Biramo Pty Limited v Biramo Books Pty Limited [2002] NSWSC 861

New South Wales Supreme Court

CITATION : Biramo Pty Limited v Biramo Books Pty Limited [2002] NSWSC 861 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 1802 of 1998 HEARING DATE(S) : 30 and 31 July 2002, 1 August 2002 and 16 September 2002 JUDGMENT DATE : 20 September 2002

Biramo Pty Limited (First Plaintiff) Dianne Allen and Colleen Murphy as Executors of the Estate of Anna Rutherford deceased PARTIES : Biramo Books Pty Limited (Second Defendant) Allan Frederick Rich (Third Defendant) Bisas (Warners Bay) Pty Limited (Fourth Defendant) Simcos (Management) Pty Limited (Fifth Defendant) JUDGMENT OF : Windeyer J at 1

COUNSEL : Mr J E Thomson (Plaintiffs) Mr T Hancock with him Ms C Champion (Defendants) SOLICITORS : Sparke Helmore (Plaintiffs) Church & Youll (Defendants) CATCHWORDS : CORPORATIONS - directors' duties - whether director breached his duties to the company in making payments from the company to himself and other companies controlled by him - TRUSTS - whether company with similar name to plaintiff company and in associated business formed and controlled by same director holds assets and business on trust for the first company DECISION : See paragraph 39

- 23 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

WINDEYER J

FRIDAY 20 SEPTEMBER 2002.

1802/98 BIRAMO PTY LIMITED (IN LIQ) & ANOR V BIRAMO BOOKS PTY LIMITED & ORS JUDGMENT Outline 1 There are two questions to be decided in this case. The first is whether the third defendant breached his duties as a director of Biramo Pty Limited in making payments from the company to himself and to the fourth and fifth defendants. The second is whether the first defendant, Biramo Books Pty Limited holds its assets and business on trust for Biramo Pty Limited. Background 2 This action has had an unfortunate history. It was commenced by summons filed on 24 March 1998 by Professor Anna Rutherford (Rutherford) as plaintiff against Biramo Pty Limited (Biramo), Biramo Books Pty Limited (Biramo Books), Allan Frederick Rich (Rich), Bisas (Warners Bay) Pty Limited (Bisas) and Simcos (Management) Pty Limited (Simcos) as defendants. The summons sought an order that Biramo be wound up and that Mr Hicks be appointed liquidator. It sought a declaration that Biramo Books holds its assets on constructive trust for Biramo and that Rich, Bisas and Simcos be held liable to account to Biramo for the sums of $30,000, $40,000 and $80,000 paid to them respectively from the funds of Biramo together with other ancillary orders including an assets preservation order. On 27 March 1998 an order was made that Biramo be wound up and that Mr Hicks be appointed as liquidator. The hearing on the balance of the summons commenced before Simos J on 29 November 2000. On that day counsel for Rutherford informed the judge that the liquidator consented to the company becoming a plaintiff providing Rutherford indemnified him for costs. That appeared to be an appropriate procedure as the claim in the summons was always a claim made by Rutherford on behalf of Biramo. The action seems to have proceeded on that basis from then on, although the formal order joining Biramo as a plaintiff seems not to have been made until 2 March 2001. Whatever the position, the claim has always been a derivative action brought by Rutherford on behalf of Biramo. 3 The hearing continued before Simos J on 29 and 30 November and 1 December 2000; and 19 February 2001. On 19 February Simos J directed that an expert nominated by the plaintiffs and one nominated by the defendants, meet in the absence of legal representatives, for the purpose of identifying areas of agreement and difference on the loan account balances of Rutherford and the defendants with Rutherford. Mr Bell, the defendants' expert, produced a report reconciling the bank statements with the deposit books and cheque butts, and calculating the loan account positions at various dates on the basis of those documents and reconciliation and a different figure having regard to transactions not recorded in the books but identified by Mr Rich. After the joint meeting at which Mr Bell represented the defendants and Mr Hicks the plaintiffs, substantial agreement was reach, although it is fair to say this required acceptance of the information of Mr Rich. Rutherford died on 21 February 2001. On 9 March 2001 Dianne Allen and Colleen Murphy, the present second plaintiffs, who had obtained a grant of special letters of administration, were joined as plaintiffs in place of Rutherford and the hearing continued on that day when it was stood over until 5 April 2001 for further hearing. Unfortunately, Simos J then became ill and retired without being able to conclude the hearing. To this time there were no pleadings in spite of there being an allegation in the summons of misappropriation of company funds. 4 On 1 November 2001, the Chief Judge in Equity made an order for a new trial. He ordered pleadings. The parties agreed that the evidence before Simos J be read as evidence in the new trial. That new trial commenced before me on 30 July 2002. To confirm what was happening the following orders and notations were made by consent at the commencement: 1. Order that the affidavits read at the hearing before Simos J which commenced on 29 November 2000 ("the First Hearing") be taken as read at the present hearing subject to all rulings as to admissibility made by Simos J. 2. Order that the transcript of evidence of the first hearing be marked Exhibit "AF" on the present hearing and that the evidence of witnesses recorded in that transcript be treated as the evidence of those witnesses in these proceedings. 3. Order that the Exhibits tendered at the First hearing be exhibits at the present hearing bearing the numbers and letters previously assigned to them. 4. Note that: (a) On 29 November 2000, the liquidator of Biramo Pty Ltd consented to the Biramo Pty Ltd becoming a Plaintiff in the proceedings on the basis that the then Plaintiff, Prof. Rutherford indemnified him for his costs and any adverse order for costs which might be made against him. (b) On 2 March 2001, the Court ordered that Biramo Pty Ltd be joined as a Plaintiff in the proceedings. (c) On 9 March 2001, the Court gave leave to Dianne Allen and Colleen Murphy as the executors of the will of the Anna Rutherford be joined to the proceedings as Plaintiff in lieu of the named Anna Rutherford.