DSHE Holdings (Receivers & Managers Appointed)(In Liquidation) v Nicholas Abboud (No 3); National Australia Bank Limited v Nicholas Abboud (No 4) [2021] NSWSC 673

Supreme Court New South Wales

Medium Neutral Citation: DSHE Holdings (Receivers & Managers Appointed)(In Liquidation) v Nicholas Abboud (No 3); National Australia Bank Limited v Nicholas Abboud (No 4) [2021] NSWSC 673 Hearing dates: 16 - 20, 30 March 2020; 21 - 25, 28 - 30 September 2020; 1, 6, 8, 9, 12 - 16, 19 - 23, 26 October 2020; 2 - 6, 18, 19, 23 - 25 November 2020; 1, 3, 4, 7, 8, 10 - 11; 15 - 18 December 2020; 4, 5, 8 - 12 and 15 February 2021 Decision date: 11 June 2021 Jurisdiction: Equity - Commercial List Before: Ball J Decision: See paragraphs [612] and [613] Catchwords: CORPORATIONS – Directors and officers – Directors' duties – Duty of care and diligence – Where executive directors alleged to have adopted a "rebate maximisation policy" – Whether policy led to buy stock irrespective of consumer demand – Whether non-executive directors failed to put in place internal controls to monitor procurement activities CORPORATIONS – Shares – Dividends – Where dividend allegedly declared in breach of section 254T Corporations Act 2001 (Cth) – Where dividend allegedly declared in breach of directors' duties – Whether directors can act in breach of duty when declaring a dividend even without contravening section 254T – Whether reference to "creditor" in section 254T includes future creditors –– Meaning of "materially prejudice" expression in s 254T – Whether business judgment rule applies to decision to declare dividends CONSUMER LAW – Misleading and deceptive conduct – Whether executive directors made misleading and deceptive statements when negotiating credit facilities – Where executive director made statements concerning matters within his area of responsibility and about which he had personal knowledge – Where statements misleading or incomplete – Executive director found to have personally engaged in misleading and deceptive conduct on the facts DAMAGES – Damages caused by misleading and deceptive conduct – Proof – Where misled party acquired something of value as result of misleading conduct by way of security over loan – Held misled party's onus of proof is discharged by showing value of security lower than value of loan DAMAGES – Damages caused by misleading and deceptive conduct – Quantification – Held damages to be assessed as the difference between the amount lent and the amount actually received in the receivership – Whether payment by receivers of creditors' legal costs amounts of a distribution in the creditors' favour Legislation Cited: Australian Consumer Law Australian Securities and Investments Commission Act 2001 (Cth) Corporations Act 2001 (Cth) Corporations Amendment (Corporate Reporting Reform) Act 2010 (Cth) Cases Cited: Attard v James Legal Pty Ltd [2010] NSWCA 311; [2010] NSWCA 311 Australian Competition and Consumer Commission v LG Electronics Australia Pty Ltd [2017] FCA 1047 Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640, [2013] HCA 54 Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; (2006) 59 ACSR 373 Australian Securities and Investments Commission v Narain (2008) 169 FCR 211, [2008] FCAFC 120 Australian Securities and Investments Commission v Rich (2009) 236 FLR 1 Australian Securities and Investments Commission v Warrenmang Ltd (2007) 63 ACSR 623; [2007] FCA 973 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 Boyd v Leftwich (1982) 43 ALR 280 Campbell v Backoffice Investments (2009) 238 CLR 304, [2009] HCA 25 Cassimatis v Australian Securities and Investments Commission (2020) 275 FCR 533; [2020] FCAFC 52 Cleary v Australian Co-Operative Foods Ltd (Nos 2 & 3) (1999) 32 ACSR 701, [1999] NSWSC 991, [1999] NSW 1062 Connective Services Pty Ltd v Slea Pty Ltd (2019) 767 CLR 461, [2019] HCA 33 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 DCT Projects Pty Limited v Champion Homes Sales Pty Limited [2016] NSWCA 117 EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82, [1984] FCA 180 Henville v Walker (2001) 206 CLR 459, [2001] HCA 52 Houghton v Arms (2006) 225 CLR 553, [2006] HCA 59 Ikon Communications Pty Ltd v Advangen International Pty Ltd [2018] NSWSC 1650 Industrial Equity Limited v Blackburn (1977) 137 CLR 567, [1977] HCA 59 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets (No 6) (2007) 63 ACSR 1, [2007] NSWSC 124 KGD Investments Pty Ltd v Placard Holdings Pty Ltd [2015] VSC 712 Kinsela v Russell Kinsela Pty Ltd (in liq) (1986) 4 NSWLR 722 Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458 Moloney v Bells Securities Pty Ltd [2005] QSC 13 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited (2010) 241 CLR 357, [2010] HCA 31 Pages Property Investments Pty Ltd v Boros [2020] NSWSC 1270 Pico Holdings Inc v Voss [2004] VSC 263 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257 at [37]f [2003] HCA 10 QBE Insurance Group Ltd v Australian Securities Commission (1992) 38 FCR 270 Re Centro Property Trust [2011] NSWSC 1171 Re CSR Ltd (2010) 183 FCR 358; [2010] FCAFC 34 Swiss Re International SE v Simpson (2018) 354 ALR 607; [2018] NSWSC 233 Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23 Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514 Williams v Pisano (2015) 90 NSWLR 342, [2015] NSWCA 177 Texts Cited: Australian Government, Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education Category: Principal judgment Parties: DSHE Holdings Limited ACN 166 237 841 (Receivers & Managers Appointed) (Administrators Appointed) (Plaintiff | Cross Defendant on Sixth Cross Claim ) Nicholas Abboud (First Defendant | Cross Claimant on Second Cross Claim | First Cross Defendant on Sixth Cross Claim) Michael Potts (Second Defendant | Cross Claimant on Third Cross Claim | Sixth Cross Defendant on Sixth Cross Claim) Phillip John Cave (Third Defendant | Cross Claimant on Fifth Cross Claim | Second Cross Defendant on Sixth Cross Claim) Robert Murray (Fourth Defendant | First Cross Claimant on First Cross Claim | Fifth Cross Defendant on Sixth Cross Claim) William Wavish (Fifth Defendant | Cross Claimant on Fourth Cross Claim | Ninth Cross Defendant on Sixth Cross Claim) Lorna Raine (Sixth Defendant | Second Cross Claimant on First Cross Claim | Seventh Cross Defendant on Sixth Cross Claim) Robert Ishak (Seventh Defendant | Third Cross Claimant on First Cross Claim | Fourth Cross Defendant on Sixth Cross Claim) Jamie Tomlinson (Eighth Defendant | Fourth Cross Claimant on First Cross Claim | Eighth Cross Defendant on Sixth Cross Claim) David Robert White and others listed in Schedule 1 t/as Deloitte Touche Tohmatsu (Cross Claimants on Sixth Cross Claim | Cross Defendants to First, Second, Third, Fourth and Fifth Cross Claims)