved in the voting and he did not know of the exclusive residence intention as at June 2008. If he became aware of that intention at a later time, that is not relevant to the decision taken by the Board in June 2008. The Jagatramkas have not established a coordinate liability of the Cross Defendants.
4. By reason of the conclusion in [193] above, it is not necessary to consider the two discretionary reasons advanced in the CDCS which are based on, firstly, Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 and, secondly, Bond v Larobi Pty Ltd (1992) 6 WAR 489 at 503 and Harpley Nominees Pty Ltd v Jeans [2006] NSWCA 176 at [43]-[45] and [47]. Nor is it necessary to consider the defence of misleading and deceptive conduct, which was advanced by the Cross Defendants against Mr Jagatramka.
5. The Cross Claim therefore fails and Mr Jagatramka must pay the costs of the Cross Defendants.

Conclusion

1. It follows that: 1. There should be judgment in favour of WCL against Mr and Mrs Jagatramka in the amount of $6,403,050 plus interest, being an amount of $5,690.677.95 as at June 2019 (and to be calculated up to the date of judgment). 2. There should be judgment in favour of Properties with no order as to costs. 3. There should be judgment in favour of the Cross Defendants on Mr Jagatramka's Cross Claim. 4. Mr and Mrs Jagatramka should pay the costs of WCL of the proceedings. 5. Mr Jagatramka should pay the costs of the Cross Defendants on the Cross Claim.

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