Supreme Court New South Wales Medium Neutral Citation: In the matter of Wan Ze Property Development (Aust) Pty Ltd [2012] NSWSC 722 Hearing dates: 24 May 2012 Decision date: 29 June 2012 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Parties to bring in agreed Short Minutes to give effect to judgment within 14 days or otherwise to bring in respective Short Minutes for which they contend and short submissions in respect of differences between them. Catchwords: CORPORATIONS - Corporations Act 2001 (Cth) s 237 - Derivative proceedings - Application by First Plaintiff to bring proceedings in the name of the Second Plaintiff - Whether matters under Corporations Act 2001 (Cth) s 237(2) are satisfied. CORPORATIONS - Winding up - Corporations Act 2001 (Cth) s 461 - Application for order that company be wound up on the just and equitable ground. PRACTICE AND PROCEDURE - Summary judgment - Application for judgment granting final relief sought in Further Amended Originating Process in circumstances that Defendants in extended default of Court's orders. EQUITY - Fiduciary duties - Claim for breach of fiduciary duty against directors of company. EQUITY - Trusts - Constructive trust - Barnes v Addy (1874) LR 9 Ch App 244 - Liability for knowing assistance - Knowing assistance - Whether there is evidence to meet knowledge requirement for knowing assistance. EQUITY - Trusts - Claim for proprietary remedy in circumstances where real property transferred to Defendants for no consideration - Whether volunteer holes property in respect of which claimant has a proprietary interest. Legislation Cited: - Civil Procedure Act 2005 (NSW) ss 56, 56-58, 59, 61, 61(3) - Corporations Act 2001 (Cth) ss 181, 181(1), 181-182, 182(1), 232, 233, 237, 237(2), 237(2)(a), 237(2)(b), 237(2)(c), 237(2)(d), 461, 461(1)(k) - Real Property Act 1900 (NSW) ss 42, 42(1) - Supreme Court (Corporations) Rules 1999 (NSW) - Uniform Civil Procedure Rules 2005 (NSW) rr 12.7, 12.7(2), 13.1, 13.1(b) Cases Cited: - Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552; 173 ALR 665 - Bahr v Nicolay (No 2) [1988] HCA 17; (1988) 164 CLR 604 - Bankers Trust Co v Shapira [1980] 1 WLR 1274 - Barnes v Addy (1874) LR 9 Ch App 244 - Barrett v Sinclair v McCormack [1999] VUCA 11 - Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105 - Bi v Mourad [2010] NSWCA 17 - Break Fast Investments Pty Ltd v Giannopoulos (No 5) [2011] NSWSC 1508 - Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 - Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2008] NSWCA 52; (2008) 245 ALR 780; 227 FLR 43; 65 ACSR 661 - Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2010] NSWSC 445 - Chahwan v Euphoric Pty Ltd t/as Clay & Michel (No 2) [2010] NSWSC 1062 - Chew v R (1991) 4 WAR 21; 5 ACSR 473 - Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248 - Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 - Cosmos E-C Commerce Pty Ltd v Bidwell & Associates Pty Ltd [2005] NSWCA 81 - Cowern v Nield [1912] 2 KB 419 - Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 - Doyle v Australian Securities and Investments Commission [2005] HCA 78; (2005) 227 CLR 18; 223 ALR 218; 56 ACSR 159 - Dynasty Pty Ltd v Coombs (1995) 59 FCR 122; 138 ALR 64 - Edenden v Bignell [2008] NSWSC 666 - Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 - Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672; 19 ACLC 856 - Furs Ltd v Tomkies [1936] HCA 3; (1936) 54 CLR 583 - General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 - Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 - Glazier Holdings Pty Ltd v Australian Men's Health Pty Ltd (No 2) [2001] NSWSC 6 - Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 ACSR 534 - Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230 - Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324 - Lahoud v Lahoud [2006] NSWSC 126 - Liosatos v Kefalinian Brotherhood 'O Kefalos' of NSW [2000] NSWSC 1138 - Liverpool City Council v Estephan [2009] NSWCA 161 - Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11,512 - Maher v Honeysett and Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 - Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; (2002) 54 NSWLR 146 - Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 - MG Corrosion Consultants Pty Ltd v Vinciguerra [2011] FCAFC 31; (2011) 82 ACSR 367 - Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 - Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343 - Neste Oy v Lloyds Bank plc [1983] 2 Lloyd's Rep 658 - Ng v Chong [2010] NSWSC 127 - O'Neill v Phillips [1999] 1 WLR 1092 - Orix Australia Corporation ltd v Moody Kiddell & Partners Pty Ltd [2005] NSWSC 1209 - Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187; 14 ACSR 109; 12 ACLC 674 - R v Byrnes [1995] HCA 1; (1995) 183 CLR 501; 17 ACSR 551 - R v Towey (1996) 21 ACSR 46 - Re Estate of Northey (dec'd); Northey v Juul [2005] NSWSC 933 - Re Goldcorp Exchange Ltd [1995] 1 AC 74 - Re Gladstone Pacific Nickel Ltd [2011] NSWSC 1235; (2011) 86 ACSR 432 - Re HIH Insurance Ltd and HIH Casualty and General Insurance Ltd; Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253; 41 ACSR 72; 20 ACLC 576 - Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134; [1942] 1 All ER 378 - Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 - Showtime Management Australia Pty Ltd v Showtime Presents Pty Ltd [2008] NSWSC 618 - South Australia v Clark (1996) 66 SASR 199; 19 ACSR 606; 14 ACLC 1019 - South Johnstone Mill Ltd v Dennis [2007] FCA 1448; (2007) 163 FCR 343; 64 ACSR 447 - 7Steel Building Solutions Pty Ltd v Wright [2011] NSWSC 779 - Stocks v Wilson [1913] 2 KB 235 - Stuart v Kingston [1923] HCA 17; (1923) 32 CLR 309 - Super 1000 Pty Ltd v Pacific General Securities Ltd [2008] NSWC 1222; (2008) 221 FLR 427 - Swansson v R A Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 - Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 - Vinciguerra v MG Corrosion Consultants Pty Ltd [2007] FCA 503; (2007) 61 ACSR 583 - Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589; (2007) 63 ACSR 429 - Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459 - Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598 - Westdeutsche Landesbank Cirozentrale v Islington London Borough Council [1996] AC 669 - Westpac Banking Corporation v Lahood [2011] NSWSC 1057 - White Constructions (ACT) Pty Ltd (in liq) v G B White [2004] NSWSC 303 - Wily v King [2010] NSWSC 352 - Zhu v Yingle Culture Exchange (Aust) Pty Ltd [2011] NSWSC 1339 Texts Cited: - P Butt, Land Law, 6th ed, Thomson Reuters, 2010 Category: Principal judgment Parties: Hong Jiang (First Plaintiff) Wan Ze Property Development (Aust) Pty Ltd (Second Plaintiff) Yongan Xie (Third Plaintiff) Ke Qin Ren (First Defendant) Pei Xu (Second Defendant) Yi Cheng Jiang (Third Defendant) Gloconnect Pty Ltd (Fourth Defendant) Representation: Counsel: D.L. Cook (Plaintiffs) T. Leung (sol.) (Defendants) Solicitors: Haworth & Lexon (Plaintiffs) Link Lawyers (Defendants) File Number(s): 11/51745 Judgment 1By Second Further Amended Originating Process filed on 24 May 2012, the First Plaintiff, Ms Hong Jiang ("HJ"), seeks orders under s 237 of the Corporations Act 2001 (Cth) granting leave to bring proceedings in the name of Second Plaintiff, Wan Ze Property Development (Aust) Pty Ltd ("Company") in respect of certain allegations, substantive relief in respect of those allegations, orders in respect of oppression under s 233 of the Corporations Act, orders for the winding up of the Company under s 461 of the Corporations Act and certain relief on her own account. Factual background 2I should first set out the relevant factual background. HJ was a director and holder of 50% of the shares of the Company. The other 50% interest in the Company is owned by the Fourth Defendant, Gloconnect Pty Ltd. 3On 15 August 2008, it appears to have been agreed between HJ, the First Defendant, Ke Qin Ren ("KQR"), the Second Defendant, Pei Xu ("PX") and the Third Defendant, Yi Cheng Jiang ("YCJ") that the Company would purchase land at Baulkham Hills and develop it into townhouses which would be sold; that HJ, the Third Plaintiff ("YX") and KQR would each provide loan funding to the Company which would also borrow monies from a bank; and any profit from the venture would be distributed in agreed amounts. 4HJ was not added as a joint signatory of the Company's accounts when those accounts were established [HJ 1 [25]]. Although meetings concerning the development originally occurred, they subsequently became fewer and HJ was not shown receipts or invoices or documents relating to the project [HJ 1 [33]]. 5On 2 September 2008, the Company entered contracts to purchase the land at Baulkham Hills and, on 18 September 2008, it entered into a construction contract with a third party. It took out a bank loan on 28 November 2008 and became the registered proprietor of the land on 1 December 2008. The construction of the townhouses was completed in October 2010; the Company entered into contracts for the sale of several units in October 2010; and those sales were completed in December 2010. 6On 23 December 2010, HJ and YX requested access to the Company's accounts and financial reports and were initially told by KQR that "that's fine" but that it would take about two weeks. HJ and YX were then provided with copies of bank statements, but not with the bank statements for December 2010, when the sales of the townhouses settled and the Company started to receive money from the sale of the townhouses. 7On 8 January 2011, KQR advised HJ and YX that there was about $600,000 in the Company's account, when there was in fact about $1.1 million in that account. KQR also claimed that YCJ had withdrawn $600,000 without KQR's consent because he had lent that amount to the Company and had shares in Gloconnect, and that KQR also withdrew $600,000, as to which he claimed to have repaid a personal loan of $300,000 to a third party for the project, used $216,000 to repay a loan of $200,000 from HJ and YX and taken $100,000 "for me". 8From January 2011, KQR and PX declined to add HJ or YX as joint signatories to the Company's account, purportedly because YCJ disagreed to that course and would stop his involvement in the Company if it were implemented. In fact, YCJ had resigned as a director of the Company prior to that time. In a further conversation on 11 January 2011, KQR rejected HJ and YX's request that they should be permitted to jointly manage the Company's accounts, on the basis that they were receiving a fixed profit from the project and (notwithstanding that HJ was a director of the Company) "are not entitled to be involved in managing anything, including the Company's account". 9In January 2011, the Company transferred unit 16 in the Baulkham Hills development to YCJ for a stated purchase price of $485,000 which, it is alleged, was not paid. In February 2011, the Company transferred unit 20 to PX for a stated purchase price of $520,000 which, it is alleged, was also not paid. The bank loan in respect of the development was repaid in full by mid-February 2011. 10There is evidence of multiple withdrawals from the Company's account (HJ 1 [63], Ex HJ-1 pp213-214). HJ gave evidence, without objection, that inquiries made by her and YX and subpoenas issued to third parties indicated that payments of $278,348.22 had been made on 24 December 2010 and $300,000 on 31 December 2010 by the Company to YCJ. HJ's uncontested evidence was that she did not authorise the transfer of unit 16 to YCJ or the transfer of unit 20 to PX. Application for leave to bring derivative proceedings 11It is convenient first to deal with the application for leave to bring derivative proceedings on behalf of the Company and the issues raised by those proceedings. By Amended Interlocutory Process filed on 24 May 2012, HJ and YX (who is also a director of the Company) seek an order under s 237 of the Corporations Act that HJ be granted leave to bring these proceedings on behalf of and in the name of the Company in respect of allegations pleaded in a Further Amended Points of Claim. The application for an order under s 237 of the Corporations Act reflects the order sought in paragraph 1 of the Second Further Amended Originating Process. 12The principles applicable to an application for leave to bring proceedings under s 237 are well established. In order to grant leave under Corporations Act s 237(2), the Court must be satisfied of five matters and must grant that leave if satisfied of those matters. The first requirement, under s 237(2)(a) of the Corporations Act, is that it is probable that the Company will not bring the proceedings. That requirement is satisfied in this case because HJ and KQR are the two directors of the Company and are likely to be deadlocked in respect of any decision whether to bring the relevant proceedings and, further, because a substantial period has elapsed since the relevant conduct without such proceedings being brought by the Company. 13The second criterion, specified in s 237(2)(b) of the Corporations Act, is that HJ is acting in good faith and HJ must establish this matter to the Court's satisfaction: Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2008] NSWCA 52; (2008) 245 ALR 780; 227 FLR 43; 65 ACSR 661; Showtime Management Australia Pty Ltd v Showtime Presents Pty Ltd [2008] NSWSC 618 at [77]. Relevant factors include whether HJ honestly believes that a cause of action exists and has reasonable prospects of success and whether she is seeking to bring the action for a collateral purpose. It is not essential that HJ say by sworn evidence that she believes that a good cause of action exists, since inferences can be drawn from the nature and circumstances of the case sought to be brought: Maher v Honeysett and Maher Electrical Contractors Pty Ltd [2005] NSWSC 859. 14In my view, it is clear that HJ and YX are acting in good faith. HJ is a substantial shareholder in the Company and HJ and YX are substantial creditors of the Company and a recovery of funds by the Company will increase the value of their shares and increase the likelihood that the debt owed by the Company to them will be repaid. There is no collateral purpose to be served by them in promoting the proceedings and they have acted diligently in their pursuit of the application under s 237 of the Corporations Act. I find that the application is brought in good faith. 15The third criterion, under s 237(2)(c) of the Corporations Act is that the grant of leave is in the best interests of the Company. This test requires more than a prima facie indication that the proceedings may be or are likely to be in the interests of the Company and the court must be satisfied that the proposed action actually is, on the balance of probabilities, in the Company's best interest: Swansson v R A Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313. Relevant matters include the prospects of success of the proceedings, their likely costs, the likely recovery if the proceedings are successful and the likely consequences if they are not: Maher v Honeysett and Maher Electrical Contractors Pty Ltd above at [44]. In Re Gladstone Pacific Nickel Ltd [2011] NSWSC 1235; (2011) 86 ACSR 432 at [57], Ball J observed that: "In considering what is in the best interests of the company, it is necessary to consider the prospects of success of the action, the likely costs and likely recovery if the action is successful and likely consequences if it is not. One relevant matter in considering these issues is the nature of any indemnity the applicant has offered to the company if the action is brought and the likelihood that the company will recover under that indemnity. It is also necessary to consider the resources the company will be required to devote to the action and the resources it has available, together with the effect that the action may have on other aspects of its business. Finally, it is necessary to consider whether some other remedy is available to the applicant so as to make the proposed action unnecessary from its point of view ..." 16The evidence before me indicates that two units of significant value have been transferred by the Company to PX and YCJ without payment being made for them; a large number of payments have been made by the Company which were not authorised by HJ or by any meeting of the Company's board; and those payments are not presently explained, and have not been explained despite diligent efforts by the Plaintiffs over an extended period to obtain such an explanation. The prospects of success of the proceedings are substantial, particularly in circumstances that the Defendants have not sought to lead evidence to explain their conduct, and the likely recovery would be to the advantage of the Company, its shareholders and its creditors. There is no evidence of any adverse impact to the Company of commencement of the proposed proceedings. HJ and YX have offered to indemnify the Company against the costs of the proceedings, although, having regard to the findings which I reach below, those costs will likely be minimal. I am satisfied that it has been established that the grant of leave is in the Company's best interests. 17The fourth criterion for the grant of leave, under s 237(2)(d) of the Corporations Act, is whether there is a serious question to be tried in the proceedings. Whether there is a serious question to be tried requires the application of the same test as applied by the Court in determining whether to grant an interlocutory injunction: Swansson v R A Pratt Properties Pty Ltd above at [25]; Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 ACSR 534; South Johnstone Mill Ltd v Dennis [2007] FCA 1448; (2007) 163 FCR 343; 64 ACSR 447 at [78]; Vinciguerra v MG Corrosion Consultants Pty Ltd [2007] FCA 503; (2007 61 ACSR 583 at [140], upheld on appeal in MG Corrosion Consultants Pty Ltd v Vinciguerra [2011] FCAFC 31; (2011) 82 ACSR 367; Re Gladstone Pacific Nickel Ltd above at [56]. The matters to which I have referred above and the absence of any evidence by the Defendants in response indicates that there is a serious question to be tried in these proceedings. The Defendants did not seek to contend to the contrary. 18The fifth requirement for the grant of leave is that, at least 14 days before making the application, HJ gave written notice to the Company of her intention to apply for leave and the reasons for applying, or alternatively if it is appropriate to grant leave although that provision is not satisfied. In the present circumstances, HJ had given such notice through the extended correspondence between her solicitors and the Defendants' solicitors and, even if such notice had not been given, it would be appropriate to grant leave notwithstanding that provision was not satisfied. 19Accordingly, I consider that each of the requirements for the grant of leave under s 237 of the Corporations Act are satisfied and I will grant leave for HJ to bring these proceedings on behalf of and in the name of the Company in respect of the specified causes of action. Application for judgment under UCPR rr 12.7(2), 13.1 or s 61 of the Civil Procedure Act 20By Amended Interlocutory Process filed on 24 May 2012, HJ also seeks judgment granting the final relief sought in specified paragraphs of the Further Amended Originating Process dated 9 September 2011, which has since been superseded by a Second Further Amended Originating Process which was filed by leave pursuant to orders made by the Court on 24 May 2012. 21Section 61 of the Civil Procedure Act 2005 (NSW) allows the Court to give such directions as it thinks fit for the speedy determination of the real issues between the parties to the proceedings. Section 61(3) provides that, if a party to whom such a direction has been given fails to comply with it, the Court may, by order, inter alia, strike out any defence filed by a defendant and give judgment accordingly, or strike out any document filed by any party in whole or in part, and make such other order or direction as it considers appropriate. The terms of that section are not limited to an order in respect of a pleading, and allow such an order to be made in respect of "Points of Defence" whether or not they should strictly be treated as pleadings. The issues which arose in Edenden v Bignell [2008] NSWSC 666 and Wily v King [2010] NSWSC 352 from the fact that proceedings under the Supreme Court (Corporations) Rules 1999 (NSW) are commenced by Originating Process therefore do not arise in this application. 22Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 12.7(2) provides that, if a defendant does not conduct its defence with due dispatch, the Court may strike out the defence, either in whole or in part, or make such other order as the Court thinks fit. I would read this rule as applying to the conduct of a defence, irrespective of whether a Defence or "Points of Defence" have been filed. The power to strike out a Defence under this rule has been exercised in respect of multiple failures to comply with directions: Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274. In exercising this power, I must also have regard to the overriding objective in s 56 of the Civil Procedure Act and the requirement in s 59 of the Civil Procedure Act to avoid delay beyond that which is reasonably required for the interlocutory activities necessary for a fair and just determination of the issues in dispute. 23In Bi v Mourad [2010] NSWCA 17 at [47], Allsop P observed that: "Delay is a feature of litigation intended to be eliminated as far as possible by the statutory enactment of the regime in the Civil Procedure Act. ... The reforms that have taken place under the Civil Procedure Act and the evident attempt by courts to ensure efficiency can be seen not merely to reflect worthy efforts for efficiency but also to be steps vital for the provision of timely individual justice." 24In Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2010] NSWSC 445, Palmer J ordered the dismissal of proceedings under Civil Procedure Act s 61 and UCPR r 12.7. In his subsequent judgment in Chahwan v Euphoric Pty Ltd t/as Clay & Michel (No 2) [2010] NSWSC 1062, Palmer J observed that: "A court will not readily [take] the drastic step of dismissing proceedings absolutely under s 61(3)(a) CPA for a plaintiff's failure to comply with the court's directions if the lesser sanction of striking from the list under s 61(3)(b) or some other action contemplated in s 61(3)(c)-(g) will be sufficient to induce a plaintiff's timely compliance and move the case towards a quick, just and cheap determination of the real issues. But the power to dismiss completely and unconditionally given by s 61(3)(a) is there to be used in the appropriate case, when the considerations of justice and fairness to both sides dictate ..." 25In 7Steel Building Solutions Pty Ltd v Wright [2011] NSWSC 779 at [18], McDougall J considered the position where a defendant was in serious breach of court orders and held that the Court's power under s 61(3) had been enlivened and observed that: "That is a power that is to be exercised in accordance with the dictates of justice, but informed by the overriding purpose set out in s 56 of the Civil Procedure Act . In making an order as serious as the one sought, the court is required to consider the possible injustice that would be occasioned to the defendant if his defence were struck out, with the injustice that has been caused to the plaintiff by the defendant's non-compliance. Had the non-compliance continued over a longer period of time, had it been more repeated, or had it been even more clearly aimed at frustrating the plaintiff's legitimate attempts to prepare its case, a ground might be made out for the exercise of the power. But in the present case, I think, balancing the interests of justice between the parties does not require such a serious step to be taken." In that case, his Honour did not grant default judgment under Civil Procedure Act s 61, but allowed one last opportunity to comply with the Court's orders. 26The application of s 61 of the Civil Procedure Act and UCPR r 12.7 was also considered in Zhu v Yingle Culture Exchange (Aust) Pty Ltd [2011] NSWSC 1339, where the defendants had failed to comply with directions requiring them to prosecute the production of an appropriate discovery list and documents in their possession and there had been a failure to prosecute the proceedings on behalf of the defendants. Rothman J pointed to the requirements under s 56-58 of the Civil Procedure Act for the Court to facilitate the just, quick and cheap resolution of the real issues between the parties and noted at [21] that: "The terms of the Civil Procedure Act and the recognition of the courts in modern litigation is that case management forms as important a task in the delivery of justice as does providing to parties the continuing ability to comply with that which is necessary to run their case." His Honour also pointed to the relevance of the expression "justice delayed is justice denied" where the plaintiffs in that case claimed for monies relating to the conduct of a business in which it was alleged that the defendants took money under false pretences, and there had been no answer to the allegations made. In that case, his Honour ultimately did not make orders striking out the defence, but instead made self-executing orders operating from a future date. 27In the present case, there has been a serious and prolonged non-compliance with the Court's orders by the Defendants. On 13 June 2011, the Defendants were ordered to provide verified lists of discovery by 13 June 2011 and they did not comply with that order. On 19 September 2011, the Court made a second order that the Defendants give verified discovery by 30 September 2011 and they also did not comply with that order. On that date, the Defendants were directed to file any amended defence by 30 September 2011 and they have not done so. The Defendants were also directed to serve evidence and they have not done so. On 12 December 2011, Barrett J directed that the Plaintiff have leave to serve an application for summary determination of the proceedings by reason of these defaults. 28The Defendants have not sought to file any evidence in explanation of the defaults before me, nor has any suggestion been made before me that a short extension of time would lead to the result that a verified list of documents would be served, nearly 12 months after it had previously been required, or that affidavits would be served. I more readily draw the inference that default is likely to continue and that there would be no useful purpose to be served in making further orders for the Defendants to take any step in the proceedings, where they have neither complied with the Court's previous orders nor offered any explanation of their non-compliance or any indication that, granted further time, they would comply with the Court's orders in the future. I consider that this is therefore a proper case in which to make orders under s 61 of the Civil Procedure Act and UCPR r 12.7(2) striking out the Defence filed by the Defendants. 29UCPR r 13.1 in turn provides for summary judgment in respect of a plaintiff's claim for relief. The applicable principles in respect of a summary judgment application are well established. Before a Court will give summary judgment, it is necessary for the Court to reach a high level of satisfaction that the order should be made, and the power to order summary judgment should be sparingly employed: Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129; Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598 at 602-683; Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552; 173 ALR 665; Cosmos E-C Commerce Pty Ltd v Bidwell & Associates Pty Ltd [2005] NSWCA 81 at [37]-[38]; Westpac Banking Corporation v Lahood [2011] NSWSC 1057 at [15]. While UCPR r 13.1(b) requires that evidence be adduced by the Plaintiff from a responsible person of a belief that the Defendants have no defence to the claim, a failure to comply with that requirement will not necessarily justify refusal of the application, where the Court is in fact satisfied that there is no defence to the claim: Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11,512. 30The question whether summary judgment should be given in favour of the Plaintiffs and the Company needs to be approached on the basis that, as I have noted above, HJ and YX have filed extensive evidence to support their and the Company's claims and the Defendants have not filed either an Amended Defence in accordance with directions made by the Court or any substantive evidence over an extended period. This is not a matter where a defence could not exist to the relevant claims, as a matter of fact, but instead a matter where the Defendants have not sought to establish such a defence by evidence, whether in accordance with the Court's original directions, or in the period after Barrett J granted leave for the Plaintiffs to seek summary judgment in the proceedings or at the hearing before me. 31I will therefore address the application for summary judgment on the basis that the evidence which would be available at a final hearing is that evidence which has now been filed by the Plaintiffs. The question of summary judgment also needs to be approached on the basis that various areas where information is unknown to the Plaintiffs, for example the identity of persons to whom payments were made by the Company, reflect the fact that the Defendants have failed to comply with orders made by the Court for discovery over an extended period and remained in breach of those orders when the application for summary judgment was heard before me. Claim for breach of statutory duties and breach of fiduciary duty against KQR and PX 32The Plaintiffs allege (Second Further Amended Originating Process [24]-[26]) that unit 16 in the development undertaken by the Company was transferred to YCJ for a stated purchase price of $485,000 but in fact for no consideration, or alternatively in circumstances that YCJ had breached the sale agreement by failing to pay the purchase price, and that YCJ holds unit 16 on trust for the Company. It is also alleged that unit 20 in that development was transferred to PX for a stated purchase price of $520,000 but in fact for no consideration, or alternatively in circumstances that PX had breached the sale agreement by failing to pay the purchase price and that PX holds unit 20 on trust for the Company. The Defendants have not led evidence to contest these allegations. 33The Plaintiffs' also allege (Second Further Amended Originating Process [35]-[44]) that, between 17 December 2010 and 18 February 2011, KQR and PX approved a series of withdrawals of the Company's funds to themselves, YCJ and various unknown parties, without the knowledge or authority of HJ as a director of the Company, without the Company's authority and not for a proper purpose. The Defendants have also not led evidence to contest these allegations. 34The Plaintiffs allege that the transfer of units 16 and 20 and the unauthorised payments made by the Company contravened ss 181-182 of the Corporations Act and breached fiduciary duties owed by KQR and PX to the Company. I have had regard to the fact that these are serious allegations which must be assessed by reference to the requirement for clear and cogent proof under Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336. 35Section 181(1) of the Corporations Act requires a director or other officer of a corporation to exercise his or her powers and discharge his or her duties in good faith in the best interests of the corporation, and for a proper purpose. In Chew v R (1991) 4 WAR 21; 5 ACSR 473 at 499, Malcolm CJ summarised the requirements of that duty as being that directors (1) must exercise their powers in the interests of the company, and must not misuse or abuse their power; (2) must avoid conflict between their personal interests and those of the company; (3) must not take advantage of their position to make secret profits; and (4) must not misappropriate the company's assets for themselves. The second limb of s 181(1), requires that directors' powers may be exercised only for the purpose for which they were conferred and not for any improper purpose: Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187 at 218; 14 ACSR 109; 12 ACLC 674. Whether a director acted for a proper purpose within s 181 is to be determined objectively: Re HIH Insurance Ltd and HIH Casualty and General Insurance Ltd; Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253; 41 ACSR 72; 20 ACLC 576 at [738]-[739]. 36Section 182(1) of the Corporations Act prohibits a director, secretary, officer or employee of a corporation from improperly using his or her position to gain an advantage for himself or herself or someone else, or cause detriment to the corporation. An objective standard is to be applied in determining what amounts to an 'improper' use of position: R v Byrnes [1995] HCA 1; (1995) 183 CLR 501; 17 ACSR 551; R v Towey (1996) 21 ACSR 46. In Doyle v Australian Securities and Investments Commission [2005] HCA 78; (2005) 227 CLR 18; 223 ALR 218; 56 ACSR 159, the High Court observed that the relevant conduct would be improper if it amounted to: "a breach of the standards of conduct that would be expected of a person in [the director's] position by reasonable persons with knowledge of the duties, powers and authority of his position as director, and the circumstances of the case, including the commercial context." 37The rule against conflict of interest requires that a director avoid situations in which there is a "real and sensible possibility" of conflict between the director's personal interests and the company's interests, and a director who makes a profit by use of his or her position as a director or who uses information acquired as a director to benefit himself or herself is liable to account to the company for that profit or benefit: Furs Ltd v Tomkies [1936] HCA 3; (1936) 54 CLR 583; Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134; [1942] 1 All ER 378; South Australia v Clark (1996) 66 SASR 199; 19 ACSR 606; 14 ACLC 1019. 38The uncontested evidence establishes that the withdrawals were made, and that they were made without the Company's authority in that HJ had not consented to those withdrawals, either formally or informally; there is no evidence that they had been otherwise approved by any proper corporate process within the Company; and the Defendants have not led evidence that the withdrawals either had such corporate approval or were for a proper purpose. I therefore consider that a breach of ss 181-182 of the Corporations Act and the corresponding fiduciary duties by KQR and PX has been established and that I should make such declarations in respect of KQR and PX. Claim for breach of directors duties and breach of fiduciary duty against WCJ 39The Plaintiffs also seek a declaration of contravention of ss 181-182 of the Corporations Act and breach of fiduciary duty in respect of WCJ who ceased to be a director of the Company on 20 December 2010. Only one relevant withdrawal was made in the period in which he was a director, the amount of $10,000 paid to an unknown payee. I consider that I should make that declaration in respect of YCJ for the same reason as the declarations in respect of KQR and PX, although it only has operation over a shorter period and in respect of a single withdrawal. Claim for knowing assistance against YCJ 40Alternatively, it is alleged (Second Further Amended Originating Process [43]-[44]) that YCJ knew that payments of $274,348.22 made to him on 24 December 2010 and of $300,000 made to him on 31 December 2010 made were made without the Company's authority and/or were caused to be made by KQR and PX in breach of fiduciary duties owed by them to the Company and that he assisted each of, and participated in, the breaches by KQR and PX of fiduciary duties owed to the Company. No claim for knowing receipt was made in respect of these matters. 41A third party may be liable as a constructive trustee if he or she knowingly assists a trustee in a dishonest and fraudulent design: Barnes v Addy (1874) LR 9 Ch App 244. In order to make good such liability, the Plaintiffs must first establish that YCJ in fact assisted KQR and PX in a breach having the relevant character. However, there was no evidence that YCJ took any step to assist or facilitate any such breach of duty by KQR and PX or had any involvement in that breach other than by receiving the monies paid by the Company and there is no evidence as to the circumstances in which those funds were received. In my view, a third party's receipt of funds paid by a director in breach of duty, where the third party has taken no step to facilitate or associate himself or herself with that breach, may give rise to a claim for knowing receipt, but does not, without more, establish a claim for knowing assistance. The claim for knowing assistance against YCJ must fail for that reason. 42There is also a second difficulty with that claim. The Australian formulation of the knowledge requirement for knowing assistance is found in the High Court's decision in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373. The Privy Council took a different approach in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, holding that dishonesty on the part of a third party was sufficient to establish liability, irrespective of the fiduciary's state of mind, if the relevant breach of duty by the fiduciary was established. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, the High Court noted that Royal Brunei differed from Consul Development in omitting the requirement that a fiduciary had engaged in dishonest and fraudulent design and that Australian Courts should continue to apply that requirement until the High Court further dealt with the matter (at [160]-[164]). The Court also observed that Consul Development was authoritative as to the question of knowledge required to satisfy the second limb of Barnes v Addy, requiring (1) actual knowledge or (2) wilfully shutting one's eyes to the obvious or (3) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make or (4) knowledge of circumstances which would indicate the facts to an honest and reasonable man, and held that mere knowledge of circumstances which would put an honest and reasonable man on inquiry is not sufficient to establish liability for knowing assistance. The pleading alleges that YCJ knew or ought to have known that the payments were made without authority or in breach of fiduciary duty but does not allege knowledge of dishonesty, either to the requisite standard or at all. The claim for knowing assistance against YCJ must also fail for that reason. Claim for monies had and received against KQR and YCJ 43A third claim is made (Second Further Amended Originating Process [45]-[52]) against each of KQR and YCJ that each of them received specified payments to which they were not entitled from the Company and were unjustly enriched by the receipt of those payments. 44No substantive submissions were made as to whether a claim for unjust enrichment can be used as an adjunct to a claim for breach of directors duties against KQR in this way and I do not consider it appropriate to grant summary judgment on that basis in the absence of such submissions. 45The Plaintiffs also plead an alternative case of unjust enrichment against YCJ, on the basis that the Company paid him the amount of $578,348.22 and was under no legal or other obligation to do so and he was not, whether at law or in equity, entitled to retain the money or the benefit of it. However, I consider that I am bound by the High Court's decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd above to proceed on the basis that a claim in unjust enrichment should not be permitted in substitution for a claim for knowing receipt of monies paid in breach of directors' duties under the first limb of Barnes v Addy (which, as I noted above, was not brought). Accordingly, I should not grant summary judgment in respect of that claim. Claims for compensation and accounting 46The Plaintiffs sought orders that KQR and PX, jointly and severally, pay to the Company the amount of the payments made during the period between 17 December 2010 and 18 February 2011 identified in paragraph 35 of the Further Amended Points of Claim. That order is a more precise formulation of the claims for damages and equitable compensation in paragraphs 10 and 11 of the Second Further Amended Originating Process. The Plaintiffs accepted in the course of oral submissions before me that the amount contained in that order should be $2,364,995.70 (a reduction from the amount originally specified in draft orders which were provided) to reflect the incorrect treatment of one credit to the account as an unauthorised payment, and the fact that a challenge to one payment was not pressed when the Defendants indicated that they would otherwise have objected to the filing of the Second Further Amended Originating Process. 47The basis for that order is established where the relevant payments were made in breach of directors duties or breach of fiduciary duty, without the company's authority and not for a proper purpose, and the Defendants have not led any evidence to suggest that any such payment was in fact for a proper purpose of the Company. Although the Defendants' solicitors had asserted, in correspondence, that several of those payments were for proper expenditures in relation to the development, the Defendants did not seek to make good that assertion by evidence led in the proceedings or in the application heard before me. 48The Plaintiffs seek a corresponding order against YCJ, jointly and severally with KQR and PX, for the amount of $10,000 being the single payment identified in paragraph 35 which was made between 17 December 2010 and his resignation as a director on 20 December 2010. I would make that order on the same basis as the corresponding orders against KQR and PX. 49The Plaintiffs seek an order that KQR, PX and YCJ account to the Company for all proceeds of sales of property of the Company and for all loan proceeds received by the Company and that that matter be referred to an Associate Judge for that purpose and further directions. That order reflects Order 9 sought in the Second Further Amended Originating Process. I would make such an order consequential upon the declarations which I have made in respect of breach of fiduciary duty by each of KQR, PX and YCJ. However, before orders for an accounting are made, I would need to hear further submissions as to whether such an accounting should occur in common form, so that KQR, PX and YCJ are required to account for what has actually been received and disposed of, or should take place on the basis of wilful default so that they must also account for what should have been received if their duties had been properly discharged: Glazier Holdings Pty Ltd v Australian Men's Health Pty Ltd (No 2) [2001] NSWSC 6 at [37]-[39]; Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; (2002) 54 NSWLR 146 at [65]-[66]; Re Estate of Northey (dec'd); Northey v Juul [2005] NSWSC 933; White v Thompson [2011] NSWCA 161 at [44]ff. Claim for proprietary remedies 50In the Second Further Amended Originating Process, the Plaintiffs sought a declaration that YCJ holds unit 16 on trust for the Company and that PX holds unit 20 on trust for the Company, and orders that PX and YCJ respectively do all things necessary to transfer title to the units to the Company. The claim in respect of those units is founded on the basis that unit 16 was transferred to YCJ and unit 20 to PX for no consideration. It is therefore not dependent on the claim for knowing assistance against YCJ as to which I did not order summary judgment for the reasons noted above. 51In Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105, the High Court held that money given by a thief to a third party who received that money as a volunteer could be recovered by the victim of the theft although the third party had not participated in the theft. The same principle is applicable where the transfer of units 16 and 20 took place under the sale contracts but YCJ and PX did not pay the stated consideration, for the reasons explained by the Court of Appeal of Vanuatu in Barrett & Sinclair v McCormack [1999] VUCA 11, which was approved by White J in Orix Australia Corporation Ltd v Moody Kiddell & Partners Pty Ltd [2005] NSWSC 1209. The Court there referred to Neste Oy v Lloyds Bank plc [1983] 2 Lloyd's Rep 658; Re Goldcorp Exchange Ltd [1995] 1 AC 74; Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669; Cowern v Nield [1912] 2 KB 419; Stocks v Wilson [1913] 2 KB 235, and Bankers Trust Co v Shapira [1980] 1 WLR 1274 and observed that: "The fraud here goes to the heart of the contract resulting in a total failure or absence of consideration. The appellants in essence provided nothing in exchange for the respondent's money. ... This amounted to theft, the taking of something for nothing in return. The taking of something without anything in return, not qualifying as a gift or some other lawful assignment, is the very basis for the imposition of constructive trusts in the above cases of Nest Oy, Cowern, Stocks and Bankers Trust. In Nest Oy, the payee received money when it knew it could not perform the contract. Likewise, the payee in Cowern provided the payer with nothing in return as the goods the payee supplied were worthless. Further, Cowern, like Stocks, are cases involving infants who could not at law contract for non-necessities. The promises of infants were not legally enforceable against them by the other party. Thus, these infants provided no consideration at the formation of executory contracts where consideration is the exchange of legally enforceable promises. There was an absence of consideration as the party contracting with the infant received nothing in exchange for its promise to provide and subsequent provision of property. The infants in Cowern and Stocks had fraudulently misrepresented their age. The fraud of the infants in Cowern and Stocks went to the heart of the contract as it concerned their ability to contract and provide consideration. In like fashion, though the appellants had fraudulently misrepresented the true value of the shares in an arms length vendor-purchaser transaction, their fraud went to the heart of the contract, resulting in the total failure or absence of consideration. [The vendor] was getting something for nothing. In Bankers Trust, the fraudulent parties had defrauded the bank with the use of forged cheques. Again, there was the taking of something without something in return. In every case, a proprietary remedy was appropriate. 52In Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589; (2007) 63 ACSR 429 at [40]-[41], White J summarised the relevant principles as follows: "Where property is stolen, the property is trust property in the hands of the thief and can be traced into the hands of a third party who receives the property otherwise than as a bona fide purchaser of the legal estate for value without notice. The property is trust property in the hands of the thief because the thief is bound in conscience to hold the property on behalf of its true owner. Whether the trust is characterised as a resulting trust (Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75; [2004] NSWCA 82 at [103]-[117]), or as a constructive trust (Westdeutsche Landesbank v Islington London Borough Council per Lord Browne-Wilkinson at 716), the trust is of an institutional rather than a remedial character. It arises because the conscience of the thief is bound. In the same way, where property is acquired by fraud and there is a complete failure of consideration, the trust arises immediately on the receipt of the property: Orix Australia Corporation Ltd v Moody Kiddell & Partners Pty Ltd [2005] NSWSC 1209 at [155]-[156] and cases cited. So, in Neste Oy v Lloyds Bank plc [1983] 2 Lloyd's Rep 658, referred to with apparent approval in Re Goldcorp Exchange Ltd [1995] 1 AC 74 at 104; [1994] 3 NZLR 385 at 404, where the payee received payment from its principal of moneys which were not impressed with an express trust, but which were to be used in performance of a contract which the payee knew could not take place, the payee held the payment on trust for the payer from the time of its receipt. The circumstances which created the trust in Neste Oy were that the payee knew (as was the fact) that there could be no performance under its contract, so that there was a total failure of consideration for the payment, and the payment could not in conscience be retained. The trust was an institutional trust which attached to the moneys from the time of receipt." 53In Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230 at [92], Allsop P noted that: "a person entirely innocent of a fraud who comes to know that he or she has received and still retains the proceeds of, or taken advantage of, a fraud to which he or she was not party, cannot knowingly seek to retain those proceeds or that advantage, without, in effect, becoming a party to that fraud and liable accordingly..." Allsop P also observed at [154]-[155] that a volunteer who receives property which he know belongs to another can be called upon "to account as a constructive trustee (because he or she upon discovery of the fund or asset belonging to another has become one)" and that: " ... the trust rests on the existence of property rights and in that sense is not purely remedial. The court declares that a trust exists and existed (though the innocent volunteer did not know it) ..." 54In my view, the transfer of the relevant units in breach of fiduciary duty to PX and YCJ who received them for no consideration fall within these principles. A question arises as to whether the High Court's decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd above excludes the application of these principles in cases of knowing receipt, where a claim under Barnes v Addy would be available. That question is resolved by the Court of Appeal's decision in Heperu Pty Ltd v Belle, where Allsop P (with whom Campbell JA and Handley AJA agreed in this regard) held that nothing in Farah Constructions was intended to deny relief in a case where a volunteer held property in respect of which a claimant had a proprietary interest (at [159]-[162]). 55An issue may also arise in cases of this character as to the application of s 42 of the Real Property Act 1900 (NSW) which relevantly provides that: "Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded ..." [emphasis added] The reference to "fraud" in this section is "to be construed as meaning something more than mere disregard of rights of which the person sought to be affected had notice, and as importing something in the nature of personal dishonesty or moral turpitude" and involves "dishonesty on the part of the registered proprietor in securing his registration as proprietor": Stuart v Kingston [1923] HCA 17; (1923) 32 CLR 309 at 329; Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604 at 614; Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 at [168]; P Butt, Land Law, 6th ed, Thomson Reuters, 2010 at [2069]. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd, the High Court held that only certain legal or equitable causes of action against a registered proprietor operate as an in personam exception outside the language of s 42(1): see also Super 1000 Pty Ltd v Pacific General Securities Ltd [2008] NSWSC 1222; (2008) 221 FLR 427; Break Fast Investments Pty Ltd v Giannopoulos (No 5) [2011] NSWSC 1508. However, quite apart from the fact that the Points of Defence in these proceedings have been struck out for the reasons noted above, no defence relying on s 42 of the Real Property Act was raised in this case (as was also the case in Heperu Pty Ltd v Belle). I therefore need not address this issue. 56For these reasons, I consider that the Plaintiffs are entitled to the declarations which they have sought that YCJ holds unit 16 on trust for the Company and that PX holds unit 20 on trust for the Company, and are entitled to orders that PX and YCJ respectively do all things necessary to transfer title to the units to the Company. 57The Plaintiffs alternatively sought orders declaring that unit 20 is charged in favour of the Company in respect of the amount of compensation which KQR and PX are liable to the Company and that unit 16 is charged in respect of the amount of $588,348.22 to which, the Plaintiffs contended, YCJ was liable to the Company. The Plaintiffs also sought orders which formulated charges over the relevant units in particular amounts, reflecting other payments made by the Company to the relevant Defendants. The Plaintiffs also sought orders granting a liquidator of the Company all necessary powers of sale over the relevant properties to realise such charges. I consider that the question of the powers available to a liquidator is better addressed in circumstances where the liquidator has the opportunity to be heard, if he seeks to do so, in respect of these matters. The Plaintiffs made clear that, if the Court was not minded to grant specific powers of sale over the relevant units to a liquidator at this point, then they sought the imposition of a constructive trust in the manner sought in the Second Further Amended Originating Process and I will take that course. Declarations as to amounts owed by the Company to the Plaintiffs 58The First and Third Plaintiffs seek a declaration that they are owed $1.2 million together with interest at 0.9% per month from 18 November 2008 to the date of payment by the Company. This order reflects paragraph 19 of the relief claimed in the Second Further Amended Originating Process. The Plaintiffs also seek an order that payment of interest at the prescribed amount be made from the date of the relevant payments being made from the Company's account to date of judgment. I do not consider that I should make such declarations or orders on a summary basis where the Company's role in these proceedings has, in substance, been that of a plaintiff rather than that of a defendant; and the Plaintiffs have had the conduct of the Company's case and there has been no representation of its (or third party creditors') interests so far as the Plaintiffs bring claims against it. It will be open to the Plaintiffs to lodge a proof of debt for the claimed debts in the liquidation of the Company which will follow from the orders which I will make below. Oppression 59The Plaintiffs also seek orders in respect of oppression under s 233 of the Corporations Act. Section 232 of the Corporations Act provides that the Court may make an order under s 233 if: (a) the conduct of a company's affairs; or (b) an actual or proposed act or omission by or on behalf of a company; or (c) a resolution, or a proposed resolution, of members or a class of members of a company; is either: (d) contrary to the interests of the members as a whole; or (e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity. 60These sections and their predecessors extend to conduct involving "commercial unfairness" or where the conduct complained of involves a visible departure from the standards of fair dealing and a violation of the conditions of fair play, or a decision has been made so as to impose a disadvantage, disability or burden on the plaintiff that, according to ordinary standards of reasonableness and fair dealing, is unfair: Morgan v 45 Flers Avenue Pty Ltd [1985] HCA 68; (1986) 10 ACLR 692 at 704; Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459; Dynasty Pty Ltd v Coombs (1995) 59 FCR 122; 138 ALR 64 at 72; Liosatos v Kefalinian Brotherhood "O Kefalos" of NSW [2000] NSWSC 1138. 61In Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672; 19 ACLC 856, Spigelman CJ observed that the statutory formulation of "oppression" confers a wide-ranging remedial jurisdiction on the court and that jurisdiction should not be confined by technical distinctions. His Honour noted that the individual elements of oppression, unfair prejudice and unfair discrimination referred to in the statutory formulation illuminate each other and each reflect the essential criterion of commercial fairness. Exclusion from a legitimate expectation of participation in a company's management may be oppressive, when combined with a failure to make a reasonable offer to buy the plaintiff's shares: O'Neill v Phillips [1999] 1 WLR 1092 at 1104; Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343 at [109]-[110]; Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 at [42] per Austin J. 62In my view, a compelling case for relief for oppression has been established having regard to the matters to which I have referred above, including the exclusion of HJ from the Company's management and the unauthorised payments and unauthorised transfers of property to which I have referred. I do not understand the Plaintiffs to seek such relief under s 233 of the Corporations Act if an order that the Company be wound up is made under s 461 of the Corporations Act, and I have found that such an order should be made. Application for winding up orders 63The Plaintiffs seek an order under s 461 of the Corporations Act that the Company be wound up, which reflects Order 5 sought in the Second Further Amended Originating Process. 64The Court may make an order under the just and equitable ground under s 461(1)(k) of the Corporations Act by reason of mismanagement, misconduct or lack of confidence in the conduct and management of the company's affairs. An order for winding up may also be made on the just and equitable ground if a company was based on an association formed on the basis of a personal relationship involving mutual confidence, and that confidence has broken down or where a shareholder has been denied access to information or excluded from major decisions: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd above; Nassar v Innovative Precasters Group Pty Ltd at [322]. 65In my view, a compelling case for winding up the company on the just and equitable ground has also been established having regard to the matters to which I have referred above, including the exclusion of HJ from the Company's management and the unauthorised payments and unauthorised transfers of property to which I have referred, and I will make that order. Orders and costs 66The Plaintiffs seek an order that the Defendants pay their costs of the proceedings on an indemnity basis. It is not necessary to repeat the principles applicable to such an order at length. Those principles were summarised by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248 at 256-257 and by McDougall J in White Constructions (ACT) Pty Ltd (in liq) v G B White [2004] NSWSC 303 at [5]-[11] in a passage subsequently quoted in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324 at [24]. The summary of principles in Colgate-Palmolive Co v Cussons Pty Ltd above was in turn applied in Lahoud v Lahoud [2006] NSWSC 126 at [11] and in Ng v Chong [2010] NSWSC 127 at [18] and in Liverpool City Council v Estephan [2009] NSWCA 161 at [100], Giles JA observed that s 56 of the Civil Procedure Act adds emphasis to the occasion to depart from costs on an ordinary basis where a failure to properly conduct the proceedings has caused costs to be incurred unnecessarily. In my view, the history of default to which I have referred above warrants an order for costs against the Defendants on an indemnity basis. 67I direct the parties to submit agreed short minutes of order to give effect to this judgment within 14 days, if agreement can be reached between them, or otherwise to submit the respective orders for which they each contend and short submissions in respect of any differences between them. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 July 2012