Reported Decision : 54 ACSR 111 (2005) 23 ACLC 1181 New South Wales Supreme Court CITATION : Gebo Investments (Labuan) Ltd v Signatory Investments Pty Ltd; Application of Campbell & Ors [2005] NSWSC 544 HEARING DATE(S) : 05/04/05, 06/04/05 Written submissions: 29/04/05, 11/5/05, 12/05/05, 16/05/05, 25/05/05, 26/05/05 JUDGMENT DATE : 9 June 2005 Equity Division JURISDICTION : Corporations List JUDGMENT OF : Barrett J DECISION : Amended interlocutory process filed 24 December 2004 dismissed. Interlocutory process filed 29 March 2005 stood over for making of consequential orders. CATCHWORDS : CORPORATIONS - winding up - jurisdiction to order winding up of "Part 5.7 body" - unregistered foreign company - whether Part 5.7 body status dependent on business currently being carried on in Australia - whether winding up order may be made after business in Australia discontinued - what amounts to carrying on business in Australia Corporations Act 2001 (Cth), Division 2 Part 5B.2, Part 5.7, ss.9, 21, 205B, 205D, 582(3), 583, 601CL(14) Offshore Companies Act 1990 (Malaysia), ss.2(1), 7, 15 LEGISLATION CITED : Supreme Court Rules, Part 40 rule 9 Trade Practices Act 1974 (Cth), s.52 Actiesselskabet Dampskib "Hercules" v Grand Trunk Pacific Railway Company [1912] 1 KB 222 Australian Securities and Investments Commission v International Unity Insurance (General) Ltd [2004] FCA 1060 Australian Securities and Investments Commission v Edwards (2004) 22 ACLC 1469 Banque des Marchands de Moscou (Koupetschesky) v Kindersley [1950] 2 All ER 105 Corporate Affairs Commission v Drysdale (1978) 141 CLR 236 Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575 40 Dunlop Pneumatic Tyre Co Ltd v Aktien-Gesellschaft Fur Motor Und Motorfahrzeugbau Vorm Cudell & Co [1902] 1 KB 342 Gibson v Barton (1875) LR 10 QB 329 CASES CITED : Hyde v Sullivan (1956) 56 SR (NSW) 113 Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164 Okura & Co Ltd v Forsbacka Jernverks Aktiebolag [1914] 1 KB 715 Pearce v Tower Manufacturing & Novelty Co Ltd (1898) 24 VLR 506 Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180 Re Russian Bank for Foreign Trade [1933] 1 Ch 745 Re Wayland (as liquidator of ABC Containerline NV) (2005) 52 ACSR 750 Smith (on behalf of National Parks and Wildlife Service) v Capewell (1979) 142 CLR 509 Starr v Trafalgar Financial Corporation Ltd (1983) 7 ACLR 902 John Campbell - First Applicant Erminio Kotlar - Second Applicant Plover 8 Limited, a Company Incorporated In Malaysia - Third Applicant Green Co Limited, a Company Incorporated In Malaysia - Fourth Applicant Gebo Equity Investments (Labuan) Limited - First Respondent/First Plaintiff Christopher Paul Levick - Second Respondent/Second Plaintiff PARTIES : Botany Holdings Limited, a company incorporated in Labuan, Malaysia - Third Respondent/Third Plaintiff Signatory Investments Pty Limited (ACN 102 668 315) (Provisional liquidator appointed) - Fourth Respondent/First Defendant Life Wealth 8 Limited, a company incorporated in Labuan, Malaysia (Provisional liquidator appointed) - Fifth Respondent/Second Defendant David Martin Johnson trading as Johnson Lawyers - Sixth Respondent/Third Defendant John Vouris - Respondent to Second Interlocutory Process FILE NUMBER(S) : SC 6680/04 Mr R.E. Dubler SC/Mr A. Ivantsoff - Applicants COUNSEL : R.K. Eassie - 1st to 5th Respondents Mr G.P. George - Respondent to Second Interlocutory Process Matthews Folbigg Pty Limited - Applicants Nash O'Neill Tomko - 1st to 5th Respondents SOLICITORS : Johnson Lawyers - 6th Respondent Holding Redlich - Respondent to Second Interlocutory Process LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J THURSDAY, 9 JUNE 2005 6680/04 – GEBO INVESTMENTS (LABUAN) LIMITED & 2 ORS v SIGNATORY INVESTMENTS PTY LIMITED & 2 ORS; APPLICATION OF JOHN CAMPBELL & 3 ORS JUDGMENT The proceedings and the current applications 1 On 9 September 1945, Major General G F Wootten, General Officer Commanding 9th Australian Division, accepted the surrender of Japan's 37th Southern Army on one of the islands of Labuan, which, since 1912, had been part of the British Crown Colony of the Straits Settlements. Labuan became part of the Federation of Malaysia in 1963. It is now a Federal Territory of Malaysia, declared to be an International Offshore Financial Centre. In these proceedings, I am called upon to determine a question about the exercise of statutory jurisdiction created by the Corporations Act 2001 (Cth) in relation to a company owing its existence to a Malaysian Federal statute providing for the incorporation of companies operating in, from or through Labuan. 2 LifeWealth 8 Limited was incorporated under the Offshore Companies Act 1990 of Malaysia on 8 November 2002. I shall refer to it as "LifeWealth Labuan". On 9 December 2004, this court ordered that Mr John Vouris be appointed liquidator of LifeWealth Labuan provisionally. A corresponding order was made in respect of Signatory Investments Pty Limited, a company registered under the Companies Act 2001 (Cth). Applications for winding up orders in respect of both companies are pending. 3 An amended interlocutory process was filed in the winding up proceedings on 23 December 2004. The applicants under the interlocutory process are Mr Campbell, Mr Kotlar, Plover 8 Limited and Green Co Limited. The individuals are shareholders of Signatory Investments. The two companies (both incorporated in Malaysia) are shareholders of LifeWealth Labuan. The first, second and third respondents to the application are the plaintiffs in the proceedings, that is the applicants for the winding up orders, being Gebo Investments (Labuan) Limited, Mr Levick and Botany Holdings Limited. They are also associated with and interested in LifeWealth Labuan and Signatory Investments. The fourth and fifth respondents are Signatory Investments (first defendant) and LifeWealth Labuan (second defendant), while the sixth respondent is Mr Johnson, an Adelaide solicitor, who is the third defendant in the proceedings. 4 By the amended interlocutory process filed on 23 December 2004, the applicants sought a variety of orders directed towards setting aside of the orders of 9 December 2004 appointing a provisional liquidator or terminating the appointment of the provisional liquidator. The plaintiffs seeking winding up resist the making of those orders. This aspect of the interlocutory proceedings may thus be seen to be a contest between two factions of the group of persons associated with and interested in the two companies. Correspondence in evidence shows that there are now deep divisions and animosities between the two factions. 5 On 29 March 2005, the applicants under the amended interlocutory process filed a further interlocutory process. This seeks an order that, if a winding up order is made in respect of either or both of LifeWealth Labuan and Signatory Investments (the applicants having been unsuccessful in their attempts to bring about a situation where a provisional liquidator is no longer in office), the liquidator appointed should be some person other than Mr Vouris. The applicants' position 6 Both these interlocutory applications came before me for hearing on 5 and 6 April 2005. Mr R.E. Dubler SC, who appeared with Mr A. Ivantsoff of counsel for the applicants, made it clear in opening his clients' case that they pressed for only part of the relief originally sought in the amended interlocutory process filed on 24 December 2004. They maintained the claim for orders setting aside the order appointing a provisional liquidator in respect of LifeWealth Labuan but did not seek that (or any other) order in relation to the appointment of a provisional liquidator of Signatory Investments. Moreover, it was made clear that the particular order sought in respect of LifeWealth Labuan was an order under Part 40 rule 9 of the Supreme Court Rules setting aside the order of appointment, as distinct from any order terminating the appointment. This is because the case advanced by the applicants is that the court had no jurisdiction to make an order appointing a provisional liquidator of LifeWealth Labuan. It must, I think, be accepted that, if LifeWealth Labuan is not a body in respect of which the court has jurisdiction under the Corporations Act 2001 (Cth) to make a winding up order, the order for the appointment of a provisional liquidator cannot be allowed to stand and must be set aside: Starr v Trafalgar Financial Corporation Ltd (1983) 7 ACLR 902. Inability of LifeWealth Labuan itself, by its officers, to seek to have the order set aside (Corporations Act, s.471A(2)) is not an issue where, as here, the moving parties are shareholders of LifeWealth Labuan. 7 At the hearing on 5 and 6 April 2005, the conditional claims in the second interlocutory process concerning Mr Vouris were pressed by the applicants and resisted by Mr Vouris in respect of both LifeWealth Labuan and Signatory at the hearing. But a different picture emerged in subsequent written submissions. I shall return to that matter. 8 At the conclusion of the hearing on 6 April 2005, directions were made for the filing of written submissions. Submissions were duly filed. I received the last of them on 26 May 2005 and then reserved judgment on the applications. Status of LifeWealth Labuan as a Part 5.7 body 9 I deal first with the jurisdictional challenge to the order appointing a provisional liquidator of LifeWealth Labuan. Implicit in the exercise of jurisdiction under the Corporations Act 2001 (Cth) in that way on 9 December 2004 was a finding that LifeWealth Labuan is a "Part 5.7 body". That term is defined by s.9 as follows: " Part 5.7 body means: (a) a registrable body that is a registrable Australian body and: (i) is registered under Division 1 of Part 5B.2; or (ii) is not registered under that Division but carries on business in this jurisdiction and outside its place of origin; or (b) a registrable body that is a foreign company and: (i) is registered under Division 2 of Part 5B.2; or (ii) is not registered under that Division but carries on business in Australia; or (c) a partnership, association or other body (whether a body corporate or not) that consists of more than 5 members and that is not a registrable body." 10 The applicants say that LifeWealth Labuan is not and has never been a "Part 5.7 body", with the result that the court was not empowered by s.583 to entertain an application for an order that it be wound up or an interlocutory application for an order appointing a provisional liquidator. Section 583 is as follows: " Winding up Part 5.7 bodies Subject to this Part, a Part 5.7 body may be wound up under this Chapter and this Chapter applies accordingly to a Part 5.7 body with such adaptations as are necessary, including the following adaptations: (a) the principal place of business of a Part 5.7 body in this jurisdiction is taken, for all the purposes of the winding up, to be the registered office of the Part 5.7 body; (b) a Part 5.7 body is not to be wound up voluntarily under this Chapter; (c) the circumstances in which a Part 5.7 body may be wound up are as follows: (i) if the Part 5.7 body is unable to pay its debts, has been dissolved or deregistered, has ceased to carry on business in this jurisdiction or has a place of business in this jurisdiction only for the purpose of winding up its affairs; (ii) if the Court is of opinion that it is just and equitable that the Part 5.7 body should be wound up; (iii) if ASIC has stated in a report prepared under Division 1 of Part 3 of the ASIC Act that, in its opinion: (A) the Part 5.7 body cannot pay its debts and should be wound up; or (B) it is in the interests of the public, of the members, or of the creditors, that the Part 5.7 body should be wound up; (d) if the Part 5.7 body is a registrable Australian body—the winding up must deal only with the affairs of the body outside its place of origin." 11 The plaintiffs say that LifeWealth Labuan was, at the time of the making of the order for the appointment of a provisional liquidator, within the s.9 definition of "Part 5.7 body" because it was, in terms of paragraph (b) of the definition, "a registrable body that is a foreign company and … is not registered under that Division [ie, Division 1 of Part 5B.2] but carries on business in this jurisdiction and outside its place of origin". 12 The definition of "foreign company" in s.9 is: "'foreign company' means: (a) a body corporate that is incorporated in an external Territory, or outside Australia and the external Territories, and is not: (i) a corporation sole; or (ii) an exempt public authority; or (b) an unincorporated body that: (i) is formed in an external Territory or outside Australia and the external Territories; and (ii) under the law of its place of formation, may sue or be sued, or may hold property in the name of its secretary or of an officer of the body duly appointed for that purpose; and (iii) does not have its head office or principal place of business in Australia." 13 LifeWealth Labuan owes its existence to the Offshore Companies Act 1990, an enactment of the Parliament of Malaysia. Section 7 of that Act allows an "offshore company" to be incorporated for any lawful purpose and says that, subject to qualifications, such a company "may carry on in, from or through Labuan any business which may lawfully be carried on in Malaysia" and "shall only carry on business in, from or through Labuan". Section 15 creates a system of incorporation by registration. A person desiring the incorporation of an offshore company must lodge with the "Registrar" (being the Labuan Offshore Services Authority) a subscribed memorandum, the proposed articles and certain other documents. The Registrar must, subject to the Act, "register the company by registering the memorandum and articles". Sections 15(3) and 15(4) provide as follows: "(3) On the registration of the memorandum, the Registrar shall certify under his hand and seal that the company is, on and from the date specified in the certificate, incorporated, and that the company is a company limited by shares. (4) On and from the date of incorporation specified in the certificate of incorporation, but subject to this Act, the subscribers to the memorandum together with such other persons as may from time to time become members of the company shall be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company, and of suing and being sued, and having perpetual succession and a common seal, with power to hold land but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is provided by this Act." 14 It is thus clear that LifeWealth Labuan, as a company incorporated under the Offshore Companies Act 1990 of Malaysia, is "a body corporate" (this is the effect of ss.15(3) and 15(4)) and that, because incorporated by a Malaysian enactment, it is "incorporated ... outside Australia". It cannot be described as a "corporation sole" (the whole tenor of s.15 of the Malaysian Act points to its being a corporation aggregate) and, because it is not "incorporated within Australia or an external Territory", there is no basis on which it could conceivably be within the s.9 definition of "exempt public authority". It follows that LifeWealth Labuan is within paragraph (a) of the s.9 definition of "foreign company". 15 The conclusion that LifeWealth Labuan is a "foreign company" is enough to lead to the further conclusion that it is a "registrable body", since, according to s.9, "registrable body" means a "registrable Australian body" (a concept irrelevant for present purposes) or a "foreign company". 16 Returning to paragraph (b) of the s.9 definition of "Part 5.7 body", it is not suggested that LifeWealth Labuan was ever registered under Division 2 of Part 2B.2, with the result that any conclusion that it is within that paragraph (b) depends on a finding that it "carries on business in Australia". On a somewhat broader front, there is a question whether the jurisdiction under s.583 is exercisable where a particular foreign company, having previously carried on business in Australia without registration under Division 2 of Part 5B.2, has ceased to do so before that jurisdiction is invoked. Since the answer to that question will have a bearing upon the extent of the factual inquiry necessary to dispose of the present application, I shall deal with it now. The "carries on business in Australia" element 17 The jurisdiction under s.583 is exercisable in relation to a "Part 5.7 body" which, in terms of the s.9 definition already noticed, must, if not registered under Division 2 of Part 5B.2, be seen to be caught by the words "but carries on business in Australia". This, in the applicants' submission, means that if a particular unregistered foreign company formerly carried on business in Australia but has ceased to do so before invocation of the s.583 jurisdiction, that jurisdiction is not available since cessation of business has caused the foreign company no longer to be a "Part 5.7 body". 18 The applicants' submission is inconsistent with two recent first instance decisions, one of the Federal Court and the other of the Supreme Court of Queensland. I refer to the decision of Lander J in Australian Securities and Investments Commission v International Unity Insurance (General) Ltd [2004] FCA 1060 (27 August 2004) and that of McMurdo J in Australian Securities and Investments Commission v Edwards (2004) 22 ACLC 1469 (8 October 2004). 19 In the International Unity case, there was an application under s.583 of the Corporations Act for a winding up order in respect of a company incorporated in the Solomon Islands on the basis that it was unable to pay its debts and had ceased to carry on business in Australia. Lander J was of the opinion that the fact that the company did not, at the time of the winding up proceedings, carry on business in Australia did not mean that it was not, at that time, a Part 5.7 body. His Honour said (at paragraph [22]): "In this case, the plaintiff relied upon ss 583(c)(i) and (ii) of the Act. Section 583(c)(i) itself provides for four separate circumstances which would allow for a Part 5.7 body to be wound up. One of those circumstances is that the Part 5.7 body has ceased to carry on business in the jurisdiction. That confirms my view that a company does not necessarily cease to be a Part 5.7 body in sub-section (b)(ii) of the definition if it ceases to carry on business in Australia. It remains a Part 5.7 body for the purpose of a winding up order under s 583 if the ground relied upon is that it carried on business in Australia but has ceased to carry on business." 20 Matters were taken further in ASIC v Edwards. The applications there before the court included an application for an order for the winding up of an unregistered managed investment scheme and an application for an order for the winding up of the scheme's operator, an unregistered foreign company (Carsworthy Limited). McMurdo J observed that, if the scheme was to be wound up, there was a compelling case for the winding up of the operator as well. After referring to the winding up jurisdiction under s.583 in respect of Part 5.7 bodies, his Honour said: "[39] However the scheme is no longer operated and there is no evidence Carsworthy Limited still carries on business at least in Australia. Is it nevertheless a Part 5.7 body in the sense that it is an unregistered foreign company which "carries on business in Australia"? In s 9, the reference to carrying on business is expressed in the present tense. Can a company be a Part 5.7 body, considered as at the hearing of an application under Part 5.7, if it no longer carries on business here but once did as an unregistered foreign company? That question was recently answered in the affirmative by Lander J in Australian Securities and Investments Commission v International Unity Insurance (General) Ltd [2004] FCA 1060. As His Honour pointed out, one of the circumstances which would allow for a Part 5.7 body to be wound up is that it has ceased to carry on business in this jurisdiction, which confirmed his view that: 'a company does not necessarily cease to be a Pt 5.7 body in subs (b)(ii) of the definition if it ceases to carry on business in Australia. It remains a Pt 5.7 body for the purpose of a winding up order under s 583 if the ground relied upon is that it carried on business in Australia but has ceased to carry on business.' In the present case, the ground relied upon is not that it has ceased to carry on business in Australia (although that ground is apparently established) but that it is just and equitable that it should be wound up]. It is my view that whichever ground is relied upon, Carsworthy is a Part 5.7 body for which a winding up order can be made. [40] Division 2 of Part 5B.2 deals with the registration of foreign companies. A foreign company must not carry on business in this jurisdiction unless it is registered or it has applied to be registered and the application has not been dealt with: s 601CD(1). Once registered, the foreign company must lodge a written notice, if it ceases to carry on business in this jurisdiction, within seven days of doing so: s 601CL(1). If a registered foreign company does cease to carry on business here, its name can be struck off the register, whereupon it ceases to be registered under that Division: s 601CL(5), (7). By s 601CL(6), it is provided that the striking off from the register of the name of the foreign company does not affect the power of the court to wind it up. What is the source of the power to wind up such a body, that is a deregistered foreign company? There is a power within s 601CL(14) to appoint a liquidator of the foreign company in the circumstance where a registered foreign company commences to be wound up, or is dissolved or deregistered, in its place of origin. But that is a power in relation to a registered foreign company rather than in relation to a deregistered company. The court's power to wind up a deregistered company, as indicated by s 601CL(6) must derive from s 583. It is only Part 5.7 (which includes s 583) which empowers the court to wind up a body which is not a "company" (meaning a company registered under this Act.) Because the deregistered company could be wound up only under Part 5.7, a deregistered foreign company must be a Part 5.7 body as defined. It could be wound up as a Part 5.7 body only if paragraph (b) of the definition is read as referring to a foreign company that has been registered under Division 2 of Part 5B.2 or to an unregistered foreign company that has carried on business in Australia. [41] Once a registrable body that is a foreign company becomes registered under Division 2 of Part 5B.2 or carries on business in Australia, it becomes a Part 5.7 body which is thereafter susceptible to an order for winding up, regardless of whether it subsequently becomes deregistered or ceases to carry on business in Australia. Once it becomes a Part 5.7 body it has effectively submitted to the jurisdiction conferred by the Act for its winding up. Such an interpretation of the definition of a Part 5.7 body is clearly beneficial to the operation of Part 5.7. The contrary interpretation would enable a foreign company, which carried on business here illegally by being unregistered, to avoid an order for winding up in Australia by ceasing its business here just ahead of a winding up application. Especially where an expressed circumstance for winding up is the cessation of business in Australia, it is difficult to see that such a limitation upon the operation of Part 5.7 was intended. [42] The result is that Carsworthy Limited became a Part 5.7 body by being an unregistered foreign company carrying on business in Australia. Once it became a Part 5.7 body, it was amenable to the operation of Part 5.7, and it remains so amenable although it has ceased to carry on business here. It is therefore a body which may be wound up under s 583." 21 The applicants say that these cases were wrongly decided and should not be followed. It was submitted by Mr Dubler SC on their behalf that there was, in each case, a misplaced emphasis on the reference in s.583(c)(i) to the power to make a winding up order where the body "has ceased to carry on business in this jurisdiction". The emphasis is said to be misplaced because it overlooks the fact that one species of Part 5.7 body is a foreign company registered under Division 2 of Part 5B.2. Once so registered, a foreign company remains a Part 5.7 body whether or not it carries on business in Australia. In the case of a Part 5.7 body not so registered, the applicants emphasise, carrying on of business in Australia is an essential ingredient of the Part 5.7 body status. 22 It was submitted on behalf of the respondent plaintiffs, however, that I should follow International Unity and ASIC v Edwards. Submissions made on their behalf point out that s.582(3) shows clearly that a body which has previously carried on business in "this jurisdiction" but no longer does so may be wound up under s.583. This is because s.582(3) says explicitly that a body which has ceased to exist by virtue of the laws of its place of incorporation may be so wound up. Such a body is, clearly enough, incapable of carrying on business (or doing anything else) anywhere. It cannot be intended that s.582(3) applies only to a foreign company registered under Division 2 of Part 5B.2, particularly since there is provision in that Division itself for the case where a registered foreign company is wound up, dissolved or deregistered in its place of origin: see s.601CL(14) which requires, in that eventuality, that the court appoint a liquidator on the application of either ASIC or the liquidator in the place of origin. There must be a residuary operation for s.582(3) in relation to Part 5.7 bodies that are not registered under Division 2 of Part 5B.2. 23 I propose to follow the two cases in question. To do so would be in accordance with observations I made in Re Wayland (as liquidator of ABC Containerline NV) (2005) 52 ACSR 750 upon an ex parte application where their correctness was not canvassed. I see force in the submissions made on behalf of the plaintiffs. The dissolution and consequent non-existence of a foreign company brought about by the law of the place of its incorporation is recognised under our law: Re Russian Bank for Foreign Trade [1933] 1 Ch 745. Section 582(3), by providing expressly that such a dissolved foreign company may be wound up under s.583 clearly recognises that the carrying on of business within the jurisdiction at the time of the making of the winding up order under that section is not an essential component of the power to make the order. And, particularly in light of s.601CL(14), s.582(3) cannot be regarded as confined to bodies registered under Division 2 of Part5B.2. 24 There is the added point that, as a first instance judge deciding a matter under a Commonwealth statute creating a national scheme of regulation, I should follow decisions of courts exercising coordinate jurisdiction for the purposes of that scheme unless convinced that they are plainly wrong. I am not of that opinion in relation to the present matter. Indeed, I accept that the link coming from a concluded course of carrying on business is sufficient in principle, and as a matter of statutory interpretation, to make available the s.583 jurisdiction for reasons given in the two cases. It cannot be accepted that a foreign company that has carried on business in Australia, with all the consequences that that entails (including, in most cases, incurring debts payable to Australian residents) is put beyond the reach of Australian winding up simply by retreating to its homeland. If, in reality, it has left no legacy requiring administration in Australia (assuming grounds for winding up are shown), any application for a winding up order is likely to be refused on discretionary grounds. But if matters cognisable in an Australian winding up have been left behind, the jurisdiction to wind up is, in my view, ongoing: cf Banque des Marchands de Moscou (Koupetschesky) v Kindersley [1950] 2 All ER 105. I respectfully adopt and endorse, in particular, the statements in paragraph [41] of McMurdo J's judgment in ASIC v Edwards. 25 It follows from what I have just said that LifeWealth Labuan may become the subject of a winding up order under s.583 if it has, at any time, carried on business in Australia. The jurisdiction to appoint a provisional liquidator rests on the same foundation. If LifeWealth Labuan had at any time carried on business in Australia, the circumstance that it was not still carrying on business in Australia at the time of the making of any such order would not mean that the power to make the order had evaporated. The LifeWealth 8 business 26 It is common ground that a business known as "LifeWealth 8" has been carried on and that its principals (in the sense of human instrumentalities) were Mr Levick, Mr Kotlar, Mr Walker and Mr Campbell. The business is described by Mr Levick in one of his affidavits as "an internet share market game". In the course of submissions on 15 December 2004, Mr Johnson said that it was "a pyramid scheme". In a media release of January 2004, the Australian Securities and Investments Commission described LifeWealth 8 as "the most outrageous financial scheme of the past 12 months". The detailed workings of the business are not important for present purposes. It is sufficient to say that it was conducted by means of the Internet and involved solicitation of credit card payments from persons visiting the LifeWealth 8 website. Persons making payments were described as "members" or "licensees" and obtained access to a simulated stock market in which they could trade imaginary shares. Licensees were encouraged to introduce others so that there would be increased "investment" and trading volume and, according to the theory, greater chances of enhanced "prices" and therefore profits. 27 It is also common ground that several corporate entities played a part in the overall pattern of activities that involved the LifeWealth 8 business. One of them has exactly the same name as LifeWealth Labuan (that is, "LifeWealth 8 Limited") but is incorporated in Hong Kong (I shall call it "HKCo"). Another (which I shall call "BVICo") has the name "Wealth 8 Limited" and was incorporated in the British Virgin Islands in either March or May 2003 (direct evidence of the precise date was not tendered). There is reference in the evidence to a third company with the name "LifeWealth 8 Limited" but the preponderance of the evidence is that, while there was, at one stage, a plan to form a company in Malta under that name (which plan pre-dated the formation of LifeWealth Labuan), the plan was never implemented and the Malta company was never incorporated. There is, however, a United States entity called "LifeWealth 8 LLC" which, it appears, is the registrant of a website address used in the conduct of the LifeWealth 8 business. Whether mere solicitation by Internet involves carrying on business in Australia 28 The evidence shows that more than 2,000 persons resident in Australia responded to solicitation through the LifeWealth 8 website and became licensees for the purposes of the simulated stock market activity by making credit card payments by means of the website. Because the solicitation was, in each such case, made as part of a systematic plan and was received and acted upon in Australia, it is the contention of the plaintiffs that some corporate entity associated with the LifeWealth 8 activity carried on business in Australia. The plaintiffs say that that corporate entity was LifeWealth Labuan and that LifeWealth Labuan should therefore be found to have carried on business in Australia. 29 The workings of the Internet were not the subject of evidence before me. The matter was, however, the subject of evidence and discussion in Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575 and, because there is no controversy in that respect in the proceedings with which I am dealing, I am content merely to quote and adopt a passage in the joint judgment of Gleeson CJ, McHugh, Gummow and Hayne JJ at [14] – [16]: " [ 14] One witness called by Dow Jones, Dr Clarke, described the Internet as 'a telecommunications network that links other telecommunication networks'. In his opinion, it is unlike any technology that has preceded it. The key differences identified by Dr Clarke included that the Internet 'enables inter-communication using multiple data-formats ... among an unprecedented number of people using an unprecedented number of devices [and] among people and devices without geographic limitation'. [15] The World Wide Web is but one particular service available over the Internet. It enables a document to be stored in such a way on one computer connected to the Internet that a person using another computer connected to the Internet can request and receive a copy of the document. As Dr Clarke said, the terms conventionally used to refer to the materials that are transmitted in this way are a 'document' or a 'web page' and a collection of web pages is usually referred to as a 'web site'. A computer that makes documents available runs software that is referred to as a 'web server'; a computer that requests and receives documents runs software that is referred to as a 'web browser'. [16] The originator of a document wishing to make it available on the World Wide Web arranges for it to be placed in a storage area managed by a web server. This process is conventionally referred to as 'uploading'. A person wishing to have access to that document must issue a request to the relevant server nominating the location of the web page identified by its 'uniform resource locator (URL)'. When the server delivers the document in response to the request the process is conventionally referred to as 'downloading'." 30 Identification of the place or places at which persons involved in the LifeWealth 8 business uploaded documents and thereby made them capable of being downloaded anywhere in the world is not something on which any firm conclusions can be drawn on the evidence before me. But it cannot be said, on that evidence, that any such uploading activity took place in Australia; although it is plain that persons in Australia were capable of downloading such material in Australia and that many did so. I assume, without deciding, that the acts of uploading occurred outside Australia. That raises the question whether physical acts outside Australia which result in business communication with persons in Australia are, by reason of the territorial quality of the receipt of the communication, properly regarded as carrying on business in Australia. The question applies equally to a situation where a person outside Australia telephones persons in Australia or sends a messages by post or email to persons in Australia and, as a result of those acts performed by the person outside Australia, receives responses which amount to or lead to transactions forming part of some undoubted business activity. 31 It is my opinion that the circumstances outlined are, of themselves, insufficient to constitute the carrying on of business in Australia. Case law makes it clear that the territorial concept of carrying on business involves acts within the relevant territory that amount to or are ancillary to transactions that make up or support the business. Many of the cases concern persons acting as agents within the jurisdiction of enterprise bases and operating outside the jurisdiction. One view has traditionally been taken where the agent within the jurisdiction has authority to bind the principal to dealings there; while another view has been taken of cases in which the agent is empowered to do no more than receive proposals or orders within the jurisdiction (often, no doubt, in response to solicitation there) and retransmit them to the principal. The distinction is discussed in several cases, including Okura & Co Ltd v Forsbacka Jernverks Aktiebolag [1914] 1 KB 715. Buckley LJ, speaking of a situation of the latter kind, there said (at p.721): "These being the facts, 101, Leadenhall Street is really only an address from which business is from time to time offered to the foreign corporation; the question whether any particular business shall or shall not be done is determined by the foreign corporation in Sweden and not by any one in London. In my opinion the defendants are not 'here' by an alter ego who does business for them here, or who is competent to bind them in any way. They are not doing business here by a person but through a person. That person has to communicate with them, and the ultimate determination, resulting in a contract, is made not by the agents in London, but by the defendants in Sweden. It follows from this that one of the essential elements which must be present before a write can be served in this country on the agent of a foreign corporation is lacking in this case. This appeal must, therefore, be dismissed." 32 By the same reasoning, the mere employment by a foreign company of a commercial traveller in Victoria to receive orders on commission and to forward them to its office abroad was held, in Pearce v Tower Manufacturing & Novelty Co Ltd (1898) 24 VLR 506, not to be carrying on business in Victoria. 33 Advances in technology making it possible for material uploaded on to the Internet in some place unknown to be accessed with ease by anyone in Australia with Internet facilities who wishes (or chances) to access it cannot be seen as having carried with them any alteration of principles as to the place of carrying on business developed at times when such communication was unknown. It has never been suggested that someone who by, say, letters posted in another country and addressed to recipients in Australia, seeks to interest those persons in business transactions to be entered into in the other country and in fact succeeds in concluding such transactions with some of them thereby carries on business in Australia, even though, depending on precise circumstances, the solicitation may contravene some other Australian law. There is a need for some physical activity in Australia through human instrumentalities, being activity that itself forms part of the course of conducting business. 34 Unless there is evidence of activities in Australia of placing material on the Internet or processing and dealing with inquiries or applications received by Internet, the question whether LifeWealth Labuan carried on business in Australia must be addressed by reference to the elements of the evidence that go beyond Internet solicitation of persons to be licensees of the LifeWealth 8 simulated stock market game. The territorial aspect of carrying on business 35 The relevant concept of carrying on business in Australia is elucidated by s.21: " Carrying on business in Australia or a State or Territory (1) A body corporate that has a place of business in Australia, or in a State or Territory, carries on business in Australia, or in that State or Territory, as the case may be. (2) A reference to a body corporate carrying on business in Australia, or in a State or Territory, includes a reference to the body: (a) establishing or using a share transfer office or share registration office in Australia, or in the State or Territory, as the case may be; or (b) administering, managing, or otherwise dealing with, property situated in Australia, or in the State or Territory, as the case may be, as an agent, legal personal representative or trustee, whether by employees or agents or otherwise. (3) Despite subsection (2), a body corporate does not carry on business in Australia, or in a State or Territory, merely because, in Australia, or in the State or Territory, as the case may be, the body: (a) is or becomes a party to a proceeding or effects settlement of a proceeding or of a claim or dispute; or (b) holds meetings of its directors or shareholders or carries on other activities concerning its internal affairs; or (c) maintains a bank account; or (d) effects a sale through an independent contractor; or (e) solicits or procures an order that becomes a binding contract only if the order is accepted outside Australia, or the State or Territory, as the case may be; or (f) creates evidence of a debt, or creates a charge on property; or (g) secures or collects any of its debts or enforces its rights in regard to any securities relating to such debts; or (h) conducts an isolated transaction that is completed within a period of 31 days, not being one of a number of similar transactions repeated from time to time; or (j) invests any of its funds or holds any property." 36 This section does not, of course, provide any exhaustive or exclusive definition of carrying on business in Australia. This is made clear by the word "includes" in s.21(2). There remains scope for the operation and application of territorially based concepts of carrying on business derived from the general law. Before those concepts are examined, the scope and effect of s.21(3) should be noted. 37 Section 21(3) begins with the words, "Despite subsection (2)". It is thus expressed to have an effect that is unconstrained by the statements in s.21(2) as to particular acts and activities that are to be regarded as carrying on business in a particular territory. It follows that the statement in s.21(3) as to what does not constitute the carrying on of business in a territory is to be construed on the basis that it is neither confined nor expanded by anything in s.21(2). Section 21(3) refers to nine categories of activity, some of which are divided into subcategories (see paras (a), (b), (e), (f), (g) and (j)). A body corporate does not carry on business within the territory "merely because", in the territory, it engages in activity (a) "or" engages in activity (b) "or" engages in activity (c) "or" engages in activity (d) "or" engages in activity (e) "or" engages in activity (f) "or" engages in activity (g) "or" engages in activity (h) "or" engages in activity (j). The words "merely because" are, it seems, a modern version of "for the reason only that" in earlier corresponding provisions (see Companies Act 1961, s.344(3); Companies (New South Wales) Code, s.510(3)). Because the nine paragraphs (a) to (j) are separated by the word "or" (which appears at the end of each of the first eight) and the operation of the provision as a whole is conditioned by the words "merely because", the effect of s.21(3), as it seems to me, is that a body corporate does not carry on business in a particular territory if the only activity it engages in there is one of the nine. If it engages in several (or all) of them, the only effect of s.21(3) is to ensure that the undertaking of any one of the activities does not of itself produce a finding that business is carried on. Because s.21(3) operates by reference to each of the nine forms of activity separately, it does not, where several of the activities are engaged in, direct a finding that business is not carried on; but equally does not lead to any positive conclusion that business is carried on. 38 I return to the general law concept of carrying on business. According to those concepts, carrying on of business generally involves conducting some form of commercial enterprise, systematically and regularly with a view to profit (see, for example, Hyde v Sullivan (1956) 56 SR (NSW) 113 at p.119), although, as a number of cases emphasise, there may be a finding that business is carried on even where some of the usual elements are missing. The following passage in the judgment of Gibbs J in Smith (on behalf of National Parks and Wildlife Service) v Capewell (1979) 142 CLR 509 is instructive: "The expression 'carry on business' in its ordinary meaning, signifies a course of conduct involving the performance of a succession of acts, and not simply the effecting of one solitary transaction. In Smith v Anderson (1880) 15 Ch D 247; [1874–80] All ER Rep 1121, where the Court of Appeal considered the effect of s 4 of the Companies Act 1862 (UK) which spoke of an 'association … formed … for the purpose of carrying on any … business', Brett LJ said, Ch D at 277–8; All ER Rep at 1130: 'The expression "carrying on" implies a repetition of acts, and excludes the case of an association formed for doing one particular act which is never to be repeated.' In Kirkwood v Gadd [1910] AC 422; [1908–10] All ER Rep 768 Lord Loreburn LC said (AC at 423): 'What is carrying on business? It imports a series or repetition of acts.' In the same case Lord Atkinson (at 431) referred with apparent approval to the statement of Brett LJ in Smith v Anderson . Similarly, in Premier Automatic Tickets Issuers Ltd FC of T (1933) 50 CLR 268 at 298, Dixon J, in a passage frequently quoted, said that 'the carrying on or carrying out of any profit-making undertaking or scheme' in a taxation statute, 'appears to cover, on the one hand, the habitual pursuit of a course of conduct, and, on the other, the carrying into execution of a plan or venture which does not involve repetition or system …'. The decision in Cornelius v Phillips [1918] AC 199; [1916–17] All ER Rep 685, is not authority for any different view of the meaning of the expression. It was there held that a money-lender had carried on the business of money-lending at an hotel which was not his registered address although he had effected only one transaction at the hotel. In that case, which was recently discussed and distinguished in Yango Pastoral Co Pty Ltd v First Chicago Aust Ltd (1978) 21 ALR 585; 53 ALJR 1, the single transaction which fell within the statutory prohibition was conducted by a person who was, on any view, carrying on a money-lending business. Similarly, in Lowe v Cant [1961] SASR 333, it was held that a milk vendor who had been allotted a zone under regulations governing the supply of milk and who, on one occasion, delivered milk to a householder in another zone, had carried on business as a retail vendor of milk within a zone other than that allotted to him. Again, there was no doubt that the milk vendor was carrying on business as such or that the isolated transaction which occurred outside his allotted zone was done in the course of carrying on that business. In these cases, although the defendant engaged in only one transaction of the kind proscribed, that transaction was done in the course of carrying on a business. A single transaction may amount to the carrying on of a business, although no other transaction has so far been effected, if it is proved that there was an intention to carry on a business and that the transaction was undertaken in pursuance of that intention: Fairway Estates Pty Ltd v F C of T (1970) 123 CLR 153 at 164-5. It seems clear that a solitary transaction of sale or purchase of skins in New South Wales will only constitute an offence against s 105(a) of the Act, if the sale or purchase has been made by the defendant with the intention that it shall be the first of several transactions in a business which he thereby commences to carry on, or if it has been made in the course of a business which the defendant is carrying on elsewhere." 39 As the very last part of that statement indicates, a company may be found to be carrying on business "in" a particular geographic area even though the bulk of its business is conducted elsewhere. Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164 concerned a company that operated overland tours in which passengers were transported by bus and provided with food and camping accommodation purchased by the company in fulfilment of its contractual obligations to customers. The despatch of busloads of passengers through Western Australia and the undertaking of commercial transactions there in support of their transportation entailed the carrying on of business in Western Australia. And this was so even though none of the tours ever started or finished in Western Australia and it was rare for anyone to join a tour in Western Australia (and anyone who did so always left it outside Western Australia). It was held by majority (Gibbs, Stephen, Mason and Jacobs JJ, Barwick CJ dissenting) that this was sufficient to warrant a finding that the company carried on business in Western Australia, even allowing for the operation of statutory exceptions of the kind now found in s.21(3) of the Corporations Act. 40 Dunlop Pneumatic Tyre Co Ltd v Aktien-Gesellschaft Fur Motor Und Motorfahrzeugbau Vorm Cudell & Co [1902] 1 KB 342, concerned a German company which hired a stand at a trade fair in London for nine days and placed there an employee whose function it was "to explain the working of the articles exhibited, and to take orders for and press the sale of the defendants' goods". The employee was held to be "a person sent over by the defendant corporation as their representative to do for them in this country business of theirs, which, not being a concrete entity, they could not do for themselves like an ordinary individual, namely, the business of exhibiting and vending their wares at the show at the Crystal Palace". 41 In Actiesselskabet Dampskib "Hercules" v Grand Trunk Pacific Railway Company [1912] 1 KB 222, it was held that the activity of raising loans in London for use in the company's railway operations in Canada amounted to carrying on business in England. The rationale appears from the judgment of Buckley LJ (at p.228): "The cardinal factors are that the company does acts within the jurisdiction which are part of its business as a company, and does them at a fixed place within the jurisdiction. The raising of this loan capital is part of the company's business, and it is done here by a London committee constituted of the directors resident in England. They are the company's agents in this country for that purpose." The applicants' basic contention 42 The applicants say that the LifeWealth 8 business was carried on in two distinct phases: first, from December 2002 to 1 May 2003, by the individual promoters on behalf of the company proposed to be formed in Malta; and, second, from 2 May 2003 until it ceased operation or was disposed of in late 2004, by BVICo (as I have said, the evidence is equivocal as to whether incorporation of BVICo occurred in March 2003 or May 2003). According to the applicants, the LifeWealth 8 business was never conducted by LifeWealth Labuan which only ever acted as a holding company. 43 In support of the first part of this contention, the applicants point to the fact that one of the human actors, Mr Levick, registered "LifeWealth 8" as a business name and opened a bank account of his own styled "Life Wealth 8". Both these things were done in Australia. There is in evidence a search of the register under the Business Names Act 1962 of this State which shows "Life Wealth 8" as having been registered in respect of Mr Levick from 31 October 2002 to 25 January 2003. 44 In pursuing the question whether LifeWealth Labuan at any stage carried on business in Australia, it is convenient to begin with the evidence emerging from contemporary documents that have been introduced into evidence. Each side tendered a quantity of documents. They are replete with references to "LifeWealth 8" but only rarely explicit in identifying which of the corporate entities is referred to. I shall therefore concentrate on documents that unambiguously relate to or concern LifeWealth Labuan as distinct from any other entity. Having obtained, from the contemporary documents, whatever indications there are of relevance to the question of LifeWealth Labuan's carrying on business in Australia, I shall consider what inferences may be drawn from them and then test those resultant inferences against the affidavit and oral evidence. Documentary evidence – company searches 45 The annual return of LifeWealth Labuan shows its shareholders to be Green Co Ltd, Botany Holdings Ltd, Plover Ltd, GEBO Equity Investments (Labuan) Ltd and Bumiputra-Commerce Corporate Services Ltd. There is, as I understand it, no dispute that each of these companies is incorporated in Malaysia and that the first four companies are owned by and under the actual control of, respectively, Mr Kotlar, Mr Levick, Mr Campbell and Mr Walker. 46 The annual return records the directors of LifeWealth Labuan as Signatory Investments Pty Ltd, Global Offshore Services Ltd (a Malaysian entity) and Bumiputra-Commerce International Trust (also a Malaysian entity). 47 An ASIC search of Signatory Investments Pty Ltd as at 17 November 2004 shows the directors to be Mr Kotlar (appointed 30 October 2002), Mr Walker (appointed 16 July 2003) and Mr Campbell (appointed 30 October 2002). Mr Levick is shown as a former director (appointed 30 October 2002) whose appointment ended on 24 March 2003. Each of the four is shown as having his address in Australia: Mr Kotlar at Glenelg East in South Australia, Mr Walker at North Turramurra in New South Wales, Mr Campbell at Broadbeach in Queensland and Mr Levick at Kingsford in New South Wales. The shares in Signatory Investments are shown as held in equal proportions by Mr Levick, Mr Kotlar and Mr Campbell. 48 An opinion of Ms Felicia Ho, a member of the Malaysian bar, introduced into evidence concludes that the purported appointment of Signatory Investments as "controlling director" of LifeWealth Labuan "is null and void", although Ms Ho says that, based on the annual return as filed, Signatory Investments is one of the three directors, the other two being the two Malaysian entities disclosed by the annual return to which I have referred. By contrast, in a letter of February 2005, Mr Azli Noor of Bumiputra-Commerce Trust Ltd says that he has no documents on file substantiating either the appointment of Signatory Investments as a director or its being given the powers of a "controlling director". He says that listing of Signatory Investments as a director in the annual return was "a mistake". Documentary evidence – shareholders agreement 49 There is in evidence an agreement dated 8 February 2003 between Mr Campbell, Mr Kotlar, Mr Levick and Mr Walker entitled "Shareholders Agreement" and signed by all of them. Clause 1.1 defined "Company" as "Life Wealth Limited". The first recital says that "the Company is a company incorporated in Labuan, Malaysia of which the abovementioned [i.e, the four named partes] are all shareholders". The second recital reads: "AND WHEREAS the Company is an online network marketing company that has developed intellectual property with its principle [sic] place of business being St Julian's Malta (Head Office)." 50 Clause 2.0 said that the affairs of the company were to be managed by a board of four directors, with each of Campbell, Kotlar, Levick and Walker being entitled to elect one director while remaining a shareholder. Clause 2 went on to deal with directors' remuneration and with directors' decision making, with some matters requiring unanimous agreement and others by a resolution passed by majority vote at a meeting or by unanimous written consent divorced from a meeting. There was in clause 2.9 the following provision ("Shareholder" referring to each of Campbell, Kotlar, Levick and Walker): "2.9 Each Shareholder shall, for so long as he/she is the owner of the shares of the Company devote such time and effort as may reasonably required to carry on the business of the Company and the Shareholder shall use his/her best efforts, skill and abilities to promote the interests of the Company. Each shareholder agrees that he/she will not engage, without consent of the other Shareholders, in a business which is directly competitive to that of the company." Later provisions dealt with the preparation of "a company business plan" and made "the jurisdiction for this document" the laws of Malaysia. Documentary evidence – Steve Axiotis 51 There is in evidence a written agreement dated 17 October 2002 between LifeWealth Labuan and one Steve Axiotis, whose address was stated to be in North Balwyn, Victoria. The corporate party to the agreement is described as "Life Wealth 8 Limited (LW8) a company incorporated in Malaysia". The person who supposedly signed on its behalf is Mr Levick. By that supposed agreement, LifeWealth Labuan retained Mr Axiotis to provide computer services as described. The retainer was for the period 21 October 2002 to 21 January 2003. The fixed remuneration was expressed in Australian dollars. Another clause said: "10,000 shares in the Members Private Stock Market shall be granted and such shares will be subject to the terms and conditions as imposed on all members of LW8." Provision was made for reimbursement of expenses "related to the Life Wealth 8 Limited business activities". 52 This cannot have been a contract to which LifeWealth Labuan was a party. It did not come into existence until 8 November 2002. 53 A further consulting contract is dated on 7 January 2003. The parties are expressed to be "Life Wealth 8 Limited (LW8) a company incorporated in Malaysia" and Mr Axiotis. The signatory for LifeWealth Labuan was Mr Walker. Again, the remuneration was in Australian dollars and there was provision for reimbursement of expenses related to "the Life Wealth 8 Limited business activities". There was provision of the granting of an additional 10,000 "shares in the Members Private Stock Market". Although the agreement refers to the possibility of extension "beyond the finishing date", no term (or "finishing date") is stated. 54 Webpage information shows that Mr Axiotis was promoted as "General Manager, Technology and Information Systems" of "Lifewealth8.com". 55 By late 2004, substantial sums due to Mr Axiotis had not been paid. In evidence is his Telstra bill for which he had not been reimbursed. It covers the period 24 February 2004 to 8 May 2004 and shows substantial numbers of calls from two landline telephone numbers in Victoria and from his mobile phone, those to places outside Australia being billed at a rate designated "Int Mobile" from which it appears that they were international calls. The Telstra bill is addressed to Mr Axiotis at his North Balwyn address. There are also Optus bills for a mobile telephone account addressed to Mr Axiotis' North Balwyn address. These are for calls in periods ending April 2004 and July 2004. Documentary evidence – Ulfat Ali 56 In June 2003, Mr Walker received a proposal for a loan of 2.5 million Euros from a lender introduced by Mr Ulfat Ali whose base seems to have been in Dubai. Mr Ali's proposal referred to the prospective borrower as "Life Wealth 8 Limited". This was in accordance with an earlier message from Mr Walker to him which he had signed as "Chief Executive Officer, Life Wealth 8 Limited". In that communication, Mr Walker said: "Our main operating company is in Labuan in Malaysia, however our CEO and his staff live in Sydney Australia. We operate in 81 countries and have approximately 21,000 distributors. Please note our previous registered office was in Malta as per our attached letter from Paysystems our Debtor, they have used an old address on file. Contract details: Richard Walker Chief Executive Officer 6 Stephanie Place North Turramurra New South Wales 2074 Australia." 57 Two unexecuted forms of loan agreement are in evidence, one for 2.5 million Euros and the other for 1.5 million Euros. Also in evidence are minutes of a purported board meeting of "Life Wealth 8 Limited" held on 19 November 2003 at 6 Stephanie Place, North Turramurra, at which were present Mr Walker, Mr Campbell and Mr Kotlar. A subsequent note of unknown authorship says: "19 November, while EK is in Europe and JC in Bangkok, RW holds a board meeting at his home with EK a [scil. and JC in] attendance …" 58 The purported meeting resolved to appoint a Mr Grossmann "a Director of this Corporation" for the sole purpose of obtaining a working capital loan in the amount of 5.0 million Euros. (An email from Mr Johnson to Mr Walker of 28 June 2004 makes it clear that the Grossmann appointment was in connection with the Ali loan.) 59 Mr Walker later sent to Mr Ali something unidentifiable which caused Mr Walker to email Mr Kotlar on 15 August 2003 saying: "This is what has been given to Mr Ali. He then asked questions about LifeWealth 8 Labuan, however given that is about to go then this would then move to Wealth 8 Limited in BVI." The subject matter, clearly enough, was a loan. Documentary evidence – drafts of 8 September 2003 and Ivy Sia's email 60 The evidence includes draft minutes of meeting of directors of LifeWealth Labuan represented as having been held in Labuan on 8 September 2003. Under the heading "Present" there appears: "Mr Nor Azli Mohd Noor (BCIT) (appointed chairman Mr Gary Douglas (in attendance on behalf of 'GOS') Mr Erminio Kotlar & Mr John Campbell (In attendance on behalf of Signatory Investments Pty Ltd)" 61 The first substantive item in the draft minutes is: "A global discussion was made on the overview of LW8's business, corporate structure and cash flows status of the Company." 62 Certain resolutions are then set out, including resolutions giving Signatory Investments certain specific authorities to deal with certain specific matters. 63 Another document in evidence is a draft of a directors' written resolution also dated 8 September 2003 of BVICo obviously prepared by the person who prepared the draft minutes of the meeting of directors of LifeWealth Labuan. I say this because of the consistent forms of document identification at the foot of each document. Provision is made for signing by Mr Campbell and Mr Kotlar as "Directors of Signatory Investments Pty ltd (Authorised Representative of LIFEWEALTH 8 LIMITED) CORPORATE DIRECTOR." 64 It is obvious that each of these documents is a draft as neither is signed and each contains handwritten alterations. The second document also carries a handwritten notation: "forwarded to client after amendments by Ivy 24/9/03" 65 This reference to "Ivy" and to activity by her in relation to the draft on 24 September 2003 causes me to mention an email of 17 September 2003 from Ivy Sia addressed "Dear John" but sent not only to Mr Campbell but also to Mr Kotlar and Mr Walker. It concludes: "Regards Ivy Sia (Ms) GLOBAL OFFSHORE SERVICES LTD Level 14(B) Main Office Tower, Financial Park Complex, Labuan F.T. 87000 MALAYSIA Ph: +6087 423 282 Fax: +6087 452 453 E-mail: globalos@tm.net.my" 66 The text of the email is as follows: "Following recent meeting, emails and further discussions with Mr Nor Azli of Bumiputra-Commerce International Trust (L) Bhd, we would like to request for the followings in order for us to proceed: 1/ Corporate documents of Wealth Account Development Limited, BVI [WADL-BVI] 2/ Corporate documents of LifeWealth 8 Limited, Hong Kong (specially statutory forms on the appointment of corporate directors, transfer of shares, share certificate issued to LifeWealth8 Limited, Labuan, minutes and forms on the change of name from Champ Creation Investment Limited to LifeWealthu 8 Limited, etc) 3/ We also would like to remind you to seek legal advice on the separation of the companies (between LW8-HK, LW8-LABUAN, W8BVI & its business) 4/ Signed copies of agreements (S&P and Deeds) pertaining the sales of LifeWealth 8 Limited, Hong Kong and Wealth8 Limited, BVI. We have the unsigned copies from Richard, are the agreements be executed on 29 August 2003? back dating it? 5/ Could you provide us Mr Keith Wong, HK's email address and contact numbers? Please advise that we need this information in order to do up the respective resolutions. Should you require further clarification on the above matters, please do not hesitate to contact us. Hope to hear from you soon. Thank you." Documentary evidence – PaySystems relationship 67 On 15 November 2002, "Life Wealth 8 Limited", the address of which was given as "Portomaso, St Julians, Malta ST J06", entered into an agreement with PaySystems Corporation of Montreal, Canada. The agreement was signed for "Life Wealth 8 Limited" by Mr Campbell. PaySystems was a provider of so-called "e-cash". It operated and made available for reward systems by which payments could be made and received by Internet. 68 That this "Life Wealth 8 Limited" was, despite the Malta address, LifeWealth Labuan is borne out by a letter of 23 July 2003 from PaySystems confirming that "LifeWealth 8 Limited" was "a Premier VIP client in good standing with PaySystems Corporation". The letter is addressed as follows: "ATTN: Mr Richard Walker Chief Executive Officer LifeWealth 8 Limited Level 14B, Main Office Tower Financial Park Labuan Jalan Merdeka 87000 Federal Territory of Labuan MALAYSIA" This, of course, was the address of Global Offshore Services Ltd as appearing in Ivy Sia's email. 69 The relationship with PaySystems later became strained. Lawyers representing themselves as acting for "LifeWealth 8 Limited" wrote to PaySystems in June 2004 alleging breaches of contract. A letter from those lawyers to Mr Johnson dated 23 August 2004 reported that PaySystems was "now effectively bankrupt". A settlement with PaySystems was afterwards reached. A sum of 600,000 Euros was involved. Arrangements were made for the proceeds to be paid into Mr Johnson's trust account in Adelaide. All these matters appear from emails in evidence. Documentary evidence – Austcom litigation 70 By statement of claim filed on 3 November 2004 in the Victoria Registry of the Federal Court of Australia, LifeWealth Labuan sued Austcom International Pty Ltd and others upon causes of action under s.52 of the Trade Practices Act 1974 (Cth). Correspondence in evidence shows that Johnson Lawyers, who acted for the plaintiffs in those proceedings, received their instructions from Mr Campbell. 71 Paragraph 1 of the statement of claim reads: "The applicant ('LW8'): (a) is and was at all material times a corporation incorporated in Malaysia according to law and able to sue; (b) carries on and has at all material times carried on a business in relation to the sale over the internet of games, personal development products and other products, including telecommunications services." 72 It is also relevant to quote other paragraphs of the statement of claim: "6. On 27 February 2003, a meeting took place between Fendis on behalf of Austcom and John Campbell, Erminio Kotlar and Richard Walker on behalf of LW8 at 6 Stephanie Place, North Turramurra in Sydney, the home of Walker." "12. By reason of the matters pleaded in paragraphs 6 – 11 above, Austcom engaged in misleading and deceptive conduct, or conduct that was likely to mislead or deceive, within the meaning of s.52 of the Trade Practices Act." 73 Paragraph 15 alleges a contract between "LW8" and Austcom. The particulars to that paragraph are: "The contract is partly oral and partly to be implied. In so far as it is oral, it was formed during discussions between Fendis, Campbell, Kotlar and Walker on 27 February 2003 and 7 March 2003 …" 74 Further representations are alleged in paragraph 27 of the statement of claim. The particulars to that paragraph are as follows: "In May and June 2003, telephone conversations took place on various dates between Campbell (mainly in Sydney, Gold Coast, Queensland or Bangkok), Kotlar (mainly in Adelaide) and Fendis (mainly in Melbourne). A meeting took place between Campbell and Fendis in Salt Lake City on 5-7 June 2003. Meetings took place between Campbell, Kotlar, and Fendis in Melbourne on 26 and 27 September 2003, in Surfers Paradise, Queensland on 22-24 November 2003. A telephone conversation took place on 27 November 2003 between Campbell in Surfers Paradise and Fendis in the United States. …" 75 It is also relevant to quote paragraph 30 of the statement of claim: "30. Induced by and in reliance on the Capricorn Representation: (a) LW8 entered into the Capricorn Exchange Gateway Contract, as referred to below; (b) In January 2004 , LW8 had its web site amended, so that it advised customers that they were dealing with Capricorn Exchange and, during the period 17 to 24 January 2004, allowed the processing of transactions from its web-site through the Capricorn Exchange Gateway." 76 I quote also paragraph 36 of the statement of claim: "36. Further or alternatively to paragraphs 27-35 above, in or about May-November 2003, Capricorn Exchange (by or through its agent, Fendis) entered into a contract in Australia with LW8 under which Capricorn Exchange would provide to LW8 the Capricorn Exchange Gateway ('the Capricorn Exchange Gateway Contract')." 77 The Austcom litigation was eventually settled. A deed to effect the settlement was prepared. Under the deed, a sum was to be paid by the Austcom parties to "LW8", described in the deed as simply "Life Wealth 8 Limited" without territorial description but, of course, no doubt intended to be the same company as was described in the statement of claim. The settlement involved a payment to "LW8". Mr Hill, of Johnson Lawyers (Mr Johnson's firm), who had acted for "LW8" in the litigation, recorded in a note of 2 December 2004 he had had from Amy Penson: "Amy rang to request the trust account details for payment of the settlement sum. I will email these details to her. She also raised the issue of LW8 and reference to the Virgin Islands in our initial statement of claim. On our statement of claim filed in the Federal Court LW8 is a Malaysian entity. I said that this was my [sic] also my understanding. I do not know the history of the company but I presume this was an error. She has run an offshore company search and read the number to me. This accords with the common seal on the executed deed." 78 The copy of the deed in evidence has been executed by Life Wealth 8 Limited only. It bears what purports to be the common seal of that company and the signature of Mr Campbell. The common seal has on it: "Company No LL03497." This number corresponds with the number stated on the certificate of incorporation of LifeWealth Labuan issued by the Labuan Offshore Financial Services Authority on 8 November 2002. 79 Mr Hill emailed to Amy Penson an answer to the question she had asked. He said: "Reference to the Virgin Islands on our initial statement of claim was an error. The correct details as per our statement of claim filed with the Federal Court are as follows: Lifewealth 8 Limited Company No LL03497." Documentary evidence – proposed disposal of operations 80 Minutes of a purported meeting of directors of LifeWealth Labuan of 30 August 2004 are in evidence. It is relevant to quote the document in full: "Minutes of Meetings of Directors of Life Wealth 8 Limited held by telephone and in accordance with the shareholders agreement noting that Richard Walker had resigned as a director from the LW8 group. Date: 30th August 2004. Resolution: The Board hereby authorise the [sic] Erminio Kotlar to negotiate with the Directors of Qol (herein called ieeha) with a view to the Life Wealth 8 Limited Labuan (herein called the Company) placing its licences in a sustainable environment with ieeha's business. The Board authorises Erminio Kotlar to negotiate on the best terms available so as to compensate the licensees for expectations that they may have as to the Company's obligations to them. In the event that an acceptable agreement can be reached Erminio Kotlar and/or John Campbell were authorised to execute all documents and witness the affixing of the seal by the Company to the agreements. Background: Erminio Kotlar advised the meeting that as Paysystem was financially stressed and it was only able to pay a portion of the money it owed the Company the Company was not able to satisfy the expectation of the Licensees so it would be in the interest of the Company to place the licensees in a new sustainable environment so as to give the licensees the opportunity to satisfy their expectations and to minimise the fall out to the company. Erminio Kotlar advised that as over 90% of the Licensees originate from Scandinavia it was an advantage to place them with a Norwegian/Danish entity but that its leadership would need to agree to the terms of the migration. This would enable the Company to regroup and re-establish itself with a more sustainable business model which would provide a more acceptable product range (banking finance and insurance) based on a relationship marketing system." This document carries the signatures of Mr Campbell and Mr Kotlar. 81 A partially signed heads of agreement dated 19 October 2004 is in evidence. It is expressed to be between "Qol-Network (Nordic) Aps (hereinafter known as 'ieeha')", the shareholders of ieeha, "Lifewealth 8 Limited Level 14B, Main Office Tower, Financial Park, Labuan, Malaysia (hereinafter known as 'LW8')", "Greenco Limited", Mr Kotlar and one Campbell Scott. Included in this document are undertakings by LW8 as follows: " 1.1 In consideration of the terms of the proposed formal agreements provide ieeha with all assets necessary to migrate the LW8 Licensees and to effectively run a business model based the ieeha.com.concept. 1.2 Will provide absolute title to ieeha of all its know how and other intellectual property, including data bases and grant irrevocable exclusive licence of its IT system to ieeha. 1.3 From the launch date of the migration of LW8 Licensees to ieeha, LW8 will cease to operate its business and agrees not to carry on a similar operation in the future. 1.4 Will make available current LW8 staff for ieeha to assess as to their suitability and commitment to ieeha and those found suitable offered appropriate ieeha contracts. 1.5 Will use its best endeavours to meet a launch date of October 2004. 1.6 Will assist in providing a suitable product range. 1.7 Will remain responsible for all its debts and will indemnify ieeha from any liability arising from those debts." 82 When I say that this document is partially signed, I refer to the fact that it carries the signature of Mr Kotlar in one of the two spaces provided for signatures of directors of LifeWealth Labuan (the other space has Campbell's name typed against it), the signatures of Mr Kotlar and (I assume) Mrs Kotlar where there is provision for signing by Greenco and the signature of Campbell Scott. Assessment of documentary evidence – corporate acts 83 The search materials in evidence show that LifeWealth Labuan was, in a formal sense, established in such a way that all its shareholders and all its directors were corporations.. The shareholders agreement paints quite a different picture. It is an agreement among the four individuals who stood behind and controlled both four of the five corporate shareholders (the exception is Bumiputra-Commerce Corporate Services Ltd) and are or were directors of Signatory Investments Pty Ltd, the company represented to be the "controlling director" of LifeWealth Labuan – a position which according to Ms Ho's opinion, Signatory Investments did not occupy (in addition and as already noted, Mr Azli Noor of Bumiputra-Commerce Trust Ltd said in his letter of February 2005 that there was no record of Signatory Investments ever having been appointed a director at all). 84 By the shareholders agreement, the four individuals made it clear that they considered themselves to be the shareholders of LifeWealth Labuan and to have the power of appointing its directors, the first directors being themselves. They set down in unambiguous terms their compact regarding the operation of the Labuan company they controlled. The shareholders agreement smacks of a reality that is refreshing by comparison with the obvious contrivance reflected on the face of the record. Bumiputra-Commerce Corporate Services Ltd (ostensibly the fifth shareholder) and Global Offshore Services Ltd and Bumiputra-Commerce International Trust (ostensibly the directors in addition to Signatory Investments) were, on the evidence, professional service providers in Labuan. I infer from this that they did not, as a matter of fact, decide what commercial ventures LifeWealth Labuan should undertake, how it should raise money, how it should spend money, which contracts it should enter into and, in general, how it should pursue commercial objectives. This is borne out by the email of 17 September 2003 from Ivy Sia of Global Offshore Services Ltd to Campbell, Kotlar and Walker. Global Offshore Services Ltd was supposedly a director of LifeWealth Labuan. One would expect, therefore, that it brought its own independent decision-making to bear upon the affairs of LifeWealth Labuan. But as is shown in particular by Ivy Sia's email, it did no such thing. It sought instructions from Campbell, Kotlar and Walker on such matters, apparently seeing its own role as advisory and administrative. 85 It may well be (the documentary evidence does not allow me to say) that meetings of the "formal" board ostensibly attended by human agents of the two Labuan corporate entities (and, if applicable, of Signatory Investments) occurred from time to time. The draft minutes of 8 September 2003 suggest that this may have been so on one occasion or, at least, that it may have been contemplated. But the scheme mapped out by the shareholders agreement, coupled with the purported board meetings involving Campbell, Kotlar, Levick and Walker, must be accepted as reflecting the way in which LifeWealth Labuan was, in reality, actuated and operated by those in fact in a position to control it and who actually exercised their de facto power to do so. It is relevant to note, in this connection, the definition of "director" in s.2(1) of Malaysia's Offshore Companies Act 1990: "'director' means any person, by whatsoever named called, occupying the position of director of an offshore company or a foreign offshore company, and includes a person in accordance with whose directions or instructions the directors of such a company are accustomed to act and an alternate or substitute director." 86 This has a familiar ring for Australian readers. Except for the concluding references to "alternate or substitute director" it is virtually identical with the definition in s.5(1) of the uniform Companies Acts of 1961-2. Both provisions have English antecedents. The definition in the Australian legislation of 1961-2 has been held by the High Court of Australia to extend to de facto directors: see Corporate Affairs Commission v Drysdale (1978) 141 CLR 236 in which all members of the court supported that basic proposition by reference to many English cases going back to 1875. Murphy J described a de facto director as a person who "acts as a director without lawful authority". Aicken J spoke of the concept of a director de son tort discussed in Gibson v Barton (1875) LR 10 QB 329. Mason J referred to a person occupying and acting in the position of director, as distinct from holding the office of director. In Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180, Millett J described de facto directors as "directors who assume to act as directors without having been appointed validly or at all". 87 Given the common source of both the Australian and Malaysian enactments and the common legal heritage, I proceed on the basis that the Malaysian definition extends to de facto directors. In any event, and as Ivy Sia's email of 17 September 2003 shows, there is evidence that the "formal" board took its instructions from, at least, Campbell, Kotlar and Walker and that they were persons in accordance with whose directions or instructions the corporations formally in office as directors were accustomed to act, with the result that a separate element of the definition of "director" applied. 88 It therefore seems highly likely that Campbell, Kotlar and Walker and probably Levick as well would be viewed as having been directors of LifeWealth Labuan according to the definition of "director" in s.2(1) of the Offshore Companies Act 1990. But whether they were within the statutory definition or not, they were the natural persons who controlled four of the five shareholders which in turn had power to change the composition of the board of directors and to cause the affairs of LifeWealth Labuan to be conducted in ways they chose without reference to the separate wishes of the corporations that were, in name, the directors. 89 Acts and activities, in fact, of Kotlar, Campbell, Levick and Walker (or some of them) entirely consistent with the exercise of de facto power to act for LifeWealth 8 as directors or officers are evident from the documents. Walker clearly acted in that way in the correspondence with Ulfat Ali where he held himself out as "Chief Executive Officer" of LifeWealth Labuan. He (or someone else) made representations to PaySystems that caused it to address its letter of 23 July 2003 to him as "Chief Executive Officer" of LifeWealth Labuan at its office in Labuan. Campbell did likewise in entering into the agreement with PaySystems and in affixing what purported to be the common seal of LifeWealth Labuan to the settlement deed concerning the Austcom litigation. The allegations and particulars in the Austcom statement of claim were received into evidence before me on the basis that they did not constitute an admission. But they are nevertheless evidence of clear and unambiguous representations (which, given the documentary evidence of the source of the lawyers' instructions, may be taken to have come from Campbell) that Campbell, Kotlar and Walker were involved in the conversations and meetings of 27 February 2003 and May and June 2003 which LifeWealth Labuan itself put forward as the foundation of its case. 90 In January 2003, Walker acted for LifeWealth Labuan in committing it to a new contract with Mr Axiotis. Campbell, Kotlar and Walker purported to hold board meetings of LifeWeatlh Labuan, as, on another occasion, did Campbell and Kotlar. 91 In all these ways, Campbell, Kotlar, Walker and Levick can be seen from the documents in evidence to have actuated and operated LifeWealth Labuan in accordance with the method of operation agreed by them, as its controllers, in the shareholders agreement. The construct as to directorate put in place by them through the service providers in Labuan was, as a practical matter of fact, cast aside when it actually came to causing LifeWealth Labuan to do anything of a substantive nature. When the need for substantive action arose, the true controllers emerged from the shadows they had created by means of the Labuan construct and exercised the de facto power they had always intended should be theirs. Assessment of documentary evidence – carrying on of business 92 There can be no doubt that the acts performed by LifeWealth Labuan through Campbell, Kotlar, Walker and Levick, as disclosed by the documentary evidence, were acts in the course of carrying on a business; also that LifeWealth Labuan carried on business beyond activities as a mere holding company. It may well be that BVICo or HKCo or both of them were, at different times, involved in the conduct of the same business. I am not concerned with that question. Even if they were, that does not detract from the reality that the business was a business carried on by LifeWealth Labuan. 93 The shareholders agreement of 8 February 2003 signed by all four natural person principals recited that LifeWealth Labuan "is an online network marketing company". A marketing company sells things. Mr Axiotis, a consultant contracted to LifeWealth Labuan, was promoted on a website as "General Manager, Technology and Information Systems". His second contract (the contract dated 7 January 2003) entitled him to reimbursement of expenses related to "the Life Wealth 8 business activities" – thus confirming that his contractual counterparty (which, as I have already said, was obviously LifeWealth Labuan) had "business activities" requiring technology and information systems skills of the kind he had. In his correspondence with Ulfat Ali, Mr Walker (signing himself "Chief Executive Officer, Life Wealth 8 Limited") said, "Our main operating company is in Labuan in Malaysia". The "operating company" thus referred to could only have been LifeWealth Labuan. An operating company operates and is to be distinguished from a holding company. LifeWealth Labuan's own statement of claim in the Austcom litigation represented that it "carries on business and has at all material times carried on business in relation to the sale over the internet of games, personal development products and other products, including telecommunications services". This reference to "business in relation to the sale …" is consistent with the earlier description of LifeWealth Labuan as a marketing company. The arrangements with PaySystems for the provision of Internet payment facilities were undertaken by LifeWealth Labuan by means of the agreement of 15 November 2002. That it was LifeWealth Labuan that contracted with PaySystems is borne out by the PaySystems letter of 23 July 2003 to Mr Walker (which letter, I infer, was obtained as a replacement for the one referred to in Mr Walker's communication with Ulfat Ali a month or so earlier in which an "attached letter from Paysystems our Debtor" was said to carry "an old address on file" – apparently a Malta address). The purported board minutes of 30 August 2004 referred to the possibility of "Life Wealth 8 Limited Labuan … placing its licences in a sustainable environment", while the partially signed heads of agreement dated 19 October 2004 to which LifeWealth Labuan was a party referred to migration of "the LW8 Licencees" to ieeha, with LifeWealth Labuan remaining responsible for all debts. It is thus shown that it was LifeWealth Labuan that was party to agreements with licensees. 94 Taken together, these elements of the documentary evidence amply justify a provisional finding that LifeWealth Labuan carried on a business beyond that of a mere holding company. A holding company would have had no need for Mr Axiotis's services, for internet payment facilities or for the services provided by the parties who were the defendants in the Austcom litigation. Nor would it have had "licensees" (that is, on-line subscribers to the Internet stock market game) capable of being "migrated" to ieeha. These activities of LifeWealth Labuan bear out the statement of Mr Walker to Ulfat Ali and the statement in the Austcom statement of claim that LifeWealth Labuan was an "operating company" that "carries on business and has at all material times carried on business in relation to the sale over the internet of games, personal development products and other products, including telecommunications services". Assessment of documentary evidence – Australian connection 95 The ASIC search of Signatory Investments as at 17 November 2004 shows each of Campbell, Kotlar, Levick and Walker as having an address in Australia. The statutory requirement in response to which a director's address is notified to ASIC is imposed by s.205B of the Corporations Act. As s.205D makes clear, the notified address must be the residential address unless the special procedure for notifying some other address is implemented, in which event that becomes clear upon the ASIC record. There is nothing in the search to show that the special procedure for notification of an alternative address has been implemented in relation to any of Campbell, Kotlar, Levick and Walker. That, coupled with the fact that, under s.205B(4), any change in address must be notified to ASIC within 28 days, warrants a provisional inference that, in November 2004, each of the four persons concerned had his residential address in Australia. I note that Campbell gives an address in Thailand in an affidavit sworn there, from which it appears that he may spend time in that country. 96 Mr Walker's message to Mr Ulfat Ali in which he described himself as "Chief Executive Officer", after saying that "[o]ur main operating company is in Labuan in Malaysia", said that "our CEO and his staff live in Australia". He gave his address at North Turramurra. The purported board meeting of "Life Wealth 8 Limited" held on 19 November 2003 for the purposes of the Ulfat Ali matter was shown as having taken place at the North Turramurra address, even though the subsequent note suggests that, on that day, Kotlar was in Europe and Campbell in Thailand. 97 Mr Axiotis, contracted to LifeWealth Labuan and held out on a website as "General Manager, Technology and Information Systems" of "Lifewealth8.com", obviously operated in Australia. His telephone account shows that the very substantial number of telephone calls he made in the period 24 February 2004 to 8 May 2004 (and separately in periods ended April 2004 and July 2004) and for which he claimed under the contract providing for reimbursement of expenses "related to the Life Wealth 8 Limited business activities" were calls made from within Australia. 98 In the statement of claim it filed in the Auscom litigation, LifeWealth Labuan itself alleged a meeting on 27 February 2003 at Walker's North Turramurra address attended by Walker, Campbell and Kotlar "on behalf of" LifeWealth Labuan and Fendis on behalf of Austcom. LifeWealth Labuan also referred in the statement of claim to telephone conversations with Fendis to which Campbell was party "mainly in Sydney, Gold Coast, Queensland or Bangkok" and Kotlar was party "mainly in Adelaide". The statement of claim also said that in or about May – November 2003 Capricorn Exchange "entered into a contract in Australia with LW8", that is, LifeWealth Labuan. The proceeds of the settlement of the Austcom litigation were received in Australia, as were the proceeds of the settlement with PaySystems. 99 All these matters indicate that Campbell, Kotlar, Levick and Walker were generally resident in Australia and performed in Australia various acts in furtherance of the business of LifeWealth Labuan. Walker made a representation that he, as the CEO of LifeWealth Labuan, like the CEO's staff, was resident in Australia. Mr Axiotis attended to the business of LifeWealth Labuan in Australia. Various meetings and telephone conversations to which Campbell, Kotlar and Walker were party with Fendis occurred in Australia and were meetings and conversations in which representations said by LifeWealth Labuan to have occurred in trade or commerce were made to it and in which contracts upon which it relied in the Austcom litigation were said by it to have been made. 100 Walker's North Turramurra address was held out by him to Ulfat Ali as the base from which the CEO of LifeWealth Labuan operated. Meetings said to be board meetings of LifeWealth Labuan were held at that address, as was at least one meeting with Fendis at which LifeWealth Labuan, according to its own account, received actionable misrepresentations in trade or commerce and engaged in contractual behaviour. 101 The documentary evidence therefore warrants a provisional finding that the business carried on by LifeWealth Labuan was carried on in Australia. It also justifies, in my view, a provisional finding that a place of business was maintained at the North Turramurra address. The latter finding, if sustained, is itself sufficient to ground a conclusion that business was carried on in Australia while the place of business was maintained: see s.21(1). As far as the provisions of s.21(3) are concerned, it is clear that the mere fact of the Austcom litigation was initiated and prosecuted in an Australian court cannot, of itself, be seen to be sufficient to ground a conclusion that business was carried on in Australia: see s.21(3)(a). The same is true of the supposed board meetings, viewed alone: see s.21(3)(b). None of the other provisions within s.21(3) appears to be of relevance and the cumulative effect of the facts to which I have referred as emerging from the documentary evidence remains, in my view, quite sufficient to sustain the provisional finding of carrying on of business in Australia. Affidavit and oral evidence 102 I have described the findings emerging from the documentary evidence as provisional findings because of the need to test them against the remainder of the evidence. I therefore turn now to the affidavit and oral evidence. 103 Mr Levick deposed in an affidavit sworn on 7 December 2004 that, at the suggestion of Mr Campbell, Williams & Partners, a firm of Brisbane accountants were retained to set up the LifeWealth 8 venture as an off-shore structure. He set out the details of the structure as he understood it. He referred to one "formal" board meeting of Signatory Investments having been held in January 2003 and to an unstated number of occasions on which decisions of that board of directors were made informally by agreement between himself, Campbell, Kotlar and, at a later stage, Walker. He deposed to a practice by which the individuals treated meetings of the directors of Signatory Investments "as, in effect, meetings of the 'board' of LW8 Labuan". 104 Mr Levick refers in his affidavit to the drafting of the shareholders agreement of 8 February 2003. He says that he drafted it and Walker amended the draft. A matter emerging from Mr Levick's cross-examination was that he had been unaware of the existence of BVICo until the commencement of these proceedings in late 2004. He also said that, after the proposal to use a Malta company was abandoned, "the Labuan company was listed as where the company was trading from", referring to information posted on the website (which is borne out by Exhibit 7). He denied any understanding that LifeWealth Labuan was only to be a holding company. 105 Mr Walker's affidavit refers to LifeWealth Labuan having maintained a bank account in Hong Kong. He also throws light on the residence issue as it relates to Campbell, saying that, to his knowledge, Campbell lived in Australia until late 2003 or early 2004 when he moved to Thailand. As to the two Malaysian corporate directors of LifeWealth Labuan, he says that they "receive instructions from Signatory Investments" and "to the best of my knowledge and belief, have no knowledge of the day to day business affairs conducted by LifeWealth 8 Limited". He says that Campbell and Kotlar visited Labuan on one occasion. This was in July/August 2003. He says they were there for a couple of hours. This is generally consistent with the draft minutes of a meeting of directors of LifeWealth Labuan on 8 September 2003 at which Campbell and Kotlar are shown as having been "[I]n attendance on behalf of Signatory Investments Pty Ltd". 106 In the course of cross-examination, Mr Walker said that it was his understanding that contracts entered into by licensees "could well have been with Life Wealth 8 Labuan". The cross-examination continued: "Q. Why would that be Labuan? A. Well, that was the original entity that was the particular company which people dealt with the business; that was all the contracts with staff, with any particular organisation and so on. Q. Can you produce to the Court or identify to the Court any document which would be a contract between a licensee and Labuan? Can you? A. I probably could do that if given the time, yes, I could. Q. And you could have done that before today? A. I could have done that before today. Q. But as you sit in the witness box you can't identify any such document? A. I don't have the documents here, so I can produce documents if requested." And later: "Q. See, I want to suggest to you that it is as plain as day that the licensees, if there are creditors today, they are creditors of the BVI company; what do you say? A. No, I disagree with that. Because in terms of when people signed up with Life Wealth 8 Labuan and a vast majority of people signed up when Life Wealth 8 Labuan was on the website and that had the governing law and so on, that they would have contracts with Life Wealth 8 Labuan. 107 In an affidavit sworn on 17 December 2004, Mr Kotlar sets out a number of matters of legal conclusion, expressed as statements of what he has been advised by his solicitors. They carry no weight in determining the objective matters relevant to the question whether LifeWealth Labuan has carried on business in Australia. Mr Kotlar does not contradict the evidence of Mr Levick as to the practice regarding "board" meetings or the genesis of the shareholders agreement. 108 Mr Campbell refers in his affidavit to the incorporation of LifeWealth Labuan. He says he was "extremely mindful" that the Life Wealth 8 business should "not under any circumstances be considered to have a trading presence or permanent establishment status for tax reasons in Australia, or other high tax countries". Campbell does not dispute the making of the shareholders agreement or seek to suggest that it was not acted upon. He says that the meetings which Levick categorises as, in effect, "meetings of the 'board' of LW8 Labuan" were really "conducted with reference to the Life Wealth 8 business". 109 Mr Kearney of Williams & Partners, the Brisbane accountants, gave affidavit evidence about the establishment of various companies, including LifeWealth Labuan and Signatory Investments. His evidence throws no light on the way in which the affairs of those companies were in fact administered. The applicants put considerable store by Mr Kearney's evidence about the corporate structure and the relationships between the various companies. But it is clear that he had no knowledge of how things were actually being done, as distinct from how he had expected or intended that they would be done when he devised the initial plan. 110 Mr Wong, an accountant employed in Hong Kong, gave evidence about work he did in setting up accounting records and accounting systems for BVICo and HKCo. He was cross-examined about certain aspects of the content of accounts. It became clear that his understanding of corporate activities, assets and liabilities had been obtained by him wholly from other persons (also that many relevant matters pre-dated his first involvement in October 2003), with the result that his evidence does not elucidate any matter presently relevant. The second hand nature of his evidence makes unreliable the corporate charts he prepared. 111 Mr Axiotis gave evidence about what he did in performance of his contract. He worked first under instruction from Mr Kotlar and later Mr Campbell. He arranged for the web hosting function for the network to be carried out by a company in the United Kingdom which is a managed hosting facility. His duties involved "all IT functions, software requirements, software quality issues, hosting services and responsibility, broadcasts, producing statistics and liaising with the software providers, "Dreamtime". He also became, in his own words, "the de facto support IT person for the whole organisation". He performed all his work from his home base in Melbourne and it was from there that he incurred the telephone expenses. 112 The affidavit and oral evidence traversed a great number of matters having no bearing upon the present inquiry. There was material about the activities of BVICo and HKCo. There was a great deal of material about the breakdown in relationships between the principals, complete with accusations and denials. As to the matters I have identified from the documentary evidence as leading to the provisional finding that LifeWealth Labuan had a place of business in Australia and otherwise carried on business in Australia, however, there is nothing in the affidavit or oral evidence which does otherwise than confirm and, in some areas, strengthen the finding. Conclusions on first application 113 I am satisfied that LifeWealth Labuan carried on business in Australia from at least February 2003 when it entered into the consulting contract with Mr Axiotis and engaged in the conduct at North Turramurra upon which it relied in the Austcom litigation. I am also satisfied that LifeWealth Labuan continued to carry on business in Australia until at least August 2004 when Mr Campbell and Mr Kotlar signed the minutes related to migrating licences to ieeha. Having regard to what I consider to be the correct approach to the matters canvassed in International Unity and ASIC v Edwards, those conclusions are sufficient to attract the s.583 jurisdiction with respect to the winding up of Part 5.7 bodies. It follows that the court had jurisdiction to make the order of 9 December 2004 appointing Mr Vouris to be liquidator of LifeWealth Labuan provisionally. 114 The amended interlocutory process filed on 23 December 2004 is therefore dismissed. The second application 115 In their written submissions, the applicants under the interlocutory process filed on 29 March 2005 said: "In the event that the Court finds that it has jurisdiction over the Labuan Co, the applicants consent to an immediate winding up, at least on the just and equitable ground. It asks then that the Court appoint a liquidator other than Mr Vouris for the Labuan Co and the first defendant [ie, Signatory Investments], in any event." 116 The written submissions filed on behalf of Mr Vouris referred to "Mr Vouris' offer to resign if the companies are to be wound up", adding that there was accordingly no issue between the parties and the application falls away. 117 This brought the following response from the applicants in subsequent written submissions: "Mr Vouris attempts to deal with the contested application by indicating an alleged ' offer to resign if the companies are to be wound up' (par 23). The only indication prior to his final submissions of an offer to resign was half way through the second day where Mr George, in a highly qualified way, indicated that if a liquidator that was both registered in Australia and Malaysia could be found ' Mr Vouris would be prepared to resign in favour of that person' T67.5-.15. At best, the applicants were able to indicate that they would obtain a consent from a registered liquidator in Sydney whose firm also had an office in Malaysia: see T69. Mr George did not on behalf of his client make an offer to resign in favour of such a person. Thereafter Mr Vouris was cross examined. Just before the end of the second day the provisional liquidator was still tendering evidence and only formally closed its case in opposition to both applications at this point (see T135.36). The trial ended on the second day on the basis that Mr Vouris was opposing both applications. The first time there was an unconditional offer to resign from Mr Vouris was in his final written submissions which remains unclear as to its meaning and effect. At best, it is only now that it would appear there is no contradictor to the application. Accordingly, the issue arises as to the proper order as to costs on the application." 118 The final written submissions filed for Mr Vouris said: "As noted in submissions in chief, Mr Vouris offered to resign if a liquidator with dual registration could be appointed. This offer was made before a consent from such a party was obtained and indeed, before the applicants seemed aware that the Court required a consent from another official liquidator before an appointment could be made. By adopting this course, Mr Vouris has performed beyond the expected because in the face of the applicants' criticism, he was free to resign but chose not to do so before the jurisdiction application was decided, in the knowledge that his resignation would involve significant costs, as a new provisional liquidator would be compelled to invest considerable time (and therefore incur significant costs) acquainting himself or herself with the companies and the risk remained that the Court would find it does not have jurisdiction to wind-up Lifewealth 8 Labuan and the expenditure wasted. Consents to act as the liquidator (but not provisional liquidator) of both Lifewealth 8 Labuan and Signatory have now been filed and Mr Vouris does not wish to be appointed liquidator of either company. As the application does not ask for Mr Vouris to be removed as the provisional liquidator of either company (and the applicants must therefore be content for him to remain provisional liquidator), there is no application before the Court, because it is common sense that even the Court cannot remove what Mr Vouris never had." 119 The references to a new consent having been filed are apparently references to a consent dated 20 April 2005 of Neil Robert Cussen and Geoffrey Trent Hancock, official liquidators, filed on 21 April 2005. They have consented to be appointed liquidators of both LifeWealth Labuan and Signatory Investments. 120 The impression I have is that the applicants, in light of my decision with respect to s.583 jurisdiction, will not oppose the making of an order that LifeWealth Labuan be wound up on the just and equitable ground and an order that Mr Cussen and Mr Hancock be appointed liquidators; that the applicants will not oppose the making of corresponding orders in relation to Signatory Investments; that the plaintiffs seek such orders in relation to the two companies; and that there is accordingly no need for any order to be made upon the applicants' interlocutory process filed on 29 March 2005 except, perhaps, for a formal order of dismissal. Disposition 121 The amended interlocutory process filed in 24 December 2004 is dismissed. 122 Because there is a need for the impression I have outlined with respect to the interlocutory process filed on 29 March 2005 to be confirmed (or otherwise), I shall direct that that the proceedings be listed before me in the Corporations List on 20 June 2005 at 10am for the purpose of making orders. 123 The matter of costs is covered to some extent, but not in full, in the written submissions already filed. I will make directions as to submissions on costs when the matter comes before me on 20 June 2005. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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