Reported Decision : 64 ACSR 552 New South Wales Supreme Court CITATION : JARRETT & ORS v PERPETUAL TRUSTEE CO LIMITED [2007] NSWSC 1231 HEARING DATE(S) : 12 to 16 February 2007; 24 May 2007 JUDGMENT DATE : 14 November 2007 JURISDICTION : Equity JUDGMENT OF : Hall J at 1 DECISION : (1) On the findings made, I conclude that: (a) The disputed dividends claimed by the plaintiffs in the Second Further Amended Statement of Claim were validly determined and paid as dividends with the informed consent of the directors of RH & M, Elwood and UIGI. Those companies subsequently affirmed the dividends and ratified their payment by crediting them in the relevant accounts. The members of the respective companies, RAH No 1 and RAH No 2, also ratified the dividends and their payment. (b) Payment of the disputed dividends, the subject of the plaintiffs' claim under the Second Amended Statement of Claim, was not made under a mistake as therein alleged. (c) On the above conclusions, the amounts paid by way of dividend to Mrs Jarrett during her lifetime are not recoverable by the plaintiffs by way of action at law for money had and received or in equity. (d) The disputed dividends having, on the findings made, being duly declared or determined and paid, there was no power in the plaintiffs companies to revoke or rescind them. (e) Accordingly, there is to be judgment entered in favour of the defendant in relation to such dividends. (2) On the findings made in respect of the cross-claim, I have concluded: (a) The evidence does not establish that a meeting of directors of RH & M took place on or after 10 December 2001 at which an interim dividend in the amount of $6,600,000 was declared or determined. (b) The evidence does not establish that a meeting of directors of Elwood occurred on or after 10 December 2001 at which an interim dividend in the amount of $500,000 (or for $496,096.31) was declared or determined. (c) That the monies repaid by Mr Milsom to Elwood on 12 November 2002 and to RH & M on 19 November 2002 were not repaid by him upon the basis of a mistaken assumption. (d) The evidence does not establish that the reimbursement of monies referred to in the preceding paragraph arose as a consequence of the "RH & M representations" and/or the "Elwood representations" relied upon by the cross-claimant in its Amended Statement of Cross-Claim. On that basis, no contraventions of s.52 of the Trade Practices Act or of s.42 of the Fair Trading Act arose as alleged in the cross-claim. (e) It follows from the above findings that the payments made by re-imbursement to RH & M and Elwood from the estate bank account with Westpac Banking Corporation were not payments of monies held on trust for the benefit of the estate as claimed by the cross-claimant on the cross-claim. (3) The parties are requested to lodge short minutes of order. CATCHWORDS : Whether disputed dividends purportedly made to trustee companies during life of a director of the payer companies were validly declared – whether meetings of directors and members of companies held – whether such minutes of meetings as exited established that meetings were in fact held at which resolutions declaring dividends were allegedly passed – what constitutes a "meeting" – whether dividends purportedly declared that did not conform with the constitutions of the companies were paid – what constitutes "payment" of dividends – whether crediting of dividends in loan accounts constituted payment of dividends to deceased director – whether crediting loan accounts gave rise to a liability on the part of the payer companies – whether dividends and their payment ratified or confirmed loans granted by deceased director to company for amounts equal to disputed dividends paid by companies – deceased director ultimate beneficiary of the income of the group of companies – what amounts to payment of dividends – crediting by book entry intended to reflect payment of dividends – whether pre-existing cross liabilities between companies paying dividends and recipient necessary – whether there was agreement underlying mutuality of liabilities which the book entries were treated by all relevant parties as settling – doctrine of unanimous consent – cross-claim – whether as an issue of fact dividends had been declared or determined prior to director's death for 2002 year – circumstantial evidence – drawing inferences – subsequent conduct of directors or omission to act. Companies Act 1867 Corporations Act 2001 (Cth) LEGISLATION CITED : Evidence Act 1995 (NSW) Fair Trading Act 1987 (NSW) Trade Practices Act 1974 (Cth) ABC v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540 Aborel Nominees Pty Limited v Horsburgh (1986) 11 ACLR 138 Air Great Lakes Pty Limited v K S Easter (Holdings) Pty Limited [1985] 2 NSWLR 309 Australian Energy Limited v Lennard Oil NL (1986) 2 Qd R 216 Brodgen v Metropolitan Railway Co [1877] 2 AC 666 at 682 Challenge Charter Pty Limited v Curtain Bros (Qld) Pty Limited [2004] VSC 1 Cook's Construction Pty Limited v Brown (2004) 49 ACSR 62 East Finchley Pty Limited v Federal Commissioner of Taxation (1989) 20 ATR 1623 Fabre v Arenales [1992] 27NSWLR 437 Federal Commissioner of Taxation v Steeves Agnew & Company (Victoria) Pty Limited (1951) 82 CLR 408 Francis v South Sydney District Rugby League Football Club Limited [2002] FCA 1306 Harkins v Butcher [2002] 55 NSWLR 558 Herrman v Simon (1990) 4 ACSR 81 Howard Smith & Co Limited v Varawa (1907) 5 CLR 68 Hussey v Horne-Payne (1879) 4 AC 311 at 316, 320 Integrated Computer Services Pty Limited v Digital Equipment Corp (Aust) Pty Limited (1988) 5 BPR 11,110 Jones v Dunkel (1959) 101 CLR 298 CASES CITED : Kinsela v Russell Kinsela Pty Limited (in liq) (1986) 4 NSWLR 722 Minister for Immigration v Khawar (2002) 67 ALR 577 MYT Engineering Pty Limited v Malcon Pty Limited (1999) 162 ALR 441; 30 ACSR 705 Parras Holdings Pty Limited v Commonwealth Bank of Australia [1997] FCA 1107 Ormwave Pty Limited v Smith [2007] NSWCA 210 Re Associated Electronic Services Pty Limited (in liq) [1965] Qd R 36 Re Compaction Systems Pty Limited [1976] 2 NSWLR 477; (1976) 2 ACLR 135 Re Duomatic Ltd [1969] 2 Ch 365, 373 Re Harmony and Montague Tin & Coffee Mining Company (1873) 8 Ch App 407 Re Harry Simpson & Co Pty Limited (1964) 8 WN (NSW) 207 Re Harry Simpson & Co Pty Limited and Companies Act 1936 [1966] 2 NSWLR 445 Re Rural and Veterinary Requisites Pty Limited (in liq) (1978) 3 ACLR 597 Say-dee Pty Limited v Farah Constructions Pty Limited [2005] NSWCA 309 Sutherland (as liquidator of Sydney Appliances Pty Limited (in liq) v Robert Bosch (Aust) Pty Limited & Ors (2000) 33 ACSR 680 Swiss Screens (Australia) Pty Limited v Burgess (1987) 11 ACLR 756 Temples Wholesale Flower Supplies Pty Limited v Federal Commissioner of Taxation (1991) 29 FCR 93 Toyota Motors v Ken Morgan Motors [1994] 2 VR 106 Vroom BV v Foster's Brewing Group Limited [1994] 2 VR 32 Willbros International Pty Limited v Emelco International Pty Limited [2000] NSWSC 156 PARTIES : JARRETT, Alicia Louise & ORS v PERPETUAL TRUSTEE CO LIMITED FILE NUMBER(S) : SC No 2145 of 2004 COUNSEL : P: J M Ireland QC/N Mansouridis D: N C Hutley SC/B J Lee SOLICITORS : P: McGirr James Hall & Associates D: Tress Cox Lawyers THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HALL, J. WEDNESDAY 14 NOVEMBER 2007 No. 2145 of 2004 ALICIA LOUISE JARRETT & ORS v. PERPETUAL TRUSTEE COMPANY LIMITED JUDGMENT HIS HONOUR: Introduction 1 The plaintiffs claim relief in the nature of a declaration that certain disputed dividends were invalid and an order against the defendant, the Perpetual Trustee Company Limited, in its capacity as the present executor of the estate of the late Mrs Margaret Louise Jarrett (who will be referred to in this judgment as "Mrs Jarrett") for the payment of monies in respect of the same. 2 Mrs Jarrett died on 10 February 2002. The defendant succeeded Mr Warren Milsom as the executor of the estate. Mr Milsom, over many years, played a central role in both advising Mrs Jarrett and in relation to the financial administration of the various companies with which she was associated as life tenant of certain settlement trusts discussed below. 3 The disputed dividends (30 in all over a 13 year period between the years 1988 and 2001) were claimed to have been declared and paid by the second plaintiff, R H & M Properties Pty Limited (RH & M), the third plaintiff, UIG Investments Pty Limited (UIGI) and the fourth plaintiff, Elwood Pty Limited (Elwood). 4 The dividend amounts in question in these proceedings are as follows:- RH & M $12,195,861 UIGI $6,237,481 Elwood $4,536,170 5 The total amount in dispute is, accordingly, approximately $22.9 million ("the disputed dividends"). The plaintiffs' case, in essence, is that the various steps taken with respect to RH & M, UIGI and Elwood and the trusts did not result in the valid declaration or payment of dividends in the abovementioned period. They, accordingly, claim that the deceased impermissibly drew on the funds of the above companies and she is obliged to reimburse the monies with interest thereon. The first plaintiff by these proceedings, accordingly in effect, seeks to augment or enhance her interests in remainder arising under the settlements that are referred to below by establishing invalidity, firstly, in the process by which corporate power was employed or implemented (or not) (the "declaration issue") and, secondly, in the process purportedly employed to effect the distribution of dividend income to Mrs Jarrett (the "payment issue"). 6 The defendant instituted proceedings against the plaintiff companies by way of cross-claim, which were heard with the plaintiffs' proceedings. In the Amended Statement of Cross-Claim, the Perpetual Trustee Company Limited, inter alia, seeks an order for the re-payment of monies totalling $7,100,000. It contends that dividends amounting to that figure were duly declared during the lifetime of the deceased for the 2001 year. Following Mrs Jarrett's death, such monies were paid, but subsequently, in circumstances discussed below, they were reimbursed by her estate. The cross-claim is opposed by RH & M and Elwood. The central issue is whether dividends amounting to $7.1 million were validly declared by the companies before the death of the deceased or were otherwise payable by reason of a directors' agreement conferring an entitlement upon Mrs Jarrett. 7 Mr J M Ireland QC, with Mr N Manousaridis of counsel appeared on behalf of the plaintiffs/cross-defendants. Mr N C Hutley SC, with Mr B J Lee of counsel appeared on behalf of the defendant/cross-claimant. Facts 8 The plaintiff companies, RH & M, UIGI and Elwood, were formed by Mr Rupert Albert Geary Henderson, Mrs Jarrett's father, as investment and trading companies. Mr Henderson died in 1986. Between 1948 and 1962, he caused a series of six discretionary trusts to be established. They were established by Deeds dated 12 April 1948, 9 December 1949, 3 October 1952, 1 September 1956, 16 September 1958 and 27 February 1962. They became known as the "Margaret Louise Jarrett Trusts". On 30 June 1950, the late Mr Henderson caused a further discretionary trust to be established. It is known as the "Hazel Alice Margaret Henderson (Deceased) Settlement". The shares in RH & M and UIGI were the assets of the abovementioned trusts. 9 For taxation purposes, the trusts were grouped into two tax-paying entities, namely, the MLJ Settlement Trust and the Hazel Henderson Settlement Trust. The MLJ Settlement Trust (or the "Margaret Louise Jarrett Trusts") was the aggregation for tax paying purposes of five trusts established within the Henderson family. Copies of the relevant trust deeds, were in evidence: Exhibit A4 (pp.747 to 761). Mrs Jarrett was the sole beneficiary of the trusts by which she was entitled to all the income arising from the trusts' shareholdings in RH & M, UIGI and Elwood during her lifetime. The relevant provision in the relevant settlements provided:- "… NOW THIS DEED WITNESSETH that in consideration of the premises and of his natural love and affection for his said daughter, the settlor directs and it is hereby agreed as follows:- 1. The Trustees shall hold and/or invest the said sum of two thousand pounds (£2,000) upon the following trusts:- (a) Until the said Margaret Louise Henderson attains the age of 21 years, the Trustees shall during that period accumulate the income arising from the Trust Fund and invest the same and the resultant income thereof in any of the investments hereby authorised in augmentation of the capital of the Trust Fund. (b) Upon the said Margaret Louise Henderson attaining the age of 21 years, the Trustees shall stand possessed of the Trust Fund UPON TRUST to pay the whole of the income of the Trust Fund to the said Margaret Louise Henderson during her lifetime and after her death then as both capital and income UPON TRUST for all of the children or any … child of the said Margaret Louise Henderson … or being a female shall attain the age or previously marry if more than one in equal shares …" 10 The position throughout the relevant years was that Mr Jarrett had both the status and capacity as a life tenant of the settlement trusts and as well the role of director of the plaintiff companies. Upon Mrs Jarrett's death, her daughter, Alicia, was a beneficiary as to both capital and income under the trusts upon her attaining the age of 21 or upon her prior marriage. 11 Mrs Jarrett swore an affidavit in Family Court proceedings on 5 February 1998. Paragraphs 1 to 5, 18 to 26, 76 to 88, 93 to 95, 107 to 109, 130, 140 and 168 of the affidavit were tendered and marked as Exhibit 1 in the present proceedings. Those paragraphs included relevant background and history. Mrs Jarrett stated in them that, on 23 December 1987, she caused RAH No 1 Pty Limited ("RAH No 1") and RAH No 2 Pty Limited ("RAH No 2") to be incorporated and took steps for the appointment of herself and her then husband, Robert, as directors and shareholders of those companies. Between 23 December 1987 and 28 August 1990, she appointed RAH No 1 and RAH No 2 to be the joint trustees of the Margaret Louise Jarrett Trusts, the Hazel Henderson Settlement and the Helene Henderson Settlement. 12 According to Mrs Jarrett's affidavit, Mr Warren Milsom, chartered accountant, managed the Henderson Group of companies (which included RH & M, Elwood and RAH No 1 and RAH No 2) from 1998. She stated that Mr Milsom, for the majority of the relevant period of time a partner of Talbots, chartered accountants, met with her in person or by telephone about once a week. At those meetings, he consulted with her in relation to matters concerning the management of the Henderson Group of companies. She stated:- "95. I have relied heavily upon the advice of my accountants and solicitors in providing instructions for the management of the Henderson Group." 13 The corpus of the settlements was represented by shares held by the two trustee companies, RAH No 1 and RAH No 2 as joint trustees of the various settlements from 1988. RAH No 1 and RAH No 2 were appointed by deed dated 28 August 1988. They jointly owned the issued capital of both RH & M and UIGI on behalf of the various trusts. They have, since Mrs Jarrett's death, retired and the companies have been deregistered. Mrs Jarrett remained a director of RAH No 1 and RAH No 2 from 26 August 1988 until her death, and, at all material times, was the sole shareholder of RAH No 1 and RAH No 2 14 From 1989 to her death on 10 February 2002, Mrs Jarrett was also the governing director of RH & M and a director in that period of UIGI and Elwood. These companies, at all material times, had two directors. 15 From 1989 until 14 September 1995, Mrs Jarrett and Mr Robert Jarrett were the only directors of RH & M, UIGI and Elwood. They were also in that period the directors of the trustee companies RAH No 1 and RAH No 2. From about 1997 until resignation after the death of Mrs Jarrett, the other director of RAH No 1 and RAH No 2 was Mr Milsom. 16 Mr and Mrs Jarrett separated in 1995. Their marriage was subsequently dissolved. On 14 September 1995, Mr Milsom was appointed as an additional director of all of the above companies with the deceased and her former husband. As company secretary and a director with day to day management responsibilities, he prepared the minutes of all meetings of the company. After 14 September 1995, Mr Jarrett played no part in the conduct or affairs of the companies. He formally ceased to be a director of them on 30 March 1998. 17 Upon the death of Mrs Jarrett, the first plaintiff, Alicia Jarrett became entitled to all the assets of the settlements including, in particular, the shares in RH & M and UIGI, which have since vested in her. The plaintiffs contended that the assets also included the retained income of the companies accumulated during the lifetime of her mother and which it is claimed were not validly distributed. That is a matter is relevant to an issue arising on the cross-claim. 18 The first plaintiff, Alicia Louise Jarrett, became a director of RH & M, UIGI and Elwood on 10 February 2002 and has remained a director of those companies. 19 Mr Milsom continued as a director of RH & M, UIGI and Elwood after the death of the deceased until his resignation on 30 June 2003. 20 In the period from 1989 until Mrs Jarrett's death, Mr Milsom played an active and central role in advising her and the plaintiff companies. He also attended to the financial administration of the various companies with which the deceased was associated as life tenant of the settlements. It is part of the plaintiff's case that the initiative for the declaration of interim dividends came from him. 21 The plaintiffs' money claim is based upon the quantum of dividends purportedly credited to the loan accounts of the deceased in the books of RH & M and Elwood. In this respect, Mr Miller, chartered accountant and a partner in the firm Talbots, prepared summaries of the loan account of the deceased. Exhibit GJM-GG to his affidavit sworn on 18 August 2006 summarised Mrs Jarrett's loan account for RH & M between 1991 and 2002. Exhibit GJM-HH to his affidavit summarised the account for Elwood for the same period. Based on those two exhibits, Mr Miller prepared a further analysis and calculations which formed the subject of his affidavit sworn on 12 February 2007. Exhibits GJM-JJ and GJM-KK to that affidavit in relation to the two companies highlight the dividends purportedly credited to each loan account and in each case deleting from the calculation of the running balance the amount of each of the purported dividends. On this basis, the running balances of each of the accounts include all items in Exhibits GJM-GG and GJM-HH, the exhibits to his affidavit sworn on 18 August 2006, except for the purported dividends. Mr Miller's affidavit then provided "new calculations" for each loan account between 1991 and 2002. 22 UIGI declared dividends were credited to Elwood (which held the bank account), which, in turn, credited the UIGI dividends to a loan account of Mrs Jarrett. 23 The second plaintiff (RH & M) was a holding company with a number of investments including cash and listed shares. 24 The third plaintiff (UIGI) was a company with various business interests including newspapers. One of its subsidiaries was the fourth plaintiff, Elwood. Elwood was involved in a number of business enterprises at the initiative of the deceased. These included a nursery business in the Southern Highlands of New South Wales. 25 Mr Miller, chartered accountant, became involved in the affairs of the company in late 1989. He worked with Mr Milsom for a substantial period of time. Mr Miller stated in his affidavit sworn 24 June 2004 that in or about November 1989 Mr Milsom was appointed company secretary of the companies to which I have referred. 26 Following the death of Mrs Jarrett, Mr Miller became company secretary of RH & M and of UIGI. 27 In the period between 1989 and her death in 2002, Mrs Jarrett obtained substantial drawings from RH & M and Elwood. As earlier stated, the disputed dividends were said to have been paid by crediting the loan account of the trusts or the loan account of Mrs Jarrett in the books of RH & M or Elwood. 28 On occasions, dividends were paid by Mrs Jarrett granting a loan to Elwood for an amount equal to the dividend paid by RH & M and UIGI. (The effect of this was that, as at 30 June 2001, the company loan accounts recorded that RH & M, UIGI and Elwood were indebted to the Estate of the deceased in the amount of $9,169,281). The monies advanced also financed the acquisition by the deceased of assets including real property. 29 Payments for Mrs Jarrett's expenses were made by the respective companies to the deceased directly and to third parties at her request, her loan accounts being drawn upon over the relevant period to meet her personal expenditure. RH & M also received income on property owned by Mrs Jarrett which was credited to her loan account. 30 The corporate trustees of the MLJ Settlement Trust and the Hazel Henderson Settlement Trust, at the time of the disputed dividends, (RAH No 1 and RAH No 2) were the sole shareholders of RH & M and UIGI. The shares in those companies were the only assets of substance belonging to the MLJ Settlement Trust and the Hazel Henderson Settlement Trust. Income from Elwood would form part of the income of the Trusts, it being a wholly owned subsidiary of UIGI. The case as pleaded in the Further Amended Statement of Claim 31 As discussed below, the central focus of the plaintiff's case was the contention that the purported dividends were not regularly made in accordance with the constitutions of RH & M and Elwood. Alternatively, if they were validly made, the plaintiffs contended there had been no valid or effective payment of dividends over the relevant years. Entries in the accounts of RH & M and Elwood were, it was argued, mere book entries and were not in law effective payments, the monies never moving out of RH & M and Elwood. The book entries, it was contended, were simply a "transition" of monies from retained profits which were intended to be the fund from which monies were to be paid. 32 The plaintiffs further submitted that there was not to be found an agreement by the shareholders of RH & M and Elwood, namely, RAH No 1 and RAH No 2 to the treatment of the "dividends" reflected by the book entries as discharging any dividend obligation (ie, assuming that relevant dividend declarations were validly made). 33 The plaintiffs relied upon the absence of any minutes of meetings of the trustee companies as evidencing the absence of an agreement by trustee companies with the dividend distribution procedure employed for the making of payments to or on behalf of Mrs Jarrett. Perpetual Trustee Company Limited, the defendant, however, as discussed below, relied upon statements of account, financial reports and, what was said to be, a complete set of income tax returns which it contended evidenced the unanimous agreement by all relevant persons to the methodology by which payment of the dividends was said to have been effected. The plaintiffs' case, however, was that there had been a wrongful distribution of the funds of RH & M and Elwood to Mrs Jarrett instead of to the trustees RAH No 1 and RAH No 2. The plaintiffs, accordingly, maintained that there is a liability in the defendant to account for such monies. In this respect, the plaintiffs asserted payment by way of mistake in crediting the monies to Mrs Jarrett's loan accounts as opposed to them being paid to the trusts. 34 In the Second Further Amended Statement of Claim which was filed in Court on 15 February 2007, the plaintiffs also pleaded duties allegedly owed by Mrs Jarrett, firstly, to the first plaintiff, Alicia Jarrett, (paragraph 33) and also as director of the second, third and fourth plaintiffs (paragraphs 34, 35 and 35A, respectively) of the Second Further Amended Statement of Claim. 35 As to the duty alleged to have been owed to the first plaintiff, paragraph 33 of the Amended Statement of Claim is in the following terms:- "33. Between 1988 and her death in 2002, the deceased owed duties to the first plaintiff as entitled in remainder to the assets of the 1948, 1949, 1950, 1952, 1958 and the 1962 settlements:- (a) to act impartially as between herself and the first plaintiff in dealing with those assets; (b) to determine whether particular receipts should be treated as income or capital of the Settlements and deal with them accordingly; (c) to carry on the business of the settlements in a prudent manner and pay herself as life tenant thereof only those sums which might properly be distributed to her." 36 The plaintiffs alleged that the duties owed by the deceased as director of the second, third and fourth plaintiffs were fiduciary duties owed to each of those plaintiffs, namely:- (a) To exercise her powers for the purpose for which they were conferred and bona fide for the benefit of the company as a whole. (b) Not to put herself in a position in which her duties to the company and her personal interests might conflict. 37 In paragraph 36 of the Second Further Amended Statement of Claim, the plaintiffs alleged that Mrs Jarrett was in breach of the duties pleaded in paragraphs 33, 34 and 35A in that she participated as director respectively of the second, third and fourth plaintiffs "… in purported declarations by the second, third and fourth plaintiffs". Particulars in respect of the second, third and fourth plaintiffs of the disputed dividends were set out in the pleading. 38 In relation to the relevant dividends described in paragraphs 36A, 36B and 36C of the Second Further Amended Statement of Claim, respectively as the "RH & M purported dividends", "UIGI purported dividends" and the "Elwood purported dividends", the plaintiffs claimed that amounts equal to those particularised "… were credited in the books of the second/third and fourth plaintiffs to a loan account …" of each of those plaintiffs. 39 In paragraph 36D, the plaintiffs pleaded that, from time to time, "… amounts were paid by the second and fourth plaintiffs to or on behalf of the deceased and, after 10 February 2002, to or on behalf of the deceased's estate, which amounts were debited to the loan accounts referred to in paragraphs 36A and 36B". 40 The plaintiffs contended (paragraph 37 of the Second Further Amended Statement of Claim) that each of the purported dividends declarations identified were invalid. 41 In paragraph 37 of the Second Further Amended Statement of Claim, it was alleged that declarations were not "… declared or ratified in general meeting by the shareholders of the respective plaintiffs or were not recommended by the board of directors or both". 42 The plaintiffs, accordingly, claim that Mrs Jarrett was liable to account to the plaintiffs in respect of the amounts set out in paragraph 36 of the Second Further Amended Statement of Claim. 43 As stated earlier, the plaintiffs also seek an order that the defendant, as executor of the estate, account to the plaintiffs for each of those amounts or, alternatively, the amount identified in paragraph [36] of the Second Further Amended Statement of Claim together with compound interest. 44 An order was also sought for all necessary further accounts and inquiries and, as well, an order for costs. The evidence 45 In the plaintiffs' case, six folders of documents were tendered entitled "Agreed tender bundle" numbered respectively 1 to 6. These became Exhibits A1 to A6. Exhibits A1 and A2, were the subject of frequent reference during the hearing of the proceedings. Exhibits A1, A2 and A3 were subtitled as follows:- Exhibit A1 (Volume 1) – RH & M Properties Pty Limited (RH & M) Exhibit A2 (Volume 2) – UIGI Investments Pty Limited (UIGI) Exhibit A3 (Volume 3) – Elwood Pty Limited (Elwood) 46 These three volumes had also been exhibited to Mr Patterson's affidavit in corresponding bundles as Exhibits SP-1, SP-2 and SP-3. Mr Patterson is a chartered accountant who was retained by the defendant for the purposes of the proceedings. 47 In general terms, the volumes included within them copies of accounting and other documents relating to the three abovementioned companies being documents that came into existence in the period 1989 and 2001. Exhibits A1, A2 and A3 included:- • minutes of directors' meetings; • minutes of annual general meetings; • profit and loss statements; • balance sheets; • income tax returns. 48 Exhibits A1 and A2 also included copies of income and expenditure accounts, balance sheets and income tax returns of the two trustees, RAH No 1 and RAH No 2, in respect of the two settlement trusts. Also included in those exhibits were copies of the income tax returns of Mrs Jarrett. 49 A "dividend summary" (marked as MFI 7A) was prepared. This dividend spreadsheet summary (in three sheets) summarised the evidence in Exhibits A1, A2 and A3 as supplemented by Exhibit 3 relevant to each of the three companies:- (a) RH & M (page 1 of the summary), dividends numbered 1 to No 14 with respect of the financial years 1988 to 2001 (but not including the 1992 and 1993 financial years). (b) UIGI (page 2 of the summary), dividends numbered 15 to No 24 with respect to the financial years 1988 to 1999 (but not including the 1998 financial year). (c) Elwood (page 3 of the summary), dividends numbered 25 to No 30 with respect to the financial years 1989, 1990, 1995, 1996, 1997 and 1998. 50 Note 2 of the summary, MFI 7A, records a fact established by the evidence:- "All dividends subject to amended statement of claim have been paid out of either current year profits or a combination of current year profits and prior year retained profits $11,900, 570." 51 The summary, MFI 7A, also contained an indication as to those years for which no minutes of directors' meetings or minutes of annual general meetings or of minutes recording the adoption of accounts in annual general meetings in relation to the three companies were sighted by Mr Miller, who was called in the plaintiffs case. Detailed information in the summary is contained within subtitled columns for each company with page references to the tender bundles, volumes A1, A2 and A3. 52 The defendant relied upon the contemporaneous records within Exhibits A1, A2 and A3 as direct evidence of the facts relevant to both the declaration of dividends issues and the payment issue. It also relied upon those records as establishing a convention or practice which it claimed reflected a consensus in the nature of an agreement or arrangement whereby all relevant shareholders were said to have agreed from year to year upon declarations for the disputed dividends and that payment be effected by a process or mechanism whereby dividends would, with the agreement of the corporate trustees, be paid by crediting Mrs Jarrett's loan accounts with the plaintiff companies, RH & M, UIGI and Elwood. Relevant financial accounting records 53 There are some gaps in the available accounting records of RAH No 1, RAH No 2, RH & M, UIGI and Elwood over the relevant period. Additionally, the financial reports for each entity were not available for each of the relevant years. 54 Mr Simon Patterson, chartered accountant, to whom reference has already been made, (principal of the accounting firm, WHK Greenwoods), was retained by the defendant to undertake a comprehensive review of the documentation recording the movement of monies in relation to RAH No 1, RAH No 2, RH & M, UIGI, Elwood and the MLJ Settlement Trust and the Hazel Henderson Settlement Trust. 55 The purpose of the review was to determine the processes and the documentation associated with the payment of dividends by RH & M, UIGI and Elwood in the relevant period. 56 The absence of all financial reports and income tax returns for each entity over the relevant years meant that Mr Patterson was unable to provide a conclusive opinion on all aspects of the movement of dividend payments. 57 Mr Miller's affidavits sworn on 24 June 2004, 2 August 2004 and 14 August 2006 established the following matters:- (1) He, Mr Miller, assisted Mr Milsom in the 1989 financial year, that being the first year that Talbots carried out accounting work for RH & M, UIGI and Elwood. (2) Talbots many years ago had acquired records from the firm, Neville Arthur Adcock, that had previously carried out accounting work for the group. These consisted of handwritten ledgers, journals and cashbook records for each of the companies. Thereafter, handwritten records were continued by Mr Milsom. In later years, computer records were created. (3) The financial accounting records in the relevant period were generated as follows:- (a) RH & M Properties Pty Limited (i) The system inherited from Neville Adcock was a "Kalamazoo" system which was continued for RH & M by Talbots until the year ended 30 June 1991. (ii) Thereafter, Talbots adopted a computerised ledger system, "Solution 6 MAS", to keep the records of RH & M together with a handwritten journal in a "Collins" accounting book. The Kalamazoo accounting system was continued for RH & M in the years 1992 to 1996 in respect of the cash book and journal records. Only ledger records were prepared in those years by computer. (iii) The Kalamazoo records from late 1989 until the year ended 30 June 1996 in respect of RH & M have not been located, despite a search of records. On this basis, it was submitted that the conclusion may be drawn that the earlier Kalamazoo records of RH & M are no longer, in fact, in existence. (iv) In respect of the years 1997 to 2001, manual journals were created except for the years 2000 and 2001. Journal entries for 2001 had been extracted. (v) All computer generated accounting records of RH & M (ledger) commencing 1 July 1991 and journal records commencing 1 July 1996 have been retained by Talbots. (b) UIG Investments Pty Limited (i) Kalamazoo records had been maintained for the company which comprised cash book, ledger and journal entries up to the time Talbots first received instructions in 1989. (ii) These records were continued by Talbots with the Kalamazoo system being utilised up to the year ended 30 June 2001. Handwritten cash book, ledger and journal records for 1989 to 2001 to UIGI were held by Talbots. (c) Elwood Pty Limited (i) Handwritten ledger, cashbook and journal records were obtained by Talbots for Elwood from Neville Adcock in late 1989. (ii) Handwritten cash book and journal records of Elwood were maintained and continued by Talbots up to the 2001 year. Computerised ledgers were kept in respect of the period from 1 July 1991. 58 Mr Patterson's evidence (affidavit sworn on 16 August 2006) established:- • That generally speaking, dividends had been paid by way of crediting in the books of the payer (either RH & M, UIGI or Elwood) a sum in the loan accounts of the Trusts and in some instances a sum directly to the loan accounts of Mrs Jarrett. • He did not sight evidence by way of minutes of meetings of directors and annual general meetings authorising and/or confirming the payment of the dividends. • All of the dividends had been reported and included in the financial reports of the various paying entities. • With the exception of dividends paid in 1988 (about which he had no information), the dividends recorded by the paying entities (RH & M, UIGI or Elwood) had been included as assessable income in the hands of respective shareholders (RAH No 1, RAH No 2 and UIGI) and subsequently in the hands of Mrs Jarrett as the beneficiary of the relevant trusts. • There were large movements in the loan accounts between Mrs Jarrett, her estate, the trust and the various entities. 59 Mr Patterson additionally stated (affidavit sworn on 16 August 2006) that there were a number of instances where the accounting process for the payment of dividends appeared to involve the crediting of Mrs Jarrett's loan accounts with dividend entitlements, notwithstanding that the shareholders in those instances were the two trusts. He added (paragraph 19):- "… to an accountant reviewing the primary records (they were prepared in accordance with standard accounting practice), the inference I would draw is that the Trustees of the Trusts, by direction or otherwise, offset their dividend entitlement against the distributions to the beneficiaries such that the beneficiary became the creditor of the dividend paying company." 60 Mr Patterson also concluded:- "21. In summary, the financial records have been prepared on a consistent basis in that all of the dividends have been reported in the various Financial Reports of the companies and the dividends paid have been included as assessable income in the Trusts' Income Tax Returns and the Trust beneficiaries' tax returns for the years reviewed." 61 Mr Patterson set out in paragraph 24 of this affidavit an analysis of the movement and accounting treatment of each of the dividends numbered 1 to 30 (see summary, MFI 7A). The declaration of dividends issue (a) The constitutional powers to declare and sanction payment of dividends 62 The relevant provisions of the Articles of Association of RH & M on the subject of dividends are contained in Articles 102, 103 and 105 of the Company's Articles of Association. They provided:- "102. All dividends shall be declared and paid according to the nominal value of each share and irrespective of the amounts paid or deemed to be paid up thereon and the Directors may from time to time declare interim dividends. 103. No dividend shall be payable except out the profits of the Company and no dividend shall carry interest as against the Company. The declaration of the Directors as to the amount of the net profit shall be conclusive and no larger dividend shall be declared than is recommended by the Directors but the Company in general meeting may declare a smaller dividend. … 105. Any general meeting sanctioning a dividend may direct payment of same wholly or in part by the distribution of specific assets and, in particular, of fully or partially paid shares, debentures or debenture stock of the Company or of any other Company or in any one or more of such ways and when any difficulty arises in regard to the distribution the Directors may settle the same as they think expedient …" 63 In addition to the above provisions, Article 106 provided that notice of the declaration of any dividend, interim or otherwise, may be given to members by advertisement or otherwise as the directors determine. 64 In relation to UIGI, the relevant Articles in relation to "Dividends and Reserves" differed from those in the constitution of RH & M. The relevant Articles included, in particular, Articles 98, 99, 100, 101, 104 and 105 of the Articles of Association:- " Dividends and Reserves 98. The company in general meeting may declare dividends, but no dividend shall exceed the amount recommended by the Directors. 99. The Directors may, from time to time, pay to the members such interim dividends as appear to the Directors to be justified by the profits of the company. 100. No dividend shall be paid otherwise than out of profits or shall bear interest against the company. 101. The Directors may, before recommending any dividend, set aside out of the profits of the company such sums as they think proper as reserves which shall, at the discretion of the Directors, be applicable for any purpose to which the profits of the company may be properly applied … 102. … 103. … 104. Any general meeting declaring a dividend or bonus may direct payment of such dividend or bonus wholly or partly by the distribution of specific assets and, in particular, of paid-up shares, debentures or debenture stock of any other company or in any one or more of such ways and the Directors shall give effect to such resolution …" 65 It can be seen that, in the case of RH & M, the directors simply had power to declare interim dividends. Those may, or they may not, be sanctioned by a general meeting of the members of the company. 66 In relation to UIGI, the power was in the company in general meeting to declare dividends (Article 98) and, additionally, it was provided that the directors may "pay" to the members such interim dividends (Article 99). 67 In the case of Elwood provision was made in Article 114 of the company's Articles of Association in the following terms:- "114 (a) The company in general meeting may declare dividends but no dividend shall exceed the amount recommended by the Directors. (b) The Directors also may, from time to time, pay to the members interim dividends as appear to the Directors to be justified by the profits of the Company. (c) No dividend shall be paid otherwise than out of the profits and the declaration of the Directors as to the amount of the profits of the Company shall be conclusive." 68 The plaintiffs contended that no dividends were validly declared in accordance with the requirements of the constitutions of the relevant plaintiff companies. They claimed, in this respect, that there were no meetings of directors wherein dividends were declared and no annual meetings at which any such dividends were approved. The plaintiffs accepted, in light of the provisions of s.251A of the Corporations Act 2001 (Cth), that they carried the onus of proof on such issues. 69 Based upon the ground relied upon, namely, that there were no valid payments of dividends, the plaintiffs claimed an entitlement to their recovery upon two bases:- • The doctrine of mistake – that the payments by RH & M and Elwood from the loan accounts of the deceased were made under an incorrect assumption and hence by mistake. • The payments were made without authority and were recoverable in a common law action for money had and received. In particular, the disputed declarations and payments, the plaintiffs contended, were not made with an authority given in accordance with the constitutions of the companies. (b) The plaintiffs' case on the dividends issue 70 The plaintiffs' case distinguished between years for which there were minutes of annual general meetings of RH & M and Elwood and those for which there were no such minutes, although maintaining that even where minutes existed, the Court would not find them as evidencing actual meetings held. In so saying, the plaintiffs acknowledged the provisions of s.251A(6) of the Corporations Act 2001 (Cth) which provide that a minute recording resolutions of meetings of shareholders and directors and which is signed is evidence of the proceedings, resolution or declaration to which it relates, unless the contrary is proved. 71 It may be concluded upon the basis of Mr Miller's evidence as well as other evidence that all available original minute books and Annual Financial Statements of each of RH & M and UIGI had been obtained for the purpose of these proceedings. Accordingly, the plaintiffs submitted that the Court could be satisfied that there are no "missing minutes" of the relevant companies (plaintiffs' outline of final submissions, paragraph 36). 72 The evidence established that:- • Mr Milsom acted as company secretary of RH & M and UIGI between 1989 and 2002 and as such he had the minute books of those companies within his control. • Mr Milsom in that period also had possession of the books of accounts of those companies. • Mr Miller joined the firm Talbots in 1983 and later became a partner (on 1 July 1994). He was familiar with the procedure for the preparation of accounts between 1989 and 2002 and was involved in their preparation. • Mr Miller was not involved in the preparation of minutes of meetings of directors or of members of RH & M and UIGI or Elwood or of notices in respect of such meetings. • The accounts and financial reports of the above companies were annually preceded by the posting of the general ledger records from the cash books of the companies which were prepared by Mr Milsom together with other records. Between about August and September each year, the general ledger entries were prepared for each company along with associated journal entries. 73 Mr Ireland QC, on behalf of the plaintiffs, relied upon appendices 1 and 2 to Mr Shannon's affidavit sworn on 4 August 2004, wherein dividends not confirmed by minutes of annual general meetings amounted to $9,373,000 in the case of RH & M and $1,020,000 in the case of UIGI. If the Court rejected the plaintiffs' case that all purported dividends were invalid, then the plaintiffs' alternative case, it was contended, would lead to an outcome in line with Mr Shannon's abovementioned calculations. 74 The plaintiffs' case on the "declaration issue" is that the Court would conclude that there were no valid declarations made in respect of the dividends in question. Dividends purportedly made never assumed the character of dividends and, accordingly, the plaintiffs' contended RH & M and Elwood never came under a liability to pay them. Accordingly, the crediting of the loan accounts of those companies it was said neither reflected nor created any liability by them to the deceased. 75 On Mr Miller's analysis, the plaintiffs' contention was that the Court would find that no directors' meetings and no meetings of members of the companies RH & M, UIGI and Elwood were held between 1989 and the death of Mrs Jarrett on 10 February 2002. Meetings such as certain minutes of meetings prepared by Mr Milsom may suggest took place did not, it was argued, reflect the reality. In support, the plaintiffs relied upon the minutes of RH & M and UIGI in relation to directors' meetings held in May and June of particular years. Such meetings, they submitted, did not occur. The minutes, they maintained, were produced in the September or October of particular years in connection with the finalisation of draft accounts, well after the balance date. Even if the Court was to conclude otherwise, the plaintiffs, nonetheless, argued it would, in any event, find that the constitutional requirements or criteria for the declaration of dividends by RH & M, UIGI and Elwood had not been met. 76 For those years in respect of which there are minutes of meetings, Mr Ireland relied upon what was termed "the annual cycle" of accounting in relation to the production of the group's accounts and financial reports. It was submitted that this timing was important in evaluating whether or not dividends purportedly declared before the end of June in a given financial year could in fact be taken as evidencing the fact of a meeting having taken place before 30 June in each relevant year. 77 The annual process for the preparation of the accounts the plaintiffs contended involved the following:- (a) The posting of the general ledger records from the company's cash books prepared by Mr Milsom and from other records in his possession. This was done as a matter of routine each year generally between August and October, under Mr Milsom's supervision. The cash books of RH & M and Elwood were used to create computerised general ledger records. Between approximately August and September each year, the general ledger entries were prepared for each company together with associated journal entries. (b) It was customary for the auditors to carry out work in relation to the financial reports of the companies during October in a particular year. (c) By the end of October each year, Talbots prepared, in draft, financial reports for each of the companies for the previous financial year. 78 Mr Ireland submitted that, having regard to this annual process, it was clear that the draft financial reports were given attention well after year end. He observed that one may speculate as to why amounts for dividends were effectively backdated to the end of June. 79 In this way, the plaintiffs challenged the legal effect that could attach to minutes of meetings, in particular those relating to the declaration of dividends:- "(a) The purported minutes of general meetings of RH & M and UIGI where they do exist, do not constitute proof that such meetings were held or that the resolutions referred to therein were validly passed." (Plaintiffs' note concerning 'minutes' of general meeting dated 24 May 2007) 80 Mr Ireland, in this respect, in oral submissions, drew specific attention to the minutes of the annual general meeting of shareholders of RH & M said to have been held on 31 December 1990. They referred to a resolution that specified the dividend be confirmed. It recorded "$1,058,000 declared on 28 June 1990". 81 Mr Ireland made two points. Firstly, there was no evidence of any delegation to those recorded as having attended the annual general meeting to represent the trusts. Secondly, the reference to the declaration by the directors on 28 June 1990 could not be taken as accurate having regard to the cycle of accounting work referred to above. The cycle supported the inference that the dividend for a particular year was determined after the completion of the financial year. In that respect, Mr Ireland submitted:- "The result will be that the figure which is purportedly included in this example … $1,058,000 could not, we say, as a matter of logic have been envisaged as at 28 June 1990. So that what has happened in this case clearly enough is that an entry has been made just before the end of the previous financial year … There is no direct evidence about that." 82 Accordingly, it was argued a minute of a meeting held in May (or usually late June of a financial year) which referred to an amount by way of a purported dividend could not in truth represent a decision made on the date that it bore. It followed, so it was contended, that the minute of the meeting could not qualify for the presumptive effect of a meeting having been held at which a declaration was made:- "… our fundamental submission in this case is that neither the directors' minutes … the purported minutes … typically in late June of each financial year … can be safely treated as duly made and made at the time that they purport to have been made. Therefore, the meetings which they purport to authenticate should not, … be treated as having occurred." 83 The first year for which "minutes" exist is the year ended 30 June 1990. A report of directors of RH & M and its subsidiaries for that year bears the signature of the deceased and Mr Jarrett and records that dividends were paid or recommended during the financial year, being a franked interim dividend of $1,058,000 paid on 28 June 1990 (Exhibit A1 at p.49). 84 The "minutes" of the Annual General Meetings of the shareholders of RH & M purport to relate to a meeting on 31 December 1990 at which the deceased and her husband were said to be present and to which I have made reference above. The minutes of that Annual General Meeting (being part of Exhibit A1 at p.48) are reproduced below:- "Minutes of the Annual General Meeting of the Shareholders of RH & M Properties Pty Limited held at 2 Clairvaux Road, Vaucluse on 31st December 1990. PRESENT: Mr R J Jarrett (Chairman) Mrs M L Jarrett NOTICE OF All members entitled to vote being present, Notice of Meeting as required by the Companies Act 1981 was dispensed with. MEETING: MINUTES: Minutes of the previous Annual General Meeting of the company, held 24th November 1989 were read, confirmed and signed. The Report of the Directors and the Balance Sheet of the Company as at 30th June 1990 with the Report of the Auditor, together with the Profit and Loss Statement for the year ended 30th June 1990 were taken as read. ANNUAL ACCOUNTS: Resolved that the Report of the Directors and the Balance Sheet of the Company as at 30th June 1990 with the Report of the Auditor, together with the Profit and Loss Statement for the year ended 30th June 1990 be and are hereby adopted. Resolved that the following dividend be confirmed: DIVIDEND: $1,058,000 declared on 28th June 1990. RE-ELECTION OF DIRECTORS: Resolved that M L Jarrett and R J Jarrett, who retire in accordance with the Articles of Association, be and are hereby re-elected Directors of the Company. APPOINTMENT OF The Chairman tabled nomination of appointment of auditors. AUDITOR: Resolved that Rowlands Chartered Accountants be appointed as auditors of the Company. CONFIRMED CHAIRMAN" 85 In relation to the above, I note that:- • The minutes of the Annual General Meeting referred to as having been held on 24 November 1989 have not been found. • As to the dividend said to have been confirmed in the Annual General Meeting, the balance sheet of the company as at 30 June 1989 revealed adequate funds to permit a dividend being declared in the amount of $1,058,000, the retained profits being in the amount of $2,420,209. 86 The plaintiffs' submissions, as earlier noted, was that by a process of inference, the Court ought conclude that "minutes" of meetings were constructed well after the date upon which the relevant meeting or meetings allegedly occurred and that it may be concluded that no meetings took place. 87 Mr Miller, in his affidavit sworn on 1 November 2006, gave evidence as to the preparation of company accounts and reports. He stated:- "10. From 1989, an annual pattern developed with respect to the work done by Talbots in the preparation of annual accounts and financial reports necessary for the group of companies which included the corporate plaintiffs. 11. The annual process of preparation of the group's accounts and financial reports generally commenced with the posting of the general ledger records from the companies' cash books prepared by Mr Milsom and from other records in his possession. This was done by the staff of Talbots as a matter of routine each year, generally between August and October, under Mr Milsom's supervision. The cash book records of RH & M and Elwood were used to create computerised general ledger records. UIGI had a manual general ledger only. From time to time I was involved in the preparation of the general ledgers to the extent of answering questions raised by staff of the firm and I was sometimes engaged by Mr Milsom in discussions about particular matters. 12. Between about August and September each year, the general ledger entries were prepared for each company, together with associated journal entries …" 88 In the same affidavit, Mr Miller stated that the procedure he described was also taken in relation to the accounts for the 2001 financial year commencing in about August 2001. He also described the procedure whereby draft accounts were prepared by Talbots for the 2001 financial year and presented to Mr Milsom for RH & M, UIGI and Elwood in about September 2001. Mr Milsom gave instructions in about September 2001 approving a dividend of $300,000 for the 2001 financial year in relation to RH & M. In consequence, a computer entry was made by way of journal entry, in the books of RH & M which debited the ledger account for retained earnings and credited the dividend to the loan account of Mrs Jarrett (Account No. 881). 89 Mr Miller identified the ledger entries (tender bundle, volume A1 at p.301) being a debit of $300,000 in dividends paid or payable and in volume A1 at p.302, a credit of $300,000 in Mrs Jarrett's loan accounts. They were both dated 30 June 2001. However, the entries were made in about September 2001. 90 He stated that at about that time Talbots prepared and Mr Milsom signed a purported minute of a directors' meeting held on 29 June 2001 as well as a financial report for the year ended 30 June 2001 dated 31 October 2001. 91 Mr Miller also stated that Mr Milsom signed a minute of a directors' meeting of RH & M purportedly held on 30 August 2001 between himself and Mrs Jarrett and a minute of a directors' meeting between himself and Mrs Jarrett purportedly held on 15 October 2001. 92 To his knowledge, Mr Miller observed, there was no annual general meeting of RH & M held on 13 November 2001 or otherwise in respect of the 2001 financial year. He said there were no minutes of a general meeting of RH & M to consider and approve the 2001 accounts of RH & M which were prepared by Talbots. He added that, so far as he was aware, Mr Milsom gave no instructions to Talbots to prepare minutes of such a meeting. He was aware at that time that Mrs Jarrett was ill. He had not seen her in the office of Talbots at any time between August 2001 and her death on 10 February 2002. 93 The plaintiffs' submission was that the discussion by Mr Miller of the procedure for the 2001 accounts revealed that no attention was given to the question of dividends until after the close of that financial year. This, I note, is of particular relevance to the cross-claim. 94 The plaintiffs additionally contended that where there existed purported minutes of directors' meetings of RH & M and UIGI, the Court should conclude that, at least up to 1995, they were brought into existence by Mr Milsom without reference initially to the deceased or her former husband and that after September 1995, it was Mr Milsom who took the initiative in drafting purported minutes of directors and shareholders and signed by him. It was further submitted that following 1995, so far as the documents are concerned, "… there is nothing to show even the knowledge of the deceased with respect to the existence of Mr Milsom's purported meetings of directors and shareholders" (plaintiffs' outline of final submissions, paragraph 62). 95 In their written submissions, the plaintiffs' contention was formulated in the following terms:- "63. As a matter of fact, the circumstances surrounding the creation of the purported 'minutes' do not provide evidence upon which the Court could conclude that they evidence a consensus of the relevant persons. There were three reasons for this conclusion:- (a) The proper factual conclusion is that the minutes relating to 'dividends' were created at the sole initiative of Mr Milsom. There is absolutely no evidence of his previous communication with the deceased before he compiled them; (b) In the period between 1995 and 1998, there was no contact with Mr Jarrett, who would have been a necessary party to any meeting to declare a 'dividend'. Clearly as a matter of fact, he was not. Therefore, the 'minutes' made up by Mr Milsom did not reflect any actual communications between the relevant directors at the time. (c) In cases where there are no minutes at all, no informal consensus was ever reached between the relevant parties. Mr Milsom decided in some cases to provide for 'dividends'. In a sub-set of those cases, he decided to create minutes to reflect the necessary organic decisions of the company and to make good that situation. (d) In cases where no minutes eventuated, there was absolutely no warrant for any informal consensus to be inferred." 96 In relation to particular references to the declaration of dividends in directors' reports, it was submitted for the plaintiffs that statements to the effect that a proposal for a dividend was intended to be placed before an annual general meeting had no probative force. Similarly it was contended that statements in annual returns as to the date of annual general meetings did not prove the fact that such meetings had, in fact, occurred. (c) The defendant's case on the dividends issue 97 Mr Hutley SC, on behalf of the defendant, disputed the significance which the plaintiffs attached to the absence of certain documents. Insofar as it may be concluded from the evidence that such records do not exist, in particular, minutes of particular directors' meetings or annual general meetings, then the defendant relied upon "contemporaneous records" referring to the making of declarations of dividends in preceding years to establish the fact that dividends had been duly declared in those years. The spreadsheet summaries for RH & M, UIGI and Elwood, MFI 7A, which relate to the material contained in Exhibits A1 to A3, supplemented by Exhibit 3, identify the contemporaneous documents relied upon by the defendant. 98 Mr Hutley contended that the plaintiffs incorrectly placed reliance upon a negative – the absence of some minutes of meetings – as supporting a conclusion that no decision declaring dividends took place in particular years. 99 The defendant invited attention to documentary evidence from which it argued inferences and conclusions as to relevant decision-making may legitimately be drawn. That evidence is said to confirm the fact that there had been a consensus or a meeting of the minds of the directors. This reflected, so it was argued, corporate decision-making over the relevant period by which Mrs Jarrett acquired rights to the disputed dividends. Reliance was placed upon Swiss Screens (Australia) Pty Limited v Burgess (1987) 11 ACLR 756 and Re Duomatic Ltd [1969] 2 Ch 365, 373, the Duomatic principle discussed below. 100 The defendant submitted:- • The records, in particular, in Exhibit A1 and A2, sufficiently evidence the fact that declarations in respect of the disputed dividends were made. These included the minutes of directors' meetings and of meetings of members of the plaintiff companies in annual general meetings. Where any minutes were missing for a particular year, the minutes of meetings held in a succeeding or subsequent year, and which referred to the fact that there had been declarations made the previous year, provided sufficient corroboration. • Insofar as it was the plaintiffs' contention that the minutes of meetings relating to interim and final dividends are not to be taken as either accurate or genuine and are to be regarded as a "shams" , the plaintiffs carried the evidentiary onus in that respect and this they had failed to discharge. • The exhibited material, in particular, the income tax returns of tax paying entities and Mrs Jarrett's returns, establish that there was, in respect of each year, a consensus or a meeting of the minds of the directors of RH & M and Elwood whereby an entitlement was conferred upon Mrs Jarrett to disputed dividends. Accordingly, even if the evidence failed to establish that all dividends were declared strictly in accordance with the procedures prescribed by the constitutions of the relevant companies, authority for them existed by virtue of the unanimous consent of the directors in each year. 101 The defendant's alternative submission was that, even if a meeting did not occur in a particular year, it did not follow that there had been no meeting of the minds of the directors of the companies. In this respect, any irregularity was capable of being overcome by the practical operation of the doctrine of unanimous informal consent and the application of the Duomatic principle: Re Duomatic Limited (supra) (see below). 102 Accordingly, it was the defendant's case that:- (a) the documentary evidence, when properly analysed, established that declarations for the payment of dividends were made and that they were ratified or confirmed in the relevant years; (b) the evidence established that there was consensus or agreement between the shareholders of the relevant companies as well as by the trustee companies in respect of Mrs Jarrett's entitlement to the disputed dividends and for their payment by the method that was adopted; (c) where, as in this case, there was no suggestion of any unauthorised payments of capital of RH & M, UIGI or Elwood, the relevant financial accounts and other documentation established that the dividends were paid for proper purposes and were made in good faith; (d) that the income arising in the trusts having been paid to Mrs Jarrett, there was no evidence suggesting that she knew that the dividends and the means by which they were paid, were in any way irregular or were other than properly made; (e) at all material times, the plaintiff companies, RH & M, UIGI and Elwood, had sufficient income and were entitled to pay dividends out of the profits of the relevant company and the dividends were in fact paid from profits; (f) the plaintiff companies affirmed the dividends in circumstances where they would be affixed with knowledge of their rights to elect as to whether or not the dividends should be paid. Their conduct since the payment of the dividends amounted to a ratification of payments made and associated transactions; (g) all participants arranged their affairs, including their reporting and revenue obligations, on the basis that dividends had been duly paid and disclosed and they paid tax accordingly. 103 The defendant also took issue with the plaintiffs' proposition that the absence of some records (in particular, certain minutes of meetings) relating to particular dividends evidenced the fact that no meetings were held at which dividends were declared or authorised. 104 It submitted that the plaintiffs had incorrectly assumed that the absence of a written memorandum of a decision equated to the absence of such a decision. That assumption is said to have "… no foundation in law or logic" (defendant's supplementary outline of opening submissions, paragraph 13(b)). It contended, relying upon Swiss Screens (supra) that something other than a formally constituted meeting sufficed for corporate decision-making. 105 It was submitted that, provided there was evidence establishing that a meeting of minds had occurred between the members of the paying companies, something less than a formally constituted meeting sufficed for corporate decision-making: Re Duomatic Limited (supra). Even if it were determined that formal resolutions had not been passed, all participants, it was contended, had acted with unanimous informal assent, the equivalent of resolution. 106 In Swiss Screens (supra), Bryson J observed that a decision may be made by directors of a company other than by way of a formal meeting. The implementation of the decision (in that case the decision as to the allotment of shares) had taken place as revealed by the minutes, the share register and other records of the company. 107 In that case, the managing director of the company, the second plaintiff was the principal figure in the company's affairs and the first defendant was his former wife. There were irregularities and anomalies throughout the records relating to the company, with little attention having been paid to the maintenance of company records. 108 However, it was held that the evidence established that a decision had been taken, though albeit with little formality, there being no evidence of a resolution having been passed at a meeting of directors of the company. Bryson J held that directors of a company could well have reached concurrence in taking some course in the company's affairs and which could with accuracy be regarded as a meeting of the directors (at 758):- "… what does seem to me to be essential is that they should both concur in some decision in the management of the business of the company. If they do, and the event is recorded in a minute which accurately states what they concurred in as their decision, the meeting and the minute are no less effectual because the minute is formally expressed and appears to be an account of a much more solemn event than in fact took place." 109 On the evidence in that case, it was clear that there had been actual unanimity on an intra vires course of action, the Court holding that it was not necessary for unanimity to be reached on an occasion when all were present. 110 In determining in Swiss Screens (supra) that an allotment of shares had in fact taken place, Bryson J had regard to documents which came into existence at a later point in time to that when the decision was made. These included a return of allotment of shares, the annual return of the company as at the specified date which contained a statement of the issued capital referring to the shareholdings of the former directors. Bryson J added:- "In substance, when I address myself again to the evidence relating to whether the allotment which the plaintiffs seek to establish took place, I find that the material to be relied on is the minutes, the share register and other records of the company, including the share certificates and annual returns signed by Mrs Burgess and confirming in part or in whole that there were shareholdings such as those to which the allotment relate …" 111 The decision in Swiss Screens (supra) emphasises:- • That irregularities and anomalies in the records of a company will not always or necessarily negate corporate decision-making in the context of a "family company" or a tightly held companies. • With companies of that kind, concurrence between directors in the course of a company's affairs which form part of the management of the business of the company may be evident from the conduct of directors and be the equivalent of a "meeting" . That may be so, notwithstanding irregularities or anomalies in company record-keeping. 112 The defendant also disputed the plaintiffs' contention as to the asserted falsity in relation to the minutes of meetings prepared after the balance dates for the companies:- "… the evidence summarised in the Patterson affidavit makes plain that the companies had very substantial retained profits which stood in the books of the companies at the end of the financial year prior to the payment of the relevant dividends. The bulk of the dividends were in round figures. The capacity of the companies to declare the dividends is established by comparing the amounts of those dividends to the retained profits of the relevant company at the end of the previous financial year. The Court would not discount the likelihood of Mr Milsom having a very good idea of the likely ability of the companies to pay a dividend out of profits for a relevant year prior to the finalisation of accounts for a given financial year. Indeed, given Mr Milsom's familiarity with the affairs of the companies, it would be an extraordinary proposition to suggest he would not have had an idea of the capacity of the companies to pay a dividend prior to accounts being finalised …" [Supplementary Submissions of Defendant dated 24 May 2007, paragraph 11]. 113 On the issue of "payment" of dividends, it was contended that the Court would conclude that all relevant participants agreed to the "mechanism" by which Mrs Jarrett was to receive her entitlement under the MLJ Settlement Trusts and the Hazel Henderson Settlement Trust. I will refer to this issue in some detail below. 114 Finally, the defendant also invoked the equitable defences of laches and acquiescence and the provisions of s.1318 of the Corporations Act 2001 (Cth) to excuse any breach that may be determined. Analysis 115 As observed in the Defendant's Outline of Submissions (paragraph 10), the submissions made on behalf of the plaintiffs are relied upon in respect of the whole of the period, 1989 to 1991 inclusive. The defendant, in those submissions, observed:- "… the plaintiffs' submissions … are couched at a high level of generality in dealing with all of the disputed dividends as though they were identical transactions. In order for the Court to be satisfied that the plaintiffs have discharged their burden of establishing that individual payments were unauthorised, it is, obviously enough, necessary to look at the circumstances of each transaction. This is not addressed in the plaintiffs' submissions." 116 The defendant submitted that there are differences between each dividend beyond quantum and, in particular, that they were documented in different ways and that payment was effected in a variety of ways. 117 A central issue in the plaintiffs' case on the dividend declaration issue concerns the question as to whether there had, on the evidence, from year to year, been an effective exercise of corporate power notwithstanding any proved failure or irregularity in compliance with a particular company's articles of association. 118 It is clear that authorisation by the informal consent of the directors of a corporation may be given within limitations. In Kinsela v Russell Kinsela Pty Limited (in liq) (1986) 4 NSWLR 722, Street CJ stated:- "In a solvent company the proprietary interests of the shareholders entitle them as a general body to be regarded as the company when questions of the duty of directors arise. If, as a general body, they authorise or ratify a particular action of the directors, there can be no challenge to the validity of what the directors have done. But where a company is insolvent the interests of the creditors intrude. They become prospectively entitled, through the mechanism of liquidation, to displace the power of the shareholders and directors to deal with the company's assets. It is in a practical sense their assets and not the shareholders' assets that, through that medium of the company, are under the management of the directors pending either liquidation, return to solvency, or the imposition of some alternative administration." 119 In Re Duomatic Limited (supra), Buckley J heard a summons by liquidators of a company seeking, inter alia, repayment of amounts paid to directors of a company in respect of salaries on the ground that such sums had never been voted upon in general meeting. 120 The court held that the fact that a formal step had not been taken to convene a general meeting of the company was not determinative. The directors had approved the accounts of the company for the relevant financial year and had signed copies of those accounts. They had met together with the auditor of the company, who had explained to them the make-up of the aggregate figure for directors' salaries shown in the profit and loss account. Buckley J stated that a preference shareholder who had no right to receive notice or to attend to vote at a general meeting, could be in no worse position if the matter were dealt with informally by agreement between all the shareholders having voting rights than he would have been had the shareholders met together in a duly constituted general meeting. 121 In Duomatic (supra), Buckley J stated, in relation to the absence of a formal resolution by the company in a duly convened meeting:- "It seems to me that if it had occurred to Mr Elvins and Mr East, at the time when they were considering the accounts, to take the formal step of constituting themselves a general meeting of the company and passing a formal resolution approving the payment of directors' salaries, that it would have made the position of the directors who received the remuneration, Mr Elvins and Mr Hanly, … secure, and nobody could thereafter have disputed their right to retain their remuneration. The fact that they did not take that formal step but that they nevertheless did apply their minds to the question of whether the drawings by Mr Elvins and Mr Hanly should be approved as being on account of remuneration payable to them as directors, seems to lead to the conclusion that I ought to regard their consent as being tantamount to a resolution of a general meeting of the company. In other words, I proceed upon the basis that where it can be shown that all shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be." 122 In Herrman v Simon (1990) 4 ACSR 81 at 83, Meagher JA, with whom Samuels and Priestley JJA agreed, cautioned that the Duomatic principle applies to formalities and not to substance, noting that it operates in circumstances where all shareholders want the same substantial result and say so, acting unanimously. Where those circumstances exist, the doctrine's operation dispenses with a failure to observe formalities. Meagher JA observed that the principle is really only one of waiver and would not apply to the destruction of rights of those who are ignorant of any relevant proposal. 123 In general terms, this principle applies where all director/shareholders are fully informed on a matter and, having duly considered it, give their unqualified consent to a course of action proposed. As noted in Sutherland (as liquidator of Sydney Appliances Pty Limited (in liq) v Robert Bosch (Aust) Pty Limited & Ors (2000) 33 ACSR 680 (Santow J), the Duomatic principle has been approved by the High Court in MYT Engineering Pty Limited v Malcon Pty Limited (1999) 162 ALR 441; 30 ACSR 705 at [9] and it can be taken to be settled law in Australia. Reference was made in Sutherland (supra) to the observations of Bowen CJ in Eq in Re Compaction Systems Pty Limited [1976] 2 NSWLR 477; (1976) 2 ACLR 135 (at 141):- "If all the shareholders of a company are present together in a meeting, and signify their assent to a transaction which is within the powers of the company, their decision will be effective, as if a resolution to that effect had been passed at a properly constituted meeting. This may be so, notwithstanding those at the meeting thought they were conducting a directors' meeting and the necessary formalities required for the calling of a general meeting had not been observed ( In re Express Engineering Works Limited [1920] 1 Ch 466). This may also be so where those present thought they were conducting a meeting and passed a resolution, but where, in fact, the requirements of the articles or the Companies Act as to notice had not been observed ( In re Oxted Motor Co Limited [1921] 3 KB 32; In re Bailey, Hay & Co Limited [1971] 1 WLR 1357). Indeed, it has been held that provided the transaction is intra vires and honest, it is valid if all corporators assent, and that it does not matter whether assent is given at a meeting of some kind, or without a meeting, and whether it is given simultaneously or at different times and places ( Parker & Cooper Limited v Reading [1926] Ch 975). It should be added that the Privy Council in EBM Co Limited v Dominion Bank [1937] 3 All ER 555 at 566 thought it advisable to say that they found it unnecessary to express any view as to the correctness of this last decision." 124 The defendant relied upon past conduct as evidencing the consensus of all relevant parties as well as the fact and nature of the payment of dividends and the concurrence of the trustees in the arrangements established in that respect. Such conduct included the lodging of annual taxation returns and fulfilment of annual statutory reporting obligations. 125 In Re Harry Simpson & Co Pty Limited and Companies Act 1936 [1966] 2 NSWLR 445, fresh evidence concerning later events was admitted on appeal, the liquidator of the company in question having rejected a proof of debt on the ground that the amount in question was a sum due to a member of the company "in his character of member" within the meaning of the relevant provision. 126 The fresh evidence sought to be relied upon consisted of returns of income which in the relevant period had been lodged with the Commissioner of Taxation. These established, inter alia, that the trustees of the relevant settlements not only paid income tax on the dividends which were declared annually, but they also revealed that the company itself recognised in its returns to the Commissioner that the dividends had been capitalised. The evidence as to the method of treatment of the disputed dividends was relevant in determining what the parties had comprehended and agreed upon in relation to them. The evidence established that the monies in question were owing by the company to the creditor "in the character of a member" under the relevant statutory provision. 127 Mr Ireland identified two matters that he suggested limited the application of the Duomatic principle. The first was that it usually applied where there is an "overlapping" of directors and shareholders, if not a complete identity, and where the shareholders are beneficially entitled to the shares. In the present proceedings, it was observed, the shareholders (RAH No 1 and RAH No 2), as corporate entities, "would have to delegate somebody to perform that function". It was further observed that the "background" fact in the present case was the existence of the trusts and that, in earlier years, Mr and Mrs Jarrett and, in later years, Mr Milsom and Mrs Jarrett, did not hold beneficial interests in the shares of the companies. 128 These matters having been identified, Mr Ireland's submission was not that the Duomatic principle could not apply, but that, if the plaintiffs had displaced the prima facie effect suggested by minutes of meetings, then an onus fell on the defendant to make good the informal mode of validating the declaration of dividends and their payment. 129 The accounting records for RH & M and UIGI reflect decisions and actions in both declaring and paying dividends by crediting Mrs Jarrett's loan accounts and in the payment of her living expenses. The trustees' concurrence in the treatment of dividends declared by the companies but retained by them under those arrangements are seen reflected in the declarations and disclosures made in their respective taxation returns. Similarly, the returns of Mrs Jarrett manifested her consent and participation in the arrangements. 130 The documentary evidence as to the mechanism or arrangement for the payment of dividends, in my opinion, unless shown to be, in some way, falsified or as a "sham", consistently reflects consensus and mutuality from year to year as between RH & M and UIGI, the trustees and Mrs Jarrett. The pattern of conduct in this respect occurred in circumstances wherein corporate control resided in Mr and Mrs Jarrett in the earlier years and Mrs Jarrett and Mr Milsom in the latter years. 131 In terms of such "conduct", whether it be considered as the conduct of the plaintiff companies, of the trustee companies and/or the conduct of Mrs Jarrett and Mr Milsom, given the amount of retained profits in each of the relevant years and Mrs Jarrett's entitlement to receive income from the settlement trusts during her lifetime, there were no particular constraints or limitations on how dividends could be declared or paid arising from any relationship between Mrs Jarrett and her daughter, the first plaintiff. 132 Although it was contended on behalf of the plaintiffs that Mrs Jarrett procured the payments in question allegedly made without authority and that she was "in breach of duty", in that respect, there was little by way of analysis of the question of "duty" to support the contention. 133 In the Plaintiffs' Outline by way of opening (paragraph 9), it was contended that Mrs Jarrett "… had a fiduciary duty as the custodian of the assets for the ultimate beneficiary, her daughter, Alicia Jarrett …" and that the "… acquisition of … assets by the deceased was at the expense of her daughter …". The proceedings were said to have been initiated "to recover the assets of the companies which her mother illegally acquired". The Plaintiffs' Submissions in Reply (paragraph 2) similarly put forward the proposition that Mrs Jarrett:- "… had the responsibilities of a trustee to her daughter, Alicia Jarrett (who was a minor), to preserve and protect the asset of the trust, namely, the shareholdings in the companies for their true beneficial owner … So long as she survived, Alicia Jarrett was always destined to be the beneficial owner of the assets. The deceased (her mother) was a steward of the assets with a right to receive dividend income only if and when it was legally generated. Where no dividend income was legally generated by those assets, the deceased was entitled to nothing in a particular year. The companies were entitled to retain these earnings. This is a matter entirely ignored in the defendant's submissions." 134 These submissions, with respect, somewhat elide the necessary distinction between the basis of Mrs Jarrett's entitlement to income under the settlement trusts with the concepts inherent in the submission as to breach of fiduciary duty. 135 The latter presupposes that a relevant relationship existed between Mrs Jarrett and her daughter which was, by specific conduct, breached. The existence of the necessary relationship (and the nature and purpose of that relationship) is fundamental to the scope and extent of any fiduciary obligations that arise from it: Say-dee Pty Limited v Farah Constructions Pty Limited [2005] NSWCA 309 at [158]. It is important, accordingly, to establish whether there was a relevant legal relationship between Mrs Jarrett and her daughter in the relevant years. 136 Whilst the plaintiff submitted that Mrs Jarrett was "a trustee of the assets", that expression in the context of the submission assumes rather than addresses the issues of the essential legal "relationship" and how a breach of duty on the facts of this case is said to arise, given, in particular, the absence of any allegation that the capital or corpus of the trusts has been in any way detrimentally affected. As noted earlier, at all material times, RH & M, UIGI and Elwood had adequate levels of income to pay the dividends. Each was entitled to declare and pay them and Mrs Jarrett was entitled to receive them by way of distributions from the dividend recipients. 137 In circumstances in which all disputed dividends were paid from current year profits and/or retained earnings, they were not, in my opinion, paid in breach of any obligation Mrs Jarrett owed as director of the plaintiff companies nor as a life interest beneficiary of the settlement trusts. That conclusion effectively leaves the plaintiffs' case as to an alleged misapplication of corporate assets to be determined upon the principal basis argued, namely, the claimed failure to declare dividends in accordance with the constitutions of RH & M, UIGI and Elwood. Findings and conclusions on the dividends issue 138 The evidence establishes that in each year in the earlier part of the relevant period, Mr and Mrs Jarrett concurred in their capacity as directors of the second, third and fourth plaintiffs in decisions made in the course of management of the business of each of those companies to declare the dividends recorded in respect of each year. Similarly, the evidence establishes in the decision-making as directors, concurrence of Mrs Jarrett and Mr Milsom to declare the dividends recorded in respect of each year in the latter years of the relevant period. 139 The decisions made declaring dividends as stated in the preceding paragraph were, intra vires, the companies, the second, third and fourth plaintiffs and were made upon the basis that in each year the dividends were to be paid from the available profits including retained profits of the companies. 140 The documents within Exhibits A1, A2 and A3 and summarised in the schedule to this judgment, record, in respect of each relevant year, and establish the facts concerning the decision-making and consensus reached as to the disputed dividends, their amount and their payment. 141 It was not, in my opinion, incumbent on the defendant to adduce oral evidence from Mr Milsom in order to establish the matters that are evidenced in Exhibits A1, A2 and A3. 142 The plaintiffs have not established that the documents contained within those exhibits to be false or sham documents or that particular information within them is false or unreliable. No submission was made that Exhibits A1, A2 or A3 were not admissible or should be excluded on grounds arising under the provisions of s.135 of the Evidence Act 1995. 143 On the evidence, including, in particular, Exhibits A1, A2 and A3, I make the following findings:- (i) That throughout the period 1989 to 2001 inclusive, the primary records (see summary in the schedule to the judgment) indicate that Mr Milsom did not act without the concurrence of Mrs Jarrett (and in the earlier years to 1995, that of Mr Jarrett) or in an unauthorised manner in relation to the disputed dividends. (ii) In the period 1989 to 1995 inclusive, the evidence establishes that Mr Milsom regularly consulted Mr and Mrs Jarrett in their capacity as directors of RH & M and Elwood, in relation to corporate decision-making for the declaration of dividends and their payment up to September 1995 and thereafter Mr Milsom and Mrs Jarrett as directors. The primary records in Exhibits A1, A2 and A3 evidence meetings of directors of the second, third and fourth plaintiffs, whether formal or informal in nature and/or the giving of unanimous consent with respect to the declaration and payment of the disputed dividends. (iii) During the period 1989 to 2001 inclusive, all directors (Mrs Jarrett, Mr Jarrett and Mr Milsom of RH & M, UIGI, Elwood and RAH No 1 and RAH No 2) conducted themselves on the basis that action taken to effect the declaration and payment of the dividends was regarded and treated as sufficient to achieve those ends. The documents within Exhibits A1, A2 and A3 evidence actions taken in that respect. 144 Accordingly, despite any irregularities or shortcomings that exist in minutes of resolutions, the evidence establishes a determination or decision by the directors of the plaintiff companies to declare and pay the disputed dividends. Whether or not the constitutional requirements for the declaration of dividends were met, the exhibited material in Exhibits A2 and A3 establishes that the shareholders in RH & M and UIGI approved the disputed dividends which, in my opinion, were validly declared. 145 It was submitted on behalf of the plaintiffs that there was no proof that any of the identified individuals had ever been appointed to represent RAH & No or RAH No 2 for the purpose of general meetings of RH & M or UIGI or otherwise. It is not, however, to be overlooked that Mrs Jarrett was in a position of control, insofar as she had the dual role and capacity as director of RH & M, UIGI and Elwood, as well as of RAH No 1 and RAH No 2 and that she as well held the position of shareholder of the latter two (trustee) companies which, in turn, held the shares in RH & M, UIGI and Elwood. 146 In such a tightly interwoven corporate arrangement, both the knowledge and the approval of the trustee shareholders (through Mrs Jarrett) of dividends proposed in each year of the relevant period may be accepted as but one of the practical effects arising from the arrangement. The payment issue (a) The contentions of the parties 147 The plaintiffs' contention on the "payment" issue was that the mere crediting of the loan accounts did not give rise to any liability on the part of RH & M and Elwood to the deceased. Such credits, it was argued, were intended to reflect the payment of dividends by means of book entry but in circumstances where they were not effective at law to effect payment. It was contended that there was no liability in those companies to the deceased:- "… payments made upon the assumption that they did represent such indebtedness was incorrect, mistaken and hence recoverable in an action at law for money had and received or in equity." (Plaintiffs' Outline of Final Submissions, paragraph 16) 148 At the centre of the plaintiffs' submissions was the proposition that where a company wishes to effectuate payment by book entry, there must be evidence that the book entry is not only designed to but does eliminate cross-liabilities in equal amounts which are mutually extinguished as an agreed set-off. 149 In the present case, the plaintiffs contended there was no evidence of the trustee companies (when Mr and Mrs Jarrett were directors of them and, later, Mrs Jarrett and Mr Milsom) having made a decision that was effective to establish such a set-off arrangement. Further, it was submitted that neither Mrs Jarrett nor the trustees of the settlements owed any liability to RH & M or Elwood against which RH & M or Elwood could set-off any liability they had to pay a particular dividend. 150 The plaintiffs' position in relation to the issue of the dividends as expressed in opening submissions was that:- • There was no payment of dividends effective in law (the book entries signified simply a transition of monies from retained profits, but that no monies in respect of dividends were transferred from RH & M). • The evidence did not establish an obligation of RH & M to its shareholders as acquitted or discharged by the book entries. • The evidence did not establish that there was agreement for the discharge of any obligation in RH & M in respect of the dividends (this upon the assumption that dividends were validly declared). • The evidence established that the dividends remained unpaid and, accordingly, they may be rescinded. Reliance was also placed upon the steps said to have been taken after the death of the deceased by way of rescission of the purported dividends. 151 The defendant, on the other hand, asserted that the real issue was not whether there were pre-existing cross-liabilities at a particular time but whether there was an agreement "dealing with an underlying mutuality of liabilities which the book entries were treated by all relevant parties as settling …" (Defendant's Outline of Submissions, paragraph 46). (b) Evidentiary matters 152 The evidence concerning the arrangements leading to and established for the payment of dividends to Mrs Jarrett included the following elements:- (a) The plaintiff companies purportedly declaring dividends. (b) The dividends as the source of the distributions purportedly made to the corporate joint trustees. (c) The purported distributions being effected by RAH No 1 and RAH No 2. (d) Credits being made to the loan accounts maintained by RH & M and Elwood in the name of Mrs Jarrett. 153 A fact underlying the above arrangements was that Mrs Jarrett was the sole beneficiary entitled to income arising under the settlements from the trust assets. In a practical sense that income was said to have been distributed by way of the purported dividends. The evidence did, as the defendant contended, establish that at the dates of the declaration and payment of the disputed dividends, RH & M, UIGI and Elwood had generated profits from their trading or investment activities sufficient to entitle them to pay the dividends. Additionally, there was no actual or potential intrusion into the abovementioned arrangements of any third party's rights (eg, the rights of any competing creditors) with respect to the disputed dividends. 154 Other relevant matters established in evidence were:- • The fact that RAH No 1 and RAH No 2 were at all material times the sole shareholders of RH & M and UIGI. The shares in those companies were the only assets of substance belonging to the MLJ Settlement Trust and the Hazel Henderson Settlement Trust. • That at all material times Mrs Jarrett was the shareholder of RAH No 1 and RAH No 2 and a director of both companies. She was also, at all such times, a director of RH & M, UIGI and Elwood. 155 In his affidavit sworn on 16 August 2006, Mr Patterson, who was retained by the defendant to review the documentation recording movements of monies, stated (paragraphs 18 to 21):- "18(a) … (b) Generally speaking, dividends have been paid by way of crediting in the books of the payer (either RH & M, UIG or Elwood) a sum on the loan accounts of the Trusts and in some instances a sum directly to the loan accounts of Mrs Jarrett. (c) … (d) … (e) With the exception of dividends paid in 1988 (where I have no information) the dividends recorded by the paying entitles (RH & M, UIG or Elwood) have been included as assessable income in the hands of respective shareholders (RAH1, RAH2 and UIG) and subsequently in the hands of Mrs Jarrett and the beneficiary of the trusts. (f) There were large amounts in the loan accounts between Mrs Jarrett, the Estate of MLJ, the Trusts and the various entities. 19. In a number of instances, the accounting process for the payment of dividends appeared to involve the crediting of Mrs Jarrett's loan accounts with dividend entitlements, notwithstanding that the shareholders in these cases were the two Trusts. To an accountant reviewing the primary records (they were prepared in accordance with standard accounting practice), the inference I would draw is that the Trustees of the Trust, by direction or otherwise, offset their dividend entitlement against the distributions to the beneficiary such that the beneficiary became the creditor of the dividend paying company. 20. There were instances whereby Mrs Jarrett's entitlements to Trust income were dealt with by way of granting of a loan to Elwood for an amount equal to the dividend paid by RH & M and UIG. I am not able to comment as to the purpose of this course of action. The end result of this accounting treatment is that the end beneficiary, Mrs Jarrett, has loaned her dividend entitlement back to the payer company. 21. In summary, the financial records have been prepared on a consistent basis in that all the dividends have been reported in the various Financial Reports of the companies and the dividends paid have been included as assessable income in the Trusts' Income Tax Returns and the Trusts' beneficiaries' tax returns for the years reviewed." 156 I accept Mr Patterson's statements extracted in the preceding paragraph as well supported by the evidence in these proceedings. The defendant submitted that:- "44. Irrespective of the accounting mechanism by which the dividends were recorded in the company's records, Mrs Jarrett was paid monies out of the profits of those companies which correlated to the amounts the subject of the disputed dividends and all relevant participants organised their affairs for years on the basis that dividends were properly paid. 45. The plaintiffs cannot succeed in discharging their evidentiary and persuasive burden of establishing that it should be inferred that Mrs Jarrett, RAH No 1 and RAH No 2, UIG, RH & M and Elwood did not agree that the mechanism by which Mrs Jarrett would receive her entitlement pursuant to the MLJ Settlement Trust and the Hazel Henderson Settlement Trust was through the payment of dividends effected in the manner which in fact occurred (and indeed, even though it is not necessary for the disposition of the plaintiffs' claim, the existence of such an agreement must, in the circumstances, be inferred from the available material) …" (defendant's outline of submissions, 18 May 2007, (paragraphs 44 and 45). (c) Issues and principles 157 The defendant submitted that the real issue was whether the Court could be satisfied that, in fact, there was no agreement dealing with an underlying mutuality of liabilities which the book entries were treated by all parties as settling. Those entries were said to evidence the mechanism by which Mrs Jarrett received an amount representing the dividends, defrayed her ongoing expenses and advanced monies to the company. 158 The plaintiffs contended that the defendant had failed to identify relevant book entries whereby dividends purportedly owing by RH & M and UIGI to the trustee shareholders (RAH No 1 and RAH No 2) were set-off against other book entries consistent with the principle enunciated in Re Harmony and Montague Tin & Coffee Mining Company (1873) 8 Ch App 407 (Spargo's case). The plaintiffs submitted, as earlier noted, that it had not been established that either Mrs Jarrett or the trustees owed any liability to RH & M and UIGI against which the companies could have set off any liability they may have had to pay the purported dividends. 159 The defendant disputed the need to establish such cross-liabilities and contended that the plaintiffs' reliance upon the principle in Spargo was misplaced. The issue, the defendant contended, was whether the evidence established, as it contended it did, a multi-party agreement which dealt with an underlying mutuality of liabilities and which the parties regarded the book entries as settling. It sought to distinguish Re Associated Electronic Services Pty Limited (in liq) [1965] Qd R 36 relied upon by the plaintiffs arguing that the issue in that case was essentially concerned with the question of the alteration of the character of debts arising from a dividend to one arising by way of loan. The defendant instead relied upon the decision of the Court of Appeal in Re Harry Simpson & Co Pty Limited (1964) 8 WN (NSW) 207 and upon Re Rural and Veterinary Requisites Pty Limited (in liq) (1978) 3 ACLR 597 and Aborel Nominees Pty Limited v Horsburgh (1986) 11 ACLR 138 (Gobbo J) and Temples Wholesale Flower Supplies Pty Limited v Federal Commissioner of Taxation (1991) 29 FCR 93, 103 (Fed Ct FC). These cases are examined below. 160 There is a considerable body of case law concerned with the circumstances in which a payment may be effected by way of book entries: see, in particular, Federal Commissioner of Taxation v Steeves Agnew & Company (Victoria) Pty Limited (1951) 82 CLR 408, 420. It is to be noted that, in that case, in which it was held that drawings by the managing director of the defendant were paid when the defendant's liability for remuneration had not arisen, there was no evidence of an account between the managing director and the defendant having been struck and of a payment made in satisfaction of the balance. There was "no mutual extinguishment of cross-demands" (at p.420). In that case Dixon J (as he then was) held that if cross-liabilities in sums certain of equal amounts immediately payable are mutually extinguished by an agreed set-off, then that amounts to payment for most common law purposes. Dixon J referred to dicta of Mellish LJ in Spargo's case (supra), but stated that for the application of the principles in that case "… there must be cross-liabilities an agreement, express, tacit or implied, and the cross-liabilities must be equal. If they are not equal, payment of the residue must be effected by other means …" (at p.420). 161 In Spargo's case, the issue was whether, following the winding-up of a mining company, Spargo (one of the company's promoters and shareholders) was liable to make payment of £50 per share on shares issued to him. 162 Following registration of the company, a meeting was held at which all seven shareholders were present. Resolutions were unanimously passed at the meeting that an amount of £2,176 be credited to Mr Spargo for a lease of mining property and that that amount be paid out of the share capital of the company. The accounts of the company recorded all shares as fully paid up save for Spargo's shares. 163 The evidence established that Spargo was credited with an amount for the lease of the property and debited with the amount payable on his shares. In those circumstances, it was held that he must be considered to have paid his calls with respect to the shares in cash. 164 The decision in the case was to the effect that the relevant provisions of the Companies Act 1867 (s.25) did not require any particular formality "before" there could be a "payment in cash". Hence, where on one side there was a bona fide debt immediately payable by the company for the mining property and, on the other side a bona fide liability to pay money as owing on shares, two demands in respect of each may be set-off against each other so that the shares may be considered as having been paid for in cash. In East Finchley Pty Limited v Federal Commissioner of Taxation (1989) 20 ATR 1623, Hill J stated (at 1635) that the rule in Spargo's case is not a principle confined merely to the company law context but that at its heart is the undeniable futility of two parties, each obligated to the other, passing cheques backwards and forwards to accomplish a transaction. 165 In the present proceedings, the plaintiffs relied upon the principles referred to above in support of their contention that there were no mutual liabilities existing at the relevant times between the second, third and fourth plaintiffs and RAH No 1 and RAH No 2 and that, accordingly, relevant accounting entries could not and did not effect a payment to RAH No 1 and RAH No 2. 166 Before dealing with the application of the principle in Spargo's case, I consider it appropriate at this point to examine the defendant's contentions. It relied, in essence, upon the approach adopted in Re Associated Electronic Services Pty Limited (in liq) (supra); Re Harry Simpson & Co (supra); Re Rural and Veterinary Requisites Pty Limited (in liq) (supra) and Aborel Nominees Pty Limited (supra) 138. Those decisions are, in my opinion, relevant to the issue of payment in the present proceedings insofar as they consider the significance that may attach to the conduct or treatment by the shareholder directors and the relevant companies in respect of dividends credited to loan accounts of those directors/shareholders in the companies' books.H Har 167 The last-mentioned of these cases involved challenges to decisions by liquidators in deferring particular proofs of debt of the shareholder/directors of the relevant companies. Thus, in the first two of the above cases, there was an issue as to whether or not any agreement between the shareholder and the company to the effect that his or her dividend in one particular year was to be treated as paid and lent to the company, was or was not supported by consideration in order to determine whether any agreement in that respect was binding or not. In Re Associates Electronic Services (supra), the Court determined that there was no consideration, whereas, the opposite conclusion was arrived at on the evidence in Re Rural and Veterinary Requisites (supra). 168 The circumstances in Rural and Veterinary Requisites involved an appeal against the decision of liquidators in deferring certain proofs of debt of two shareholders and former directors of the relevant company, Mr and Mrs Lyndon. The debts sought to be deferred were in respect of loan accounts of the Lyndons in the company's books. Dividends (and other remuneration including bonuses and directors' fees) were credited to the loan accounts of the Lyndons. An agreement was entered into between the directors, a Mr and Mrs Chapman, and the company whereby the Chapmans acquired certain shares in it. The agreement made provision to the effect that the Lyndons would not, without the consent of the Chapmans, "withdraw their existing loan accounts from the company". The company also agreed that it would pay interest for overdrawn accounts on all shareholders' loans. 169 The Court (Campbell J) referred to the actions or treatment of the loan accounts as evidencing the fact that the dividends had been paid and treated as loan monies in the company's accounts (at p.5):- "In the present case it is clear that the company at all times recognised that the dividends once declared had been capitalised; it always treated them as loan monies in its own accounts and in its own taxation returns. A significant fact is that monies for personal use were drawn from time to time by Mr and Mrs Lyndon from their loan accounts. The Lyndons at all times accepted the capitalisation of the dividend monies which were paid into their loan accounts. The company was a party to the agreement of 1 June 1970 which referred to the 'existing loan accounts' and agreed to pay interest on all shareholders' loans. Amounts which were due from time to time for income tax were withdrawn from each of the loan accounts … The applicability of art. 100 of Table A, in the circumstances, supports the view that both the company and the Lyndons recognised that these accounts were loan accounts and that the dividends were treated by all parties as having been paid …" 170 The agreement in question was supported by consideration and both the company and the Chapmans appeared to have acquiesced in the way in which the Lyndons dealt with the loan accounts. 171 Similarly, in Aborel Nominees (supra), the practice of the company's directors was periodically to declare dividends in favour of the shareholders but no actual payment of the dividends was made. The dividends had been recorded in the company's books as paid in the current accounts of the shareholders and in some cases those accounts were described as loan accounts. 172 Gobbo J observed that there was no written agreement that replaced the obligation to pay a declared dividend with an obligation to repay a loan and to pay interest. The matter was to be decided on the basis of an implied agreement. His Honour stated (at pp.140-141):- "… it is, in my view, legitimate here to look at the course of events rather than confining oneself to the events directly concerned with the actual commencement of any agreement. This is because there are in issue a series of amounts spread over several years. In any event, where there is an evidentiary issue as to whether what appears to be an agreement is made out, it is legitimate to look to subsequent conduct by the parties to throw light on the question as to whether an agreement was actually arrived at. In small family companies, the same degree of formality is not expected as would be the case with companies that were larger or of a different character. In the former case, the actual way in which the relevant parties acted is likely to be more useful than the record of the transaction in deciding what was the effectual agreement, if any, arrived at. The material relied upon by the appellants in the present case suffice to make out an effectual agreement of loan as to the amounts in question. There was first the evidence from the appellants as to an understanding reached that the dividends were to be treated as loans and to bear interest. This complied with entries in the books of the company that gave effect to this understanding. Finally, there was the evidence as to the income tax returns both of the shareholders and of the company. As in the Harry Simpson case, the dividends were shown as income received by the shareholder in a year of declaration of dividend and interest on these amounts was also shown in the individual income tax returns. When taken together, this material shows a course of events that is only consistent with an obligation to treat the dividends as a loan and to pay interest thereon …" 173 The judgment in Aborel Nominees (supra) emphasises, in my opinion, that in the present case too there is a need for attention to be given to relevant events over time insofar as they reflect upon the practice or convention adopted by all relevant parties with respect to the disputed dividends including the subsequent conduct of the "parties" that evidence the existence of an antecedent agreement between them. 174 As emphasised in Aborel Nominees (supra), the acts of the "parties" may be a more reliable guide to the existence of an agreement than a formal record of a transaction. In particular in this regard, the income tax treatment of dividends may form part of the history that manifests the true nature or character of income declared. 175 The defendant submitted, in my opinion correctly, that, although some minutes of meetings and other documents are missing, those that do exist (and which are summarised in the attached schedule) confirm the arrangement which Mrs Jarrett, the shareholders of RH & M and Elwood and of the trustee companies must be taken to have been satisfied with and which they agreed to. 176 In the absence of a reason for doing so, the income tax returns lodged by each party, including the trustees, are to be taken as genuinely reflecting that arrangement. There is no basis for not accepting those returns as accurate. I accept the submission made on behalf of the defendant that it was for the plaintiffs to call Mr Milsom if they wished to challenge the integrity and accuracy of the records in Exhibits A1, A2 and A3. 177 The Minutes of the Annual General Meeting of RH & M held on 31 December 1990 were referred to in the course of submissions as an illustration of corporate decision-making captured by contemporaneous records:- (a) Mr and Mrs Jarrett are recorded as present at the meeting, they being members entitled to vote. (b) Although no minutes of the company annual general held on 24 November 1989 were located, the minutes of the annual general meeting held on 31 December 1990 provide some evidence of the fact that there had been minutes for the previous meeting for the previous year which were read, confirmed and signed. (c) The minutes of the annual general meeting held on 31 December 1990 constitute a record of the fact that the company adopted audited accounts including the balance sheet of the company as at 30 June 1990 and a profit and loss statement for the year ended 30 June 1990, which accounts are in evidence. This, it was contended, supported the fact that the minutes should be accepted as truthful. (d) The minutes record a resolution of the company that was confirmed declaring a dividend of $1,058,000 on 28 June 1990. 178 On behalf of the plaintiffs, it was submitted that the defendant had not identified any agreement to which the trustees, RAH No 1 and RAH No 2, were parties and which dealt with the payment of the purported dividends, nor the terms of any such agreement, nor the means by which such agreement arose: Plaintiffs' Submissions in Reply, paragraph 18 179 However, in this respect, it has been well accepted that on examination the circumstances in a particular case may establish the mutual assent of parties or an agreement as inferred from the manifestation of mutual assent. In Integrated Computer Services Pty Limited v Digital Equipment Corp (Aust) Pty Limited (1988) 5 BPR 11,110 (CA NSW) McHugh, JA on behalf of the Court adverted observed that from such circumstances, a contract may be inferred from the acts and conduct of parties. Australian Energy Limited v Lennard Oil NL (1986) 2 Qd R 216 is an example of the implication of a contract from conduct and relevant principles were discussed in Vroom BV v Foster's Brewing Group Limited [1994] 2 VR 32 at 79-83. 180 In meeting the evidence of Mr Miller to the effect that the amount of dividends were determined later in the year, Mr Hutley drew attention to the balance sheet of RH & M as at 30 June 1989. This revealed retained profits in the amount of $2,420,209 for the 1989 year (and $2,974,587 for the 1988 year). 181 Mr Hutley contended that it was fanciful to suggest Mr Milsom could not have known as at 30 June 1990 that there was sufficient income available for a distribution of a dividend of approximately $1,000,000. The company was entitled to declare a dividend out of retained profits and that was what had occurred during the relevant period. The fact that the accounting records of the company were made up after the end of the financial year consistent with common practice, he submitted, was not relevant. 182 As to the plaintiffs' contention that there was lack of evidence of the trustee companies having agreed to participate in the mechanism employed for payment of dividends, Mr Hutley relied upon the consistent pattern of tax returns including those lodged on behalf of the trustee companies. These, he correctly submitted, reflected them having received and then distributed the dividends to Mrs Jarrett. The accounts and returns for 1990 were taken as illustrating those facts:- (a) The income and expenditure account for the year ended 30 June 1990 of RAH No 1 and RAH No 2 as trustees of the Margaret Louise Jarrett Trust recorded dividend income from RH & M in respect of fully franked "B" ordinary shares of $529,000 and income of $539,185 in respect of fully franked shares in UIGI, a total of $1,068,185 less trustees' fees of $2,000, leaving a balance of $1,066,185. (b) The 1990 income tax return for the Margaret Louise Jarrett Trust records beneficiary entitlements of $1,749,123 (less an imputation credit of $682,938, leaving a net amount of $1,066,185). (c) Mrs Jarrett's income tax return for the 1990 year also recorded a distribution of income in the amount of $1,749,123. 183 The evidence establishes that the trustees were not only fully informed, but participated in the arrangement. Again, in that respect, the trustees' income tax returns evidenced the receipt of dividend payments consistently disclosed by them in compliance with the trustees' taxation obligations. 184 Mr Hutley, in my opinion, with respect, correctly contended:- "… we submit that the evidence is overwhelming of a process whereby there is what I have described as declaration of dividend, payment to the trust, distribution to [sic] the trust, solemnly declared in their tax returns, receipt by Mrs Jarrett, Mrs Jarrett pays tax on it, lent back to the company. That's what occurs. Thereafter, Mrs, Jarrett, with the agreement of the company, draws against it. That's the practice that's maintained consistently through every year with which we are dealing, because there is a complete record of the tax returns of each of the organisations." Findings and conclusions on the payment issue 185 In the present proceedings, I make and record the following findings:- (i) All parties acted with full knowledge and consent. I am satisfied on the evidence that, in the years between 1989 and 2001 inclusive, directors' meetings and meetings of members of RH & M, Elwood and UIGI were held for the purpose of determining and declaring the disputed dividends. There is no evidence of any party having acted other than honestly. (ii) The plaintiff companies were, as earlier observed, entitled to pay dividends at the time they were in fact paid out of either current year profits or a combination of current year profits and retained profits relative to previous years. The dividends, accordingly, were paid without detrimental impact to the corpus of the trusts. (iii) Mrs Jarrett was, in fact, paid monies out of the profits of the companies which correlated with the amounts of the disputed dividends. (iv) On the evidence, the dividend payment arrangement was beneficial to the companies insofar as monies paid as dividends were lent (less expenses paid on her behalf) by Mrs Jarrett to RH & M, Elwood and UIGI as interest free working capital. (v) All participants conducted themselves, including, in relation to their reporting and revenue obligations, on the basis that the disputed dividends were in fact paid. Tax was paid on the dividend income as income received in the relevant years. (vi) The disputed dividends were credited in the loan accounts of the trusts and the loan account of Mrs Jarrett in the books of the payers, namely, RH & M, UIGI or Elwood. Certain dividends were paid by Mrs Jarrett granting a loan to Elwood for an amount equal to the dividend paid by RH & M and UIGI. (vii) The evidence, including, in particular, the relevant accounting records and taxation returns of the trustee companies, established the corporate trustees' ratification of the amounts paid during Mrs Jarrett's lifetime as dividends and their assent to and participation in the arrangements made for the payment of the dividends . 186 On the findings made, I conclude that:- (a) The disputed dividends claimed by the plaintiffs in the Second Further Amended Statement of Claim were validly determined and paid as dividends with the informed consent of the directors of RH & M, Elwood and UIGI. Those companies subsequently affirmed the dividends and ratified their payment by crediting them in the relevant accounts. The members of the respective companies, RAH No 1 and RAH No 2, also ratified the dividends and their payment (b) Payment of the disputed dividends, the subject of the plaintiffs' claim under the Second Amended Statement of Claim, was not made under a mistake as therein alleged. (c) On the above conclusions, the amounts paid by way of dividend to Mrs Jarrett during her lifetime are not recoverable by the plaintiffs by way of action at law for money had and received or in equity. (d) The disputed dividends having, on the findings made, being duly declared or determined and paid, there was no power in the plaintiffs companies to revoke or rescind them. (e) Accordingly, there is to be judgment entered in favour of the defendant in relation to such dividends. THE CROSS-CLAIM Payment of dividends made after the death of Mrs Jarrett 187 In the amended cross-claim filed in court on 14 February 2007, the Perpetual Trustee Company seeks a number of orders against RH & M, as first cross-defendant, and against Elwood, as second cross-defendant, including orders in respect of certain "dividends" paid in 2002 after the death of the deceased. 188 In paragraphs 1 and 11 of the amended statement of cross-claim, judgment is claimed against RH & M and Elwood respectively in sums determined to be outstanding by each of them to the cross-claimant. Alternatively, declaratory relief is sought in respect of alleged interim dividends in the amount of $6,600,000, said to have been paid by RH &M on or after 10 December 2001 and an interim dividend in the amount of $500,000 (or $496,096.31), which it is alleged was paid by Elwood on or after 10 December 2001. 189 Alternatively to such relief, an order is sought that an account be taken of the loan account between the cross-claimant and RH & M and Elwood respectively and that each of those companies pay to the cross-claimant any amount determined to be outstanding in relation to the relevant loan account. 190 Alternative orders are sought including orders for damages pursuant to s.82 of the Trade Practices Act 1974 (Cth) and s.42 of the Fair Trading Act 1987 (NSW). 191 An order is sought (paragraph 7 of the amended statement of cross-claim) that RH & M account to the cross-claimant the amount of $3,219,825.07 said to have been received by it on or about 12 November 2002 together with interest on that sum. 192 In respect of Elwood, an order is claimed against it by the cross-claimant in the amount of $4,447,394.41 said to have been received by that company on or about 12 November 2002 together with interest on that sum. 193 Finally, orders are sought, pursuant to s.1322(4)(a) of the Corporations Act 2001 declaring that the dividends set out respectively in paragraphs 36(a) and 36(c) of the Further Amended Statement of Claim were not invalidly declared and/or paid. 194 Orders are also sought in respect of interest and costs. 195 The cross-claimant also seeks relief against UIGI, to the extent necessary, by way of an order pursuant to s.1322(4)(a) of the Corporations Act 2001 in respect of dividends set out in paragraph 36(b) of the Further Amended Statement of Claim. The facts and assertions pleaded in the Amended Statement of Cross-Claim 196 In the Amended Statement of Cross-Claim, the Perpetual Trustee Company particularised the representations relied upon and said to have been made by Mr Miller in his letter dated 11 October 2002. The particulars in respect of RH & M are set out in paragraph 8 of the Amended Statement of Cross-Claim in the following terms:- "On or about 11 October 2002, RHM represented to the Estate that:- (a) the dividend paid by RHM in 2002 ('2002 RHM Dividend') was not properly declared and, as a result, its payment was 'void'; (b) that by reason of there being 'no evidence' that Mrs Jarrett exercised her discretion as Governing Director of RHM to declare the 2002 RHM Dividend, that the 2002 RHM dividend was void; (c) that the documentation relation to the 2002 RHM dividend was prepared in such a way as to render the payment of 2002 RHM dividend void." 197 In paragraph 9 of the Amended Statement of Cross-Claim, the particulars of the representation relied upon against Elwood, again based upon the letter from Mr Miller dated 11 October 2002, was set out as follows:- "9. On or about 11 October 2002, Elwood represented to the Estate that:- (a) the dividend paid by Elwood in 2002 ('2002 Elwood Dividend') was not properly declared and as a result of its payment was 'void'; (b) that the 2002 Elwood Dividend was 'in excess of the retained earnings' of Elwood and 'hence … [could not] be declared out of the profits of [Elwood]'; (c) that there was 'no evidence that Mrs Jarrett acted in her capacity as Trustee and Life Beneficiary of the Trusts to a point and instruct a proxy to act at any General Meeting of [Elwood]' and, as a consequence, the 2002 Elwood dividend was void; (d) that the documentation relating to the 2002 Elwood Dividend was prepared in such a way as to render the payment of 2002 Elwood Dividends 'void'." 198 In paragraphs 10 and 11 of the Amended Statement of Cross-Claim, the cross-claimant contended that the "RH & M representations" and the "Elwood representations", at the time they were made, were each misleading and deceptive or were likely to mislead and deceive. Particulars are set out in each of those paragraphs of the matters relied upon as establishing the alleged misleading or deceptive conduct. It is also contended that, to the extent to which the RH & M representations and the Elwood representations were statements of opinion by Mr Miller on behalf of RH & M and/or Elwood, it is contended, they did not have a reasonable basis for the making of the representations. 199 Finally, the cross-claimant contended in paragraphs 17 to 19 of the Amended Statement of Cross-Claim that the estate paid to RH & M and Elwood amounts calculated by Mr Miller on behalf of those companies as necessary to rectify the "over reimbursement" of the estate by the two companies by reason of the payment of amounts to the estate in connection with the 2002 RH & M dividend and the 2002 Elwood dividend being void. The amounts set out in paragraph 17 are:- (a) RH & M, an amount of $3,219,825.07 (described as the RH & M payment). (b) Elwood, an amount of $4,447,394.41 (described as the Elwood payment). 200 In relation to the making of those payments, it is contended that the "RH & M representations" and the "Elwood representations" were material causes and played some part in the estate making the abovementioned "RH & M payment" and the "Elwood payment". In consequence of the payments having been made, it is claimed that each company suffered loss or damage by what are referred to as the "RH & M Contravention" and the "Elwood Contravention" (being the alleged contraventions of s.52 of the Trade Practices Act and s.42 of the Fair Trading Act). 201 In respect of the "Elwood payment" of $4,447,394.41, the cross-claimant alternatively, in its particulars, claims the amount of $496,096,31 (or $500,000) being said to be the amount of the 2002 Elwood dividend being the "net effect of the amount paid to the benefit of Elwood by the Estate" (paragraph 21 of the Amended Statement of Cross-Claim). 202 In paragraphs 22 to 26 of the Amended Statement of Cross-Claim it is contended that the RH & M payment and the Elwood payment were amounts held in the Estate Account and, accordingly, were held on trust for the benefit of the estate that the monies were impressed with a trust. It is contended that the RH & M payment and the Elwood payment were procured by Mr Miller in breach of his fiduciary duties to the estate. The particulars of the latter allegation are:- "The RHM payment and the Elwood payment were procured to further the negotiating position of the first plaintiff as against the beneficiaries of the Estate." 203 In support of this latter claim, it is contended that RH & M and Elwood were knowingly concerned in the alleged breach by Mr Miller of his fiduciary duties to the estate. 204 In respect of the matters set out in paragraphs 16 to 25(g) inclusive of the Amended Defence to the Further Amended Statement of Claim (to the extent necessary), Perpetual Trustee Company claims that it is entitled to an order pursuant to s.1322(4)(a) of the Corporations Act 2001declaring that the dividends set out in paragraph 36 of the Further Amended Statement of Claim were not invalidly declared or paid by reason of any contravention of a provision of the Corporations Act 2001 or of a provision of the constitution of RH & M, Elwood or UIGI. Payment of the purported dividends 205 On 14 August 2002, Mr Milsom, as then executor of Mrs Jarrett's estate, arranged for payments to be made by RH & M and Elwood to the estate totalling $7,100,000, being $6,600,000 by RH & M and $500,000 by Elwood. Those monies, however, were, some months later, reimbursed in circumstances outlined below. 206 I consider below the specific claims with respect to the alleged interim dividends in the amounts of $6,600,000 and $500,000 (or $496,093.61) respectively. The cross-claimant, as the present executor of the estate following the retirement of Mr Milsom, cross-claimed for repayment of the total amount of $7,100,000 on two alternative bases:- (a) Firstly, that dividends totalling that sum were in fact declared during the lifetime of the deceased for the 2002 year. Whether they were in fact declared in that year is a central issue. (b) Secondly, a decision by or an "agreement" made between the directors, namely, the deceased and Mr Milsom, as directors of RH & M and Elwood to distribute dividends by way of the retained profits in relation to both companies. The Facts (a) Factual matters occurring between 14 October 2001 and 23 April 2002 207 The contention is that the dividends were declared for the 2002 financial year in favour of Mrs Jarrett by RH & M and Elwood at a meeting of directors said to have taken place on 10 December 2001. 208 It is common ground that there are no minutes of a meeting or meetings held on that date (or on any other date) recording a resolution of either company to declare dividends for that year in favour of Mrs Jarrett. There is no other memorandum or record recording the holding of a meeting or meetings on 10 December 2001 or the making of declarations or decisions in respect of either company on that matter. 209 In his affidavit sworn on 1 November 2006, Mr Miller stated that, so far as he was aware, as at the date of Mrs Jarrett's death, no steps had been taken in respect of the declaration of any dividend of RH & M, UIGI or Elwood in relation to the 2002 financial year. 210 In about October 2001, Mr Miller had a conversation with Mr Milsom in which he was advised by Mr Milsom that Mrs Jarrett has been diagnosed with cancer. When Mr Miller asked how bad the diagnosis was, Mr Milsom responded that it was "not good". 211 Mr Miller stated that, some time after that conversation, there was a further discussion in which Mr Milsom indicated that Mrs Jarrett wanted to "… re-do her Will" and that he had recommended Tress Cocks & Maddox to her for that to be done. 212 He was subsequently told by Mr Milsom that a solicitor from that firm was obtaining instructions from Mrs Jarrett concerning her new Will. Mr Miller did not speak to Mrs Jarrett in the period after learning of her diagnosis and her death on 10 February 2002. 213 On 14 November 2001, Mr Milsom faxed certain documents to Ms Bronwyn Johnston of Tress Cocks & Maddox, solicitors (Exhibit D, pp.1009 to 1016). Document 1015 of that exhibit is a list of assets in respect of Elwood and RH & M prepared by or presumably at the request of Mr Milsom. It recorded as at 30 June 2001 "Dividends Payable of $496,096.31" in respect of Elwood and, as at the same date, "Dividends Payable of $6,568,326.04". Those amounts correspond with the retained earnings of Elwood and RH & M respectively. 214 Although this list of assets, which included reference to dividends, was prepared a month before the claimed declaration or determination is said to have been made on or after 10 December 2001, it was nonetheless relied upon as evidencing an awareness or a consciousness in Mr Milsom of what was likely to occur in relation to Mrs Jarrett. The list, it was contended, had been prepared in anticipation of the preparation of her Will which, in turn, was being prepared in anticipation of her demise. The amounts recorded as "Dividends payable" in Exhibit D, p.1015 (namely, $496,096.31 in respect of Elwood and $6,568,326.04 in respect of RH & M, totalling $7,064,422.35) were said to reflect the dividends to be determined and, as referred to above, to approximate the amount of the retained profits. 215 In April 2002, Mr Miller was requested by Mr Milsom to assist him in preparing a list of assets of the estate of the late Mrs Jarrett. He said that, at about that time, there was a discussion between them in which words to the following effect were said:- MILSOM: "Well, you'll have to work out the profits of the companies up to the date of Mrs Jarrett's death so that the estate can be paid that entitlement." MILLER: "Alright. We will have to look at it." 216 In oral evidence, Mr Miller stated that he had seen a calculation of the profits of the companies made up to the date of death on the computer screen or in a computer printout. He said that those figures were incorporated into the list of assets. He said that, at the time, he understood that the estate had an entitlement to the profits of the companies up to the date of death. He said that the retained earnings of the two companies appeared in the amounts shown in respect of "loan account balances as per company records" on p.6 of his report (Exhibit C), namely, $9,617,307.43 in respect of RH & M and $3,948,989.18 in respect of Elwood. 217 Mr Miller explained that by the above statement, he understood Mr Milsom wished a calculation to be made of the earnings of the companies up to the date of Mrs Jarrett's death on 10 February 2002. 218 Mr Miller further stated that, following the calculations, accounting entries were made in about April 2002 but dated 10 December 2001, in the books of RH & M and Elwood which purported to record the following "dividends":- (a) RH & M Properties Pty Limited $6,600,000 (b) Elwood Pty Limited $500,000 219 In mid to late April 2002, Mr Miller stated that he was instructed by Mr Milsom in relation to an application for probate of Mrs Jarrett's estate. As part of that work, a calculation was prepared of the estate's entitlement from the trusts in which the deceased had been interested during her lifetime. 220 Mr Miller further stated in his last-mentioned affidavit, that in the course of that work:- "… Mr Milsom gave instructions that a dividend be calculated as payable by the companies to the estate, by reference to the earnings of RH & M and Elwood prior to the death of the deceased. On the basis of those calculations, a figure of $7.1 million was included in the sum owing to the estate by the companies in the documents prepared in connection with the estate lodged by Mr Milsom for probate." 221 His evidence, as stated above, was that as at the date of Mrs Jarrett's death (10 February 2002), the "dividends" of $6.6 million and $500,000 had not been credited to her accounts. 222 Mr Miller was cross-examined in respect of the accounting entries made in 2002 but dated 10 December 2001. These were contained in a report which he prepared dated 23 April 2002 in respect of the estate of the late Margaret Louise Jarrett entitled "information in respect of probate as of 10 February 2002". The report was compiled by him from information supplied by employees of Talbots. That report is Exhibit C in the proceedings. It stated that "… the client is solely responsible for the information contained in the special purpose financial report …". It also stated that "Mr W E Milsom, an employee of Talbots, … is a director of the group of private companies and is the Executor of the client". 223 In respect of the accounting entries which Mr Miller said were made in about April 2002 but dated 10 December 2001 in the books of RH & M and Elwood in respect of the purported dividends, Mr Miller was asked in cross-examination about the entries:- "Q. You see it was dated 10 December 2001? A. Yes. Q. It wasn't dated as at the death of the deceased, was it? A. No. Q. You weren't consulted about the choice of that date? A. No. Q. You accepted that that was the appropriate date? A. Yes. Q. Were you aware that the figure of $6.6 million had been included in the document which is Exhibit C at the date you signed it? A. Yes. Q. What I want to suggest to you is you realised that related in substance to retained earnings, correct? A. Yes." 224 Mr Miller was cross-examined on his affidavit evidence as to the accounting entries made in April 2002, but dated 10 December 2001. It was put to him:- "Q. You understood that this figure of $6.6 million was, in effect, referring to a declaration of dividend as at 10 December 2001 of approximately all the retained earnings. Correct? A. Yes. Q. In respect of both companies? A. Yes. 225 The cross-claimant relied, inter alia, upon this evidence to support the proposition that a finding could and should be made that the 2002 dividends were regularly paid following what was claimed to be a weekly discussion with Mr Milsom on issues relating to the companies and Mrs Jarrett's personal affairs. It was further submitted that there was a sound reason for declaring the 2002 dividends in the amount in which they were declared (namely, the extent of the retained earnings) and that the matter was "urgent". However, such concessions as were made by Mr Miller must be considered in light of the facts otherwise established by the evidence. 226 Mr Miller agreed in further cross-examination that the purported dividends of $6.6 million in respect of RH & M was a rounded off figure, and not the amount of $6,568,326.04 in the books of the company. He understood that the $6.6 million figure was in effect referring to a declaration of dividends as at 10 December 2001 of approximately all the retained earnings. 227 The Statement of Financial Position of RH & M as at 30 June 2001 recorded that the retained profits of RH & M for that year were $6,568,526.04. Mr Miller, in cross-examination, agreed that, as at late as 2001, he was aware of the retained profits of Elwood and that the retained profits for that company were $496,096.31 as at 30 June 2001. Against that background, he stated it was "conceivable" that as at 10 December 2001 it may have been anticipated that the profitability of Elwood was greater than ultimately proved to be the case at year's end. 228 Exhibit A5 at p.847 contains a copy of handwritten entries made by Mr Satchi in April 2002 in the general journal of RH & M recording a dividend "… paid to shareholder trusts" of $6.6 million and at p.980 of Exhibit A5, the general journal of Elwood, is a copy of handwritten entries also made by him in April 2002 recording a dividend of $500,000 under which a description "dividend paid to UK investments" appears. These entries, it was submitted on behalf of the cross-claimant, in particular having regard to the fact that Mr Satchi was not called to give evidence, constituted evidence from which an inference could be drawn "… that something material happened by way of a determination to pay dividends on 10 December 2001 …" (t.248). It was contended that the entries in the books of the company, although written in April 2002, were reflective of the fact that a decision or agreement must have been made on 10 December 2001. 229 In relation to the alleged declaration or determination of 10 December 2001, the cross-claimant accepted that the records dealing with it were in fact written up by Mr Satchi some two months after Mrs Jarrett's death, that is, in the week ending 14 April 2002. The writing up on that occasion, however, was said to reflect the date of 10 December 2001. Against that was Mr Miller's evidence that, based on the weekly time sheets for the weeks ending 16 December 2001 and 14 April 2002, there was no chargeable time allocated to either RH & M or Elwood for those weeks. In contrast, in the week ending 14 April 2002, there was almost eight hours of time charged to Elwood and what appeared to be 1.3 hours charged to RH & M. (b) Facts concerning the payment of the dividends after Mrs Jarrett's death 230 On 15 July 2002, Mr Milsom, as executor, delivered two letters to Mr Miller's firm on behalf of the estate. Copies were marked and annexed "A" and "B" to Mr Miller's abovementioned affidavit. They were both addressed to RH & M Properties Pty Limited and Elwood Pty Limited, c/- Talbots. They were in the same terms as follows:- " Estate Late Mrs M L Jarrett I write in my capacity as executor of the abovementioned estate and ask that you forward an advancement to the repayment of loan accounts owed to the late Mrs Margaret Louise Jarrett at the time of her death. I look forward to your pending correspondence to this matter." 231 In August 2002, Mr Miller stated that, as a result of receiving those letters and upon the instructions of Mr Milsom, RM & M drew the following cheques in favour of the estate and paid the same:- Date Amount 14 August 2002 $5,000,000.00 14 August 2002 $3,377,307.43 14 August 2002 $202,500.00 TOTAL $8,579,807.43 232 On 15 August 2002, again in consequence of the abovementioned letters, Mr Miller, on the instructions of Mr Milsom, drew a cheque in the amount of $3,948,989.10 by Elwood in favour of the estate. 233 Mr Miller countersigned the cheques at Mr Milsom's request on what he, Mr Miller, understood was a shared but erroneous view that as a matter of law, the estate was entitled to payment of all the earnings of the companies during Mrs Jarrett's lifetime. 234 Mr Miller's evidence was that it was only following legal advice obtained after 14 August 2002 that he became aware for the first time that the assumption upon which the payments by RH & M and Elwood were made to the estate of Mrs Jarrett had been mistaken. He said that, in consequence, a decision was made to advise Mr Milsom as executor of the estate that recovery of the "dividends" would be pursued. 235 It was the plaintiffs' submission that it should be concluded that Mr Milsom had the same mistaken belief and that he did not make the payment upon any assumption that there had been a valid or effective meeting in December 2001 authorising the payment of the "dividends" totalling $7.1 million. There is, however, no direct evidence as to what Mr Milsom's state of mind was as at the dates on which the monies were paid. (c) Facts concerning the reimbursement of "dividend" monies by the estate 236 On 11 October 2002, Mr Miller wrote to the executor of the estate (Mr Milsom) and stated, in part:- "… As part of preparing the financial reports, we have sought to review the documentation in support of the declaration of the dividends. In our opinion, this documentation is prepared in such a way as the purported dividends are not properly declared. Accordingly, we would understand the payment of the dividends to be void . In the case of RH & M Properties Pty Limited, there is no evidence that the late Mrs Jarrett exercised her discretion as Governing Director to declare the dividend . We believe that the role of Governing Director is defined in the company's constitution in such a way that no resolution at a meeting of directors or general meeting can be carried without the express and written consent of the Governing Director . Similarly, there is no evidence that Mrs Jarrett relinquished the role of Governing Director prior to her death. In the case of Elwood Pty Limited, the purported dividend is in excess of the retained earnings and hence cannot be declared out of the profits of the company. Similarly, there is no evidence that Mrs Jarrett acted in her capacity as Trustee and Life Beneficiary of the Trust to appoint and instruct a proxy to act at any General Meeting of the company . In the event that the dividends are void as outlined above, the companies will be seeking to recover the amounts paid in respect of those dividends. These amounts are $6,500,000 in the case of RH & M Properties Pty Limited and $500,000 in respect of Elwood Pty Limited. We look forward to your response in this matter." (emphasis added) 237 On 28 October 2002, Mr Milsom wrote to RH & M in the following terms:- "Upon receipt of your correspondence dated 11 October 2002, I have also reviewed appropriate documentation and conclude that your assertions are valid. To this extent, it seems Mrs Jarrett did not exercise her role as Governing Director by appointing a proxy at the above-named company's 2001 Annual General Meeting. This shows that the dividend declared and paid to trusts where Mrs Jarrett had a life tenancy would be deemed void. Due to the trust payment to Mrs Jarrett now deemed void, I believe the abovementioned company may have over-reimbursed Mrs Jarrett's from its appropriate loan accounts. I will proceed to reconcile payments made to date and will endeavour to reimburse any outstanding monies to the company within the next month." (emphasis added) 238 In cross-examination, Mr Miller's evidence was that a staff member in Talbot's office drafted the above letter of 28 October 2002 but he said that was not on his instructions "… so I presume Mr Milsom's". The reference on the top of the letter "PGS" he identified as referring to Peter Scott, an employee of Talbots at the time the letter was written and also as at the time of the hearing. Mr Scott, Mr Miller said, was assisting him in September and October 2002 including, in particular, in relation to the claim by RH & M and Elwood for recovery of the 2002 "dividends". It is not possible to state on the evidence where the initiative for Mr Milsom's letter of 28 October 2002 come from. The fact is that he represented the letter to be his own. 239 It was put to Mr Miller in cross-examination that, by this time, he was in a position of a conflict of interests due to the fact that his firm acted both for the estate whilst at the same time it was also acting in the interests of Alicia Jarrett, in particular, in relation to the recovery of the 2002 "dividends". Mr Miller conceded that the interests of the estate and of Mrs Jarrett were opposed but asserted nonetheless that he was not conscious at the time of acting in a conflict situation. 240 It was submitted on behalf of the cross-claimant that his evidence demonstrated that he could not (or refused to admit he could) perceive a conflict between the interests of the estate and that of Mrs Jarrett (Defendant's Outline of Submissions, paragraph 26). It was further submitted in this respect that Mr Miller was "a partisan" and that his evidence should be approached with caution (paragraph 27). 241 Mr Miller stated that, in November 2002, payments were received from the estate as follows:- Date Company Amount 12 November 2002 Elwood $4,447,391.41 19 November 2002 RH & M $3,219,825.07 Total $7,667,219.48 The alleged representations of Mr Miller 242 In cross-examination directed to the cross-claimant's contention that Mr Miller had made a misleading representation to Mr Milsom, Mr Miller stated that the expressions he had used in his letter of 11 October 2002 were, in effect (although not in fact so framed), intended to have been references to the fact that there was no "documentation surrounding that dividend …". He agreed in cross-examination that he was seeking to convey that, because there was no documentation, the dividends had not been properly declared. It was put to him:- "Q. You were seeking to convey a representation that because there was no documentation, the dividend was void, correct? A. Yes, I was." 243 He said that, at the time that he gave his letter to Mr Milsom, he spoke to him. His evidence in this respect was:- "It would have been along the lines of this is a letter I've been asked to prepare by the solicitors acting for Alicia. There is significant doubt over those purported dividends and the companies will seek to recover them." 244 Mr Miller agreed that he would have conveyed to Mr Milsom that the problem was "… that there are no minutes". He agreed that when he received Mr Milsom's reply, he understood him to be agreeing with the proposition that, because there were no written minutes of any meetings in relation to the dividends, they were void. 245 In relation to Elwood, Mr Miller stated that the point he was making in his letter dated 11 October 2002, was that the dividend claimed to have been declared was $500,000, but the retained profits were only approximately $497,0000. 246 Mr Miller explained that, although the total amount received in November 2002 amounted to $7,690,219.48, those monies in fact included the abovementioned amounts of $6,600,000 received from RH & M and $500,000 received from Elwood with the excess to be withheld in respect of a matter concerning the Standard Chartered Grindlays' money (as to which see below). 247 In relation to the allegation that Mr Miller had acted in breach of his fiduciary duties to the estate by procuring the "RH & M payment" and the "Elwood payment", the contention of the cross-claimant was that he had done so in order to "… further the negotiating position of the first plaintiff as against the beneficiaries of the Estate". In cross-examination, Mr Miller agreed that he had attended a conference in or about September 2002 with solicitors from McGirr James Hall & Associates acting on behalf of Alicia Jarrett and Mr Ireland QC. He agreed that he had advised those present at the conference that dividends had been paid to Mrs Jarrett from the trust funds in the sum of approximately $7 million. It was also put to him that he was aware, following the conference, that a letter of advice dated 11 September 2002 written by the last-mentioned solicitors had come to his attention. That advice, it was put, was to the effect that, if Alicia Jarrett could "claw back $7 million" out of approximately $26 million, then the assets specifically devised may not be able to be transferred to the beneficiaries who would then take pro rata. In that way, the advice indicated that Alicia Jarrett's position would be improved. Mr Miller stated that he did not take any steps to provide or furnish that advice to Tress Cox Lawyers. It was put to him that he was in a position of conflict between the interests of Mrs Jarrett and those of the estate. He agreed that their positions were "at odds". He maintained, however, that he did not perceive any conflict "… because I don't perceive that I was doing a lot for the estate at this time". 248 It was, as noted above, the following month, on 11 October 2002 that he wrote to Mr Milsom in respect of the dividends. He stated in cross-examination that he did not consider himself, in drafting the letter, to be acting in the interests of the estate. He maintained that he had no knowledge and no involvement in drafting the response letter in the name of and signed by Mr Milsom dated 28 October 2002. The cross-claimant's submissions on the cross-claim 249 In the "Defendant's Outline of Submissions", it was submitted on behalf of the cross-claimant, that the following findings relevant to the determination of the cross-claim should be made:- "(a) As noted above, at the time of the declaration of the 2002 Dividends there had, for many years, been a regime in place which facilitated the payment of income generated by the operating companies and asset holding companies to the trusts of dividends and to Mrs Jarrett by credits to the loan accounts: see exhibits A1 to A3 and Exhibit 3 summarised and cross-referenced to documents in evidence by MFI 7. (b) Mrs Jarrett's accountants Talbots had facilitated the payments and were responsible for convening meetings and doing all things necessary to effect the valid payment of the benefit of the dividends to Mrs Jarrett. (c) Mrs Jarrett spoke to Mr Milsom on a weekly basis and discussed with him matters relating to the companies and her personal affairs. (d) Mr Milsom was the only person at Talbots in late 2001 that had a close relationship with Mrs Jarrett. (e) At the time of the declaration of 2002 dividend in respect of RHM in the amount of $6,600,000, the retained profits of RHM were $6,568,326.04. (f) At the time of the payment of the Elwood dividends of $500,000, the retained profits of Elwood were $496,096.31 although it was, according to Mr Miller, 'conceivable' that as at 10 December 2001 it was anticipated profits would amount $500,000. (g) Mr Milsom in the week commencing 10 December 2001 had performed secretarial work on behalf of RHM and Elwood which work could have included arranging meetings, conducting meetings, determining on resolutions and participating in meetings. (h) At this time Mr Milsom and Mr Miller were aware that Mrs Jarrett had been diagnosed with cancer and that her prognosis was poor. (i) In the context of Tress Cocks & Maddox preparing a Will for Mrs Jarrett, Talbots prepared for that firm a 'List of Assets' as at 14 November 2001. This document referred to dividends in the amount of the retained profits of RHM and Elwood as 'Dividends Payable'. (j) Chrishan Satchi, a junior undergraduate staff member on the professional staff of Talbots performed 'WUP' (write up work) in relation to the 2002 Dividends in the week ending 14 April 2002. (k) The amount of the 2002 dividends was not struck by reference to the date of death of Mrs Jarrett but when written up the date of the 2002 Dividends was identified as 10 December 2001: this was regarded by Mr Miller as the 'appropriate date' who understood that the figure of $6,600,000 with regard to RHM was, in effect, referring to a declaration of Dividend as at 10 December 2001 of approximately all the retained earnings. This was also the case in respect of Elwood. (l) Mr Miller became aware that the 2002 Dividends had been entered as at 10 December 2001 prior to preparing Exhibit C being his 23 April 2002 report to Tress Cocks & Maddox; this was a Statement of Assets and Liabilities on 28 February 2002; Mr Milsom asked Mr Miller to pull together documents in the possession of Talbots to do the final report." 250 In oral submissions, Mr Hutley stated that the essence of the cross-claim was that, on 10 December 2001, there had been a determination by the companies "… to do something by way of cleaning up, distributing, retained profits". He observed that there was nothing special about the date 10 December 2001. That was a date said to have been chosen by Mr Milsom to reflect the determination to distribute essentially the retained profits within the companies up to that time. It bore no relationship to an accounting period or to the death of the deceased. 251 In seeking to establish that a meeting of directors had taken place on 10 December 2001, the cross-claimant placed reliance upon the records of Talbots as establishing that Mr Milsom had charged for work of a "secretarial" nature for the relevant companies in December 2001. Records of Talbots indicated that Mr Milsom charged for work indicated as being "secretarial" work (indicated by the charge code "Sec") for the relevant companies on 10 December 2001. Mr Miller agreed, in cross-examination, that work so described "included the conduct of meetings and the like". The evidence, however, also established that "secretarial work" is an expression that embraced work other than the conduct of company meetings. 252 Whilst Mr Milsom's time sheet of 10 December 2001 (Exhibit 2, Tab 1) could conceivably relate to a meeting or meetings of the companies for the purposes of declaring dividends, the entry in the time sheet has to be considered in the light of all the evidence including the above file note. Standing alone, it does not, in my opinion, evidence any action taken by Mr Milsom in respect of the purported 2002 dividends. It is noted in this respect that Mr Miller's evidence was that "company secretary matters" would include "most things Mr Milsom would have done for the company. For example, banking, writing cheques, making or taking telephone calls would be included …". 253 Although the relevant time sheet did not identify the precise work undertaken, the cross-claimant contended it supported the fact that 10 December 2001 was the date on which Mrs Jarrett's entitlement to dividends was determined. It was also submitted that the Court should, when considering findings, infer that the 2002 "dividends" arose or were treated in the same way as previous dividends had been dealt with in earlier years. Alternatively, the evidence supported an inference that there had been an agreement, an understanding or an arrangement for the payment of them reached between Mrs Jarrett and Mr Milsom in respect of that year. 254 In summary, in circumstances in which Mr Satchi was not called and having regard to the evidence relied upon in support of the cross-claim, it was submitted that the Court would infer that something material happened by way of a determination to pay dividends on 10 December 2001. Thereafter, of course, the dividends were subsequently paid, Mr Milsom receiving them in his capacity as the executor of Mrs Jarrett's estate. 255 The cross-claimant also relied upon the fact that the declaration of dividends was within a few thousand dollars of the retained profits. Mr Hutley submitted that that was "powerful evidence" "… that on that date, there was an agreement by the directors of the relevant company, namely, Mr Milsom and the deceased, to distribute dividends by way of the retained profits in relation to the company". The plaintiff/cross-defendants' submissions on the cross-claim 256 In the Plaintiff's Outline of Final Submissions, it was contended (paragraph 8) that the payments of monies to Mrs Jarrett's estate after her death were irregular. They were, according to the submissions, made upon an erroneous assumption or a common mistake made by Mr Milsom and Mr Miller, namely, that the retained profits of the companies calculated as at the date of death, were accountable by the companies to the estate, notwithstanding the fact that no dividends had been declared out of those profits during the lifetime of the deceased. In other words, the amounts paid after Mrs Jarrett's death were erroneously paid in August 2002 as an estimate of retained profits. 257 The plaintiffs/cross-defendants also submitted that, in consequence of the demands made, and in recognition of the previous invalidity of the August 2002 payments, the estate reimbursed the monies that had been paid subsequent to Mrs Jarrett's death by RH & M and Elwood. 258 They accordingly contended that the fact of the reimbursement of the monies after the death of Mrs Jarrett by the estate on 12 November 2002 of Elwood in the amount of $4,447,394.41 and on 19 November 2002, of RH & M in the amount of $3,219,825.07 was itself a recognition of the invalidity of the payments. 259 The cross-claimant further argued that, in the event of a finding that a declaration or a determination had been made to pay the claimed dividends to Mrs Jarrett and given that those dividends were paid, then the cross-claimant contended the payment away of such monies by Mr Milsom by reimbursement in November 2002 to RH & M and Elwood could not be a payment which the estate was incapable of recovering, absent a plea by the cross-defendants of a change of position. It was contended that, in those circumstances, Mr Milsom had no capacity to give away the money and a simple restitutionary remedy of monies had and received would lie for their recovery. Particular contentions of the parties 260 The cross-claimant contended that the evidence, including, in particular, that of Mr Miller, established that Mr Milsom had acted upon a belief induced by Mr Miller's statements that a written record of the agreement of Mrs Jarrett to the declaration of the dividends had been necessary and that, there being no record, the dividends paid by RH & M were therefore invalid. In such circumstances, it was argued the reimbursement made by Mr Milsom would constitute a payment made under a mistake or, alternatively, paid pursuant to a misleading and deceptive representation by Mr Miller to Mr Milsom. 261 This last-mentioned submission, however, calls for close consideration, inter alia, by reason of the matters raised and asserted by Mr Miller in his letter to Mr Milsom dated 28 October 2002 and the nature of the response made by him to Mr Miller in his letter of 28 October 2002. It is to be noted that Mr Miller emphasised, not that there was no documentation, but that such documentation as there was had been prepared "… in such a way as the purported dividends are not properly declared …". He made a further point that there was "… no evidence that the late Mrs Jarrett exercised her discretion as Governing Director to declare …" the dividend in respect of RH & M. 262 Mr Milsom, in reply, did not assert that there had been a declaration, or that there had been a meeting at which there had been a decision or a determination by the directors of RH & M and Elwood or an agreement by them in respect of dividends to be paid to Mrs Jarrett for the 2002 year. He did not raise as a relevant matter in that respect any practice that had been followed in earlier years with respect to dividends as having application or a bearing upon the question as to Mrs Jarrett's claimed lack of entitlement of the 2002 "dividends". His simple response was, in essence "… I have also reviewed appropriate documentation and conclude that your assertions are valid". He then added that it seemed that the deceased "… did not exercise her role as Governing Director by appointing a proxy at the company's 2001 Annual General Meeting …". Had there been any declaration or decision made or any agreement made by the directors of RH & M and Elwood (that is, by Mrs Jarrett and himself), then Mr Milsom's failure to state the fact would be a surprising omission, given especially his close involvement in previous years in the companies' affairs including, in particular, those concerning Mrs Jarrett's dividend entitlements. 263 It was argued on behalf of the cross-claimant in relation to Mr Miller's communication with Mr Milsom in which he asserted that the dividends had not been validly declared that:- "It became apparent from his cross-examination … that the reason Mr Miller believed that the dividends hadn't been validly declared is that there wasn't a written record of the resolutions … His understanding was that Mr Milsom shared that belief on the basis of what he had been told by Mr Miller." 264 Although this evidence was given, the failure by Mr Milsom to raise any matter in support of the proposition that a declaration by the companies or of a decision in a meeting of directors had actually been made should be taken into account in considering the question as to what inference and finding can and should be made on the dividends issue. The further submission made by Mr Hutley to the effect "… the money was paid back by Mr Milsom in the belief that absent a memorandum of the agreement of Mrs Jarrett to the declaration of the dividend it was invalid. In our submission that is just payment of money under a mistake … alternatively, Mr Miller's conduct in representing that to Mr Milsom is misleading and deceptive conduct …". Again, this submission is to be evaluated having regard to the fact that there is no direct evidence as to either Mr Milsom's asserted "belief" or knowledge on the subjacent issues as to:- (a) whether a meeting of directors had taken place on 10 December 2001; (b) if so, whether the matter of the dividends had been considered and, whether a decision or declaration was made. 265 In relation to the date 10 December 2001, it was submitted for the cross-claimant that whilst there was no explanation as to why that date was chosen, in context, it was said to be a "logical" date, because of the condition of the deceased and the amount of the dividends in question. The accounts written up in April 2002 by Mr Satchi, he claimed were intended to reflect that position. It was further submitted that it was "logical" for these events to occur, that is, that the life tenant would receive, prior to her death, the retained earnings and profits available to be distributed without diminishing the capital of the company. 266 Accordingly, it was contended that the Court would be satisfied that a decision or a determination had been made by the companies on 10 December 2001 to pay the dividends. 267 The cross-defendants, on the other hand, contended that the cross-claimant wrongly assumed that amounts referred to in the loan accounts and recorded as credits were dividend payments. This was by reason of the fact that the requirements under the constitution of each company for the creation of dividends had not been met. It was also contended that the cross-claimant wrongly assumed that RH & M and Elwood were indebted to the deceased for an amount equal to the balance shown on the relevant loan account held by the deceased with each company. 268 On the first basis, it was argued that as the purported dividends were not valid dividends, neither RH & M nor Elwood became subject to any liability to pay them. It follows, so the argument ran, crediting the loan accounts with amounts representing the purported dividends did not constitute or relate to a liability on the part of RH & M and Elwood to the deceased. 269 In these circumstances, the cross-defendants contended the payments made to the deceased by the two companies were recoverable at law by way of action for money had and received or in equity. 270 If, contrary to their primary position, it was determined that the dividends were validly declared then it was submitted the mere crediting of them did not give rise to any liability in RH & M and Elwood to the deceased upon the basis that neither the deceased nor the trustees of the settlements owed any liability to RH & M or Elwood against which those two companies could set off any liability they had to pay the dividends. They again relied, as they did in relation to the Further Amended Statement of Claim, upon the decision of the High Court in Federal Commissioner of Taxation v Steeves Agnew & Company (Victoria) (supra). 271 The cross-defendants, as a separate basis for disputing the claim, asserted an absence of lawful authority in those making the payments. This contention relied upon the fact that the scope of any company agent's authority is defined, in accordance with the company's constitution, by the terms of any delegated authority. Payments made without due authority (as claimed by the cross-defendants) are recoverable, the acts in declaring the dividends having conferred no legal authority upon those purportedly acting on behalf of RH & M and Elwood. 272 In response to the cross-defendants submissions relying upon the absence of any minutes of meetings of directors or of the members of RH & M and Elwood evidencing the declaration of dividends, the cross-claimant relied upon the Duomatic principle (see discussion in paragraphs [121] to [124] above. 273 On the primary issues as to whether there had been a declaration or determination, the cross-defendants relied upon file notes made by Ms Bronwyn Johnston of Tress Cox, Solicitors to whom reference has been made above (paragraph [213]). The first was dated 19 February 2002. It recorded a meeting on that date between 11.00 am and 12.45 pm between Mr Milsom, Ms Johnston and Mr Englefield, Ms Johnston's supervising partner. Ms Johnston recorded, inter alia, the following:- RH & M P/L – Margaret's interest is Margaret Louise Jarrett Trust0 need to know income accrued at date of death loan a/c balances June 2001 – February 2002. No dividends declared ." (emphasis added) 274 The cross-defendants contended that as Mr Milsom was the nominated executor of the estate who subsequently obtained the grant of probate, the above note is evidence of an admission by him "… that there was no meeting or other transaction on 10 December 2001 as the defendant has suggested. The defendant as, successor in title, is bound by that admission and failed to call Mr Milsom to contradict its effect". Reliance was placed upon dicta in Harkins v Butcher [2002] 55 NSWLR 558 at 563 (as to admissions by successors in title). I accept that the file note is more than likely a record of information provided by Mr Milsom to Ms Johnston and Mr Englefield. That said, the question is whether later or subsequent conduct of a party to an alleged decision or agreement (including that of directors of a company - in this case, disclosures made by Mr Milsom in his letter of 28 October) is probative of the existence or otherwise of a decision or agreement. 275 The terms of the note made by Ms Johnston are silent on the question of any consensus by or agreement between the directors of RH & M and Elwood on the subject of 2002 dividends. The general subject under discussion is indicated by the first line in the file note "… Margaret's interest". Had a consensus been reached by Mr Milsom and the deceased on the matter of the 2002 dividends or had an oral agreement been made as alleged by the cross-claimant, one might reasonably have expected Mr Milsom to have referred to either fact during the course of his meeting with Ms Johnston and Mr Englefield. However, as stated above, there is no indication in the file note of Mr Milsom having done so. 276 The second file note made by Ms Johnston was dated 17 October 2002 (Exhibit D, p.1114). It related to a telephone conversation with Mr Milsom at 11.30 am on that date and recorded, inter alia:- " RH & M – Margaret Jarrett did not ratify a dividend of 7 m should not form part of the Estate . WM will send me … updated figures." (emphasis added) 277 In the chronology of events following Mrs Jarrett's death, I note that this telephone call occurred six days after Mr Miller's letter to Mr Milsom dated 11 October 2002 and it is consistent with Mr Milsom's subsequent letter of 28 October 2002. The plaintiffs submitted, and I accept, that the note reveals something as to Mr Milsom's knowledge of the matter and tells against the premise upon which the cross-claim is based. Reliance was also placed upon the failure to call Mr Milsom or Ms Johnston to displace the conclusion to be drawn from the entries in the above file notes. I will deal specifically with the submission based upon the Jones v Dunkel (1959) 101 CLR 298 principle below. Analysis 278 In circumstances in which there is no direct evidence of a declaration, a decision or an agreement made by RH & M and Elwood in respect of dividends for the 2002 year, the issue is whether, in light of all the evidence, in particular, that referred to above, a decision, agreement or arrangement for the payment of dividends for the 2002 year may be inferred. 279 Accepting the principle that procedural irregularities may be overcome the issue is a factual one, namely, whether it is open, as a matter of inference or otherwise, to conclude that such a decision, consensus or agreement was made on 10 December 2001 or at all between Mrs Jarrett and Mr Milsom as directors of RH & M and Elwood and hence by those companies in the terms or to the effect claimed. 280 An important and fundamental fact, of course, is that, even if one could conclude that Mrs Jarrett and Mr Milsom met on 10 December 2001, there is no direct evidence as to what was discussed between them on that date or on any other date following her medical diagnosis. In those circumstances, the question is whether circumstances proved in evidence permit a consensus or an agreement between directors to be inferred. 281 The cross-claimant invites an inference to be drawn that work was undertaken by Mr Milsom on 10 December 2001 on behalf of RH & M and Elwood, that it involved a meeting of directors and further that a resolution was made at such a meeting declaring the dividends or an agreement for that to be done was made on that date. The cross-claimant also argued that the Court should, by reference to the practice adopted in respect of dividends in previous years and the factual matters identified above, conclude that such a declaration, "determination" or agreement had been made. 282 It would, of course, be an error to suppose that merely because something has been done then one may infer there was an agreement in existence which has thereby been executed. However, in Integrated Computer Services Pty Limited v Digital Equipment Corp (Australia) Pty Limited (supra) at p.11, 117-118, McHugh JA (as he then was) stated that a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words. His Honour there stated that, in reference to commercial arrangements, the question is whether the conduct of the parties, viewed in the light of surrounding circumstances, shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract. 283 In Vroom BV v Foster's Brewing Group Limited (supra) at 82-83, Ormiston J examined the approach to be taken in determining the circumstances in which a contract may be inferred or implied. He stated at p.81:- "I am prepared to accept … that agreement and thus a contract can be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that a manifestation of mutual assent must be implied from the circumstances …" 284 See also Willbros International Pty Limited v Emelco International Pty Limited [2000] NSWSC 156 (Bryson J). 285 The relevant principles to be applied in determining the existence of an agreement were enunciated by Mahoney JA in Air Great Lakes Pty Limited v K S Easter (Holdings) Pty Limited [1985] 2 NSWLR 309, at 326. In applying them, a court considers all relevant facts which may include facts occurring after the date of the alleged contract: Hussey v Horne-Payne (1879) 4 AC 311 at 316, 320; Howard Smith & Co Limited v Varawa (1907) 5 CLR 68; Toyota Motors v Ken Morgan Motors [1994] 2 VR 106 at 134 and Challenge Charter Pty Limited v Curtain Bros (Qld) Pty Limited [2004] VSC 1 at [91] per Gillard J. In the latter case, Gillard J stated:- "The court considers all the circumstances leading up to and subsequent to the date of the alleged contract. This involves considering the background facts, the setting in which negotiations took place, the negotiations, the facts objectively known to the parties, what they said, wrote and did or did not do and any other matters which bear on the question whether they intended to and did reach a concluded binding agreement in law." 286 In Brodgen v Metropolitan Railway Co [1877] 2 AC 666 at 682, it was observed:- "… although there has been no formal recognition of the agreement in terms by the one side, yet the course of dealing and conduct of the party to whom the agreement was propounded has been such as legitimately to lead to the inference that those with whom they were dealing were made aware by that course of dealing, [and] that the contract which they had propounded had been in fact accepted by the persons who so dealt with them." 287 It is important, however, that the facts, including, in particular, facts concerning conduct, that are relied upon are capable of supporting the suggested inference. In Australian Energy Limited v Lennard Oil NL (supra) at 237, Thomas J, in a judgment in which Andrew CJ concurred, stated:- "Unless it affords direct evidence of the formation of a contract, conduct of the parties is relevant only when it leads to the necessary inference that somewhere, somehow, the parties must have made a particular agreement. It would be preferable to say that the admissions of parties (including admissions by a course of conduct) may be sufficiently clear to persuade a court to infer that there has been a variation of a contract even though no evidence can be produced to show when, where, by whom or in what particular words such agreement was made. The principle is not limited to variations. The formation of a contract ( Brogden v Metropolitan Railway Co (1887) 2 AC 666) the existence of a contract and its basic terms ( Lahey v Canarvan [1970] Qld R 224, 230; Goodwin v Temple [1957] St R Qd 376, 384 (HC)) or an additional or varied term ( Bruner v Moore [1904] 1 Ch 304, 314) … may be inferred from the conduct of the parties, notwithstanding the absence of the usual evidence of formation and content ( Ferguson v Dawson (supra) at 823-824 and 831) (All ER); 1221 and 1229 (WLR); Winks v WH Heck & Sons Pty Limited (1986) 1 Qd R 226 …). Of course, it is only in cases where the evidence is clear that such inferences will be drawn; but there is nothing in principle which prevents proof of a contract by admissions (cf Luster Hosiery Limited v York (1935) 54 CLR 134, 143-144; Grey v Australian Motorists & General Insurance Co [1976] 1 NSWLR 699). The latter case exemplifies a difficulty if the admission is of a mixed statement of fact and law, but I fail to see why a party may not be held to such an admission if he makes it with sufficient clarity and deliberation." 288 In relation the question as to the relevance of later or subsequent statements and conduct of parties to an agreement or a contract to an issue of whether there was or was not an earlier concluded agreement made or a contract entered into, Gleeson CJ in ABC v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540 at 550-551 observed that "… caution may need to be exercised in relating the fact which is said to be admitted to the fact which is legally relevant" (at 551). 289 For a recent review of the relevant authorise in relation to the implication of contracts see Ormwave Pty Limited v Smith [2007] NSWCA 210 per Beazley JA at [67] to 975]. 290 The case law dealing with implied agreements is derived from cases in which courts have examined a series of overt events or acts established by the evidence for the purposes of determining whether they legitimately led to the inference of an agreement. The relevant acts (eg, discussions and correspondence, memoranda etc) may reveal whether essential matters have been addressed or not. 291 In the present case, however, there is no direct evidence of particular or identifiable acts or conduct of Mrs Jarrett and/or Mr Milsom on or after 10 December 2001 (in terms of "what they said, wrote and did or did not do": Challenge Charter (supra) from which facts inferences may be drawn as to a decision and/or declaration concerning the interim dividends. The cross-claimant's case involves an extra step of inferring primary facts (that a meeting and decision of directors of RH & M and Elwood the fact occurred on or about that date) and the further inference that a decision or declaration was made at the suggested meeting in terms referred to in paragraph 2(a) of the Amended Statement of Cross-Claim, namely, the declaration of dividends ($6,600,000 by RH & M on or after 10 December 2001) and in paragraph 12(a) of the Amended Statement of Cross-Claim ($500,000 or $496,096,31) by Elwood on or after 10 December 2001. Similarly, to infer a consensus or an agreement between directors, there would need to be evidence (eg, conduct of the directors) capable of manifesting or establishing their mutual assent. Inn ABC v XIVth Commonwealth Games Limited (supra) Gleeson CJ observed at 549:- "Although there are qualifications to it (the) general test of objectively is a persuasive influence on the law of contract." 292 Likewise, in the absence of minutes of directors' meetings or other express or direct evidence, an exercise of the discretion vested in Mrs Jarrett as Governing Director of RH & M can only be demonstrated by evidence that is capable of demonstrating that the power has in fact been exercised. 293 The principles relating to the implication of contracts discussed in the above cases arose in the context of contracts of a commercial nature or contracts in a commercial setting. The issues in the present case need to be considered in the context of closely held companies where a degree of informality is not always unexpected and against the background of the "practice" concerning the declaration of dividends that developed in previous years. With that in mind, the abovementioned principles still emphasise the need for a relevant evidentiary basis to be established before a conclusion may be reached by a process of inference as to the fact of corporate decision-making or consensus. 294 Whilst it was the cross-claimant's submission that on 10 December 2001 assent was given to the 2002 dividends entitlement, the following matters are to be taken into account in assessing the submission:- (a) What is in issue is not a subjective state of mind of the directors of RH & M and Elwood but whether any decision or intention in that respect was expressed by them whether in a formal meeting or an informal one. (b) In previous years, Mr Milsom had been, as both director and professional adviser to Mrs Jarrett and the companies, the person who had assumed responsibility for arranging meetings of the companies, drafting minutes of meetings (including those recording the making of declarations) and for the compiling records of account. If, on 10 December 2001 (or any other date), there had been mutual assent or a decision by Mrs Jarrett and Mr Milsom, as directors, by way of a resolution or agreement, then one may conclude that Mr Milsom was the person who would be involved in taking any action that was required to record a decision and/or declaration. (c) There is no evidence of any action having been taken by Mr Milsom to create a record of any resolution of directors or decision or as to any concurrence reached in 2001 between directors of either RH & M or Elwood concerning any dividend entitlements of Mrs Jarrett for the 2002 financial year. (d) The absence of any evidence as referred to in (c) (eg, minutes of meetings), stands in contrast to the evidence that tends to establish a practice in the 2000 and 2001 years by Mr Milsom of recording recommendations for and approval of dividends for the three relevant companies. (e) There is no evidence of conduct by Mr Milsom and/or Mrs Jarrett which would support, by process of inference, the making by them of a resolution or decision as directors. There is, however, evidence identified above of Mr Milsom's actions that is inconsistent with such an inference. 295 Mr Milsom's conduct following Mrs Jarrett's death is to be considered in accordance with the above principles. In particular, his communication with Ms Johnston of Tress Cox, solicitors, in February 2002 and October 2002 and his dealings with Mr Miller in August to November 2002 in connection with the repayment of "dividends" is inconsistent with the cross-claimant's central contention. 296 In considering the significance or otherwise of Mr Milsom's response to Mr Miller's letter of 11 October 2002, the response is to be read and construed in light of the specific "assertions" (Mr Milsom's term) made in Mr Miller's letter of 11 October 2002. The assertions were:- (a) That documentation in support of the declaration of dividends was such that the dividends had not been properly prepared. (b) That the dividends were accordingly void. (c) That there was no evidence that Mrs Jarrett exercised her discretion as Governing Director of RH & M to declare the dividend. (d) That no resolution at a meeting of directors or a general meeting could be carried without the express and written consent of the Governing Director. 297 Mr Milsom's reply was, inter alia, "I have also reviewed appropriate documentation and conclude that your assertions are valid". As noted earlier, he did not take issue with any of the above propositions nor seek to raise any matter inconsistent with the conclusion that the payment of dividends for the 2002 year had been invalid or void. In his capacity as director, if not also as executor of the estate, Mr Milsom was plainly the person who possessed the greatest knowledge of the affairs of RH & M and Elwood and of Mrs Jarrett. His failure to raise in his response to Mr Miller any matter supporting the making of a decision or the exercise of the discretion in Mrs Jarrett as the governing director of RH & M in respect of the RH & M dividends or in relation to the Elwood dividends is inconsistent with the premise upon which the cross-claim in respect of the 2002 dividends is based. 298 In Minister for Immigration v Khawar (2002) 67 ALR 577, Gleeson CJ stated:- "Whether failure to act amounts to conduct often depends upon whether there is a duty to act. Sometimes, for example, silence, where there is an obligation to speak might bear a positive as well as a negative aspect. In some circumstances, silence in the face of an accusation can amount to an admission . Or failure to contradict what somebody else says might, in some circumstances, involve a representation that what is said is true. It depends upon the circumstances; and a relevant circumstance might be what would ordinarily be expected, or whether the person who remains silent has a legal or moral duty to speak." 299 In relation to a submission made for the plaintiffs concerning the cross-claim, namely, that Mr Milsom's letter of 11 October 2002 should be seen as an "admission", I consider that it more appropriately be seen as a representation that what Mr Miller had said in his letter was accurate to the extent that it contended:- (a) That the purported dividend payments by RH & M were not properly declared and that the payment of the "dividends" was accordingly void. (b) That in the case of Elwood, the purported dividends were void and were in excess of the retained earnings and hence could not be declared out of the profits of the company. (c) That there was no evidence of Mrs Jarrett having exercised her discretion as Governing Director of RH & M to declare the 2002 "dividends" . 300 The cross-defendants have submitted that a Jones v Dunkel (supra) inference should be drawn against the cross-claimant in respect of their failure to call Mr Milsom to give evidence at the hearing of the proceedings including the cross-claim. The evidence is that Mr Milsom indicated to the cross-claimant's solicitors that he did not wish to confer with them or otherwise co-operate in giving evidence in these proceedings. In Fabre v Arenales [1992] 27NSWLR 437, Mahoney JA, with whom Priestley and Sheller JJA agreed, stated that there are circumstances in which it has been recognised that a Jones v Dunkel inference is not available or, if available, is of little significance. His Honour stated:- "… The party may not be in a position to call the witness. He may not be sufficiently aware of what the witness would say to warrant the inference that, in the relevant sense, he feared to call him. The reason why the witness is not called may have no relevant relationship to the fact in issue: it may be related to, for example, the fact that the party simply does not know what the witness will say. A party is not, under pain of a detrimental inference, required to call a witness on the 'blind … A Jones v Dunkel inference may not arise if, for example, a witness has a reason for not telling the truth or refusing to assist and the party who may call him is aware of this …" 301 The fundamental propositions advanced by Mr Milsom in his letter were those set out in paragraph [296] above. They were to the effect, inter alia, that the dividends were void. Whether or not the reason expressed (the way "documentation" has been prepared) was entirely accurate, Mr Milsom stated in his letter in reply that he agreed with the propositions Mr Miller had made after he himself had "reviewed appropriate documentation". On that basis, he agreed that Mr Miller's "assertions" were valid. Given Mr Milsom's extensive knowledge of and close involvement with the relevant companies up to the date of Mrs Jarrett's death, there is, in my opinion, no basis for the contention that Mr Miller's statements as expressed in his letter constituted representations that were misleading or deceptive or that, in fact, they could be said, in the circumstances established by the evidence, to have misled Mr Milsom. 302 See also Francis v South Sydney District Rugby League Football Club Limited [2002] FCA 1306; Parras Holdings Pty Limited v Commonwealth Bank of Australia [1997] FCA 1107 in respect of "unpredictable" witnesses and the issue of "reasonable excuse" for the failure to call a person as a witness. 303 Mr Milsom's position in relation to the subject matter of the cross-claim and the failure of the cross-claimant to call him is a matter of significance, particularly in light of dicta in Cook's Construction Pty Limited v Brown (2004) 49 ACSR 62, where Hodgson JA observed at [42]:- "… However … where a party has to prove something and prima facie has available evidence that would directly deal with the question, a court will be very hesitant in drawing an inference in that party's favour from direct and second-hand evidence, when the party doesn't call the direct evidence that prima facie it could have called, at least unless some explanation is given, or the circumstances themselves provide an explanation, as was the case in Fabre." 304 In the present proceedings, it was appropriate to take into account that Mr Milsom was not entirely uncooperative after his meeting with Ms Kerkoulas on 20 July 2005 as described in her affidavit sworn on 9 November 2004. On the basis of information he had provided to her, a draft affidavit was prepared and sent to him. It was, however, in November 2005 that the cross-claimant's solicitor, Mr Peter Smith, was advised that Mr Milsom would not provide an affidavit (Mr Smith's affidavit sworn on 9 November 2005). 305 Whilst, given that Mr Milsom provided some information to Ms Kerkoulas, it would not be completely accurate to say that calling him to give evidence would be to do so "on the blind", I have nonetheless concluded that, given his decision not to further co-operative and, on advice, not to provide an affidavit, the cross-claimant established a reasonable excuse within the meaning of that expression as explained in the relevant case law, for not calling him to give evidence. Accordingly, I have concluded that there is no proper ground for drawing a Jones v Dunkel inference against the cross-claimant for not calling Mr Milsom to give evidence in the hearing of the cross-claim proceedings. Conclusions 306 On the findings made in respect of the cross-claim, I have concluded:- (a) The evidence does not establish that a meeting of directors of RH & M took place on or after 10 December 2001 at which an interim dividend in the amount of $6,600,000 was declared or determined. (b) The evidence does not establish that a meeting of directors of Elwood occurred on or after 10 December 2001 at which an interim dividend in the amount of $500,000 (or for $496,096.31) was declared or determined. (c) That the monies repaid by Mr Milsom to Elwood on 12 November 2002 and to RH & M on 19 November 2002 were not repaid by him upon the basis of a mistaken assumption. (d) The evidence does not establish that the reimbursement of monies referred to in the preceding paragraph arose as a consequence of the "RH & M representations" and/or the "Elwood representations" relied upon by the cross-claimant in its Amended Statement of Cross-Claim. On that basis, no contraventions of s.52 of the Trade Practices Act or of s.42 of the Fair Trading Act arose as alleged in the cross-claim. (e) It follows from the above findings that the payments made by re-imbursement to RH & M and Elwood from the estate bank account with Westpac Banking Corporation were not payments of monies held on trust for the benefit of the estate as claimed by the cross-claimant on the cross-claim. Orders 307 In accordance with the reasons set out in this judgment, there should be judgment for the defendant on the statement of claim. 308 By reason of the conclusions which I have expressed in relation to the plaintiffs' claim in the further amended statement of claim, the application for an order under s.1322(4) of the Corporations Act 2001 (Cth) does not arise. 309 On the basis of the reasons set out above in relation to the cross-claim, there is to be judgment for the cross-defendant in relation to the dividends issue. 310 In relation to the claim on the Amended Statement of Cross-Claim, the defendant/cross-claimant has identified the sum of at least $1,119,729.40 as an amount it contends remains owing to Mrs Jarrett's estate by RH & M (paragraph 12(a) of the Defendant's Outline of Submissions). In the Defendant's Outline of Submissions (paragraph 62), it is stated that there is no dispute in the sense that the amount of $1,119,729.40 is accepted as a correct calculation. This claim is based upon the contention of RH & M that an amount presently held in the estate account at Standard Chartered Grindlays Bank belongs beneficially to RH & M. The amount is said to represent the proceeds of sale of a unit in London, the legal owner of which was the late Mr Henderson, but in respect of which it is alleged RH & M was the cestui que trust. 311 According to the evidence of Mr Miller, it appears that the funds which opened the account with Standard Chartered Grindlays Bank were the proceeds of the sale of the abovementioned home unit. Mr Miller presumed that it was an asset of RH & M. In cross-examination it was put:- "Q. So the state of the accounts between the companies and the estate is such that this figure of $1,119,000, and it is in the records and I don't need it precisely, is being retained on the basis of a claim by the companies to entitlement in respect of the funds in the name of the deceased held with Grindlays, is that the issue? A. Yes, yes. Q. And have the companies commenced any proceedings to have determined the question of the ownership of that fund? A. Not to my knowledge. There has been correspondence on that issue. Q. I see. And is it at the moment, the company is declining to pay the balance outstanding on the accounts with the companies, the subject of these proceedings because it asserts it is able to set that off against its claim in respect of the issue monies. Is that in essence what is occurring? A. Yes, without knowing the full legalities of that statement, yes." 312 The present position, accordingly, appears to be that RH & M asserts that the money held in the estate account at Grindlays belongs beneficially to it, but there is an opposing contention that it holds that money as cestui que trust. 313 The cross-claimant has submitted that it is entitled to the amount outstanding in respect of this claim, irrespective of the determination of any other issue in the proceedings and seeks judgment for the amount in the RH & M loan account. I will, however, defer making any order in relation to this aspect of the cross-claim until I have received further submissions in accordance with directions which I propose to give on a date to be determined. 314 In the circumstances, I propose to stand the further hearing of this aspect of the claim over pending any further directions as may be required and permit the parties to make any submissions as to its disposition. 315 I request the parties to bring in short minutes of orders and to lodge the same with my associate within 10 days. Order claimed under s.1322(4) of the Corporations Act 2001 (Cth) 316 The third component of the cross-claim was an order under the above provision remedying any procedural irregularity that may have occurred in relation to the disputed dividends. By reason of the findings and determination made, as earlier expressed, this aspect of the claim, as I have indicated, does not require determination. JARRETT & ORS v PERPETUAL TRUSTEE COMPANY SCHEDULE TO JUDGMENT RECORDS RELATING TO DIVIDENDS RH & M 1989 There are no Minutes of Directors' meetings relating to the dividend of $1,734,800. There are no minutes of a General Meeting held to sanction the dividend. However, Minutes of the AGM held on 24 November 1989 were noted as read and confirmed at the AGM held on 31 December 1990. Directors' Report in the names M L Jarrett and R J Jarrett recorded "… a fully franked dividend of $1,720,000 was declared on 16 June 1989". The consolidated Profit and Loss Statement for the year ended 30 June 1989 recorded "dividends declared" of $1,734,800 and "retained profits" at the end of the financial year of $2,475,608. The auditor's report confirmed that the accounts of the company were properly drawn up so as to give a true a fair view of the state of affairs of the company as at 30 June 1989. The dividend was paid, $867,400 to trustee companies re MLJ Settlement Trusts and $867,400 to the trustee company re the Hazel Henderson (Deceased) Settlement Trust 1950. The dividend received from RH & M was declared as dividend income in the 1989 Financial Reports of the two settlement trusts. Income from both trusts included the dividend income. Mrs Jarrett disclosed the dividend income in her tax return 1990 Minutes of Meetings of Directors held on 28 June 1990 – Mr and Mrs Jarrett were recorded as present and confirmed and they were signed by Mrs Jarrett as Chairperson. Resolved to declare a fully franked dividend of $1,058,000 Minutes of Meeting of Directors held on 17 December 1990, R J Jarrett (Chairman) and M L Jarrett noted as present, noting also resolution statement to be attached to accounts to be laid before the company at the AGM to be held on 31 December 1990, "in the opinion of the Directors, the Profit and Loss Statement is drawn up so as to give a true and fair view of the results of the company for the financial year ended 30 June 1990". Minutes of AGM held on 31 December 1990 confirmed and signed by Mr Milsom. They recorded a resolution that a dividend of $1,058,000 be declared on 28 June 1990. Report of Directors recorded a franked interim dividend of $1,058,000 was paid on 28 June 1990. Profit and Loss Statement for the year ended 30 June 1990 recorded interim dividend of $1,734,800 as paid. The dividend was paid from retained profits. The Profit and Loss Statement records retained profits of $2,493,239. The dividend received from RH & M was paid $529,000 to the trustee companies re MLJ Settlement Trust and as to $529,000 to the trustees of the Hazel Henderson (Deceased) Settlement Trust. Distribution's were declared in both trusts totalling $2,132,370 being both RH & M dividends and UIGI dividends. The dividends were declared as dividend income in the trust's financial reports. Income tax returns of both trusts included the dividend income. Mrs Jarrett's income tax return disclosed both the RH & M and UIGI dividends. 1994 The minutes of Meeting of Directors held on 20 June 1994 were signed by Mr R J Jarrett as Chairman on 20 June 1994. They recorded Mr and Mrs Jarrett as present and (incorrectly) a Mr G J Gorrell. The Minutes recorded a resolution that a fully franked class A dividend of $500,000 be paid out of the profits of the company to the holders of ordinary shares. It was further resolved that the dividend be paid or credited no later than 30 June 1994. Minutes of Meeting of Directors held on 16 December 1994 signed by Mr R J Jarrett as Chairman and dated 16 December 1994 recorded that the proposed Report of the Directors and Statement by the Directors in respect of the year ended 30 June 1994 was tabled and it was resolved that the Report and Statement be signed by Mr and Mrs Jarrett. Minutes of the AGM held on 30 December 1994 signed by Mr Jarrett as Chairman, recorded a resolution, inter alia, that the Profit and Loss Statement for the year ended 30 June 1994 be approved. Report of Directors (M L Jarrett and R J Jarrett) noted the dividend of $500,000 as paid on 20 June 1994. The Profit and Loss Statement recorded "dividends provided for or paid" of $500,000. The retained profits were recorded as $5,980,875.50. The dividend was paid as to $250,000 to the trustee companies in respect of the MLJ Settlement Trust and as to $250,000 to the Hazel Henderson (Deceased) Settlement Trust. The dividend income was declared in the 1994 Financial Reports and the two trusts. The income tax returns for both trusts included the dividend income. The dividend income was declared by Mrs Jarrett in her income tax return. 1995 There are no Minutes of Directors' Meetings in evidence. There are no Minutes of an AGM of the company in evidence. The Report of Directors signed by Mrs Jarrett and Mr Milsom record their presence and that of Mr Jarrett. The Report also recorded that a class A fully franked dividend of $500,000 was paid on 28 June 1995. The Statement of Directors signed by Mrs Jarrett and Mr Milsom stated their opinion that the Profit and Loss Statement gave a true and fair view of the company's profit and loss for the financial year. The Profit and Loss Statement recorded "dividends provided for or paid" of $500,000 and retained profits of $6,701,275,59. The notes to the financial statements also recorded the fully franked interim dividend of $500,000. The Annual General Ledger also recorded the fully franked dividend of $500,000. The dividend was paid as to $250,000 to each of the settlement trusts and which were recorded as declared as dividend income in the Financial Reports of those trusts. The income tax returns for both trusts included the dividend income. The income tax return of Mrs Jarrett declared the dividend income. 1996 Minutes of Directors' Meeting held on 18 November 1996, signed by Mr Milsom, as Chairman, recorded Mrs Jarrett and Mr Milsom as present. The Minutes recorded: "the recommendation of the directors were considered and IT WAS RESOLVED that the declaration of the dividend be left in the hands of the directors". Minutes of the AGM held on 14 December 1996, signed by Mr Milsom, as Chairman, recorded a resolution confirming the actions of directors in declaring a dividend of $500,000 on 20 August 1995 and that it be paid out of profits in respect of the 1996 year. The Report of Directors in the names of M L Jarrett and W E Milsom, recorded that a class A fully franked dividend of $500,000 was paid on 20 August 1995. The Statement of Directors in the names of M L Jarrett and W E Milsom confirmed the accuracy of the Profit and Loss Statement. That Statement recorded the "dividends provided for or paid" of $500,00 and that the accumulated profits were $7,319,586.09. The dividend was declared as dividend income being paid $250,000 to each of the two settlement trusts. The trusts declared the dividend income in their income tax returns. Mrs Jarrett's income tax return included the dividend income. 1997 There are no Minutes of Directors' Meetings in relation to a dividend of $500,000. There are no Minutes of an AGM of the company for the 1997 year. The Report of the Directors, signed by Mrs Jarrett and Mr Milsom, dated 13 October 1997 recorded "the following dividends were paid or recommended during the financial year: a fully franked interim dividend of $500,000 was paid on 20 June 1997". The Statement of Directors signed by Mrs Jarrett and Mr Milsom dated 13 October 1997 recorded their opinion as to the accuracy of the Profit and Loss Statement. The Profit and Loss Statement records "dividends provided for or paid" of $500,000 and that the retained profits at the end of the financial year as $8,033,110.37. The Annual General Ledger recorded for the year ended 30 June 1997 "fully franked class C" dividend as paid to the two settlement trusts dividends of $250,000 respectively. The dividends were declared as dividend income in the 1997 Financial Reports for the two settlement trusts having been received by the two trustee companies. Income tax returns for the trusts included the dividend income. Mrs Jarrett's income tax return included the dividend income. 1998 Minutes of Directors' Meeting held on 19 May 1998. Resolved "to confirm the action of directors in declaring a dividend of $1,000,000 on 19 May 1998". The Minutes were signed by Mr Milsom as Chairman. No minutes of AGM. Report of Directors dated 10 October 1998 signed by Mrs Jarrett and Mr Milsom. The Report records, "the following dividends were paid or recommended during the financial year. A fully franked interim dividend of $1,000,000 was paid on 19 May 1998". The Statement of Directors dated 30 October 1998 signed by Mrs Jarrett and Mr Milsom recorded the opinion of the directors "that the Profit and Loss Statement gave a true and fair view of the company's profit and loss for the financial year". The Profit and Loss Statement recorded "dividends provided for or paid" of $1,000,000 and retained profits of $8,033,110.37 The Annual General Ledger recorded "interim dividend to shareholders of $1,000,000". The dividend was paid $500,000 to each of the trustee companies in relation to the two settlement trusts. The dividend of $1,000,000 was declared as dividend income in the 1998 Financial Reports of the two settlement trusts and in the income tax returns of both trusts. Mrs Jarrett reported $996,420 in her personal income tax return. 1999 There are no Minutes of Directors' Meetings in relation to a dividend of $5,384,000. There are no minutes of an AGM of the company for the year ended 30 June 1999. However, Minutes of the AGM held on 31 October 1999 were noted as read and confirmed at the AGM held on 14 November 2000. The Report of the Directors, signed by Mrs Jarrett and Mr Milsom, dated 15 October 1999 recorded "The following dividends were paid or recommended during the financial year: A fully franked dividend of $5,000,000 was paid on 31 December 1998. A fully franked dividend of $384,000 was paid on 30 June 1999." The Declaration by the Directors dated 15 October 1999 recorded the opinion of the directors as to the accuracy of the Profit and Loss statement. The Profit and Loss Statement recorded "Dividends provided for or paid" of $5,384,000 and that the retained profits at the end of the financial year as $4,243,176.58. The Annual General Ledger for the year ended 30 June 1999 records a credit to the "Loan – Margaret Louise Jarrett" account on 31 December 1998 of $5,000,000 and a credit to the "Loan – M L Jarrett Current" account on 30 June 1999 of $384,000. The dividend of $5,384,000 received from RH & M was paid in the amount of $2,692,000 to each of the trustee companies respectively. The dividend was declared as dividend income in the 1999 Financial Reports of the two settlement trusts and in the income tax returns for both trusts. Mrs Jarrett reported $5,900,250 in her personal tax return for that year, being a net dividend of $5,384,000 from RH & M and a net dividend of $520,000 from UIGI. 2000 Minutes of Directors' Meeting held on 30 June 2000. Resolved "to declare a dividend of $400,000… paid or credited to the shareholders before 30 June 2000." It was further resolved that the dividend of $400,000 be franked 100%. Minutes of the AGM held on 14 November 2000, signed by Mr Milsom, as Chairman, recorded a resolution confirming actions of directors in declaring a fully franked dividend of $400,000 on 30 June 2000. The Report of the Directors 31 August 2000 is signed by Mrs Jarrett and Mr Milsom. The Report records "The following dividends were paid or recommended during the financial year: A fully franked dividend of $400,000 was paid on 30 June 2000." The Declaration by the Directors dated 31 August 2000, signed by Mrs Jarrett and Mr Milsom recorded the opinion of the directors as to the accuracy of the Profit and Loss statement. The Profit and Loss Statement recorded "Dividends provided for or paid" of $400,000 and retained profits of $5,239,700.53. The Annual General Ledger for the year ended 30 June 2000 records a credit to the "Loan – Margaret Louise Jarrett" account on 15 March 2000 of $400,000 and an entry confirming "Dividends paid or payable" of $400,000 on 15 March 2000. The dividend of $400,000 received from RH & M was paid in the amount of $200,000 to each of the trustee companies respectively. The dividend was declared as dividend income in the 2000 Financial Reports of the two settlement trusts and in the income tax returns for both trusts. Mrs Jarrett reported $396,200 in her personal tax return for that year, being a net dividend of the amount of $400,000 from RH & M. 2001 Minutes of Directors' Meeting held on 29 June 2001. Resolved "to declare a dividend of $300,000… paid or credited to the shareholders before 30 June 2001." It was further resolved that the dividend of $300,000 be franked 100%. There are no minutes of an AGM of the company for the year ended 30 June 2001. However, The Directors' Meeting held on 30 August 2001 resolved "that the Secretary be instructed to call an AGM on 13 November 2001". The Report of the Directors 31 October 2001 is signed by Mr Milsom. The Report records "The following dividends were paid or recommended during the financial year: A fully franked dividend of $300,000 was paid on 29 June 2001." The Declaration by the Directors dated 31 October 2001, signed by Mr Milsom recorded the opinion of the directors as to the accuracy of the Profit and Loss statement. The Statement of Financial Position for RH & M recorded retained profits of $6,568,326.04 and "Dividends paid or proposed" of $300,000 Fully Franked Class C dividends. The Annual General Ledger for the year ended 30 June 2001 records "Dividends paid or payable" of $300,000 on 30 June 2001. The dividend of $300,000 received from RH & M was paid in the amount of $150,000 to each of the trustee companies respectively. The dividend was declared as dividend income in the 2000 Financial Reports of the two settlement trusts and in the income tax returns for both trusts. Mrs Jarrett reported $295,400 in her personal tax return for that year, being a net dividend of $300,000 from RH & M. UIGI INVESTMENTS PTY LIMITED 1988 Minutes of Directors' Meeting held on 13 April 1988, attended by Mrs Jarrett, Mr Jarrett, and Mr Adcock. Resolved "that a dividend of $813,393 be declared and credited to the shareholders forthwith." Minutes of the AGM held on 28 December 1988 recorded a resolution confirming actions of directors in declaring a dividend of $813,393 on 13 April 1988. The 1988 Financial Report for UIGI has not been requested as the statement of claim has been amended. The Profit and Loss Statement recorded "Dividends declared" of $813,393 and retained earnings of $503,647. The Annual General Ledger for the year records a "Profit and Loss Appropriation… Dividend declared…" of $813,393. The dividend of $813,393 received from UIGI was paid to the two trustee companies. The 1988 Financial Report for the Settlement Trusts is not available, accordingly the income declared in the trusts and loan balances cannot be confirmed. The 1988 Income Tax Return for Mrs Jarrett is not available, accordingly the income declared by her cannot be confirmed. 1989 Minutes of Directors' Meeting held on 28 April 1989, attended by Mrs Jarrett and Mr Jarrett – resolved "that a dividend of $27,868 be declared and credited to the shareholders forthwith." Further, Minutes of Directors' Meeting held on 16 June 1989, attended by Mrs Jarrett, Mr Jarrett, and Mr Adcock – resolved "that a dividend of $1,797,000 be declared and credited to the shareholders on 19 June 1989." Minutes of the AGM held on 24 November 1989 recorded a resolution confirming actions of directors in declaring dividends of $27,868 on 28 April 1989 and $1,797,000 on 16 June 1989. The Directors' Report for UIGI dated 30 June 1989 recorded the abovementioned declared dividends. The Profit and Loss Statement recorded "Dividends declared" of $1,824,868 and retained earnings of $470,749. The Annual General Ledger for the year contains two entries for "Profit and Loss Appropriation… Dividend declared…" of $27,868 on 28 April 1989 and $1,797,000 on 19 June 1989. The dividend of $1,824,868 received from UIGI was paid in the amount of $912,434 to each of the trustee companies respectively. The dividend was declared as dividend income in the 1989 income tax returns for both trusts. Mrs Jarrett and Hazel Henderson Trust distributions totalling $3,555,668 declared in personal tax return. 1990 Minutes of Directors' Meeting held on 28 June 1990, attended by Mrs Jarrett, Mr Jarrett, and Mr Milsom – resolved "to declare a fully franked dividend of $1,079,220." Further, Minutes of Directors' Meeting held on 17 December 1990, attended by Mrs Jarrett and Mr Jarrett, recorded the Directors' statement as to the accuracy of the Profit and Loss statement. Minutes of the AGM held on 31 December 1990 recorded a resolution that the dividend of $1,079,220 be confirmed. The Directors' Report for UIGI recorded the abovementioned declared dividend. The Profit and Loss Statement recorded "Interim dividend paid" of $1,078,370 and retained earnings of $470,750. The Annual General Ledger for the year records "Profit and Loss Appropriation – fully franked dividend…" of $1,078,370 on 28 June 1990. The dividend of $1,078,370 received from UIGI was paid in the amount of $539,185 to each of the trustee companies respectively. The dividend was declared as dividend income in the 1990 income tax returns for both trusts. Mrs Jarrett and Hazel Henderson Trust distributions totalling $3,609,608 declared in personal tax return. 1994 Minutes of Directors' Meeting held on 20 June 1994, attended by Mrs Jarrett and Mr Jarrett – resolved "to declare a fully franked class A dividend of $500,000." Further, Minutes of Directors' Meeting held on 16 December 1994, attended by Mrs Jarrett and Mr Jarrett, recorded the Directors' statement as to the accuracy of the Profit and Loss statement. Minutes of the AGM held on 30 December 1994 recorded a resolution that the dividend of $500,000 be confirmed. The Directors' Report for UIGI recorded the abovementioned dividend. The Profit and Loss Statement recorded "Dividend paid" of $500,000 and retained profits of $4,396,318.75. The Annual General Ledger for the year records "Profit and Loss Appropriation – fully franked dividend…" of $500,000 on 30 June 1994. The dividend of $500,000 received from UIGI was paid in the amount of $250,000 to each of the trustee companies respectively. The dividend was declared as dividend income in the 1994 income tax returns for both trusts. There were no trust incomes declared in Mrs Jarrett's personal tax return. There was a dividend income declared of $1,020,334, consisting of $500,000 from UIGI and $500,000 from RH & M. 1995 Minutes of Directors' Meeting held on 28 June 1995, attended by Mrs Jarrett, Mr Jarrett and Mr Milsom – resolved "to declare a interim dividend of $500,000." Minutes of the AGM held on 5 December 1995 recorded a resolution that the dividend of $500,000 be confirmed. The Directors' Report for UIGI recorded the abovementioned dividend. The Profit and Loss Statement recorded "Dividend paid" of $500,000 and retained profits of $5,412,544.75. The Annual General Ledger for the year records "Dividend paid…" of $500,000 on 30 June 1995. The dividend of $500,000 received from UIGI was paid in the amount of $250,000 to each of the trustee companies respectively. The dividend was declared as dividend income in the 1995 income tax returns for both trusts. Mrs Jarrett reported $996,700 in her personal tax return for that year, being the total from RH & M and UIGI. 1996 Minutes of Directors' Meeting held on 18 November 1996, attended by Mrs Jarrett and Mr Milsom records that "minutes of the previous meeting of directors, as signed by the Chairman, were confirmed". However, there are no other Minutes of Directors' Meeting resolving to declare a dividend for this year. Minutes of the AGM held on 14 December 1996 recorded a resolution "to confirm the action of directors in declaring a dividend of $500,000 on 20 August 1995." The Directors' Report for UIGI recorded the dividend of $500,000 that was paid on 20 August 1995. The Profit and Loss Statement recorded "Dividend paid" of $500,000 and retained profits of $5,407,384.75. The Annual General Ledger for the year records "Dividend paid…" of $500,000 on 20 August 1995. The dividend of $500,000 received from UIGI was paid in the amount of $250,000 to each of the trustee companies respectively. The dividend was declared as dividend income in the 1996 income tax returns for both trusts. Mrs Jarrett disclosed $996,540 in her personal tax return for that year, being the total received from RH & M and UIGI. 1997 There are no Minutes of Directors' Meeting for this year. There are no Minutes of AGM for this year. The Directors' Report for UIGI dated 13 October 1997 recorded the dividend of $500,000 that was paid on 20 June 1997. The Profit and Loss Statement recorded "Dividend paid" of $500,000 and retained profits of $5,401,589.75. The Annual General Ledger for the year records "Dividend paid" of $500,000 on 30 June 1997. The dividend of $500,000 received from UIGI was paid in the amount of $250,000 to each of the trustee companies respectively. The dividend was declared as dividend income in the 1997 income tax returns for both trusts. Mrs Jarrett reported $996,420 in her personal tax return for that year, being the total from RH & M and UIGI. 1999 There are no Minutes of Directors' Meeting for this year. There are no Minutes of AGM for this year. The Directors' Report for UIGI dated 15 October 1999 recorded the dividends of $300,000 paid on 31 December 1998 and $220,000 paid on 30 June 1999. The Profit and Loss Statement recorded the total dividend paid of $520,000 and retained profits of $5,431,479.75. The dividend of $520,000 received from UIGI was paid in the amount of $260,000 to each of the trustee companies respectively. The dividend was declared as dividend income in the 1999 income tax returns for both trusts. Mrs Jarrett reported $5,900,250 in her personal tax return for that year, being the total from RH & M and UIGI. ELWOOD PTY LTD 1989 Minutes of Directors' Meeting held on 2 June 1989, attended by Mrs Jarrett, Mr Jarrett and Mr Adcock record that "the dividend of $1,397,800 be declared and credited to the shareholder on 5 June 1989". Minutes of the AGM held on 24 November 1989 recorded a resolution to confirm the abovementioned dividend. The Directors' Report for Elwood recorded the dividend of $1,397,800 that was declared on 2 June 1989. The Profit and Loss Statement recorded dividend paid of $1,397,800 and retained profits of $914,556. The dividend was paid to UIGI. The dividend was declared as dividend income in the 1989 Financial Report of UIGI. 1990 Minutes of Directors' Meeting held on 28 June 1990, attended by Mrs Jarrett, Mr Jarrett and Mr Milsom, records that it was resolved to declare a dividend of $878,250. Minutes of the AGM held on 31 December 1990 recorded a resolution to confirm the abovementioned dividend. The Directors' Report for Elwood recorded the dividend of $878,250 that was declared on 28 June 1990. The Profit and Loss Statement recorded dividend paid of $878,250 and retained profits of $1,028,581. The dividend was paid to UIGI. The dividend was recorded as received in UIGI's financial statements for this year. 1995 There are no Minutes of Directors' Meeting for this year. There are no Minutes of AGM for this year. The Directors' Report for Elwood recorded the dividend of $540,000 that was declared on 28 June 1995. The Profit and Loss Statement recorded dividend paid of $540,000 and retained profits of $476,262.05. The Annual General Ledger for Elwood Pty Limited records a dividend paid to UIGI of $540,000 on 28 June 1995. The dividend was declared as dividend income in the 1995 Financial Report of UIGI. 1996 Minutes of Directors' Meeting held on 18 November 1996, attended by Mrs Jarrett and Mr Milsom, record that the minutes of the previous meeting of directors were confirmed. However, there is no document containing the Minutes of Directors' Meeting that records the declaration of the dividend for this year. Minutes of the AGM held on 14 December 1996 recorded a resolution to confirm the dividend of $500,000 declared on 20 August 1995. The Directors' Report for Elwood recorded the dividend of $500,000 that was "paid on 20 August 1995" The Profit and Loss Statement recorded dividend paid of $500,000 and retained profits of $515,418.41. The Annual General Ledger for Elwood Pty Limited for this year records a dividend paid to UIGI of $500,000. The dividend was declared as dividend income in the 1996 Financial Report of UIGI. 1997 There are no Minutes of Directors' Meeting for this year. There are no Minutes of AGM for this year. The Directors' Report for Elwood recorded the dividend of $500,000 that was paid on 20 June 1997. The Profit and Loss Statement recorded dividend paid of $500,000 and retained profits of $520,077.10. The Annual General Ledger for Elwood Pty Limited recorded a dividend paid to UIGI of $500,000 on 20 June 1997. The dividend was declared as dividend income in the 1995 Financial Report of UIGI. 1998 There are no Minutes of Directors' Meeting for this year. There are no Minutes of AGM for this year. The Directors' Report for Elwood dated 30 October 1998 recorded the dividend of $40,000 that was paid on 19 May 1998. The Profit and Loss Statement recorded dividend paid of $40,000 and retained profits of $723,024.97. The Annual General Ledger for Elwood Pty Limited recorded a dividend paid of $40,000. The dividend was declared as dividend income in the 1998 Financial Report of UIGI. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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