FEDERAL COURT OF AUSTRALIA Asden Developments Pty Ltd (in liq) v Dinoris (No 3) [2016] FCA 788 File number: QUD 578 of 2014 Judge: REEVES J Date of judgment: 5 July 2016 Catchwords: CORPORATIONS – liquidators' statutory duties – whether liquidator breached s 180 of the Corporations Act 2001 (Cth) – whether liquidator's conduct demonstrated the required degree of care and diligence that was reasonable in all the circumstances – whether breach of s 180 of the Corporations Act 2001 (Cth) caused the applicant company damage or loss under s 1317H of the Corporations Act 2001 (Cth) – consideration of principles on causation – consideration of principles on subjective evidence regarding what an individual would or would not have done in particular circumstances Legislation: Civil Liability Act 2002 (NSW) Civil Liability Act 2003 (Qld) Civil Liability Act 2002 (Tas) Civil Liability Act 2002 (WA) Corporations Act 2001 (Cth) Evidence Act 1995 (Cth) Federal Court Rules 2011 (Cth) Trade Practices Act 1974 (Cth) (now s 18 of the Australian Consumer Law) Cases cited: Adler v Australian Securities and Investments Commission (2003) 179 FLR 1; [2003] NSWCA 131 Agricultural Land Management Ltd v Jackson (No 2) (2014) 48 WAR 1; [2014] WASC 102 Australian Securities and Investments Commission v Dunner (2013) 303 ALR 98; [2013] FCA 872 Australian Securities and Investments Commission v Fortescue Group Ltd (No 5) (2009) 264 ALR 201; [2009] FCA 1586 Australian Securities and Investments Commission v Fortescue Metals Group Ltd (2011) 190 FCR 364; [2011] FCAFC 19 Australian Securities and Investments Commission v Rich (2009) 236 FLR 1; [2009] NSWSC 1229 Australian Securities and Investments Commission v Vines (2003) 48 ACSR 291; [2003] NSWSC 1095 Australian Securities and Investments Commission v Vines (2005) 55 ACSR 617; [2005] NSWSC 738 Dasreef Pty Limited v Hawchar (2011) 243 CLR 588; [2011] HCA 21 Forge v Australian Securities and Investments Commission (2004) 213 ALR 574; [2004] NSWCA 448 Jenkins v Jonkay Pty Ltd [2007] FCA 858 Lord Buddha Pty Ltd (In Liq) v Harpur (2013) 41 VR 159; [2013] VSCA 101 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 Pace v Antlers Pty Ltd (in liquidation) (1998) 80 FCR 485 Rosenberg v Percival (2001) 205 CLR 434; [2001] HCA 18 Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465; [2012] HCA 18 Sydlow Pty Ltd (In Liquidation) v TG Kotselas Pty Ltd (1996) 65 FCR 234 Tabet v Gett (2010) 240 CLR 537; [2010] HCA 12 Viscariello v Macks (2014) 103 ACSR 542; [2014] SASC 189 Final Report of the Review of the Law of Negligence, (Commonwealth of Australia, Canberra, September 2002) Freckelton and Selby, Expert Evidence (5th ed, Law Book Co, 2013) Date of hearing: 14–16 July, 7–8 September and 16 November 2015 Registry: Queensland Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 184 Counsel for the Applicant: Mr M Martin QC Solicitor for the Applicant: Mills Oakley Lawyers Counsel for the Respondents: Mr I Erskine Solicitor for the Respondents: HBM Lawyers REASONS FOR JUDGMENT QUD 578 of 2014 BETWEEN: ASDEN DEVELOPMENTS PTY LTD (IN LIQUIDATION) ACN 115 851 833 Applicant AND: PETER DINORIS First Respondent NICK COMBIS Second Respondent JUDGE: REEVES J Introduction 1 Mr Clout is the current liquidator of Asden Developments Pty Ltd (In Liquidation). Before his appointment on 13 August 2013, Mr Dinoris and Mr Combis, the respondents in this proceeding, held that role jointly and severally. 2 In this proceeding, Asden claims that Mr Dinoris and Mr Combis (hereafter I will refer to them jointly as Mr Dinoris unless the context requires otherwise) breached their statutory duty to it as its liquidators and thereby caused it damage. 3 To make out that claim, Asden relies on two series of transactions. One occurred in late 2010, coincidentally with Asden being placed in voluntary liquidation. The other occurred in early 2011. Both series of transactions directly, or indirectly, involved Ms Melinda Nichols, who was the sole director and shareholder of Asden. Also involved in both series of transactions was a Mr Levis, who was at the time advising Ms Nichols about Asden's financial affairs. Indeed, it was Mr Levis who advised Ms Nichols to place Asden in voluntary liquidation. 4 The first series of transactions concerned the transfer of funds out of Asden's bank accounts and ultimately into two other bank accounts, one held by TJI Investments Pty Ltd (TJI Investments), a company owned by Ms Nichols, and the other held by Urban Property Consulting Pty Ltd (Urban Property), a company owned by Mr Levis. These transactions occurred in the period immediately before 22 December 2010, the date Asden was placed in voluntary liquidation and Mr Dinoris and Mr Combis were appointed as its joint and several liquidators. They occurred against the backdrop of a dispute that had developed between Ms Nichols and her estranged husband's family, particularly his father and her father-in-law, Mr George Nichols. That dispute related to the financial affairs of Asden with respect to a residential property development in which Asden was involved. 5 The second series of transactions related to the sale of a boat that was owned by Asden. That series occurred in March/April 2011, after the voluntary liquidation of Asden, when Mr Dinoris instructed a company called Auctioneering Link Pty Ltd to sell the boat. 6 In summary, Asden claims that Mr Dinoris failed to take any, or any adequate, steps to recover the funds transferred out of its bank accounts and he failed to properly supervise the sale of the boat, in breach of his statutory duty as Asden's liquidator. Factual background 7 The following paragraphs contain my findings of fact concerning the factual background to this matter. The parties have agreed upon almost all the facts in relation to the central events of late 2010 and early 2011. Insofar as they record the history of Asden and the dealings between Ms Nichols and various members of the Nichols family, my findings are largely based upon two affidavits Ms Nichols filed in the family law proceeding issued against her by her former husband. Ms Nichols was cross-examined on those affidavits at the trial of this proceeding and they were later tendered in evidence. I received two copies of each affidavit in the tender. One was a copy of the original affidavit and in the other some paragraphs in the original were redacted to reduce the quantity of the tender to those parts of the affidavits upon which Ms Nichols was cross-examined. I mention this because, in order to give a complete account of all the relevant background events, I have, to a limited extent, relied upon some paragraphs in the redacted versions of those two affidavits. That applies to parts of [13], [17], [18] and [22] below. The incorporation of Asden 8 Asden was incorporated in August 2005. It was used by the Nichols family to undertake a subdivisional and residential development at Wakerley, a suburb of Brisbane. The Nichols family relevantly comprised, first, Mr Phillip Nichols, Ms Melinda Nichols' former husband. They were married in 2007 and separated in about October 2010, shortly before the events to which this proceeding relates. Secondly, it comprised Phillip Nichols' parents, George and Jennifer Nichols, and his uncle and aunt, Peter and Debra Nichols. The latter four members of the family were the primary investors in the Wakerley development mentioned above. 9 From its incorporation in 2005, Ms Melinda Nichols was the sole director and shareholder of the company. At the time of its incorporation, Mr Phillip Nichols was either bankrupt, or about to be declared so. As a consequence, he did not have any direct role in Asden, nor in the Wakerley development. The Wakerley development and land purchase 10 The Wakerley development involved the purchase and subdivision of an area of land into 10 separate lots and the construction of houses on each of those lots. Mr George Nichols and the other three members of the Nichols family mentioned above provided all the funds necessary to undertake the development. Neither Ms Melinda Nichols nor Mr Phillip Nichols provided any funds to Asden. Ms Nichols' primary role with Asden was to maintain the company's MYOB accounting system. 11 The land associated with the Wakerley development was purchased in about July 2006 for approximately $1.6 million. Mr George Nichols made all the arrangements associated with that purchase. That included borrowing the necessary funds for the purchase from the National Australia Bank Ltd. The purchasers were Mr George Nichols and Mrs Jennifer Nichols; Mr Peter Nichols and Mrs Debra Nichols; and Ms Melinda Nichols as tenants in common as to a one-third interest each. Despite the fact she was not involved in the financial aspects of the development, Ms Nichols said that Mr George Nichols informed her that her name had to be included in the loan documentation because she was to be the registered owner of a one-third interest in the land. He told her that, in order to avoid including her as a borrower, he had instead nominated her as a guarantor for the loan agreement. In one of her family law proceeding affidavits she said: … He explained to me that the NAB required my name on the documents. George requested I sign the paperwork, stating that I would agree to be the guarantor of the loan. He advised me upon signing the loan, that it would be ok, he has a large list of assets as security for this loan, therefore I would never have to worry about being ordered by the NAB to make the repayments as the guarantor. The boat purchase 12 Before describing how the Wakerley development was carried out, it is convenient to interpose an event that occurred in October 2008. In that month, Ms Melinda Nichols caused Asden to purchase a Haines Signature 632F boat together with a Suzuki 200 HP outboard engine and a trailer. She said she did this because Phillip, her husband, wanted the boat and he could not enter into a contract to purchase it because he was an undischarged bankrupt. Ms Nichols said that Asden paid $86,900 for the boat, $55,000 of which was paid in cash and the balance was financed under a chattel mortgage with Yamaha Motor Finance Australia Pty Ltd. While that chattel mortgage was taken out in Ms Melinda Nichols' name, Asden made the monthly payments on it of $757.59. The Wakerley subdivision 13 Returning to the Wakerley development, the subdivision of the Wakerley land occurred in early 2009. As noted above, the land was to be subdivided into 10 lots. After that had occurred, Ms Nichols said that she was approached by Mr George Nichols who told her that he had received advice from his accountant and his solicitor on the most beneficial way for him to structure the development. As a consequence, in about January 2010, Mr George Nichols met Ms Nichols by arrangement at her parents' home. He had with him a bundle of documents. Ms Nichols said that he advised her that under the structure he was advised to put in place, she was to be recorded as the registered owner of one of the 10 lots, namely Lot 6, 8 Nile Close, Wakerley. The other nine lots were to be registered in the names of George, Jennifer, Peter and Debra Nichols and various other members of the Nichols family, including Debra Nichols' sister and Peter and Debra Nichols' son. She said Mr Nichols asked her to sign various documents, including a loan agreement and a mortgage, for the amount of $825,000. She said that when she asked Mr George Nichols why she was required to sign the mortgage, he said: … "don't worry Mel, the mortgages will never be registered, they have only been prepared for tax purposes, it is simply just paper'. 14 She went on to say: George explained the reason for this was only for tax purposes. He stated that the owners of each lot would not actually receive the $825,000.00 loan amounts as the paperwork stated. George also advised us the $825,000.00 loaned amounts would also not have to be re-paid due to the fact that we will never receive the loaned amount in the first instance. 15 Ultimately, Ms Nichols said that, while she did not understand this explanation, she "trusted George" and she was therefore happy to proceed to sign the documents in question. The construction of the houses at Wakerley 16 When the time came to commence construction of the houses on the Wakerley lots, Ms Nichols said that Mr George Nichols approached her again and asked her to sign a building contract in relation to the house to be constructed on Lot 6. That contract was with a building company called Earth Spirit Homes Pty Ltd. 17 Construction began on the houses for the Wakerley development in about late January or early February 2010. Despite his lack of experience, Ms Nichols said the Nichols family allowed Mr Phillip Nichols to undertake the construction of five of the houses. By October 2010, those five houses were still far from completion and Ms Nichols claimed that she had been informed that there were numerous faults present in them, that the timber frames were starting to rot and they were beginning to deteriorate. Ms Nichols said this situation led to the intervention of Mr George Nichols and, as a result, Phillip was removed from the project. Then, from early November 2010, the building company mentioned above, Earth Spirit Homes Pty Ltd, took over the whole project. Ms Nichols claimed that Mr Brett Blacklow, the principal of Earth Spirit Homes, agreed to take over the project on the understanding that it would require a significant amount of cash flow to repair the five faulty houses and complete the 10 houses in the project to lock up stage by Christmas 2010. Asden's financial pressures 18 Ms Nichols said the rearrangements with respect to the construction of the houses at Wakerley placed considerable pressure on Asden's finances and, in turn, required a significant increase in the contribution of funds from the Nichols family. As a consequence, she said she became quite concerned about Asden's financial situation. She said she raised her concerns with Mr George Nichols in an email on 2 November 2010 seeking an assurance that necessary funds would be made available to complete the Wakerley project. At about the same time, Ms Nichols said she considered the possibility of changing the directorship of Asden. She said she "just wanted to get away and start my life afresh." Ms Nichols applies for a domestic violence order 19 These concerns about Asden's financial situation occurred in the midst of another development. As is already noted above, Ms Melinda Nichols and Mr Phillip Nichols separated in about October 2010. At about that time, Ms Nichols moved out of the matrimonial home and began living with her parents. In about mid-November 2010, Ms Nichols said that she was physically threatened by Phillip and, as a consequence, she went to the local police station and applied for a domestic violence order against him. She said when she went to George and Jennifer's home a few days later to explain why she had done that, they were "completely negative towards me". From that day, she claimed "their attitude towards me changed and they no longer were willing to help or support me at all". Ms Nichols' requests for funds for Asden 20 On 16 November 2010, Ms Nichols said she sent an email to Mr George Nichols asking him to arrange to provide more funds for Asden as they were beginning to fall short. At approximately the same time, she informed him that she did not want to have anything more to do with Asden. She claimed Mr Nichols responded that he would take over the company. She said he then sent an email to Asden's office advising the staff that he would need to obtain access to the company's records to enable him to achieve the takeover. 21 Despite this indication that Mr George Nichols would take over responsibility for Asden, it is apparent that did not happen. On 29 November 2010, Ms Nichols emailed Mr George Nichols and requested him to make some further contributions to Asden as its funds were quite low and she was concerned. Mr Nichols replied on 30 November and arranged for her to collect a cheque for $50,000. Asden's taxation and other debts 22 Shortly before the end of November 2010, Ms Melinda Nichols hired a book-keeper to assist her to bring the company's Business Activity Statements (BAS) up-to-date. After that exercise was completed, it emerged that Asden owed the taxation authorities approximately $100,000 in BAS instalments, approximately $80,000 in company tax and approximately $30,000 in superannuation contributions. At about the same time, Ms Melinda Nichols had a discussion with Mr Blacklow during which he told her that at least $300,000 to $400,000 would be required to complete the work on the Wakerley project. Ms Nichols receives two cheques totalling $270,000 23 On 4 December 2010, Ms Nichols said she attended at Mr George Nichols' office in West End, Brisbane. She said she was concerned about the taxation and other debts which Asden owed. She presented Mr Nichols with a list of those debts and explained to him that $300,000 was required in order to settle all the company's debts. She also provided him with an MYOB report which showed that approximately $170,000 was owed to trade creditors. In response, she said that he "looked me in the eye and said 'not to worry Mel, I will have a cheque for you at the house to collect in the next couple of days'". 24 There is some confusion in Ms Nichols' evidence as to the timing and details of the events that occurred after this meeting on 4 December. Nonetheless, it is common ground that Mr George Nichols provided two cheques to her between the date of that meeting and 15 December, or thereabouts. The first cheque was for the sum of $100,000 and the second cheque was for the sum of $170,000. Ms Nichols deposited them into Asden's bank account at the Suncorp Bank on 6 December and on 14 December respectively. Ms Nichols told she is responsible for Asden's debts 25 On 15 December, Ms Nichols claimed she was informed by various members of the Nichols family that they considered she was responsible for Asden's debts. The first notification of this view came in the form of an email Mr George Nichols sent to her on 14 December, which she read on 15 December. In that email, Mr Nichols informed her that the BAS instalments and taxation debts were Asden's problems and he chastised her for "not having [her] finger on the pulse and not having everything under control". The second notification was an email Ms Nichols received on 15 December from Mr Peter Nichols and Mrs Debra Nichols. In part, it stated that Ms Nichols was not to incur any debts on behalf of George, Jennifer, Peter or Debra Nichols and that, from that date, Ms Nichols was not authorised to be on the Wakerley construction site and that the Nichols family had taken possession of it. The third notification was a telephone call Ms Nichols received from Mrs Debra Nichols on the same date. In that telephone discussion, Ms Nichols said that Debra Nichols told her that Asden's debts were her problem. Ms Nichols said that when she hung up from that call, she was extremely distraught and upset, and could not come to terms with what was happening. Ms Nichols receives advice from Mr Levis 26 By this time, Ms Nichols said she was already deeply concerned about her personal liability as a director of Asden in circumstances where the Nichols family were withdrawing their support for the company. She said that she thought Asden might be trading whilst it was insolvent and, as its director, she may have some personal liability for its debts. She was vague about when it was that she first developed these concerns, but she agreed in cross-examination that it may have been as early as October/November 2010. These concerns caused her to seek advice from Mr Cor Frederiks of Frederiks Accountants. That firm was Asden's accountants in late 2010. Mr Frederiks referred her to Mr Levis. While she signed the Consultancy Agreement to retain Mr Levis on 21 December 2010, it is apparent from the date of incorporation of TJI Investments – which he advised her to incorporate – (see at [35] below) that she must have begun receiving advice from Mr Levis with respect to the financial affairs of Asden on or before 14 December 2010. She claimed that the general thrust of Mr Levis' advice at that time was that she would be left in extreme debt and destitute if she did not protect herself and the outcome would possibly mean bankruptcy. The bank transfer on 15 December 27 On 15 December 2010, acting on Mr Levis' advice, Ms Melinda Nichols withdrew $264,531.02 from Asden's account at the Suncorp Bank and deposited it into an account in Asden's name at the Bank of Queensland. The Suncorp Bank account was the account into which the two cheques totalling $270,000 had been deposited (see at [24] above). Ms Nichols said that she had been advised by Mr Levis to establish an account in Asden's name at the Bank of Queensland so that this transfer could be made. Mr Levis first approaches Mr Dinoris on 15 December 2010 28 It was also on 15 December 2010 that Mr Levis first approached Mr Dinoris and enquired whether he would be willing to act as the liquidator of Asden if it were to be placed in voluntary liquidation. When Mr Dinoris agreed, Mr Levis asked him to provide the documentation necessary to make that appointment. The Nichols family demands monies from Ms Nichols 29 On 20 December 2010, Ms Nichols said she received a letter dated 16 December from Anthony's Lawyers acting for the Nichols family. The letter demanded that she personally pay the Nichols family the sum of $270,000 within seven days or they would commence legal action against her. The sum of $270,000 referred to the two cheques totalling that amount that Mr George Nichols had provided to Ms Nichols (see at [24] above). 30 The letter went on to allege that those monies had "not been applied for the purpose of the loan and you are in default of your loan agreement and mortgage". Ms Nichols said in one of her family law proceeding affidavits that she understood this to be a reference to the documents Mr George Nichols had her sign to put in place the structure for the Wakerley project as advised by Mr George Nichols' accountant (see at [13]–[15] above). 31 After she received this letter, Ms Melinda Nichols said she obtained advice from Doyle Keyworth Harris Family Lawyers about her rights under the Family Law Act 1975 (Cth). She said that she was advised that the sum of $270,000 formed part of the joint matrimonial property because it had been advanced to her under a loan. Ms Nichols did not, therefore, respond to this letter. 32 On about the same date, Ms Nichols said she received a letter from Mrs Debra Nichols enclosing a large number of invoices and stating that the Nichols family did not intend to pay the sub-contractors associated with those invoices because they had nothing to do with the Wakerley project site. Ms Nichols claimed that the invoices were all for materials that had been ordered by her husband, Mr Phillip Nichols, while he was involved in the Wakerley project. The bank transfers on 21 December 33 On 20 December, Ms Nichols said she took delivery of a car she had earlier ordered and paid $22,322.43 for it. This amount was paid out of the bank account Ms Nichols had established in Asden's name at the Bank of Queensland. After this payment, the balance in that bank account was approximately $240,000. 34 On 21 December 2010, Ms Melinda Nichols withdrew $236,500 from Asden's Bank of Queensland account above and deposited that amount in an account in the name of Urban Property. Mr Levis was the sole director of Urban Property. On the same date, Mr Levis caused $180,000 to be withdrawn from that Urban Property account and deposited into an account in the name of TJI Investments at the Bank of Queensland. 35 The company, TJI Investments Pty Ltd, was incorporated by Ms Nichols on 14 December 2010. Ms Nichols was the sole director and shareholder of that company. As I have already mentioned above, she said in evidence that she incorporated TJI Investments on advice from Mr Levis. The voluntary liquidation of Asden on 22 December 36 As recorded in the minutes of Asden, the sole member of the company, Ms Nichols, met on 22 December 2010 and resolved that the company be wound up voluntarily and that Mr Dinoris and Mr Combis be appointed joint and several liquidators. Ms Nichols said she took this step because she had been advised by Mr Levis that the company was trading insolvent once the Nichols family had withdrawn their support for it. The steps taken by Mr Dinoris on 22 December 37 After his appointment as the liquidator of Asden on 22 December 2010, Mr Dinoris obtained possession of the boat owned by Asden (see at [12] above) and gave instructions to Auctioneering Link Pty Ltd to store and, ultimately, to sell it. In addition to taking that step, he sent letters to the major banks, including the Bank of Queensland, enquiring about the details of any bank accounts held in the company's name. He also sent a letter to Ms Nichols containing: a notice requiring her to deliver the books, records, monies and property of the company to him; a questionnaire for directors and officers; and a statement outlining the responsibilities of a director of a company. The investigations of the bank transfers on 22 and 23 December 38 At 4.55 pm on 22 December 2010, Ms Del Monte of Mr Dinoris' office received an email from the Bank of Queensland attaching a bank statement showing a withdrawal of $236,500 from Asden's account with that bank. This information did not reveal the destination of the withdrawn funds. 39 At 5.28 pm on 22 December 2010, Ms Del Monte sent an email to Mr Levis enquiring about the destination of the withdrawn funds. She received no response. 40 At 4.40 pm on 23 December 2010, Ms Del Monte received an email from the Bank of Queensland attaching a copy of the withdrawal slip signed by Ms Melinda Nichols to undertake the withdrawal mentioned above. This information also did not reveal the destination of the withdrawn funds. 41 Shortly thereafter, Mr Dinoris telephoned Mr Levis and asked him if he knew of the destination of the funds. In response, Mr Levis advised that they were not received by Ms Melinda Nichols personally and that Mr Dinoris should further investigate the withdrawal of the funds. The Nichols family threatens Court proceedings on 22 December 2010 and following 42 From soon after his appointment on 22 December 2010, Mr Dinoris exchanged correspondence with a barrister named Mr David Edwards concerning the assets of Asden. Mr Edwards' first letter to Mr Dinoris was sent by facsimile on 22 December 2010. In it, Mr Edwards stated that he was instructed by Mr Phillip Nichols in relation to a proposed family law proceeding involving his wife, Ms Melinda Nichols. He asserted that one of the matrimonial assets that was to be the subject of that proceeding was "Asden Developments Pty. Ltd. and its assets". He noted that one of the assets of Asden, a boat, had been collected that day from "land owned by Phillip's father, Dr. George Nichols". Finally, he stated that Mr George Nichols had recently advanced $90,000 and a further $270,000 to Ms Melinda Nichols "so that the company's current liabilities could be paid". 43 Upon receiving Mr Edwards' letter, Mr Dinoris sent an urgent letter in response. In that letter, he requested clarification as to whether Mr George Nichols had advanced $360,000 to Ms Melinda Nichols, or to Asden. He also sought clarification as to whether Mr Edwards also acted for Mr George Nichols. He stated he had ascertained that the assets and undertakings of Asden were subject to a fixed and floating charge and also a mortgage had been provided to the National Australia Bank Ltd over the Wakerley land. He noted that he had informed the National Australia Bank Ltd that the company's assets were alleged to be matrimonial assets and were to be the subject of family law proceeding. He requested that Mr Edwards' clients deliver up to him all the assets of the company. In this regard, he stated that "[a]s Liquidator of the company, I have a duty to preserve, secure, take possession and realise the assets of the company". Finally, he requested that Mr Edwards' client deliver up possession of 27 items of plant and equipment (listed in the letter) which were located on the Wakerley development site. 44 Mr Edwards responded to Mr Dinoris' letter above on the next day, the 23 December 2010. He stated: I am advised Dr. and Mrs. George Nichols and Mr. and Mrs. Peter Nichols assert that they are the owners of the materials set out in your letter arising from a resulting trust My client's parents and Mr. and Mrs. Peter Nichols advanced the company the monies specifically to purchase the subject items and on the understanding that the company would hold them as such trustee. 45 Mr Edwards went on to inform Mr Dinoris that the Nichols family would be joining in the family law proceeding and "seeking injunctions to prevent your taking possession of those items and to restrain you from disposing of any items already in your possession". He asserted that "the company owns those materials only as trustee for them and the company's liquidators have no entitlement to take possession of them without the consent of those trustees which consent is expressly denied". 46 Mr Dinoris responded by letter on the same date, 23 December 2010. He began by noting a telephone conversation that had occurred between Ms Del Monte of his office and Mr Edwards on 22 December in which he claimed Mr Edwards had stated that Mr Dinoris had "produced a good list of assets and documentary evidence of the purchase of the assets" and "[i]t would be difficult for your client to deny the items were not owned by the company". Mr Dinoris then noted the claim that the Nichols family were the owners of the items listed in his letter of 22 December 2010 pursuant to a "resulting trust". He also noted that no documentary evidence had been provided to substantiate that claim. He then set out nine queries as follows: 1. The basis and authority your client had to withdraw funds from the bank account of the company. 2. The reasons your client had any access to the bank account of the company. 3. Whether your client made any representations to any parties on behalf of the company. 4. Whether your client and Dr Nichols were shadow directors of the company. 5. Any written agreements substantiating the terms of the advance of any funds by Dr & Mrs George Nichols and Mr & Mrs Peter Nichols. 6. A list of all payments made by Dr & Mrs George Nichols and Mr & Mrs Peter Nichols along with documentary evidence of the payments made. As you would have noticed from my letter dated 22 December 2010, the company commenced purchasing its assets from as early as November 2006. 7. Details of the nature of all services provided by the company since its incorporation for the benefit of real property owned by Dr & Mrs George Nichols and Mr & Mrs Peter Nichols. 8. The reasons Dr & Mrs George Nichols and Mr & Mrs Peter Nichols do not consider themselves to be debtors of the company. 9. Copies of any financial statements and taxation returns substantiating any trust arrangements. 47 Mr Dinoris concluded his letter by stating: I am presently investigating the affairs of the company as per my duties and responsibilities as Liquidator of the company, which include transactions involving your client, in particular the withdrawal of funds from the company's bank account. He added that he would report the results of those investigations to the Australian Securities and Investments Commission and to relevant authorities. 48 Mr Edwards responded by letter on the next day, 24 December 2010. He stated that the materials Mr Dinoris had requested would be provided "early in the new year". He also stated: Please be advised that proceedings will be instituted in the Federal Magistrates Court this morning seeking orders which inter alia include an injunction preventing the liquidators of Asden Developments Pty. Ltd. from taking possession of or dealing with any of the assets of that company pending further orders upon the undertaking of the applicant not to remove, deal with or in any way attempt to conceal the whereabouts of any such company assets. You will be served a copy of such application this afternoon. 49 He concluded with a request that Mr Dinoris agree not to attempt to seize any of the assets of Asden until the question of their ownership had been determined or agreed and he noted that "[g]uards have been placed on those properties where the items are located and this otherwise unnecessary expense could be avoided upon your agreement not to act contrary to the injunction sought". 50 Moving forward to 30 December 2010, on that day, Mr Edwards sent a letter to Mr Dinoris enclosing a copy of an initiating application that had been filed in the Federal Magistrates Court on 24 December 2010. The parties to the proceeding were Mr Phillip Nichols and Ms Melinda Nichols. In his letter, Mr Edwards drew attention to the interlocutory injunctive relief sought in that initiating application as follows: That an injunction issue to the liquidators of Asden Developments Pty. Ltd. Mr. Peter Dinoris and Mr. Nick Combis of Vincents Chartered Accountants of 32 Turbot Street Brisbane restraining those liquidators from taking possession of or dealing with any of the assets of that company until the true ownership of assets of the company have (sic) been determined. Mr Dinoris confirmed in cross-examination at the trial of this proceeding that he was not subsequently served with any injunction order preventing him from taking possession of, or dealing with, any of the assets of Asden. Mr Levis pays $10,000 to Mr Dinoris 51 On 23 December and 29 December 2010, Mr Levis drew two cheques in the amount of $5,000 on Urban Property's bank account and sent them to Mr Dinoris. These cheques were deposited in Vincents Chartered Accountants' trust account in the name of Asden. Further steps in Asden's liquidation from 24 December 52 On 24 December 2010, Mr Dinoris received Asden's books and records from Mr Levis. 53 On 24 December 2010, Mr Dinoris sent the first report to creditors. 54 On 29 December 2010, Mr Dinoris received Asden's MYOB records. 55 The first meeting of creditors of Asden was held on 7 January 2011. At that meeting, Mr Dinoris was confirmed as the liquidator of Asden. The events concerning the sale of the boat 56 As is already mentioned above, Mr Dinoris took possession of the boat on 22 December 2010 and instructed Auctioneering Link to store it pending its sale (see at [37] above). 57 In late January 2011, Ms Del Monte of Mr Dinoris' office gave instructions to Mr Khoury of Auctioneering Link to sell the boat. On 10 March 2011, Ms Del Monte contacted Mr Khoury and asked him to contact Yamaha Motor Finance to ascertain the payout figure for the loan on the boat and Yamaha's attitude towards its sale. When Mr Khoury contacted Yamaha, he was informed that it was not willing to allow him to sell the boat while the loan was outstanding, but instead it required that it be sold by an auctioneer appointed by Yamaha. On about the same date, Mr Khoury had a discussion with Mr Levis about Ms Nichols paying out the loan on the boat so that it could be sold. 58 On 22 March 2011, Mr Dinoris received an email from Mr Levis which stated "Peter, as per our conversation can you confirm to Melinda Nichols that if she has paid out the Yamaha loan she is allowed/authorised to instruct Paul Khoury to sell the boat". 59 On 23 March 2011, Mr Dinoris responded by email stating: Peter, I refer to your email below. I understand that Melinda Nichols will be satisfying the secured debt owed to Yamaha and stepping in the shoes of that secured creditor to realise the boat under the common law principle of "subrogation". I would not be in a position to object to any party claiming a secured interest over the boat from selling it. 60 On the same day, Ms Melinda Nichols said that she obtained advice from her family lawyer, Mr Doyle, about the "subrogation" issue mentioned in this email and, assured by him that she was protected, she paid $21,348.24 from the TJI Investments account mentioned above to Yamaha to discharge the outstanding loan on the boat. 61 On 28 March 2011, Ms Nichols sent an email to Mr Khoury at Auctioneering Link, which was copied to Mr Levis and her family lawyer, Mr Doyle, stating that: My name is Melinda Nichols, I have been authorised by Vincents Accountants whom (sic) are the appointed liquidators for the company Asden Developments Pty Ltd to instruct you and to give you my authorisation to sell the boat ... From the sale proceeds I expect to receive the amount of $21,348.24 as reimbursement to myself for the payment of the finance loan, then any remainder proceeds to be forwarded on to Vincents Accountants. Please do not hesitate to contact myself by replying to my email or phoning me on 0478 022 583 or alternatively contacting Peter Levis whom you have been previously dealing with. 62 Auctioneering Link sold the boat at auction on 18 April 2011 for the sum of $52,000. The proceeds of the sale were distributed as follows: (a) $11,650.00 to Auctioneering Link (b) $4,278.82 GST (c) $21,348.24 to TJI Investments account at the Bank of Queensland; (d) $9,790.00 to Private Equity Financial Services Pty Ltd; (e) $4,932.94 to Mr Dinoris. 63 Private Equity Financial Services Pty Ltd (Private Equity) was a company of which Mr Levis was the sole director. The family law proceeding and its aftermath 64 In April 2011, the Nichols family joined in the family law proceeding between Mr Phillip Nichols and Ms Melinda Nichols mentioned above (at [50]). They claimed that the sum of $270,000 mentioned above was an asset held on a resulting trust to them and they asserted that those funds were provided to Ms Nichols for the purpose of completing the Wakerley Project. 65 Between February and May 2011, on advice from Mr Doyle, Ms Nichols paid the balance of the funds held in the TJI Investments account to Mr Doyle's trust account. That transfer was undertaken in two stages. The total amount transferred was $173,831.53. 66 In mid-2012, the Nichols family successfully applied to join Mr Doyle, Mr Levis and Urban Property as third parties to the family law proceeding mentioned above. In a letter their lawyers, ClarkeKann, sent to Mr Dinoris at about that time, they explained the reason for their application in the following terms: Our clients intend to join the Third Parties to the Proceeding on the basis that the moneys paid to [Asden] (and subsequently withdrawn by Ms Nichols) were paid to the company for the express purpose of paying its creditors. Our clients intend to claim that those moneys are held on a trust and should be repaid to them by the Third Parties … 67 On 13 March 2013, the Nichols family obtained judgment in their constructive trust claim against Ms Nichols and other parties mentioned immediately above. In summary, they obtained judgment against: (a) Ms Nichols in the sum of $62,670.00 plus interest in the sum of $12,690.00; (b) Ms Nichols' family lawyer, Mr Doyle, and the partner in his law firm, in the sum of $91,967.00 plus interest in the sum of $9,963.40; and (c) Mr Levis and Urban Property in the sum of $56,500 plus interest in the sum of $11,441.25. 68 In addition to the above orders, Mr Doyle and the partner in his law firm were ordered to pay the sum of $81,863.63 held in their firm's trust account to the trust account of the solicitors for the Nichols family and Ms Nichols, Mr Doyle and his partner, Mr Levis and Urban Property were ordered to pay the Nichols family's costs of the proceeding. On 18 December 2013, Mr Doyle and his partner paid $33,100 in full settlement of this costs order. It is an agreed fact in this proceeding that the Nichols family incurred $170,803.06 in pursuing this proceeding. 69 As a consequence of the judgment against her, Ms Nichols was declared bankrupt on 8 May 2013. 70 As for Mr Levis, an order for the liquidation of Urban Property was made in June 2013 and he was declared bankrupt in July 2013. The issues that arise 71 Prior to closing submissions at the trial, counsel for the parties agreed upon an issues template that set out the main issues that fell to be determined in the proceeding. That issues template was as follows: I. BREACH OF DUTY (a) Funds ($236,500) 1. Did Mr Dinoris breach the duty owed under s180 of the Corporations Act 2001 (herein the "CAct") - (a) did Mr Dinoris owe a duty to contact Melinda Nichols in relation to the missing funds – (i) personally; (ii) on 22 or 23 December 2010; or (iii) at all. (b) whether the conduct of Mr Dinoris in relation to contacting Melinda Nichols was unreasonable in the circumstances, stating the circumstances; (c) if the conduct was unreasonable in the circumstances was it sufficiently serious to constitute negligence or did it constitute a mere non-negligent error of judgment? (b) Boat ($9,790) (a) did Mr Dinoris owe a duty to supervise the process of sale of the Boat – (i) prior to the sale of the Boat; (ii) at all. (b) whether the conduct of Mr Dinoris in relation to the sale of the Boat was unreasonable in the circumstances, stating the circumstances; (c) if the conduct was unreasonable in the circumstances was it sufficiently serious to constitute negligence or did it constitute a mere non-negligent error of judgment? II. LOSS (a) Funds ($236,500) 2. Did such breach cause, or result in, any damage to the Company sufficient to warrant an order for compensation under s1317H of CAct and if so in what amount - (a) whether the Applicant has established the factual basis for the Applicant's contention that the funds ($264,541.02) was the property of the Company as alleged in para. 5(c) of the Amended Statement of Claim; (b) had Ms Nichols been contacted is it more probable than not that she would have repaid the monies to Mr Dinoris; (c) what effect (if any) does the NAB charge have on the question of loss; (d) if so, what quantum of loss (if any) was suffered by the Applicant as a consequence of breach; (e) is the loss too remote as a matter of law? (b) Boat ($9,790) 3. Did such breach relation to the Boat cause, or result in, any damage to the Company sufficient to warrant an order for compensation under s1317H of CAct and if so in what amount - (a) what quantum of loss (if any) was suffered by the Applicant as a consequence of breach; (b) what effect (if any) does the NAB charge have on the question of loss; (c) is the loss too remote as a matter of law? (c) Set off ($56,692.02) 4. Whether the Respondents can claim a set-off as pleaded in paragraph 18(a)(iii) of the Amended Defence; (a) as a matter of law; (b) if so, what quantum of loss have the Respondents' established in respect of the set-off. III. DEFENCES (a) Business Judgment Rule 5. Was the determination of Mr Dinoris to seek funding from creditors to conduct a public examination of Melinda Nichols a business judgment within the meaning of s180(2) as pleaded in para. 48 of the Amended Defence. 6. Was the determination of Mr Dinoris that there was little utility in speaking personally with Melinda Nichols a business judgment within the meaning of s180(2), as pleaded in para. 49 of the Amended Defence. 7. If so, are the requirements of 180(2)(a), (b), (c) and (d) satisfied, viz.: (a) was the judgment made in good faith and for a proper purpose; (b) did Mr Dinoris not have a material personal interest in the subject matter of the judgment; (c) did Mr Dinoris inform himself about the subject matter of the judgment to the extent he reasonably believed to be appropriate; (d) did Mr Dinoris rationally believe the judgment was in the best interest of the Applicant company. (b) Other Statutory Defences – s1317S; s1318 8. If the Respondents are found to be liable to the Applicant for breach of duty owed under s180(1), ought they be relieved in whole, or alternatively in part, from any liability by reason that the Respondents: (a) acted honestly; and (b) having regard to all of the circumstances of the case; ought fairly to be excused for any such breach. 72 Because of the conclusions I have reached below about the Breach of Duty (b) Boat sub-issue, it is unnecessary for me to consider the loss issues above relating to that sub-issue (II. Loss (b) Boat). As well, because of the conclusions I have reached about Asden's failure to establish the critical causation element of the Funds sub-issue above (II. Loss (a) Funds (2)(b)), it is unnecessary for me to consider the other loss issues relating to that sub-issue above. Finally, because of these conclusions, it is also unnecessary for me to consider the Set off issue above (II. Loss (c) Set off) and all of the Defences issues (III.). 73 I will address the remaining issues in the order in which they appear above, beginning with Breach of Duty (a) Funds sub-issue. I. Breach of duty (a) funds 74 As appears above (at [71] I. Breach of Duty (a) Funds (1)(a)), the crux of Asden's funds sub-issue claim is that Mr Dinoris breached his duty to it under s 180 of the Corporations Act 2001 (Cth) (Corporations Act) by failing to contact Ms Nichols personally in relation to the funds transfer on 22 or 23 December 2010, or at all. Contentions 75 On this "funds" sub-issue, Asden contended that Mr Dinoris was obligated to attempt to make direct personal contact with Ms Nichols and his failure to do so constituted a breach of his duty under s 180(1). It contended that Mr Dinoris knew that Asden had only one director and that she was most probably the sole signatory to its bank accounts. It contended it was therefore reasonable for Mr Dinoris to conclude that it was Ms Nichols who withdrew the funds from the company's bank accounts the day before he was appointed as liquidator. Asden contended that, in those circumstances, it was inexcusable for Mr Dinoris not to contact Ms Nichols personally when it was, or should have been, clear to any reasonably competent liquidator that she had "cleaned out" the bank account the day before the liquidation commenced. 76 Asden submitted that company directors had a statutory obligation to cooperate with liquidators and that Mr Dinoris should have activated this obligation by contacting Ms Nichols personally once it became clear that the funds had been removed from the company's bank account. In this respect, it submitted that it mattered not whether Mr Dinoris thought Ms Nichols would not cooperate with him. 77 Asden also pointed out that the letter Mr Dinoris issued to Ms Nichols on 22 December 2010 was in a standard form and made no mention of the funds that had been removed from the company's bank account. It submitted that the "competing claims" by the Nichols family to the assets of the company and the threatened injunction proceeding by them did not provide any excuse for Mr Dinoris to fail to discharge his duty to contact Ms Nichols personally. It submitted that the obligation of a liquidator was to take custody of the assets of the company and it was immaterial whether there might be a dispute over who was entitled to those assets. Finally, Asden submitted that Mr Dinoris' conduct was not simply an error of judgment or mistake, but rather was a breach of the duty he owed to it. 78 Mr Dinoris contended that there is no hard and fast rule of law compelling a liquidator to "speak directly" with a company director concerned in a liquidation of a company. He contended that such a rule would "visit a degree of inflexibility and place too restrictive a standard on liquidators" and unnecessarily restrict the discretion that is vested in a liquidator. Accordingly, he submitted that whether or not he ought to have personally contacted Ms Nichols was a matter for his judgment, falling within the bounds of his general discretion. He submitted that was to be judged only by reference to the circumstances known, or which ought reasonably to have been known, on the information available to him at the time. He contended that, while he had no direct oral communication with Ms Nichols, he did write to her on 22 December 2010 and on 23 December and he had a discussion with Mr Levis, the agent she appointed for the purposes of the liquidation. 79 Further, Mr Dinoris contended that the duty under s 180(1) of the Corporations Act did not, in the circumstances of this case, require him to contact Ms Nichols personally because it was not at the relevant time reasonably foreseeable that harm might be caused to the interests of the company as a consequence of any omission on his part to contact her. Mr Dinoris emphasised the importance of a liquidator's independence. He also relied on the expert opinion of Mr Stimpson as to the reasonableness of his conduct (see at [104]–[110] below). He pointed to a range of circumstances which affected his decision not to make direct personal contact with Ms Nichols. He also pointed to the risk of Ms Nichols further dispersing the funds if he made contact with her and the fact that Mr George Nichols and Mr Phillip Nichols had both threatened to obtain an injunction to prevent him selling the assets of the company. The relevant legal principles 80 As can be seen from the issues template above (at [71]), Asden's breach of duty claim is based on s 180(1) of the Corporations Act. That section provides: 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. (Note omitted) 81 There is no issue that Mr Dinoris was an "officer" of Asden within the meaning of s 9(f) of the Corporations Act at all relevant times and that, by reason thereof, he owed Asden the duty prescribed by s 180(1). 82 The High Court illuminated the standard set by s 180(1) in the following terms in Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465; [2012] HCA 18 at [18]: The degree of care and diligence that is required by s 180(1) is fixed as an objective standard identified by reference to two relevant elements – the element identified in para (a): "the corporation's circumstances", and the element identified in para (b): the office and the responsibilities within the corporation that the officer in question occupied and had. No doubt, those responsibilities include any responsibility that is imposed on the officer by the applicable corporations legislation. But the responsibilities referred to in s 180(1) are not confined to statutory responsibilities; they include whatever responsibilities the officer concerned had within the corporation, regardless of how or why those responsibilities came to be imposed on that officer. (Emphasis in original) 83 With respect to the particular role liquidators perform as officers of a company, Middleton J observed in Australian Securities and Investments Commission v Dunner (2013) 303 ALR 98; [2013] FCA 872 that liquidators were subject to the same statutory duty as directors, but they were also required to meet the high standard of care and diligence expected of persons who were paid to exercise their professional skills. His Honour said: 28 As officers, liquidators and receivers are subject to the same statutory duty of care and diligence as directors under s 180 of the Act. 29 Specifically in relation to liquidators, I note that a liquidator is appointed and paid to exercise a particular professional skill, and a high standard of care and diligence is required in the performance of their duties (Pace v Antlers Pty Ltd (in liq) (1998) 80 FCR 485 at 497; 26 ACSR 490 at 501 (Pace). 30 In Pace (1998) 80 FCR 486 at 499, Lindgren J stated that a liquidator: … must exhibit care (including diligence) and skill to an extent that is reasonable in all the circumstances. "All the circumstances" will include the facts that a liquidator is a person practising a profession, that a liquidator holds himself or herself out as having special qualifications, training and experience pertinent to the liquidator's role and function, and that a liquidator is paid for liquidation work. 'All the circumstances' will also include the fact that some decisions and courses of action which a liquidator is called upon to consider will be of a business or commercial character, as to which competent liquidators acting with due care, but always without the benefit of hindsight, may have differences of opinion. 84 Having indirectly mentioned the observations of Lindgren J in Pace v Antlers Pty Ltd (In Liquidation) (1998) 80 FCR 485 (Pace), it is convenient at this point to dispose of a submission made on behalf of Mr Dinoris. That submission was to the effect that the relevant test for a liquidator's duty under s 180(1) was whether the liquidator's conduct was so unreasonable that no reasonable liquidator could have acted in that manner. Lindgren J dealt with a similar submission in Pace and rejected it in favour of the test set out above (at 498–499). I respectfully agree with his Honour's approach and accordingly reject Mr Dinoris' similar contention about that test. 85 Before leaving Pace, it is also worth noting that, in defining a liquidator's duty under s 180, Lindgren J relied upon authorities dealing with a company officer's liability in tort. In his submissions, Mr Dinoris contended for that approach albeit relying upon Austin J in Australian Securities and Investments Commission v Vines (2005) 55 ACSR 617; [2005] NSWSC 738 at [1070] where his Honour observed that "the general law of torts may now be called in aid as a source of guiding principles for the content of the statutory standard of care of company directors and officers". See also Australian Securities and Investments Commission v Rich (2009) 236 FLR 1; [2009] NSWSC 1229 (Rich) at [7231] per Austin J. I agree and therefore accept Mr Dinoris' submission in this respect. That being so, I should also mention a decision on the same question that Asden relied upon: Sydlow Pty Ltd (In Liquidation) v TG Kotselas Pty Ltd (1996) 65 FCR 234, where Tamberlin J outlined the following pertinent common law principles (at 243–4): • Liquidators can be liable in an action at common law for failure to exercise due care and skill in the performance of their duties and are therefore tortfeasors within the strict sense of the term. This liability is analogous to that of directors. • Liquidators have a duty to exercise particular professional skill, care and diligence in the performance of duties. See B H McPherson and J O'Donovan, The Law of Company Liquidation (3rd ed, 1987), p 218; Ford and Austin's Principles of Corporations Law (7th ed, 1994), pp 1013-1017; Palmer's Company Law Service, p 15130, par 15.323. • In Maelor Jones Investments (Noarlunga) Pty Ltd v Heywood-Smith (1989) 54 SASR 285, Olsson J held that a liquidator was liable in negligence on the basis that he failed to display that degree of care and skill, which by accepting office he held himself out as possessing. • In Daniels v Anderson (1995) 37 NSWLR 438 at 505, the NSW Court of Appeal (by majority, Clarke and Sheller JJA) confirmed a decision that directors owe a duty of care in tort and could be sued for contribution pursuant to s 5(1)(c) of the LRMPA and that negligent directors are tortfeasors within the meaning of that subsection. • The principles adopted in Daniel 's [sic] case are relevant and are of even greater force when considering the duties of a liquidator. Directors, unlike liquidators, are not necessarily professionals, and they do not necessarily hold themselves out as possessing any particular skill or experience. 86 While it will ultimately be unnecessary to consider the "business judgment" rule defence that Mr Dinoris has raised (see at [71] above: III. Defences (a)), I will, for completeness, mention a decision that Mr Dinoris relied upon bearing upon that issue: Viscariello v Macks (2014) 103 ACSR 542; [2014] SASC 189. In that matter, Kourakis CJ made the following observations about the operations of ss 181 and 182: 815 In Yeomans v Walker Hodgson J explained the general approach taken by supervising courts to the statutory duties imposed on liquidators as follows: In my view, the general approach of the Court in a case like this is that it should not interfere with a decision made by a liquidator unless either there is fraud, or it can be said that the discretion has not been exercised bona fide, or it can be said that the liquidator has acted in a way in which no reasonable liquidator could have acted … it may be that if a liquidator does take into account entirely irrelevant considerations, then it would be appropriate to intervene, but, in my view, that is not the case here. 816 There is great reluctance on the part of courts to interfere in commercial decisions. There is an analogy between the business judgments of directors and the discretionary decisions of liquidators involving business judgments. 817 I accept that judgments about the liquidator's conduct must be made in the context of the circumstances as they existed at the time, without the benefit of hindsight, and with the distinction between negligence and mistakes of error of judgment firmly in mind. (Footnotes omitted) 87 If I had to consider the availability of this defence, I would have concluded that it would not have been available to Mr Dinoris in the circumstances of this matter. That is so because Asden's complaint against Mr Dinoris concerns the performance of his statutory duty as its liquidator under s 180(1) and particularly his statutory obligation to take custody of, and control, all of the property to which the company is, or appears to be, entitled (s 474(1) of the Corporations Act). It does not concern a decision he made in the conduct of any business or commercial activity of Asden. In this respect, I consider the observations of Keane CJ (with whom Emmett and Finkelstein JJ agreed) in Australian Securities and Investments Commission v Fortescue Metals Group Ltd (2011) 190 FCR 364; [2011] FCAFC 19 are applicable (at [197]): This difficulty apart, the decision not to disclose the true effect of the agreements cannot be described as "business judgment" at all. A decision not to make accurate disclosure of the terms of a major contract is not a decision related to the "business operations" of the corporation. Rather it is a decision related to compliance with the requirements of the Act. For these reasons, I would not have concluded Mr Dinoris' decision not to contact Ms Nichols personally on or after 22 December 2010 was covered by the "business judgment" rule. 88 Finally, it is appropriate to mention the distinction Mr Dinoris drew between mistakes, or errors of judgment, and a breach of the statutory duty imposed by s 180(1). On this aspect, he relied upon the observations of Austin J in Rich which succinctly made that distinction. His Honour said (at [7242]): The statutory issue under s 180(1) is not whether the defendants made mistakes in the process of financial forecasting, and a fortiori, it is not whether they formed opinions different from the opinions of ASIC or even of the court. The statutory issue is whether they failed to meet the standard of care and diligence that the statute lays down. The statute requires the court to apply a standard defined in terms of the degree of care and diligence that a reasonable person would exercise, taking into account the corporation's circumstances, the offices occupied by the defendants and their responsibilities within the corporation. That requires the defendants' conduct to be assessed with close regard to the circumstances existing at the relevant time, without the benefit of hindsight, and with the distinction between negligence and mistakes or errors of judgment firmly in mind. If the impugned conduct is found to be a mere error of judgment, then the statutory standard under s 180(1) is not contravened and it is unnecessary to advert to the special business judgment rule in s 180(2). In the view that I have taken of it, explained below, s 180(2) provides a defence in a case where the impugned conduct goes beyond a mere error of judgment, and would contravene the statutory standard but for the defence (cf ASR [351-2]). 89 To sum up, the test is an objective one. It requires an assessment as to whether Mr Dinoris' conduct as a professional liquidator demonstrated the requisite degree of care and diligence that was reasonable in all the relevant circumstances. That assessment is to be made at the time of Mr Dinoris' alleged breach and not with the benefit of hindsight. It is to have regard to the degree of care and diligence expected of a skilled and professional accountant performing the role of a liquidator. It also requires care to be taken to distinguish between conduct amounting to a breach of the statutory duty and that amounting to a mistake or error of judgment. 90 There are two other provisions of the Corporations Act that should be mentioned before leaving this outline of the relevant legal principles. Both were relied upon by Mr Dinoris. The first was the content of a liquidator's duty when there were insufficient funds in the company to cover his or her expenses. In this respect, s 545 of the Corporations Act provides: (1) Subject to this section, a liquidator is not liable to incur any expense in relation to the winding up of a company unless there is sufficient available property. (2) The Court or ASIC may, on the application of a creditor or a contributory, direct a liquidator to incur a particular expense on condition that the creditor or contributory indemnifies the liquidator in respect of the recovery of the amount expended and, if the Court or ASIC so directs, gives such security to secure the amount of the indemnity as the Court or ASIC thinks reasonable. (3) Nothing in this section is taken to relieve a liquidator of any obligation to lodge a document (including a report) with ASIC under any provision of this Act by reason only that he or she would be required to incur expense in order to perform that obligation. 91 On the operation of this section, Finkelstein J observed in Jenkins v Jonkay Pty Ltd [2007] FCA 858 at [10]: 10 … In deciding whether the liquidator is acting unreasonably it is necessary to have regard to s 545 of the Corporations Act. Subsection (1) provides that "a liquidator is not liable to incur any expense in relation to the winding up of a company unless there is sufficient available property". (There are certain exceptions in relation to lodging of documents with ASIC: see s 545(3).) The effect of the section is that, apart from lodging certain documents, a liquidator is not required to do anything if he cannot recover his expenses. It means the liquidator commits no wrong in failing to carry out any duties. I will return to this issue later in these reasons. 92 Secondly, Mr Dinoris raised the fact that a breach of s 180 of the Corporations Act is a civil penalty provision: see s 1317DA. Accordingly, if a court is satisfied that a person has contravened such a provision, it must make a declaration of contravention (s 1317E) and it may order that person to pay the Commonwealth a pecuniary penalty (s 1317G). It should be emphasised that, while a declaration of contravention has been sought by Asden, it has not sought a pecuniary penalty order. Nonetheless, while s 1332 of the Corporations Act applies the civil standard of proof, Mr Dinoris referred to the factors outlined in s 140(2) of the Evidence Act 1995 (Cth) and relied upon the following observations of Gilmour J in Australian Securities and Investments Commission v Fortescue Group Ltd (No 5) (2009) 264 ALR 201; [2009] FCA 1586 at [82], which, I accept, accurately describe the approach I should take in determining whether or not Mr Dinoris contravened s 180 in this matter: In conclusion, the standard of proof that I must apply is the balance of probabilities as prescribed by s 1332, and I accept that in deciding whether ASIC's allegations are made out on the balance of probabilities I am required to take into account the causes of action and the gravity of the matters alleged and their consequences: s 140(2) Evidence Act; Briginshaw. If inferences are to be drawn, ASIC has to establish that the circumstances appearing from the evidence give rise to a reasonable and definite inference and not merely to conflicting inferences of equal degrees of probability: Australian Securities and Investments Commission v Macdonald (No 11) (2009) 256 ALR 199; [2009] NSWSC 287 at [186] …; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia at [38]. Mr Dinoris' evidence about the relevant circumstances affecting his decision 93 It is apparent from the relevant legal principles summarised above (at [89]) that Mr Dinoris' conduct as the liquidator of Asden has to be assessed in all the relevant circumstances. Mr Dinoris filed an affidavit in this proceeding in which he described in considerable detail the background to the events of late December 2010, what it was that he did once he was appointed as liquidator of Asden, why it was that he decided not to make direct personal contact with Ms Nichols and what circumstances he took into account in making that decision. Since each of these aspects of Mr Dinoris' evidence is important in assessing whether or not he breached his duty of care under s 180(1), it is appropriate to set out his evidence in some detail. 94 As to the relevant background to his decision, Mr Dinoris provided the following evidence in his affidavit: 14. My first point of contact with Mr Levis in respect of the Company was on 15 December 2010, when Mr Levis contacted me by telephone and (in substance or effect): (a) he advised: (i) that he, or his Company, was an insolvency consultant; (ii) that he had a potential voluntary Liquidation that may or may not arise involving a small number of creditors, some debtors, land and some equipment; (iii) that the name of the Company that he was assisting was Asden Developments Pty Ltd ACN 115 851 833; and (iv) that he would be the point of contact between me and the director, Melinda Nichols, as she was under a lot of pressure and stress by reason of a family dispute; (b) he requested: (i) whether I would be prepared to accept an appointment as Liquidator; and (ii) that I provide, or caused to be provided, precedent appointment documents for his client's consideration. 15. I was not provided with the telephone number or email address of the director by Mr Levis as he wanted the communications directly through him. Without a telephone number I was not able to contact the director by telephone. 16. After that telephone call, I arranged, on 15 December 2010, for: (a) an historical extract search for the Company to be obtained from the records of the Australian Securities and Investment Commission ("ASIC") which revealed the Company was subject to a fixed charge in favour of De Lage Landen Ply Ltd and a fixed and floating charge in favour of the National Australia Bank Limited ("NAB") …; and (b) an email (15.12.10 (2:30pm)), which included a link to the Form 509 Presentation of summary of affairs of a Company, to be sent to Mr Levis in accordance with his request which attached: (i) precedent Notice of Member Meeting; (ii) precedent Consent to Short Notice; (iii) Letter addressed to Melinda Nichols (with attachments dated 15 December 2010 providing information regarding the information and documentation required by me to initiate creditors' voluntary liquidation, the process for initiating such a winding up and the effect of the appointment of Liquidators ("Director Letter 15.12.10"). This letter also disclosed that the Form 509 requires the director to disclose a summary of the estimated assets and liabilities of the Company. It also disclosed that the Corporations Act 2001 requires her to provide to the meeting of creditors a full and complete Report as to Affairs (Form 507) accompanied by a report on the circumstances leading up to the proposed winding up. It was noted that the Form 507 addresses a more detailed listing of assets and liabilities of the Company; (iv) precedent Minutes of Director Meeting; and (v) precedent Minutes of Member Meeting ... … 17. During the telephone conversation with Mr Levis held on 15 December 2010, I noted that I would be prepared to accept an appointment as Liquidator for an upfront contribution of $10,000.00 towards the professional fees and outlays to be incurred in the Liquidation. I do not recall whether it was Mr Levis or me that suggested the amount of $10,000.00. 18. It is my usual practice to seek a voluntary contribution towards professional fees and outlays from a director for a creditors' voluntary Liquidation. This amount does not represent a fixed fee to undertake the appointment but a contribution towards the professional fees and outlays of the Liquidators. 19. The Director Letter 15.12.10 stated- "Before I can accept appointment as liquidator of the company, I require minimum funds of $x,xxx.00 (inclusive of GST) to be deposited into the bank account detail below ...". I do not recall the reasons the Director Letter 15.12.10 referred to "$x,xxx.00" in respect to the upfront contribution. It may have been an oversight by my staff and subsequently myself. 20. The amount of $10,000.00 was not, and was never intended to be, a fixed price quote for the Liquidation. Generally prior to an appointment as Liquidator, there are too many unknowns, each Company Liquidation is different and more often than not the costs involved are unpredictable. I did not at any stage agree that the appointment as Liquidators of the Company would be limited to a fixed amount of $10,000.00. (Emphasis in original) 95 The steps Mr Dinoris undertook as liquidator once he was appointed are already described in some detail above (at [37]–[50]) and do not require repeating here. In addition to those steps, Mr Dinoris described the following: (k) the offices of Vincents Chartered Accountants closed at the end of trade on Thursday, 23 December 2010 for the Christmas period and re-opened on Tuesday 4 January 2011. It is noted that 25 December 2010 to 28 December 2010 (inclusive) and 3 January 2011 were public holidays or weekends. I did however work on 24 December 2010; (l) on 24 December 2010, the Liquidators received boxes of Company records; (m) I prepared the Report to Creditors dated 24 December 2010 and a copy was provided to Mr Levis and Mr Nichols. The Report to Creditors was also lodged with the ASIC. It stated at page 2- "… • A number of fixed assets of the Company are held at a property owned by Dr George Nichols, who is understood to be the director's father-in-law. At the time of the preparation of this report, we had not been granted access to collect the balance of the fixed assets of the Company. • Correspondence has been received from the barrister of Phillip Nichols, ex-husband of the director, claiming that various parties are the rightful owners of the fixed assets of the Company pursuant to a "resulting trust" and that an injunction is being sought to prevent the Liquidators from collecting and selling the assets of the Company. No documentary evidence has been provided to substantiate this alleged claim. Phillip Nichols was recently discharged from bankruptcy. • The assets and undertakings of the Company are subject to a fixed and floating charge held by National Australia Bank Limited. Complete details have been provided to the bank regarding the above-mentioned issues arising with the assets of the Company. • De Lange Landen Pty Ltd holds a fixed charge. • I am awaiting information from the secured creditors regarding the debt and security positions. • My investigations are continuing into transactions involving the director and various associated parties, in particular the withdrawal of Company funds. I am also investigating the issue of shadow directors and other voidable transactions." … (n) the Liquidators then turned their attention to investigating the Company's MYOB file which was provided by an email received from Mr Levis on 29 December 2010, for which the user name and password were received on 5 January 2011, and the boxes of Company records provided on 24 December 2010 … (o) ultimately, by about 20 January 2011 it was becoming increasingly clear (and probably 8 February 2011 at the latest), that our investigations, including of the MYOB and other records of the Company, did not provide any information regarding the destination of the funds; 96 Mr Dinoris devoted a paragraph of his affidavit to explaining why it was that he did not speak to, or meet, Ms Nichols personally. In that paragraph, he stated as follows: (a) it is correct that I did not speak or meet personally with Melinda Nichols prior to the appointment or during the administration of the the (sic) Liquidation; (b) this was a consequence of Mr Levis being the conduit for communications between the Liquidators and the director as was the case since the appointment. In this case, I was not provided with Melinda Nichols telephone contact and I was requested to communicate through the director's representative, Mr Levis; (c) I understood, from what I was told by Mr Levis, that Melinda Nichols was under stress and distracted by the Matrimonial Proceedings involving Phillip Nichols and the Nichols family; (d) I consider that a prudent Liquidator would communicate with those parties whom she or he believes have knowledge of the examinable affairs of the relevant Company and are able to provide additional information and documentation. In this case, I considered that person to be Mr Levis. There was good reason in the early stages of the Liquidation, to consider that Melinda Nichols was not the prime controller of the Company. She was married to Phillip Nichols. There was evidence that Phillip Nichols was, despite his bankruptcy, dealing with creditors and entering into transactions on behalf of the Company. A purpose of the Company was to act as construction or project manager of the Wakerly (sic) Development; which development was funded by George Nichols and/or the Nichols family. I also had concerns that the funds may have been dealt with by either the director or a shadow director; (e) I did consider there was a real possibility that the funds had been removed from the Company's bank account by Melinda Nichols in breach of her duty to the Company. I stated as much in the Report to Creditors dated 24 December 2010. I also referred to Phillip Nichols' apparent involvement as a shadow director … (f) In his conversation with me on 23 December 2010, Mr Levis had stated 'matter-of factly' that the funds were not received by or held personally by Melinda Nichols … (g) as previously mentioned herein, though I held reservations about what I was being told by Mr Levis, there was at that stage no, or no sufficient, evidence available to challenge the veracity of what I was being told by Mr Levis as it was, at that stage, unclear as to where the funds had gone; (h) I considered, in the circumstances of this case, that there was little to be gained in speaking or meeting personally with Melinda Nichols. I considered, in the circumstances, that any such attempts to do so would prove fruitless and I was not at all confident that I would obtain the information from Melinda Nichols in any event. No such information was forthcoming in any documentation, records, computer files or statutory forms already provided by or on her behalf; (i) I considered, in all of the circumstances, that the best course was to investigate the transaction further by reference to the documentary evidence including the Company's MYOB, the tracing of the transaction and other documents, which investigations were undertaken. Ultimately that led to me determining to seek funding in order to utilise statutory powers to conduct a public examination of Melinda Nichols and others regarding the examinable affairs of the Company. The public examination could have been utilised to obtain information and documentation regarding transactions involving the funds, the history of the Company and the claims of various parties to the ownership of the funds; and (j) I believe that in the circumstances of this Liquidation appropriate and adequate steps were undertaken in terms of the investigations to determine the destination of the funds ($236,500.00) withdrawn from the Company's bank account. 97 He also stated earlier in his affidavit that: 41. In response thereto, and by way of further explanation, I state: … (b) the Liquidators did make enquiry of Melinda Nichols in the letter dated 22 December 2010 which contained a notice requiring delivery of books, records, monies and property of the Company; a questionnaire for directors and officers; and statement of responsibilities as director of the Company; and (c) The Form 507 (Report as to Affairs) signed by the director did not include any reference to the funds withdrawn from the bank account of the Company. 98 In cross-examination, Mr Dinoris agreed that, once he obtained a copy of the withdrawal slip on the afternoon of 23 December 2010, he was able to see that it bore what appeared to be the signature of Ms Nichols. He also agreed that he knew she was the sole director of Asden. Further, when he spoke to Mr Levis by telephone shortly thereafter, he agreed that Mr Levis did not tell him not to contact Ms Nichols and he said he did not ask Mr Levis for Ms Nichols' telephone number or contact details. In that context, he was asked why he did not thereafter contact Ms Nichols personally. In response, he said as follows: Okay. Well, there were a few reasons. Firstly, our communications on this matter were through the representative of Ms Nichols, which was Peter Levis. From my discussion with him on 23 December I was not confident that Melinda Nichols would provide any additional information to that provided by him. Secondly, I didn't have the contact details for Melinda Nichols as they weren't provided to me. And that's in respect to her telephone number and email. Thirdly, a letter was issued to Melinda Nichols on 22 December, which was the date of our appointment giving a notice under section 530A of the Corporations Act to send to us all records and assets of the company, and also disclose if anything had been fraudulently withdrawn in the last 10 years. And finally, even from the outset of the liquidation there were competing claims to the funds. There was threats of injunctions and actual applications for injunctions. There were matrimonial proceedings on hand. There wasn't clear indications at that point that any withdrawal was unlawful. So in the circumstances I had decided that I was going to conduct further investigations on the documents before considering any contact with her directly. 99 In re-examination, Mr Dinoris gave the following evidence on this issue: [MR ERSKINE] Yesterday Mr Martin asked you why did you not contact Melinda Nichols direct after speaking with Mr Levis. Do you recall that?---Yes, I do. He suggested to you it was a reasonable thing to do. Can you assist his Honour with what the process – your process of reasoning was in terms of contacting Melinda Nichols after speaking with Mr Levis on 23 December?---Okay. After speaking with Mr Levis it was my position that I determined to investigate the matter on the documents, conduct various investigations and one of the reasons for that was to determine the purpose and reason for the withdrawal of the funds. After conducting those investigations, by late January 2011/early February 2011 I determined that it was best for this liquidation under the circumstances that a public examination be conducted. We sought funding for a public examination and my concerns were if the transaction had been unlawful, whether contacting a director without conducting some investigations prior to that may have resulted in the funds being further dispersed. In terms of that last part of your answer - - -?---Yes. - - - you were concerned that – I'm just trying to understand what you said there?---Yes, yes. You're saying that if you contacted Melinda Nichols prematurely - - -?---Prematurely without conducting adequate investigations - - - You made - - -?--- - - - there may be a risk of the – of the funds being further dispersed. 100 Pertinent to the above evidence, in a later paragraph of his affidavit, Mr Dinoris set out the "relevant circumstances known to exist at the time and taken into account in this case in determining that the best course was to seek funding to conduct a public examination of [Ms Nichols]". That is, rather than attempt to speak to her personally. Insofar as they relate to the period in late December 2010 and January 2011, the circumstances Mr Dinoris described repeat much of the information set out above (at [96]–[99]). However, since his description of those circumstances is an important consideration, it is appropriate to set them out in full. They are as follows: (a) on 22 December 2010, Mr [George] Nichols had advised Ms Del Monte that he would be seeking an injunction to preclude the Liquidators from selling Company assets and that no funds were to be withdrawn from the Company bank account as he was owed $270,000.00 and required his money back and that my office should contact his Barrister, David Edwards … (b) on 22 December 2010, David Edwards telephoned me and confirmed that his client (Phillip Nichols) was considering obtaining an injunction to prevent Liquidators from selling the Company's assets by reason that they formed part of the matrimonial assets in a family law dispute between Phillip Nichols and Melinda Nichols … (c) on 22 December 2010, David Edwards sent a facsimile to me confirming that the Company's assets were considered matrimonial assets in the matrimonial proceedings and that Mr Nichols had recently advanced $360,000.00 to the Company director to pay the Company's then current liabilities … (d) on 23 December 2010, David Edwards sent a facsimile to me advising that the Nichols family asserted that they were the owners of the Company's list of assets (set out in my letter dated 22 December 2010) under a resulting trust and referring to an injunction to restrain the Liquidators from collecting and selling any of the Company assets … (e) as at 23 December 2010, an email from Mr Levis enclosed a copy of the Company's summary of unpaid invoices which revealed - $81,805.04 of unpaid contractor's invoices; $18,057.65 of unpaid subcontractor invoices; and $6,334.27 of unpaid supplier invoices … (f) as at 23 December 2010, an email from Mr Levis disclosed an amended Form 509 which resulted in a revised deficit of assets to liabilities of $393,562.00 … (g) on Friday 24 December 2010, David Edwards sent a facsimile to me advising that proceedings were being instituted in the Federal Magistrates Court that day seeking an injunction to prevent the Liquidators from taking possession of, or dealing with, any of the assets of the Company. He advised that the Liquidators would be served with a copy of the Applications that afternoon … (h) on 24 December 2010, I informed each of the secured creditors (NAB and De Lage Landen Pty Ltd) of the proposed injunction proceedings and that members of the Nichols family had claimed ownership of the Company's assets under a constructive trust … (i) on 30 December 2010, the Liquidators were served with the Initiating Application filed 24 December 2010 in the Matrimonial Proceedings seeking an injunction to prevent the Liquidators from taking possession or dealing with any of the Company's assets until the true ownership of the assets was established … (j) on 7 January 2011, Dale Cliff (then of ClarkeKann Lawyers) sent an email to me stating that caveats had been lodged by Mr Nichols over the Company's land … (k) on 11 January 2011, the Liquidators received notice that Bunnings Group Limited had lodged a caveat over the Company's land … … (r) there was no available property in the Liquidation of the Company sufficient to enable the Liquidators to carry out further investigations or conduct a public examination and Mr Combis and I, by reason of Section 545 of the Corporations Act, were not obliged (save for lodgement of formal records with the ASIC) to incur any expense in relation to the winding up of the Company; (s) requests for funding, including of Mr [George] Nichols, to carry out further investigations and conduct a public examination were unanswered and in particular the requests to ClarkeKann Lawyers dated 20 January 2011 …, 21 February 2011 …, 5 August 2011 … and 22 May 2012 … … (w) Melinda Nichols did not provide any hard copy or computer files that included information on the transactions involving the funds or disclose any such information in the statutory forms relevant to the Liquidation; (x) neither Melinda Nichols nor any other party surrendered to the Liquidators the computer(s) of the Company to enable the Forensic Technology Division of Vincents Chartered Accountants to conduct an examination of the computer files to attempt to identify an information relevant to transactions involving the funds; and (y) no information regarding transactions involving the funds was provided by Mr Levis who was representing Melinda Nichols. 101 The factors that influenced Mr Dinoris' decision to seek funds from Mr George Nichols (see at [100(r)] and [100(s)] above) to conduct a public examination of various people, including Ms Melinda Nichols, were outlined in his affidavit as follows: (i) the lack of information from the representative of the director, Mr Levis; (ii) the failure of the trace enquiry with the BOQ to reveal the destination of the funds; (iii) the failure of the examination of the Company's MYOB and hard copy records to identify any relevant information; (iv) the factors referred to in the Report to Creditors; (v) the competing claims to the funds (in this case there was a constructive trust claim); (vi) the threats made against the Liquidators where there are insufficient funds to defend same. In this case, there were threats of injunctions against the Liquidators in taking any action in respect to the funds and other assets of the Company. In addition, threats were made to my staff not to deal with or otherwise take any action in respect to any of the assets of the Company; and (vii) the claim by Phillip Nichols that the Company assets formed part of the matrimonial property. 102 By way of additional explanation, Mr Dinoris said in his affidavit that: (q) I did not initially approach all unsecured creditors for funding because, it seemed to me, they did not stand to receive any return on the potential recovery of funds; however, I did include general requests for funding by creditors in my reports to creditors dated 21 March 2012 … and 20 March 2013 ... The information available to me, at that stage, pointed to any claim to the funds coming down to a contest between the NAB and the Nichols family. The funds and assets of the Company were also subject to the claim in Federal Magistrates Court proceedings 12087 of 2010 ("Matrimonial Proceedings") between Melinda Nichols and Phillip Nichols; and (r) I determined to seek funding from the Nichols family as they were adamant that the funds belonged to them. 103 With respect to his dealings with Mr Levis, Mr Dinoris gave the following evidence: (a) … (b) it is correct that there was no response in writing received from Mr Levis in response to the email dated 22 December 2010; (c) the email dated 22 December 2010 did not request a response in writing, though I accept that any response is usually by way of return email; (d) I telephoned Mr Levis on 23 December 2010, and I understood his answers were in, or by way of, response to the email sent to him on 22 December 2010; (e) Annexure "DLC-10" to the Affidavit of Mr Clout is a true copy of the file note prepared by me immediately after that conversation between Mr Levis and I; (f) as recorded in the file note, Mr Levis informed me (in substance or effect) that the withdrawal from the Company's bank account ($236,500.00) was not received or held by Melinda Nichols personally and that such matters would need further investigation; (g) it was plain to me during that conversation held on 23 December 2010 that Mr Levis either did not wish to reveal or did not know the destination of the funds withdrawn from the Company's account on 21 December 2010 ($236,500.00); (h) I recall that I held reservations about what I was being told by Mr Levis, nonetheless there was at that stage no, or no sufficient, evidence available to challenge the veracity of what I was being told by him because it was, at that stage, not at all clear where the funds had gone. At that stage, I did have concerns that the funds may have been dealt with by either the director or a shadow director; The expert evidence of Mr Stimpson and Mr Joiner 104 Each party obtained expert evidence from a chartered accountant and insolvency practitioner: Mr Dinoris from Mr David Stimpson of SV Partners Insolvency (Qld) Pty Ltd; and Asden from Mr Matthew Joiner, a partner in the firm BDO. They were asked to provide their opinions on the question: whether or not Mr Dinoris' conduct as the liquidator of Asden was reasonable in all the relevant circumstances. Both Mr Stimpson and Mr Joiner prepared separate reports and then consulted and prepared a joint report. The joint report essentially abandoned Mr Joiner's report and adopted Mr Stimpson's report, with a number of amendments. This approach was reflected in para 2.1 of the joint report as follows: Mr Joiner and Mr Stimpson agreed that Joiner's Report was accurate in its content, but did not directly deal with the facts in these proceedings. On that basis, Mr Joiner and Mr Stimpson agreed to disregard the contents of Joiner's Report as a basis for preparing this Joint Experts Report. 105 The joint report contained a summary of the two experts' final agreed position, as follows: 4. Summary 4.1. In summary, Mr Stimpson and Mr Joiner agree that generally, Mr Dinoris' conduct was not perfect in that he appears not to have: a) Followed up the Bank of Queensland to obtain a trace to show where the funds were transferred to, and b) Contacted the director directly and demanded immediate return of the funds, however, in Mr Stimpson's opinion, those omissions are not fatal and in the circumstances, not unreasonable. It is Mr Joiner's opinion that the omissions are not reasonable in the circumstances. 4.2. With the exception of the matters in 4.1 above, we agree that Mr Dinoris has fulfilled his obligations as liquidator by investigating the funds transfer, reporting it to ASIC and creditors and seeking funding to pursue recovery of the funds. 4.3. With the exception of the comment in paragraph 6.11.2 as amended by 3.1.14 above we also agree that Mr Dinoris has acted appropriately in dealing with the sale of the boat. 106 This summary was explained and expanded upon in Mr Stimpson's report, as amended by the joint report. Set out hereunder is the part of the summary above, the amendments or comments contained in the joint report and the parts of Mr Stimpson's report to which those amendments or comments refer. 107 Summary 4.1(a) – joint report paragraphs 3.1.4 to 3.1.5 – referring to Mr Stimpson's report at paragraphs 6.1.1 and 6.1.2 Joint report paragraphs 3.1.4 and 3.1.5 3.1.4 In paragraph 6.1.1 the words "subject to sufficient funding" in the first line should be deleted. Mr Stimpson and Mr Joiner agreed that the Liquidator was obligated to undertake enquiries to identify why the funds had been transferred, where the funds had been transferred to and to report that matter to the ASIC if the director appears to have committed an offence by transferring those funds, regardless of whether or not there was sufficient funding in place. 3.1.5 In paragraph 6.1.2 the words "Regardless of whether or not funding was in place" should be inserted at the beginning of the first paragraph. In paragraph 6.1.2a, the word "first" should be inserted in front of the word "recipient" on the fourth line. In paragraph 6.1.2a, the words "in the form of a trace from the bank from where the funds were paid" should be inserted at the end of the paragraph. Mr Stimpson's report 6.1.1 and 6.1.2 6.1 What steps would a competent liquidator take if substantial monies had been withdrawn from the bank account of the company shortly prior to their appointment? 6.1.1 In my opinion, a competent liquidator would, subject to sufficient funding, take all necessary steps to determine why the funds had been transferred, where the funds had been transferred to and was the transfer an offence committed by the director. Subject to adequate funding, the Liquidator should do everything possible to recover the funds and report the transfer to creditors. If the transfer constitutes an offence, the liquidator should report the matter to the Australian Securities and Investment Commission ("ASIC") regardless of whether there are sufficient funds to cover the cost to prepare the report; refer section 545(3) of the Act which provides: (3) Nothing in this section is taken to relieve a liquidator of any obligation to lodge a document (including a report) with ASIC under any provision of this Act by reason only that he or she would be required to incur expense in order to perform that obligation. 6.1.2 The specific steps to be undertaken by a competent liquidator in these circumstances would include: a. Contact the company's bank to obtain the necessary source documentation to prove the funds had been transferred and where the funds had been transferred to. This would include bank statements, source documents (in this case a withdrawal slip) and independent bank confirmation of the recipient of the funds (including bank account number). b. Contact the transferor/director to ask where the funds were transferred. c. As BOQ could only provide a withdrawal slip for $236,500 and the director and the director's adviser ("Levis") did not provide a satisfactory response, it would be reasonable for the Liquidator to assume that the funds were withdrawn and held by the director. On that basis, the Liquidator should forward a formal demand to the director for repayment of the funds. d. If this request was refused or ignored, the liquidator should consider whether to take recovery action against the director which would potentially include a public examination, issue of a claim against the director personally or a related company and an injunction to secure the funds until recovery action is finalised. Before doing so, the Liquidator should first ask the following questions: • Does the Liquidator have sufficient evidence to pursue recovery action and seek the injunction and was legal opinion on the merits of the claim first required? • Was it necessary to first conduct a public examination of the director? • As there were no funds in the Liquidation, should creditor funding be sought? • Were the funds transferred still accessible? If the funds had been dissipated, was it going to be commercially viable to pursue further expensive recovery action? e. The transfer of the funds and the lack of co-operation by the director (if that occurs) should be reported to the ASIC pursuant to section 533 of the Act. f. A creditors meeting should be called to report the potential recovery action and seek funding from creditors. g. Pursuant to section 545 of the Act, if no funding was provided, the liquidator would not be compelled to pursue the action. (Emphasis in original) 108 Summary 4.1(b) – joint report paragraph 3.1.6 – referring to Mr Stimpson's report at paragraphs 6.2.1 and 6.2.2 Joint report paragraph 3.1.6 3.1.6 In paragraph 6.2.2, replace the word "my" in each case with "Mr Stimpson's". Mr Joiner disagrees with Mr Stimpson's opinion and considers that, having regard to the circumstances; Mr Dinoris did not act in a way in which a reasonable Liquidator would have acted. In particular, Mr Joiner considers that it would have been reasonable for Mr Dinoris to have contacted Ms Melinda Nichols on 22 or 23 December 2010 to obtain an explanation of the withdrawal of $236,000 on 21 December 2010. Mr Stimpson's report paragraphs 6.2.1 and 6.2.2 6.2 Having regard to the circumstances set out in the attached materials, in your expert opinion can it be said: a. That Mr Dinoris acted in a way in which no reasonable liquidator would have acted; or b. That the steps taken and decisions made by Mr Dinoris demonstrate a lack of care and skill that was unreasonable in all of the circumstances? 6.2.1 In relation to the transfer of funds, Dinoris: a. sent a notice to the director at 397 Mount Cotton Road on 22 December 2010 requiring her to deliver up any property and money in her possession, b. became aware of the transfer at 4.55pm on 22 December 2010, c. asked Levis via email about the transfer at 5.28pm on 22 December 2010, d. called Levis on 23 December 2010 to ask whether he knew where the funds had been transferred. Levis advised that the director did not have the funds but he thought the Liquidator would need to investigate the transfer, e. received an email from BOQ at 4.40pm on 23 December 2010 enclosing a withdrawal slip showing the $236,500 had been withdrawn. Until this point, Dinoris had no evidence where the funds had been transferred, f. received notice on the 24 December 2010 that the Nichols family intended to apply for an injunction to prevent the Liquidators from dealing with any of the company's assets, g. was served with the injunction application on 30 December 2010, h. sent a request to the solicitors for the Nichols family on 20 January 2011 for funding to investigate the transfer of funds by Melinda Nichols, i. re-sent the notice referred to in a) above to Melinda Nichols at 28 Linda Street on 21 January 2011 and emailed a copy to Levis, j. reported potential offences committed by the director to ASIC on 10 February 2011, and k. requested for the second time whether the Nichols family wished to fund an investigation into the "transactions involving Melinda Nichols". 6.2.2 In my opinion, the above steps demonstrated a sufficiently thorough and expedient investigation of the transfer of the $236,500. The only additional step that could have been taken by Mr Dinoris, but which was not taken, was to contact the director directly to enquire about the transfer. In my opinion, this omission is not unreasonable for the following reasons: i. It appears that there was an understanding that dealings between Director and Liquidator were to go through Levis. Levis initiated the contact with Dinoris to wind up the company, he co-ordinated the signing of the appointment documents by the director and the delivery of the books and records to the liquidator and generally acted as the director's representative. In these circumstances, it is understandable that Dinoris' first reaction was to contact Levis to ask about the transfer. It is not uncommon practice for referrers, whether they are lawyers, accountants or business advisers, to ask that communications to directors be directed through them. Whilst dealing through an adviser may cause delays and "filtering" of information, a liquidator may choose to work in good faith with the adviser in order to obtain the required information for the following reasons: o If the director is stressed and not able to function properly and therefore can't or won't respond or co-operate with the simplest request. In these circumstances, it's best to tread softly and work with the adviser. o If the director is unsophisticated an adviser can short-circuit and assist in some of the obligations a director has in a winding up, such as preparing the Report as to Affairs, providing the books and records or explaining certain transactions. o If both the director and adviser insist that all enquiries go through the adviser, it is sometimes best to agree to this arrangement rather than take an aggressive approach in the first instance. If co-operation is not then received, the liquidator can then resort to such remedies as demand notices requiring the director's attendance pursuant to section 530A of the Act, applications to Court or the delivery of property pursuant to section 483 of the Act or public examinations of the director pursuant to section 596A of the Act. ii. When Levis failed to properly explain the transfer of funds in the telephone conversation on 23 December 2010, the Liquidator should have considered alternative avenues, including direct interrogation of the director. iii. Before challenging the director, if (sic) would have been prudent to first obtain documentation from the bank to confirm how the withdrawal occurred; and this was obtained by Dinoris at 4.40pm on 23 December 2010. iv. On 24 December 2010, Dinoris was put on notice of the injunctive action intended by the Nichols family. v. In these circumstances, where there are no or insufficient funds in the liquidation, in my opinion, it is reasonable for a Liquidator to cease any further action to investigate and pursue recovery of the transferred funds, pursuant to section 545 of the Act. (Emphasis in original) 109 Summary 4.1(b) – joint report paragraphs 3.1.9 to 3.1.11 – referring to Mr Stimpson's report at paragraph 6.4.1 Joint report paragraphs 3.1.9 to 3.1.11 3.1.9 In relation to paragraph 6.4.1a, Mr Joiner and Mr Stimpson agree that the failure of Dinoris to contact Ms Nichols directly on 22 or 23 December 2010 is not ideal, but it is Mr Stimpson's opinion that the failure is not unreasonable in the circumstances. Further, Mr Stimpson believes the perfect or ideal situation would have been for the Liquidator to make direct contact on 23 December 2010, however it is not unreasonable that he didn't. 3.1.10 In relation to paragraph 6.4.1b, Mr Joiner believes it was reasonable for Mr Dinoris to contact Ms Melinda Nichols directly on 22 or 23 December 2010 to seek an explanation of the withdrawal made on 21 December 2010, since she was a signatory on the Company's bank account, who had arranged the withdrawal. Mr Joiner believes that it is possible for funds to be repaid immediately after receiving a demand by a Liquidator, but does concede it occurs infrequently, in his experience. 3.1.11 In paragraph 6.4.1c, the following words should be inserted at the start "On the basis of the conversations with Levis,". Mr Stimpson's report paragraph 6.4.1 6.4. In your expert opinion, can it be said: a. That the failure of Mr Dinoris to telephone or email Melinda Nichols directly on 22 or 23 December 2010 was unreasonable in all of the circumstances?; or b. That the decision taken by Mr Dinoris on 23 December 2010 that there was little to be gained in communication directly with the director was unreasonable in all of the circumstances?; or c. That the decision taken by Mr Dinoris on 20 January 2011 to seek funding from creditors to conduct a public examination of the director and others in order to further his investigations into the whereabouts of the missing funds was unreasonable in all of the circumstances? 6.4.1 I comment as follows: a. In my experience, once funds are transferred from the company's account, they are beyond the Liquidator's immediate reach and so will not be easily recovered. It was not, in my opinion, unreasonable for Dinoris to contact Levis at first instance as the representative of Ms Nichols, which he did on 22 and 23 December 2010. Upon being put on notice on 24 December 2010 that the Nichols family were taking injunctive action, it was reasonable for Dinoris to cease further recovery action. Had the injunction action not been taken and had no acceptable information been received from Levis by say early January, then a failure to contact the director at that point would in my opinion be unreasonable. b. Given Dinoris had formed the view that Levis was acting as a representative of the director before and after the liquidator's appointment, in my opinion, the decision to communicate with Levis at first instance was reasonable. When Mr Levis failed to shed any light on the matter and with Christmas in two days, I believe a prudent liquidator would have tried to contact the director, but only after they had received confirmation of the withdrawal from the bank (4.40pm on 23 December 2010). Therefore, I believe it would have been reasonable to contact the director on 24 December 2010 or shortly after Christmas. However, given the pending injunction action and the clear communication from the Nichols Family that the liquidators were not to deal with the assets, in those circumstances, I would not have taken further action in respect of the transfer. There is a strong argument that the withdrawal of the funds was either an unfair preference pursuant to section 588FA, an uncommercial preference pursuant to section 588FB, or an unreasonable director related transaction pursuant to section 588FDA and was therefore voidable by the Liquidator pursuant to section 588FE. Apart from preference demands served upon the Australian Taxation Office, I have not successfully recovered funds from another party where I have demanded the repayment of a voidable transaction, unless I have either commenced proceedings against that party pursuant to sect ion 588FF of the Act or entered into protracted negotiations with that party. c. I think it was reasonable for Dinoris to conclude that neither Levis or the director were going to co-operate with his enquiries or repay the funds and so further interrogation of both parties and recovery action may be required. Section 545 of the Act provides: Expenses of winding up where property insufficient (1) Subject to this section, a liquidator is not liable to incur any expense in relation to the winding up of a company unless there is sufficient available property. (2) The Court or ASIC may, on the application of a creditor or a contributory, direct a liquidator to incur a particular expense on condition that the creditor or contributory indemnifies the liquidator in respect of the recovery of the amount expended and, if the Court or ASIC so directs, gives such security to secure the amount of the indemnity as the Court or ASIC thinks reasonable. (Emphasis and errors in original) 110 Summary 4.3 – joint report paragraph 3.1.14 – referring to Mr Stimpson's report at paragraphs 6.8 to 6.11 Joint report paragraph 3.1.14 3.1.14 In paragraph 6.11.2, insert at the end the words "However, Mr Dinoris should have made further enquiries to verify the amount of the funds to be received for the Company's equity in the boat". Mr Stimpson's report at paragraphs 6.8 to 6.11 6.8 What rights and/or powers does a liquidator ordinarily have to control how specific property used by a company that is subject to a loan and mortgage is dealt with and/or realised by the secured creditors? 6.8.1 Appointment of a Liquidator will constitute default under most finance agreements, thereby allowing the secured creditor to take possession. 6.8.2 If the secured creditor takes possession of the asset and realises the asset, in the absence of some legal right to for instance injunct the sale, the Liquidator has no right to interfere with the process. The Liquidator must wait for the sale process to complete, but is entitled to any surplus funds once the secured creditor(s) and costs of repossession and sale are paid. 6.8.3 If the secured creditor does not take possession, the Liquidator must either disclaim the asset (if there is no equity) or recover and sell the asset and account to the secured creditor for the proceeds. In the latter circumstances, the Liquidator should agree the terms of reference with the secured creditor in regards to methodology of sale and fees and costs to be paid out of the sale proceeds before proceeding. 6.9 Having regard to the circumstances of this case, do you believe that Mr Dinoris took reasonable steps in relation to the collection and sale of the boat? 6.9.1 Mr Dinoris undertook appropriate searches and obtained documentation to prove the company owned the boat. His actions, in my opinion, to recover the boat and sell the boat at auction were entirely appropriate. In normal circumstances, the boat would have been sold, Yamaha paid out, the costs paid and the surplus returned to the Liquidation. 6.9.2 Shortly after repossessing the boat, the Nichols family claimed ownership. In my opinion. In these circumstances, Dinoris acted appropriately by stopping the sale of the boat to allow the Nichols Family sufficient time to prove their case. 6.9.3 I understand that the director subsequently paid out Yamaha and thus claimed a secured position, which I believe she was legally entitled to (here I make no comment on the source of the funds, as I believe at the time, the Liquidator was not aware that the funds to payout Yamaha came from the $236,500 transferred out of the company's account). 6.9.4 Dinoris advised the director, through Levis, that the Nichols Family were claiming ownership of the boat. Despite that, the director wished to proceed to payout Yamaha and sell the boat. At the same time, Yamaha was threatening to recover the boat from the current auctioneer (thus potentially increasing the costs). In the circumstances, Dinoris had no power to stop Yamaha recovering the boat from Khoury, and once the director had paid out Yamaha, without incurring the cost of obtaining legal advice and potentially taking legal action against the Director, he had no power to prevent her from instructing the agent to sell. 6.10 What steps would a competent liquidator take if informed by a third party that it intended to pay out that secured creditor and then exercise subrogated rights under the mortgage to sell the property? 6.10.1 A competent liquidator would: a. need to draw a conclusion on whether the subrogated creditor had a right to take possession of and sell the boat, and b. determine what effect the sale of the property by the subrogated creditor would have on the return to creditors. 6.11 Having regard to your response to questions 8, 9 and 10, do you believe Mr Dinoris took reasonable steps in the circumstances? 6.11.1 Yes, he first established ownership and then acted quickly to secure and realise the boat. Then when he learned of a dispute from the Nichols family, he acted appropriately cautiously and cancelled the auction. 6.11.2 Notwithstanding the use of some of the $236,500 to payout Yamaha, I believe Dinoris was powerless to prevent both the payout of Yamaha by the director and the sale of the boat by Khoury, once instructed to do so by the director. 6.11.3 The liquidator may have a claim against Private Equity Financial services, but as that company is in liquidation, that argument appears irrelevant. (Errors in original) 111 Both Mr Joiner and Mr Stimpson were cross-examined about the opinions they had expressed in their reports. On the question whether or not it was reasonable for Mr Dinoris not to contact Ms Nichols personally on or after 22 and 23 December 2010, Mr Joiner said: [MR ERSKINE] So I suggest it's not unreasonable for Mr Dinoris in the circumstances to have awaited the results of the Bank of Queensland trace, which he only received at 4.40 pm on 23 December 2010. Are you saying there's something unreasonable in running off and speaking to the director before he got the results here?---Well, on 22 December the – Mr Dinoris' office received the bank statement. So that shows a substantial withdrawal the day before his appointment as liquidator. I think it – in my view it would be reasonable of Mr Dinoris to have presumed that the director was the sole signatory of the company's bank account being the sole director of the company. And that he could presume that the director could fully explain where those moneys had been spent given that it was only the day before. On the 23rd he then receives a copy of the withdrawal slip with the director's signature on it. I presume that's the director's signature if sole signatory. So before he received the withdrawal slip he should have presumed that the director knew all about the withdrawal and he should have been asking the director. Now, as pointed out in paragraph 33 of Mr Dinoris' affidavit, an email inquiry was then made to another person. But what I'm saying is, in my view he ought to have spoken with Ms Nichols. 112 A short time later in his cross-examination, Mr Joiner said that Mr Dinoris did not necessarily have to contact Ms Nichols personally on 23 or 24 December 2010, but he should have done so "no later than 14 days after becoming aware". He added that "the sooner the better if he became aware that the director that made the withdrawal, the day before of his appointment as liquidator … was in control of the funds – remained in control of the funds". 113 When he was asked the same question in re-examination, he gave a similar answer, as follows: Well, in the circumstances the Christmas holiday period commenced shortly after 23 December. So I think it would have been reasonable, in my view, for someone to have contacted Ms Nichols by telephone immediately after reopening of the office in January. Presuming that the office was closed between Christmas Eve and New Year. 114 For his part, in cross-examination, Mr Stimpson largely maintained his opinion that it was not unreasonable for Mr Dinoris not to contact Ms Nichols personally following his telephone discussion with Mr Levis on 23 December 2010. However, he did agree with a number of propositions that qualified this opinion to some extent. First, he said that, in expressing this opinion, he had made an assumption that the dealings between Ms Nichols and Mr Dinoris were to be conducted through Mr Levis. Secondly, he agreed that the discovery of a transfer of funds from a company's bank accounts shortly before the company was placed in liquidation "would have raised serious alarm bells" for the company's liquidator. Thirdly, he agreed that Ms Nichols was the best person to speak to about the transfer of the funds. However, he said that he assumed that, in the circumstances, she was not going to be cooperative. Fourthly, he said that, while the "ideal scenario" was that Mr Dinoris should have contacted Ms Nichols, he thought it was reasonable for him to complete his investigations in relation to the transfer before he made that contact. Fifthly, he said that the main reason why he concluded it was not unreasonable for Mr Dinoris not to contact Ms Nichols direct was because of "the threat of an injunction". When asked what his attitude would be if that threat were removed as a factor, he gave the following answer: [MR MARTIN] So if we remove the threat of an injunction as a factor in this, Mr Dinoris should have contacted the director personally, shouldn't he?---At some point. I don't necessarily concede that it was something that had to be done urgently as in the first couple of days or even in the first week or two. Once the funds are transferred they're out of reach, so it's not going to be something that – you know, recovery of the funds is not going to happen immediately so at some point there would have needed to be either telephone contact, correspondence contact or public examination. 115 In re-examination, when asked whether there was anything on the face of the withdrawal slip "that would lead a reasonable prudent liquidator in the position of Mr Dinoris to conclude that there was a misappropriation at that point in time", he said "Well, clearly the withdrawal of the funds the day before appointment. So yes." The use to be made of the expert evidence 116 On one view, the questions asked of Mr Joiner and Mr Stimpson are essentially the same as the questions that fall to be determined in this matter: whether Mr Dinoris' conduct as the liquidator of Asden was reasonable in all the relevant circumstances (see at [89] above). That being so, it is to be doubted, in my view, whether their answers to those questions were admissible, not because they were directed to the ultimate issue that has to be decided, but because they were not wholly or substantially based upon their specialised knowledge and were therefore irrelevant: see Australian Securities and Investments Commission v Vines (2003) 48 ACSR 291; [2003] NSWSC 1095 at [27] per Austin J. However, having regard to s 80 of the Evidence Act 1995 (Cth) and the observations of McColl JA (with whom Handley and Santow JJA agreed) in Forge v Australian Securities and Investments Commission (2004) 213 ALR 574; [2004] NSWCA 448 at [261]–[273] and also taking account of the fact that neither party objected to the admissibility of the evidence of the other party's expert, I will turn to consider the answers that Mr Joiner and Mr Stimpson gave to those questions and the opinions they expressed in doing so. 117 Nonetheless, in that consideration, I propose to keep a number of matters firmly in mind. The first is the primary purpose of this expert evidence, that is: to furnish the Court with scientific information which is likely to be outside the experience of a judge or jury; or to provide the judge or jury with an inference which, due to the technical nature of the facts, he, she or it is unable to formulate; or to enable a court to evaluate matters observed and the drawing of correct inferences from facts, or to assist the judge or jury by providing special knowledge that the ordinary person would not have so that the judge or jury can make an informed judgment: see Freckelton and Selby, Expert Evidence (5th ed, Law Book Co, 2013) at [2.0.10] and the authorities there cited. The second matter is that the conduct of a liquidator in connection with the winding up of a company is not entirely outside the experience or knowledge of judges who deal with proceedings relating to company liquidations. That is particularly so where that conduct relates to a liquidator's compliance with his or her statutory obligations under the Corporations Act. Thirdly, the matters upon which Mr Joiner and Mr Stimpson have expressed their opinions largely concern questions of practice within an accountant's or liquidator's office, many aspects of which are similar to the practices followed in a lawyer's office, with which most judges would be familiar. Conversely, those matters do not involve the application of an accountant's specialised knowledge, for example, to opine whether a company is solvent. 118 Finally, before turning to consider the expert evidence of Mr Joiner and Mr Stimpson, I should note that Mr Clout, the current liquidator of Asden, gave evidence in this proceeding in which he expressed certain views about the reasonableness or otherwise of Mr Dinoris' conduct. Asden's counsel sought to rely upon this evidence as the evidence of "an independent liquidator appointed by the Court". He submitted that Mr Clout had no direct interest in the outcome of this proceeding and his evidence should be considered accordingly. I do not accept these submissions. In my view, Mr Clout's evidence cannot be treated in the same way as that of an independent expert. Apart from the fact that his expert evidence does not comply with Div 23.2 of the Federal Court Rules 2011 (Cth), as the current liquidator of Asden, he made the decision to commence this proceeding. In doing so, he clearly believed that pursuing this proceeding was in the best interests of Asden. It necessarily follows that he also believed that Mr Dinoris, by his conduct, had breached his duty to Asden and caused it to suffer loss. In such circumstances, to give Mr Clout's views on Mr Dinoris' conduct the status of an independent expert would be preposterous. It would essentially mean that the controlling mind and will of a party to this proceeding would be in a position where he is advising the Court on how to determine a crucial issue in the proceeding. That would fly in the face of all the criticisms of expert evidence expressed in the authorities gathered by Heydon J in Dasreef Pty Limited v Hawchar (2011) 243 CLR 588; [2011] HCA 21 at [56], particularly allowing expert witnesses to act as "advocates or partisans … as much … as the attorneys who conduct the suit". Mr Stimpson's reasoning is not persuasive 119 It is convenient to begin with the point on which both experts now agree. In summary, the effect of the paragraphs of the joint report set out in [107] above is that the steps described in 6.1.2 of Mr Stimpson's report should have been undertaken by Mr Dinoris regardless of the availability of sufficient funding. Given the possibility that an offence may have been committed, I accept this description of Mr Dinoris' obligations in the circumstances of this matter. This disposes of Mr Dinoris' reliance upon s 545 of the Corporations Act (see at [90]–[91] above). With respect to the steps described in 6.1.2 of Mr Stimpson's report (see at [107] above), it is clear on the evidence that Mr Dinoris did not: (a) take steps to trace the destination of the funds: see joint report para 3.1.5 and Mr Stimpson's report at 6.1.2(a); (b) contact Ms Nichols to ask where the funds were transferred: see Mr Stimpson's report at 6.1.2(b); and (c) receive a satisfactory response from Mr Levis, and yet did not make a formal demand of Ms Nichols for the repayment of the funds: see Mr Stimpson's report at 6.1.2(c) above. In relation to (c) above, because it did not specifically mention the withdrawal of the funds, I do not consider the standard form letter Mr Dinoris sent to Ms Nichols on 22 December 2010 constituted such a demand. 120 Next, I turn to the central point on which the experts disagree: whether or not it was reasonable for Mr Dinoris not to attempt to make direct personal contact with Ms Nichols. Mr Joiner considers it was not reasonable and Mr Stimpson considers it was. Paragraph 6.2.2 of Mr Stimpson's report (at [108] above) contains his reasoning for disagreeing with Mr Joiner on this central point. He expands upon that reasoning in paragraph 6.4.1 of his report (at [109] above). For the following reasons, I am not persuaded by Mr Stimpson's reasoning. 121 First, there is no evidence to support the reasoning in (i) of paragraph 6.2.2 (see at [108] above) or paragraph 6.4.1(a) (see at [109] above) of Mr Stimpson's report. On this aspect, Mr Dinoris' evidence above is important. He said that Mr Levis told him that Ms Nichols was "under stress and distracted" because of the family law proceeding (see at [96(c)] above), however, there is no evidence that he thought Ms Nichols was suffering the level of stress, or was in the extreme condition, described in the first dot point under (i) of paragraph 6.2.2. There is also no evidence to support the proposition in the second dot point under (i) that Mr Dinoris thought Ms Nichols was so unsophisticated that Mr Dinoris was justified in using Mr Levis to explain the transactions in question. As for Mr Levis' suggested role, when Mr Dinoris telephoned him to enquire about the transfer of the funds, he obtained a response that did not satisfy him and about which he was suspicious (see [96(g)] and [96(h)] above). Finally, there is no evidence to support the reasoning outlined in the third dot point under (i) of paragraph 6.2.2 of Mr Stimpson's report: that Ms Nichols and Mr Levis insisted that all enquiries should go through Mr Levis. While Mr Dinoris said Mr Levis "requested" (see 96[(b)] above) him to direct communications with Ms Nichols through him, there is no evidence that Mr Dinoris thought he was required to follow that course. When Mr Dinoris telephoned Mr Levis on 23 December 2010, as noted above, Mr Levis told him to investigate the transfer of the funds. Importantly, there is no evidence from Mr Dinoris that Mr Levis expressly told him not to contact Ms Nichols for that purpose. I interpose that, even if there were such evidence, it could not be suggested that, as the liquidator of Asden, Mr Dinoris would have been bound to follow that direction. This, all the more so, in circumstances where, as noted above, he had evidence that Ms Nichols had signed the withdrawal slip to transfer $236,500 out of the company's bank account on the day before it was placed in voluntary liquidation. As the sole director of Asden and the signatory to that withdrawal slip, Ms Nichols was the most obvious starting point for the investigations about the transfer of the funds. 122 Standing alone, the reasoning in (ii) and (iii) of paragraph 6.2.2 of Mr Stimpson's report (at [108] above) supports the conclusion that Mr Dinoris should have made direct personal contact with Ms Nichols. The reasoning in (v) of paragraph 6.2.2 of Mr Stimpson's report is now countered by the agreed opinion described above (at [119]) that, in the circumstances, enquiries should have been made of Ms Nichols regardless of the availability of sufficient funding. None of those paragraphs therefore supports Mr Stimpson's reasoning. 123 That leaves the reasoning in (iv) of paragraph 6.2.2 of Mr Stimpson's report: that Mr Dinoris was put on notice of the injunctive action intended by the Nichols family (see at [108] above). In cross-examination, Mr Stimpson placed his main reliance on this reasoning. However, as was pointed out to him, and which he appeared to accept, the threats to obtain an interlocutory injunction contained in the correspondence passing between Mr Edwards and Mr Dinoris between 22 and 24 December 2010 were directed to Asden's plant and equipment and not to the transfer of the funds out of the company's bank accounts. More importantly, that is the clear tenor of Mr Dinoris' evidence about that exchange of correspondence above (at [100] above). Throughout Mr Dinoris' description of that exchange of correspondence, insofar as it relates to any threat of an injunction, he describes that threat as being directed to "selling the company's assets" (see at [100(a)], [100(b)] and [100(d)] above), to withdrawing funds from the company's bank account (see at [100(a)] above) and to taking possession or dealing with any of the assets of the company (see at [100(g)] and [100(i)] above). Nowhere does Mr Dinoris state that he thought the injunction would prevent him investigating and recovering the funds that had already been transferred out of the company's bank account. 124 To the contrary, to the extent that the transfer of those funds was mentioned in that exchange of correspondence, it shows Mr Dinoris pursuing investigations on that issue with some diligence, but directing them to Mr Edwards' clients, Mr Phillip Nichols and Mr George Nichols (see at [46] above). Indeed, Mr Dinoris concluded that letter with a statement that implied that the issue about the withdrawal of the funds may be the subject of a report to ASIC (see at [47] above). There is, therefore, no indication in his evidence above that Mr Dinoris was in any way diverted from his enquiries into the whereabouts of the funds by any injunction threat contained in that correspondence. 125 In all these circumstances, I do not therefore consider the reasoning in paragraph 6.2.2 of Mr Stimpson's report is persuasive. Instead, I consider the opinions expressed by him at the end of paragraph 6.4.1(a) and in paragraph 6.4.1(b), removed of their qualifications relating to the threat of an injunction, are more compelling: that once no injunction order was served and no satisfactory information was received from Mr Levis, "a failure to contact the director at that point would in my opinion be unreasonable" (6.4.1(a)). And that, in the absence of a pending injunction action relating to the funds, "I believe it would have been reasonable to contact the director on 24 December 2010 or shortly after Christmas" (6.4.1(b)). 126 These opinions therefore essentially accord with those expressed by Mr Joiner that "Mr Dinoris did not act in a way in which a reasonable Liquidator would have acted. In particular, … it would have been reasonable for Mr Dinoris to have contacted Ms Melinda Nichols on 22 or 23 December 2010 to obtain an explanation of the withdrawal of $236,000 on 21 December 2010". Mr Dinoris claimed that this opinion should not be accepted because Mr Joiner did not disclose his reasoning process for it. Whether or not that is so, it happens to accord with my assessment of Mr Dinoris' conduct in all the circumstances of this case which I have summarised below. Before I turn to that summary, it is necessary to dispose of a further contention Mr Dinoris made relying upon the opinions expressed in paragraphs 6.3.1 and 6.3.2 of Mr Stimpson's report about the need to avoid inflexibility in setting standards for liquidators (see at [78] above). Those paragraphs are as follows: 6.3. Should the director/s be contacted directly by the liquidator in every case? 6.3.1 In my opinion it is preferable, but not compulsory that the Liquidator contact the director in every instance. There are times when it is not possible, or very difficult to contact the Director and is therefore more efficient to work through the Director's representative (refer to point 6.2.2(i)). There was evidence or at least a strong suspicion Ms Nichols acted as a puppet director for her husband, an undischarged bankrupt, and she was in the midst of matrimonial proceedings, it is possible she was stressed, unsophisticated or frightened to deal with the Liquidator, or all three. In those circumstances it is reasonable to deal with the adviser who should be able to provide concise information more quickly. 6.3.2 The very nature of a voluntary liquidation is that it should be undertaken in the spirit of co-operation. If the Director requests the Liquidator to deal with the appointed representative, then it is reasonable for a Liquidator to abide, unless and until that level of co-operation ceases. (Emphasis in original) 127 I do not accept that the opinions expressed in these paragraphs apply in the circumstances of this case. At the more general level, the critical question is not whether the director should be contacted directly by the liquidator "in every case", but rather whether Mr Dinoris should have attempted to contact Ms Nichols directly or personally in the relevant circumstances of this case. A concomitant of this principle is that the determination of this question in this case will not set an inflexible rule for all liquidations, nor restrict the general discretion held by liquidators, as Mr Dinoris has contended. 128 As to the particular circumstances of this case, again Mr Dinoris' evidence about the events is critical. In that respect, I have already disposed of the reasoning concerning the level of stress Ms Nichols was suffering and her lack of sophistication above. As to the question of fear, there is no evidence from Mr Dinoris above to suggest that he thought Ms Nichols was too frightened to deal with him. Thus, that rationale for his conduct can be set aside as well. Next, it is necessary to address the question of Ms Nichols acting as a puppet director for her husband. Mr Dinoris' evidence on that issue is set out above (at [96(d)]). It is apparent from that evidence that, with respect to Mr Phillip Nichols, at least on 23 and 24 December 2010, he was assiduously pursuing his investigations into the possibility that he was responsible for the transfer of the funds out of Asden's bank account. In contrast, despite accepting the "real possibility" that Ms Nichols was responsible for the transfer of the funds (see at [96(e)] above) and despite the lack of any satisfactory explanation from her agent, Mr Levis (see at [96(f)] and [96(g)] above), Mr Dinoris' only explanation for not pursuing similar enquiries with her was that such enquiries would "prove fruitless" (see at [96(h) above). This reasoning is, in my view, irrational. I do not therefore accept Mr Stimpson's opinion above that, in all the circumstances, it was reasonable for Mr Dinoris to instead deal with Mr Levis. Finally, I do not consider the desire for a liquidator to deal co-operatively with the director of a company in a voluntary liquidation situation has any bearing upon Mr Dinoris' obligation to make direct personal enquiries of Ms Nichols in the particular circumstances of this case. For these reasons, I do not accept any of the opinions Mr Stimpson has expressed in the paragraphs above. In all the relevant circumstances, Mr Dinoris breached his duty as the liquidator of Asden 129 As is recorded many times above, by the late afternoon of 22 December 2010, Mr Dinoris became aware that $236,500 had been withdrawn from one of Asden's bank accounts on the day before it was placed in voluntary liquidation. Since those funds were deposited in a bank account in Asden's name, they were prima facie part of the assets of the company. Mr Dinoris knew that Ms Nichols was the sole director and shareholder of the company. Moreover, by the late afternoon of 23 December 2010, he became aware that her signature appeared on the withdrawal slip relating to the withdrawal of those funds. Upon acquiring that information, Mr Dinoris clearly thought that Ms Nichols may be able to advise him as to the destination of those funds because he immediately spoke to her agent, Mr Levis, and asked him that question. Mr Levis told him that Ms Nichols did not hold the funds "personally" and that he should investigate the withdrawal of the funds. Mr Dinoris was suspicious of Mr Levis' answer. Importantly, Mr Levis did not tell Mr Dinoris not to speak to Ms Nichols. Further, Mr Dinoris did not ask Mr Levis to provide him with Ms Nichols' telephone number or contact details. Despite the fact Ms Nichols was the most obvious person with information about the withdrawal of the funds, Mr Dinoris did not take any steps to speak to her, at that time, or, indeed, at any time. 130 For the reasons set out above in rejecting Mr Stimpson's reasoning, I am not persuaded that any of the reasons advanced by Mr Dinoris in his evidence justified Mr Dinoris failing to make any personal enquiry of Ms Nichols about the transfer of those funds. While I accept that it was reasonable for Mr Dinoris to investigate the company's MYOB and accounting records and then to seek funds to conduct a public examination of, among others, Ms Nichols, I do not consider that that course constituted a valid substitute for a timely personal enquiry of Ms Nichols about her involvement in the transfer of the funds. Further, it was immaterial whether Mr Dinoris was not confident that he would obtain any information from Ms Nichols, he still should have made the enquiry. Similarly, I do not see how the threat of Ms Nichols further dispersing the funds provided any justification for Mr Dinoris not enquiring of her about their withdrawal. 131 For these reasons, I do not consider Mr Dinoris displayed the care and diligence of a reasonably competent liquidator when he made his decision late on the afternoon of 23 December 2010, and maintained it thereafter, not to attempt to make direct personal contact with Ms Nichols and enquire about the funds that she had withdrawn from Asden's bank account on the day before it was placed in voluntary liquidation. It follows that I consider Mr Dinoris has contravened s 180(1) of the Corporations Act as the liquidator of Asden. In reaching this conclusion, I have been careful to assess Mr Dinoris' conduct by reference to the circumstances that applied at the time and not with the benefit of hindsight. I have also considered whether his conduct constituted a mistake or error of judgment rather than a breach of duty. In all the circumstances outlined above, I consider it was sufficiently deficient to constitute the latter and not the former. I have also had regard to the factors outlined in s 140(2) of the Evidence Act 1995 (Cth) and the observations on those factors set out at [92] above. 132 Before leaving this breach of duty issue, it is convenient to address Mr Combis' role. Curiously he is not mentioned in the issues template and he was not the subject of any submissions by either party. This, despite the fact, as noted at the outset (see at [1] above), that Mr Dinoris and Mr Combis were jointly and severally appointed as the liquidators of Asden and most of the allegations in Asden's amended statement of claim are pleaded against both respondents, that is Mr Dinoris and Mr Combis. Nonetheless, there is no evidence that Mr Combis had any direct involvement in any of the events described above. That being so and unassisted by submissions, I do not therefore consider I can make any finding of a contravention against Mr Combis. I. Breach of duty (b) boat 133 At the conclusion of closing submissions, two things became clear in relation to this boat sub-issue. First, there was no issue between the parties that the boat had been sold at under value. Secondly, and more importantly, this sub-issue was essentially reduced to the question whether Mr Dinoris' failure to supervise the sale of the boat resulted in the invoice for $9,790 being paid to Private Equity, a company associated with Mr Levis. Contentions 134 On this sub-issue, Asden submitted that Mr Dinoris had done nothing to ensure that the equity in the boat was realised for its benefit. It submitted that Mr Dinoris simply allowed Ms Nichols to sell the boat and he took no interest in the distribution of the proceeds of sale thus allowing $9,790 to be paid to Private Equity. Asden submitted that these failings on the part of Mr Dinoris to properly supervise the sale of the boat was a breach of his duty as its liquidator under s 180 of the Corporations Act and that it did not amount to an error of judgment or mistake. 135 Mr Dinoris submitted that he had acted appropriately in recovering the boat and arranging to sell it at auction. He submitted that he also acted appropriately by delaying that sale to allow the Nichols family sufficient time to establish any claim they may have to ownership of the boat. Mr Dinoris submitted that he had no power to stop Yamaha recovering the boat from Auctioneering Link to realise its interests in the boat if its loan were not paid out. Similarly, he submitted that, once Ms Nichols paid out the loan to Yamaha, he had no power to prevent her from instructing Auctioneering Link to sell the boat. He claimed he was not aware that the funds she used to pay out the loan came from the monies that had been transferred out of Asden's bank account. The relevant legal principles 136 The relevant legal principles as outlined above in relation to the Breach of Duty (a) Funds sub-issue apply equally to this sub-issue (see at [80]–[88] above and particularly the summary at [89]). Mr Dinoris' evidence on the sale of the boat 137 The factual circumstances relating to the sale of the boat are described above (at [56]–[63]). As with the funds sub-issue, Mr Dinoris deposed to an affidavit which set out in quite some detail his recollection of the events relating to the sale of the boat. While, in many respects, this evidence duplicates the factual background outlined above, it is still appropriate to set it out verbatim. That evidence is as follows: (g) as at the date of Liquidation the Boat was located at the residence of Phillip Nichols at 92 Heinemann Road, Redland Bay; (h) on 22 December 2010, David Johnstone of Vincents (with the authority of the Liquidators), Mr Levis and Paul Khoury of Auctioneering Link Pty Ltd attended the property to gain possession of the Boat … (i) on 22 December 2010 possession of the Boat was obtained and delivered over to Auctioneering Link in order to secure its possession and safe storage; (j) on 31 January 2011, Ms Del Monte sent an email to Paul Khoury of Auctioneering Link confirming that Auctioneering Link had possession of the Boat and that Auctioneering Link was instructed to sell the Boat at public auction … At that stage, I considered that any proceeds of sale would be utilised toward paying the secured debt of YMF and after the costs to take possession, store and realise the Boat, any net surplus funds would be held pending an investigation into the rightful owner of the Boat and if it was established that it was the Company then the surplus would be remitted to NAB under its security interest over the assets and undertakings of the Company; (k) on 1 February 2011 (4:54pm) an email was received from Dale Cliff of ClarkeKann Lawyers challenging title to the Boat and advising that his instructions were that the Boat was not an asset of the Company and that the Nichols family had a claim to the Boat as constructive trustees … (l) on 1 February 2011 (5:02pm) Ms Del Monte sent an email to Paul Khoury of Auctioneering Link instructing him to refrain from selling the Boat as the ownership was in dispute … (m) on 1 February 2011 (5:04pm) Ms Del Monte sent an email to ClarkeKann Lawyers stating that the documentary evidence indicated that the Boat was owned by the Company … (n) on 8 and 9 February 2011 the Liquidators sought preliminary legal advice as to whether it was likely that the Liquidators could sell the Boat. The solicitors required $1,100.00 for legal advice, and the Liquidators requested Mr Levis to see if Ms Melinda Nichols would pay; … (o) on 21 February 2011 Ms Del Monte sent an email to Scott Taylor of Taylor David Lawyers requesting legal advice as to whether the Boat can be sold and the process by which it could be sold … (p) on 10 March 2011 (5:43pm) Ms Del Monte sent an email to Paul Khoury noting that the Boat was in the Company's name but the borrower under the loan agreement was Melinda Nichols. Ms Del Monte requested Auctioneering Link contact YMF to ascertain the balance owing on the finance for the Boat and discuss the prospects of selling the Boat on the proviso that the loan is paid out and the surplus is returned to the Liquidator … (q) on 11 March 2011 Melinda Nichols received an email from Josephine Smith at YMF advising that the payout figure for the existing Boat loan was $21,348.24. I was not aware of this email until it was disclosed by the Applicant on 9 March 2015 in the current proceedings … (r) it is not in issue on the pleadings that Melinda Nichols paid $21,348.24 to YMF to extinguish the borrowings under the Boat loan … (s) on 16 March 2011 Ms Lauren Del Monte spoke with Josephine Smith at YMF. Ms Smith advised that she was not able to provide an update on the Boat but confirmed that matters had been "sorted out" … (t) I received an email from Mr Levis seeking confirmation that if Melinda Nichols paid out the balance of the loan owing to YMF, she was able to instruct Paul Khoury of Auctioneering Link to sell the Boat … (u) I responded on 23 March 2011 (3:39pm) stating: ". . . I understand that Melinda Nichols will be satisfying the secured debt owed to Yamaha and stepping in the shoes of that secured creditor to realise the boat under "the common law principle of subrogation. I would not be in a position to object to any party claiming a secured interest over the boat from selling it." This was on the basis that in the circumstances, where the director was bound to pay under the loan agreement and certainly had an interest to protect in making the payment, it appeared to me that there was a reasonable basis for the Liquidators to consider that the director upon extinguishing the debt (subject to the YMF charge) would become the equitable assignee of the charge. At the time, l had no knowledge of where Melinda Nichols might have obtained the money to discharge the Boat YMF loan …; (v) on 28 March 2011, Melinda Nichols sent an email to Paul Khoury of Auctioneering Link instructing him to sell the Boat at auction and that she expected to receive $21,348.24 as reimbursement to her for the payment of the YMF loan and any balance of the proceeds to be paid to Liquidators … (w) on 6 April 2011 (5:05pm) Ms Del Monte received an email from ClarkeKann Lawyers advising that the Boat loan had been paid out the week before. ClarkeKann Lawyers sought confirmation as to whom paid out the loan and the current whereabouts of the Boat. The email asserted that the Nichols family's position was that the Boat was not a Company asset. Ms Del Monte responded by email (5:29pm) confirming that the Liquidators did not hold any documentation regarding the payout of the loan and had not issued any instructions regarding the Boat and that the Liquidators were preparing a letter to ClarkeKann Lawyers with a view to commercially settling the constructive trust claim, including the land which is being sold by NAB as mortgagee in possession … (x) On 7 April 2011, the Nichols family filed a Claim and Statement of Claim in the Supreme Court Proceedings against the Company (First Defendant) and Melinda Nichols (Second Defendant) seeking: (i) a declaration that they hold the property and assets on a constructive trust or alternatively on a resultant trust, (ii) a declaration that the assets be transferred to them; and (iii) an injunction preventing the Company from selling or otherwise dealing with the property. The pleadings were not served on Nick Combis and myself until 19 April 2011. … (y) notwithstanding the assertion that the Boat was not a Company asset, there was no claim made for the Boat in the Supreme Court Proceedings; (z) on 18 April 2011, the Boat was sold by Paul Khoury of Auctioneering Link on the instructions of Melinda Nichols and proceeds distributed as follows: Sale Price $52,000.00 Uplift boat to storage, storage of boat, advertising, boat search and detail boat $3,850.00 Commission $7,800.00 Melinda Nichols distribution $21,348.24 Private Equity Financial Services $9,790.00 GST $4,278.82 Distribution to Asden Developments Pty Ltd $4,932.94 Mr Khoury's evidence on the sale of the boat 138 Mr Khoury, the principal of Auctioneering Link, made an affidavit in which he deposed to his involvement with the sale of the boat. The relevant paragraphs of that affidavit are as follows: 20. The documents that had been provided by Lauren Del Monte indicated that the Boat was owned by the Applicant Company. I conducted my own searches and confirmed that Ms Nichols was the Director of the Applicant Company and that the Applicant Company was the registered owner of the Boat. 21. Once the Boat was transported to my business premises, I arranged for the Boat to be detailed, valued, marketed and stored. The Boat was large and blocked part of the access to the premises … 22. In January 2011 I telephoned Lauren Del Monte to obtain instructions to sell the Boat. Ms Del Monte provided those instructions by email, received at 2.07pm on 31 January 2011. 23. … 24. I recall that some legal issues arose on the following day with regard to the sale of the Boat and I received a further email from Lauren Del Monte at 5.02pm on 1 February 2011 instructing me not to sell the Boat. I responded by return email at 5.53pm that day, confirming Ms Del Monte's instructions. 25. … 26. On 10 March 2011 I received a telephone call from Lauren Del Monte who advised that the loan for the Boat was in Ms Nichols' name, but that the Applicant Company records indicated that the Boat had been purchased in the Company's name. Ms Del Monte advised that the Boat loan was with Yamaha Motor Finance Australia and she asked me to contact Yamaha Motor Finance Australia to ascertain the payout figure for the loan and to discuss the prospects of selling the Boat on the proviso that the Yamaha loan was paid out and any surplus to be returned to the Liquidators. Ms Del Monte sent me a follow up email at 1.40pm that day confirming the discussion and her instructions. 27. … 28. On or about 10 or 11 March 2011 I was contacted by Mr Levis who advised that he had spoken to Yamaha Motor Finance but was unable to obtain any relevant information. I telephoned Yamaha Motor Finance Australia to discuss the prospect of selling the Boat and paying the outstanding balance on the loan to Yamaha. The representative of Yamaha Motor Finance Australia, Josephine, was adamant that I was not to sell the Boat as she wanted to have an auctioneer from Yamaha's panel to uplift the Boat and sell it at their next auction. I advised Josephine that I had incurred costs regarding the uplift and storage of the Boat but Josephine advised me that I would have to seek reimbursement of these funds from the Liquidator as Yamaha was not interested in having me sell the Boat. I advised Josephine that I would discuss the matter with Mr Levis and Lauren Del Monte and then revert to her. 29. Mr Levis informed me that he would contact Ms Nichols to discuss the possibility of her paying out the Yamaha loan given that she was the registered owner of the Boat, and that way Ms Nichols would be in a position to instruct me to sell the Boat which would ensure that the fees would be recovered. 30. On or about 28 March 2011 Ms Nichols telephoned me to advise that she had contacted Yamaha Motor Finance Australia and had reached an agreement. She confirmed that she had paid out the balance of the loan and instructed me to sell the Boat at auction and distribute the sale of proceeds, less my expenses, such that $21,348.24 was to be reimbursed to Ms Nichols for paying out the loan, and the balance of the proceeds of sale were to be paid to the Liquidators. 31. At 12.02pm on 28 March 2011 I received an email from Ms Nichols instructing me to sell the Boat at auction. Ms Nichols confirmed that she had been authorised by the Liquidator for the Company to instruct me and give authorisation to sell the Boat. Ms Nichols stated that she expected to receive $21,348.24 as reimbursement for paying out the Boat loan, with the balance of the proceeds to be paid to liquidators. I responded by email to Ms Nichols at 1.35pm that day, thanking her for her instructions. 32. … 33. I subsequently advised Lauren Del Monte that I had been instructed by Ms Nichols to sell the Boat as she had paid out the loan to Yamaha Motor Finance Australia. I confirmed that I had been instructed to reimburse Ms Nichols from the proceeds of sale for paying out the loan. Ms Del Monte was satisfied with the arrangement and asked that I keep her apprised of the outcome. 34. I sold the Boat at auction on 18 April 2011 in accordance with the instructions I had received from Ms Nichols and Lauren Del Monte. The Boat was sold for $52,000.00 including GST. 35. At 2.05pm on 21 April 2011 I sent an email to Ms Nichols confirming that $21,348.24 had been deposited that day into the bank account for TJI Investments Pty Ltd. 36. … 37. On or around 21 April 2011 Mr Levis presented his account and I paid $9,790.00 to Urban Property Consultants Pty Ltd as instructed. 38. At 1.44pm on 9 November 2011, I received an email from Lauren Del Monte requesting that the funds I was holding on trust from the sale of the Boat be transferred into the Liquidators' account. I responded at 6.15pm on 23 November 2011 advising that the trust cheque had been sent to Liquidators in August. I confirmed that I would cancel the cheque and arrange to direct deposit the funds into the Liquidators' account. 39. … 40. At 8.38am on 2 December 2011 I received a follow up email from Lauren Del Monte inquiring as to when the Liquidators could expect to receive the balance of the funds from the sale of the Boat. I responded to Ms Del Monte at 11.31 am on 22 December 2011 advising that the sale funds had not been taken out of my trust account and that I would re-issue the payment immediately. Ms Del Monte responded at 12.12pm that day requesting that I direct deposit the funds into the Liquidators' account and confirm the exact sum to be transferred. 139 Mr Khoury's evidence in relation to the account Mr Levis presented to him for the sum of $9,790 was as follows (see at [138(37)] above). On the morning of 22 December 2010, he attended at Mr Phillip Nichols' residence in Redland Bay with Mr David Johnstone, of Vincents Chartered Accountants, and Mr Levis to collect the boat and trailer. On or about 21 April 2011, he said he received a tax invoice from Private Equity dated 18 April 2011. He said this invoice related to services provided by Mr Levis through Private Equity in connection with the sale of the boat, including assisting in the collection, repossession and transportation of the boat to the storage site as well as preparation and assistance for the sale of the boat. He said that he caused the invoice to be paid to Private Equity from the proceeds of sale of the boat on or about 21 April 2011. 140 Mr Clout, the current liquidator of Asden, was cross-examined about this issue as follows: [MR ERSKINE] So they're charges by Private Equity or Mr Levis not to Melinda Nichols, not to the company, but to Mr Khoury's company, Auctioneering Link. … Can I suggest to you that had you contacted Auctioneering Link, Mr Paul Khoury, he could have provided a copy of that to you?---I'm – I'm familiar with that copy. I'm not sure when I saw it. But I understand it was the cost of the realisation of the boat. Yes. And if it is a cost of realisation of the boat, then it was paid for services rendered?--- ..... It's an administration cost. Yes. And if it's paid for services rendered, you have no reason to believe that the service was not properly rendered?---Correct. Therefore, that is not a loss to the company because it's a cost of sale of the asset?---That's correct. Mr Joiner's and Mr Stimpson's opinions on the sale of the boat 141 The agreed position of Mr Joiner and Mr Stimpson on this sub-issue is set out at paragraph 4.3 of their joint report (see at [105] above). That paragraph refers, in turn, to the statement in paragraph 3.1.14 of the joint report to the effect that "However, Mr Dinoris should have made further enquiries to verify the amount of the funds to be received for the Company's equity in the boat". With the exception of this statement, Mr Joiner and Mr Stimpson agree that Mr Dinoris' conduct with respect to the sale of boat was reasonable in all the circumstances. 142 With respect to this qualification, Mr Dinoris referred to the evidence of Mr Joiner in cross-examination to the effect that he had not had regard to the contents of the email Ms Nichols sent to Mr Khoury at Auctioneering Link on 28 March 2011 giving him instructions to sell the boat (see at [61] above). As Mr Dinoris pointed out in submissions, the context to this email is important because it establishes that Ms Nichols gave those instructions to Mr Khoury after obtaining advice from her family lawyer about her rights of subrogation if she paid out the loan that was owing to Yamaha. Mr Dinoris had agreed to this course in his earlier email on 23 March 2011 (see at [59] above). I did not, therefore, gain any assistance from the opinions in the joint report above. No breach of duty by Mr Dinoris re the sale of the boat 143 I do not consider there is any evidence to support a conclusion that Mr Dinoris breached his duty to Asden as its liquidator with respect to his supervision of the sale of the boat. He properly appointed an agent, Mr Khoury of Auctioneering Link, to collect the boat and sell it. There is no suggestion that Mr Khoury did not discharge his duties competently and diligently as the selling agent for the boat. Having made that appointment, I do not consider Mr Dinoris was required to supervise Mr Khoury in his conduct of the sale. I also do not consider Mr Dinoris was in any way derelict in his duties by agreeing to the proposition that Ms Nichols should be paid $21,348.24 from the proceeds of sale if she first paid out the Yamaha loan to facilitate the sale. Without that loan being paid out, Mr Khoury could not sell the boat. After the settlement of the sale, Mr Khoury received an invoice from Private Equity, Mr Levis' company, and paid that invoice. It is clear on the evidence that Mr Levis had some involvement in the collection of the boat and in making the arrangements for Ms Nichols to pay out the loan to Yamaha. Whether he was justified in claiming $9,790 was something for Mr Khoury to assess. On that question, Mr Clout said in his evidence (see [140] above) that he had no reason to believe that the services described in Private Equity's invoice were not properly rendered and that it was therefore a proper cost of the sale of the asset. There is, therefore, nothing to support a conclusion that Mr Dinoris contravened s 180(1) with respect to the sale of the boat. II. Loss The loss claim 144 Having found that Mr Dinoris breached his duty to Asden as its liquidator with respect to the funds sub-issue, it is next necessary to consider whether Asden suffered any loss as a result of that breach and, if so, the quantum of that loss. In its amended statement of claim, Asden claims that, if Mr Dinoris had not breached his duty to it as its liquidator and had made a direct personal enquiry of Ms Nichols about the whereabouts of the funds in late 2010, "the funds would have been retrieved for [its] benefit". This claim relies entirely on the evidence of Ms Nichols to the effect that, had Mr Dinoris made an enquiry of her about the whereabouts of the funds at that time, she would have paid them to him as the liquidator of Asden. Contentions 145 Asden submitted that Ms Nichols' evidence that she would have returned the funds to Mr Dinoris should be accepted. In support of this contention, it pointed to her evidence in cross-examination that Mr Dinoris was the liquidator and "the authority" and, if approached by him at the time, she would have complied with his direction. With respect to the $56,500 retained by Mr Levis, Asden submitted that, once Mr Dinoris obtained the funds held by Ms Nichols, those funds "could have easily been recovered from Levis". On this aspect, Asden pointed to the relationship between Mr Dinoris and Mr Levis and contended that it was likely that a threatening telephone call from Mr Dinoris would have prompted Mr Levis to repay the money. In response to Mr Dinoris' contentions that Ms Nichols' evidence should not be accepted because: she had not complied with the demand from Anthony's Lawyers; she had not disclosed the existence of the funds in the Form 507 report she signed on 22 December 2010; and she stated in one of her family law affidavits that her motivation for removing the funds was to avoid being left in dire financial circumstances, Asden submitted that regard should be had to the facts: that Ms Nichols was "very naïve" and relied entirely on the advice of Mr Levis; that Mr Levis had completed the Form 507 report; that Mr Levis had reassured her, in relation to the transfer of the funds, that "everything was fine" and that, at the time she received the letter from Anthony's Lawyers, she was in dispute with the Nichols family. Further, Asden submitted that the advice Ms Nichols received from Mr Doyle, her family law lawyer, was clearly wrong. 146 Mr Dinoris submitted that Ms Nichols was not a credible witness. He submitted that in giving her evidence she struggled to recall critical events at the time and was guarded, cautious and less than candid. He contended that the answer Ms Nichols gave in her evidence-in-chief was in response to a leading question and that answer should be weighed accordingly. He submitted that, on the objective evidence, it was highly improbable that Ms Nichols would have repaid the funds if contacted by Mr Dinoris because: she had received advice from Mr Levis to transfer the funds; in any event, she only controlled $180,000 of the $236,500 transferred; she did not disclose the existence of the funds in the Form 507 report she signed; and she did not respond to his letter of 22 December 2010 requesting her to deliver up the assets of the company. Further, Mr Dinoris submitted that Ms Nichols did not respond to the demands from Anthony's Lawyers and, instead, placed the funds in Mr Doyle's trust account. Mr Dinoris also pointed to Ms Nichols' affidavits filed in the family law proceeding as evidence of Ms Nichols' true beliefs at the time. Mr Dinoris contended that, if Ms Nichols had been approached by him personally on 22 or 23 December 2010, or shortly thereafter, she would either have sought legal advice from Mr Doyle and paid the funds into his trust account, or sought advice from Mr Levis, who would most likely have not advised her to return the funds. Finally, Mr Dinoris submitted that the loss sustained by Asden was caused by Ms Nichols' conduct in transferring the funds out of the company's bank accounts and not by any negligent act on his part. Relevant legal principles 147 Asden has relied upon s 1317H(1) of the Corporations Act to make this claim. That subsection provides: Compensation for damage suffered (1) A Court may order a person to compensate a corporation or registered scheme for damage suffered by the corporation or scheme if: (a) the person has contravened a corporation/scheme civil penalty provision in relation to the corporation or scheme; and (b) the damage resulted from the contravention. The order must specify the amount of the compensation. Note: An order may be made under this subsection whether or not a declaration of contravention has been made under section 1317E. 148 The requirement of s 1317H(1)(a) above has been met because I have already found that Mr Dinoris contravened s 180(1) of the Corporations Act which is a civil penalty provision (see [92] above). 149 On its face, the requirement in s 1317H(1)(b) above imports an element of causation between that contravention and any damage suffered by Asden. 150 As a general principle, it is well-established that causation is a question of fact applying "common sense" to the facts of each case: see March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 at 515 per Mason CJ; 523 per Deane J; and 531 per McHugh J. 151 The particular content of the causation element in s 1317H(1)(b) of the Corporations Act was considered by Edelman J in Agricultural Land Management Ltd v Jackson (No 2) (2014) 48 WAR 1; [2014] WASC 102 (Jackson). After referring to a number of "curiosities" in s 1317H (at [434]–[438]) and reviewing its history (at [440]–[448]), Edelman J referred to the decision of Giles JA (with whom Mason P and Beazley JA agreed) in Adler v Australian Securities and Investments Commission (2003) 179 FLR 1; [2003] NSWCA 131. In that decision, Giles JA rejected (at [708]) any analogy between s 1371H and equitable claims against fiduciaries and concluded (at [709]): In my opinion, the words "resulted from" in s 1317H are words by which, in their natural meaning, only the damage which as a matter of fact was caused by the contravention can be the subject of an order for compensation. Like the word "by" in s 82 of the Trade Practices Act 1974 (Cth) (see Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494 at [38]-[42]), they should be given their ordinary meaning of requiring a causal connection between the damage and the contravening conduct, free from the strictures of analogy with equitable claims against fiduciaries. 152 Based on these observations, Edelman J accepted the proposition that recovery under s 1317H "is only possible for the damage which as a matter of fact was caused by the contravention" (at [450]), but observed in Jackson that that still left unanswered "the meaning and approach to be taken to causation" (at [450]). His Honour then proceeded to answer that question in the following terms: 451 In Adler, Giles JA applied a "but for" approach as a negative criterion. The same "but for" approach has been applied as a negative criterion by the plurality of the High Court of Australia in relation to compensation for breach of statutory proscriptions against misleading or deceptive conduct. Their Honours referred to "the essential question of causation" and spoke of "determining what action or inaction would have occurred if the true position had been known". 452 The application of an analogy with equitable compensation reaches the same conclusion; as explained above, reparative compensation for a breach of fiduciary duty of this type should involve a negative "but for" criterion. Although Giles JA warned against the application of equitable analogies to s 1317H, it is hard to see why analogies cannot be drawn with the approach to causation taken to breaches of near-identical duties in equity. As I have explained, the meaning of causation is intimately connected with the character of the duty breached. Section 1317H provides remedies for provisions, many of which concern breaches of duties owed by directors. Those duties were historically recognised only in the Court of Chancery. Perhaps for this reason, Lee AJA observed in Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) that it "may be thought that the words 'as a result of' or 'resulted from' imported the test applied in equity for linking a breach of duty in equity to loss or damage suffered". (Footnotes omitted) 153 Earlier in his judgment in Jackson, Edelman J had remarked on the use of the "but for" test within the "common sense" approach to causation as follows (at [394]): Within a "common sense" approach it has been held that at common law the "but for" test has an important role to play as a negative criterion. In other words, it is generally necessary, but not always sufficient, for the plaintiff to prove that the plaintiff's loss would not have been suffered but for the defendant's breach of duty. (Footnotes omitted) 154 The most recent High Court judgments his Honour relied upon for these remarks was the decision of Kiefel J in Tabet v Gett (2010) 240 CLR 537; [2010] HCA 12 at [112] as follows: The "but for" test is regarded as having an important role in the resolution of the issue of causation, although more as a negative criterion than as a comprehensive test. The resolution of the question of causation has been said to involve the common sense idea of one matter being the cause of another. But it is also necessary to understand the purpose for making an inquiry about causation and that may require value judgments and policy choices. (Footnotes omitted) 155 Asden's claim for loss in this case is very much founded on applying the "but for" test. That is so because, as I have already noted above, it relies entirely on the evidence of Ms Nichols to the effect that, had Mr Dinoris made an enquiry of her in late 2010 about the whereabouts of the funds, she would have paid them to him as the liquidator of Asden. The observations above are therefore particularly pertinent to the causation issue in this matter. Given the hypothetical character of Ms Nichols's evidence, it is also appropriate to consider the principles relating to evidence about what an individual would, or would not, have done in particular circumstances. 156 A plaintiff's subjective evidence about what he or she would, or would not, have done if the negligent conduct in contention had not occurred is now inadmissible under the Civil Liability legislation in force in many jurisdictions in Australia: see s 5D(3)(b) of the Civil Liability Act 2002 (NSW); s 11(3)(b) of the Civil Liability Act 2003 (Qld); s 5C(3)(b) of the Civil Liability Act 2002 (WA); and s 13(3)(b) of the Civil Liability Act 2002 (Tas). The hindsight bias inherent in such evidence was one of the main reasons underpinning the introduction of these provisions. So much appears from the Final Report of the Review of the Law of Negligence (Commonwealth of Australia, Canberra, September 2002), where the authors observed (at para 7.40): The enormous difficulty of counteracting hindsight bias in this context undermines the value of such testimony. In practice, the judge's view of the plaintiff's credibility is likely to be determinative, regardless of relevant circumstantial evidence. We therefore recommend that in determining causation, any statement by the plaintiff about what they would have done if the negligence had not occurred should be inadmissible. (Emphasis added) 157 Similar reservations about the value of such evidence have been expressed in medical negligence cases involving a doctor's failure to warn a patient about the risks of surgery. For example, in Rosenberg v Percival (2001) 205 CLR 434; [2001] HCA 18 (Rosenberg), Callinan J observed (at [221]): It is perfectly understandable that a person who has suffered what the respondent suffered here would say, and might also even have come to believe implicitly that she would not have had the operation had she known of the risk which has in fact materialised. That would usually be, and it probably was here an honest belief on the part of the respondent at the time that she gave her evidence. However, the true position is much more likely to be, no matter what a plaintiff may have honestly come to believe, that she cannot really say, in an absolute way, that she would have not had the operation. The much more likely position is that perhaps she might not have. See also [15]–[17] per Gleeson CJ; [44]–[45] per McHugh J; [86]–[87] per Gummow J; and [157]–[158] per Kirby J. 158 The position in cases of deceit or misrepresentation under s 52 of the Trade Practices Act 1974 (Cth) (now s 18 of the Australian Consumer Law) was considered in Lord Buddha Pty Ltd (In Liq) v Harpur (2013) 41 VR 159; [2013] VSCA 101 (Lord Buddha). After carefully reviewing the authorities (at [128]–[159]), Vickery AJA (with whom Weinberg and Tate JJA agreed) concluded as follows (at [159]): The drawing of the inference, on application of these principles, is but part of the fact-finding which must be undertaken on the whole of the evidence to determine the ultimate question on the issue of material inducement leading to reliance, namely whether or not the representee has satisfied the trier of fact on the balance of probabilities that the representation(s) in question contributed to the representee's decision to enter into the contract such that, whether alone, or with or notwithstanding other things that accompanied it, the representation(s) operated as a real inducement or one of the real inducements, to the representee to do so. The task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. (Footnote omitted) 159 While they were made in a different context, I consider these observations are of assistance in the approach to be taken in this matter. 160 Ms Nichols is not the plaintiff in this case. It therefore follows that she has no obvious personal interest at stake in the outcome beyond, perhaps, the natural inclination to be seen to be doing the right thing. Her hypothetical evidence about what she would have done in the circumstances must therefore be treated differently to the plaintiff negligence cases mentioned above. Nonetheless, her evidence still relates to her state of mind with respect to a hypothetical event posited to have occurred in the relatively distant past, that is five years earlier. Such subjective evidence is plainly not determinative of the causation issue in this case. Instead, as Vickery AJA observed in Lord Buddha above, the probabilities of her acting in that way have to be assessed objectively in the light of her conduct as a whole, taking into account all the relevant surrounding facts and circumstances. Ms Nichols' evidence about what she would have done if approached by Mr Dinoris 161 It is convenient to begin with the two passages of Ms Nichols' evidence where she addressed this hypothetical situation. First, in her evidence-in-chief, Ms Nichols gave the following evidence: [MR MARTIN] Now, if on the 22nd or 23 December, taking into account that the company was wound up on 22 December, if either on the 22nd or 23 December, the liquidator or one of them, Mr Dinoris or Mr Combis, had rung you and asked you about these transactions and the money in the bank account of the company that had been taken out, what would you have told them?---Well, I would have told them the truth, where it had gone. If they had asked you to repay what you had, what would you have done?---I would have repaid it. 162 Then, in cross-examination, she gave the following evidence: [MR ERSKINE] And I suggest to you that had Mr Dinoris telephone you on 21 December enquiring about 236,500, you would have sought the advice of Mr Levis?---No. Maybe, I'm not sure. Maybe I would have. But Peter Levis, as far as I'm aware, was communicating everything that had happened between – with Peter Dinoris. So I would have thought that if Peter Dinoris was ringing me then Peter Levis would already know about it. … MR ERSKINE: … Now, in evidence-in-chief yesterday you gave evidence that had Mr Dinoris or Mr Combis rung you on or about 22 or 23 December and asked about these transactions and the money in the bank account of the company that had been taken out that your evidence is that you would have told them truth. Do you recall saying that?---Yes. Where it had gone, and you would have repaid it. Do you remember saying that?---Yes. … MR ERSKINE: All right. I suggest you would not have repaid the money?---No, I – I think that I would have repaid the money. I put to you that you would have sought the advice of Mr Levis?---Well, like, I've said Peter Levis was – Peter Levis told me that Peter Dinoris was already aware of what had happened with this money so - - - And I suggest initially - - - HIS HONOUR: So was the answer yes or no? You would have told – you would have sought Mr Levis' advice or no?---Yes, I – I suppose, yes. You would have?---As far as his advice I – I probably would have spoken to him, but as far as paying it back, I mean, Peter Dinoris, he is the liquidator as such. So he, you know, he is the – the authority so I – I guess I'm trying to say I – I would have paid it back. MR ERSKINE: Well, you had already received a letter - - -?---I just – I - - - I'm sorry?---Sorry. It – this is just a little bit because Peter Dinoris and Peter Levis as far as I'm aware through this whole thing knew. So had I received a phone call from Peter Dinoris I do believe I would have paid it back. But you didn't expect at all to have any communication with Mr Dinoris direct. You appointed Mr Levis for that sole purpose or main purpose. Mr Levis handled all of the communications between you and Mr Dinoris, correct?---Yes, yes, that's correct. … MR ERSKINE: Well, it was correct, was it not, that you appointed Mr Levis to handle all of the dealings with professionals including between you and the liquidator, Mr Dinoris?---Yes. You agree with that. And most, if not all of the communications that you received from the liquidators went through Mr Levis?---Yes. So you, in those circumstances, would accept, I suggest, that if information or request for information was coming to you from the liquidators it would go through Mr Levis, your agent?---Yes. Are you aware that Mr Dinoris did, in fact, request of Mr Levis what happened to the moneys? Did you know that?---No. So Mr Levis didn't tell you?---No. It is unlikely Ms Nichols would have paid the funds to Mr Dinoris 163 When Ms Nichols' evidence at the trial of this matter approximately five years after the events of late 2010 and early 2011 is assessed against the evidence bearing on all the relevant surrounding circumstances existing at that time, I consider the likelihood is that she would not have responded to an enquiry from Mr Dinoris in late 2010 or early 2011 by agreeing to pay back the funds. Instead, I consider she would most likely have sought advice from Mr Levis, or Mr Doyle, or both of them, and acted on that advice. Further, in the circumstances, I consider it is more likely that both Mr Levis and Mr Doyle, for different reasons, would have advised her not to repay the funds to Mr Dinoris. My reasons for reaching this conclusion are set out below. 164 First, I agree with Mr Dinoris that the second and most critical question put to Ms Nichols in her evidence-in-chief above (at [161]) was a leading question: "If they had asked you to repay what you had, what would you have done?" Her answer ("I would have repaid it") must therefore be weighed accordingly. Furthermore, the question was so imprecise and the answer was so ambiguous that its meaning is difficult to discern. There is no difficulty with the word "they" in the question because, in the context of the previous question, it plainly meant Mr Dinoris or Mr Combis: "if on the 22nd or 23 December, … Mr Dinoris or Mr Combis, had rung you and asked you about these transactions and the money in the bank account of the company that had been taken out, what would you have told them?" However, in the same context, the words "repay what you had" is more problematic. It could mean the money "that had been taken out" of the company's bank account, or it could mean the money that Ms Nichols "had" at the time. Both possibilities are open on the previous question and both suffer from similar difficulties. On the first possibility, in fact, there were at the time two company bank accounts – one at Suncorp and one at the Bank of Queensland – and different amounts had been taken out of each at different times: $264,531.02 from the Suncorp account on 15 December 2010 and $236,500 from the Bank of Queensland account on 21 December 2010. On the second possibility, the difficulty is whether "had" meant in her possession, or under her control, bearing in mind the fact that, at the time, Mr Levis had the remainder of the money, namely $56,500. These features demonstrate the importance of framing precise non-leading questions when a witness is being asked to state how he or she would have acted in a particular hypothetical situation. In this case, the imprecise and leading nature of the question significantly affects the weight that can be given to Ms Nichols' answer. 165 Next, it is convenient to review the evidence relating to Ms Nichols' emotional state in late 2010 in order to assess the effect, if any, that had on the reliability of her evidence given at the trial of this proceeding. On this aspect, two observations are appropriate at the outset. First, the only evidence I have received about the events of late 2010 concerning the dealings between Ms Nichols and the Nichols family, including her former husband Mr Phillip Nichols, comes from Ms Nichols herself. I have not heard any evidence from any member of the Nichols family as to their version of those events. It follows that my observations about those events must necessarily be read in that light. Specifically, in recording Ms Nichols' views about the conduct of various members of the Nichols family, I should not be taken as accepting the accuracy of those views, merely that those are the views Ms Nichols held about those events. Secondly, I consider that the affidavits Ms Nichols made in April 2012 and January 2013 for the purposes of the family law proceeding commenced by her husband are more likely to reflect her state of mind in late 2010 than the evidence she gave at the trial of this proceeding. 166 Late 2010 was clearly a stressful period for Ms Nichols. From her affidavits filed in the family law proceeding and her oral evidence at the trial, it appears that there were many sources of this stress. They included: the separation from her husband, the domestic violence order application she made and the subsequent and related withdrawal of support from her parents-in-law: see at [19] above. They also included the contemporaneous financial pressures associated with Asden's affairs. On this aspect, it is important to recall that Ms Nichols claimed she only became involved as the sole director of Asden because Mr Phillip Nichols and Mr George Nichols asked her to do that. She added that Mr Phillip Nichols was bankrupt at the time the company was established. 167 In my view, this stress affected the reliability of Ms Nichols' evidence about the events of this period. She acknowledged as much in cross-examination when she said her recollection of those events was: "A little bit hazy, but I would try and – I will do my best. I've tried to put a lot of this behind me." I do not therefore consider her hypothetical evidence about what she would have done in this period is likely to be accurate. 168 The above conclusion is further supported by her pattern of conduct during this period as follows. Asden's financial pressures began to emerge in October/November 2010 and continued until its liquidation in December 2010 (see [18] and [20]–[24] above). Ms Nichols believed that they were largely brought about by Mr Phillip Nichols' failure to complete the five houses in the Wakerley project for which he was responsible: see at [17] above. As Asden's financial pressures began to build, Ms Nichols appears to have felt trapped. She said in one of her affidavits in the family law proceeding that she "wanted to get away and start her life afresh": see at [18] above. At about the same time, she told Mr George Nichols that she wanted to resign as a director of Asden. However, despite an indication that he would take over responsibility for the company, this did not eventuate: see at [20]–[21] above. 169 Against this background, it is apparent from her affidavits in the family law proceeding and her cross-examination at the trial of this matter that Ms Nichols felt she had been betrayed by the Nichols family when it withdrew financial support for Asden and left her with the responsibility for its taxation debts and other creditors: see at [25] above. It is also apparent that this sense of betrayal was heightened when the Nichols family, through their lawyers, Anthony's, not only demanded that she repay the $270,000 in funds, but also demanded that she pay a mortgage debt for which Mr George Nichols had years earlier assured her she would never be responsible: see at [13]–[15] and [29] above. 170 The views Ms Nichols held about the effects of all these stressors are already recorded above: see at [25] and [26]. In short, she believed that she was facing financial ruin from having agreed to become the director of Asden at the behest of the Nichols family. Furthermore, on the family law property front, she believed that her husband and his family intended to prevent her obtaining her rightful entitlements. In this respect, she said in one of her affidavits filed in the family law proceeding that: "I believe it is George's [Nichols] intention through this court proceeding to ensure he removes as much asset as he possibly can from my name, therefore reducing the matrimonial pool between myself and Phillip to negative." 171 It is not clear from Ms Nichols' evidence precisely when it was that she first sought Mr Levis' advice. She said she was referred to him by Asden's accountants, Frederiks: see at [26] above. She said she approached Fredericks because she was concerned about Asden's financial situation and whether it might be trading while insolvent. As I have observed above (at [26] and [35]), that approach and referral must have occurred on or before 14 December 2010 when TJI Investments was incorporated because she claims that Mr Levis advised her to incorporate that company. It is, however, clear that Ms Nichols and Mr Levis began to implement their scheme to protect her from financial ruin at the hands of the Nichols family almost immediately after she received the second cheque for $170,000 from Mr George Nichols on or about 14 December 2010. The catalyst appears to have been a telephone discussion she had with Mr George Nichols when she received that cheque. She said in cross-examination that, during that discussion, Mr Nichols told her he "would not be paying any more – any other debt apart from $170,000". 172 The scheme took seven days to implement. By any measure, it was elaborate. In approximate order, it involved: incorporating TJI Investments; establishing a bank account in Asden's name at the Bank of Queensland; transferring approximately $264,000 to that account; approaching Mr Dinoris to accept appointment as liquidator of Asden in preparation for placing it in voluntary liquidation; establishing a bank account in the name of TJI Investments at the Bank of Queensland; transferring $236,500 to Urban Property's bank account; transferring $180,000 to TJI Investments' bank account; and placing Asden in voluntary liquidation and appointing Mr Dinoris as its liquidator. The end result of the scheme was that approximately $264,000 was removed from Asden's bank account and, through a series of transfers, placed in two bank accounts, neither of which bore Ms Nichols' name. As well, Ms Nichols had removed herself from the directorship of Asden and thereby removed herself from the personal responsibilities associated with that company trading whilst insolvent. 173 Ms Nichols said throughout her cross-examination that Mr Levis advised her about every step of this scheme and she followed his advice. For example, when asked in evidence-in-chief why she was involved in the series of transactions on 21 December, she said: "I honestly can't remember. I was just doing – going along with Peter's [Levis] advice." Another example is the following evidence in cross-examination: "So you appointed him for the purpose of him giving you advice and you would take that advice. And so from 21 December, you did precisely what he told you to?---Yes." She also said that when she expressed concern about the transfers to Mr Levis, he told her "that it's fine. He just kept reassuring me." 174 While this evidence may suggest that Ms Nichols was naïve and compliant, as Asden contended in its submissions, my assessment of her oral and written evidence is that, from relatively early in the events of late 2010, she was sensitive to the personal financial dangers that might befall her as a result of her involvement with Asden and was astute in her actions to avoid them. Sometime before matters came to a head on 15 December, she had realised that the Nichols family may abandon Asden and leave her with the responsibility for its debts. Having appreciated that possibility, she obtained advice from Fredericks Accountants and then, on referral to, Mr Levis, she obtained advice from him. Having obtained that advice she acted on it and participated in the elaborate scheme described above. It is also important to note that Ms Nichols' involvement with Mr Levis did not cease in December 2010. It continued in March 2011, when she obtained advice from him about the sale of the boat and paying out the loan due to Yamaha: see the email exchange above at [58]–[59]. 175 Ms Nichols displayed the same astuteness in relation to her legal rights in connection with the family law property dispute with her husband. Soon after she received the letter from Anthony's Lawyers on 20 December 2010, she sought and obtained advice from Mr Doyle: see at [31] above. While it is unclear from her evidence precisely when she did this, I infer that it must have happened at about the same time as the second series of bank transfers was made on 21 December 2010: see at [34] above. When Mr Doyle advised her that the funds referred to in Anthony's letter were part of the joint matrimonial property, she acted on that advice and did not comply with the demands set out in that letter: see at [31] above. The fact that she was alert to the family law property implications of the funds at this early stage provides a further demonstration of her vigilance in relation to her legal rights. 176 Ms Nichols also obtained and acted on advice from Mr Doyle during the negotiations for the sale of the boat: see at [60] above. She also acted on Mr Doyle's advice on 3 February 2011, when she transferred $30,000 out of the TJI Investments account to his trust account and again on 10 May 2011, when she transferred the balance of the funds to that account: see [65] above. These funds then remained in Mr Doyle's trust account until March 2013 when orders were made in the family law proceeding: see at [67] above. It follows from this that Ms Nichols must have accepted Mr Doyle's advice to defend that proceeding to final judgment. That led to her bankruptcy in May 2013: see at [69] above. 177 At no stage during this period from late 2010, until she, or Mr Doyle, was ordered to pay the remainder of the funds to the Nichols family in March 2013, did Ms Nichols demonstrate any intention to comply with any demand emanating from the Nichols family with respect to those funds. Nor did she comply with the demand of Mr Dinoris contained in his letter of 22 December 2010 that she deliver up any assets of the company that she held. She agreed in cross-examination that she received this letter at some time in January 2011 and she understood that it related, at least in part, to the funds. When asked whether she obtained advice from Mr Levis about this letter, she said this: I don't particularly recall discussing this with Mr Levis, but I do recall as I received letters from Vincents that – that Mr Levis said that – that it was fine, that I didn't have to do anything as such. Mr Levis the whole time was acting with Vincents as far as I was concerned. 178 I do not therefore accept Ms Nichols' evidence that the "authority" of a personal approach from Mr Dinoris in late December 2010 or January 2011 would have caused her to pay the funds to him. I also do not accept that Ms Nichols was naïve and merely doing what Mr Levis told her to do. To the contrary, as I have already observed above, I consider Ms Nichols was alert to the risks her directorship of Asden posed to her personal financial security and she was vigilant to protect herself from that. She was also jealous to protect her legal rights in connection with respect to the family law property dispute with her husband. It was in this light that I consider Ms Nichols received, and acted on, Mr Levis' advice, not as a naïve compliant. The same applies to the advice she received from Mr Doyle with respect to her rights concerning the family law proceeding. In both cases, she acted on their advice in order to protect herself from attacks she was convinced were being made on her by various members of the Nichols family. 179 To sum up, all this evidence is consistent with Ms Nichols' pattern of conduct throughout this period of obtaining and acting on the advice she received from Mr Levis or Mr Doyle whenever any issue arose with respect to the funds, or her family law property matters, respectively. I therefore consider that if Mr Dinoris had approached Ms Nichols in late 2010, or early 2011, and asked her about the whereabouts of the funds, she would have reacted in the same way. That is to say, she would have sought advice from either Mr Levis or Mr Doyle, or both of them, and acted on that advice. The former is reinforced by the answer she gave during cross-examination when pressed to answer whether she would have sought advice from Mr Levis: "Yes, I suppose so" (see at [162] above). If she had sought advice from Mr Levis, given the elaborate scheme he had constructed for her with respect to the funds, his personal stake in that scheme to the extent of $56,500, the evasive response he gave to Mr Dinoris on 23 December 2010 when he asked him a similar question and the tenor of his advice to her throughout this period, I consider Mr Levis would most likely have advised Ms Nichols to deny any knowledge of the funds, or to give an evasive answer similar to that which he gave to Mr Dinoris on 23 December 2010. 180 Alternatively, in the unlikely event that Ms Nichols did not seek advice from Mr Levis, but instead made a full disclosure to Mr Dinoris and agreed to repay him the $180,000 she held in the TJI Investments account, I consider it most unlikely that Mr Levis would have acted in the same way with respect to the $56,500 he held in the Urban Property account. In this regard, I reject as fanciful Asden's contention that Mr Levis would have bowed to a "threatening" telephone call from Mr Dinoris. 181 If, on the other hand, or as well, Ms Nichols had approached Mr Doyle for advice, consistent with the advice that Mr Doyle gave to her throughout this period, I consider he would most likely have advised her that she should pay the funds into his trust account to abide the outcome of the family law proceeding. On this aspect, Asden contended I should have regard to the fact that this advice was wrong. While the orders made in the family law proceeding in March 2013 clearly demonstrate that is so, I fail to see how that affects the conclusion that Mr Doyle would most likely have given this advice. 182 Taking into account the difficulties associated with the form and wording of the question, the stress Ms Nichols was experiencing at the time and the evidence relating to the surrounding facts and circumstances outlined above, I do not accept Ms Nichols' evidence that, had Mr Dinoris made an enquiry of her in late 2010 or early 2011 about the whereabouts of the funds, she would have disclosed where they were and paid them to him. Conclusion 183 To sum up, I have found that Mr Dinoris contravened s 180(1) of the Corporations Act by failing to discharge his duties as the liquidator of Asden with the degree of care and diligence of a reasonably competent liquidator. However, I do not consider Asden has established that any damage resulted to it from that contravention as required by s 1317H(1) of the Corporations Act. 184 I will hear the parties as to what orders, if any, should be made, including as to costs. I certify that the preceding one hundred and eighty-four (184) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves. Associate: Dated: 5 July 2016