Grace v Grace (No 7) [2013] NSWSC 1745

Supreme Court New South Wales

Medium Neutral Citation: Grace v Grace (No 7) [2013] NSWSC 1745 Hearing dates: 15 October 2013 Decision date: 15 October 2013 Jurisdiction: Equity Division Before: Brereton J Decision: Rulings on objections Catchwords: CORPORATIONS - examinations relating to insolvency - generally - objections Cases Cited: Grace v Grace [2012] NSWSC 976 Grace v Grace (No. 6) [2013] NSWSC 897 Category: Separate question Parties: David Alexander Grace (plaintiff) Deborah Sharon Grace (first defendant) Julienne Grace (second defendant) Nevilda Holdings Pty Ltd (third defendant) Nevilda Investments Pty Ltd (fourth defendant) Dutchie Pty Ltd (sixth defendant) Phoenix Rising Investments Pty Ltd (seventh defendant) Representation: Counsel: Mr Williams SC with Mr S Goodman (plaintiff) Mr Stewart (first, second, seventh defendants) Solicitors: James Tuite & Associates (plaintiff) Clinch Long Letherbarrow Pty Ltd (first, second & seventh defendants) File Number(s): 2006/ 259566

Judgment - EX TEMPORE 1HIS HONOUR: The Court is hearing an examination of the first defendant post the delivery of accounts pursuant to orders made on 9 November 2012 and before the plaintiff is required to give notice of surcharges, falsifications and objections in respect of those accounts. As I have observed in the course of argument, this examination is in the nature of discovery and while, for convenience, it is proceeding before the Judge who heard the trial and who is to take the accounts in the absence of an Associate Judge, such an examination might, as the cases to which I referred in Grace v Grace (No. 6) [2013] NSWSC 897 indicate, have proceeded before a Registrar or examining officer. 2Objection is taken to a question - but, more pertinently, to a line of questioning - on which counsel for the plaintiff has embarked, on the grounds of relevance. 3It is useful to remember that the orders for accounts (made on 9 November 2012) were relevantly, in the following form: 4 ORDER THAT an account be taken of the benefits derived by the First Defendant, as the accounting party, from the 667 cumulative preference shares in the Third Defendant whilst held by her. ... 17 ORDER THAT an account be taken of the benefits derived by the First Defendant, as the accounting party, from each of: a) the 1 cumulative preference share in the Third Defendant whilst held by her; b) the 1 ordinary share in the Fourth Defendant whilst held by her; c) the 1 ordinary share in the Sixth Defendant whilst held by her. ... 51 DIRECT THAT, in respect of the accounts referred to in Orders 4, 10, 17, 24 and 38 above: a) each of the accounting parties shall within 28 days of the date of these orders, serve on the Plaintiff their detailed account, verified by Affidavit of all of the benefits derived by them from the property the subject of the account; b) such verifying Affidavits are to annex or exhibit all documents relevant to the detailed account as are in the possession, custody or power of the accounting parties; c) the items of each said account and each statement shall be numbered consecutively; d) the Plaintiff be at liberty within 30 days after service upon him of the said accounts and statements, to apply to an Associate Judge of Equity Division to examine the accounting party or parties viva voce or upon interrogatories in respect of the said accounts and statements; e) the Plaintiff, within 30 days after service upon him of the said accounts, or within 30 days of the conclusion of the examination of the accounting party or parties referred to in direction, have liberty to file and serve upon the accounting parties his surcharges, falsifications and objections (if any) thereto; f) that all vouching be done out of Court prior to the matter being relisted; liberty to each party to apply on 3 days notice. 4The defendants' accounts contain and refer to dividends admitted to have been received by the first defendant in respect of the shares in question. The plaintiff wishes to contend that, for the purpose of the taking of accounts, the "benefits derived" from the shares in question are not limited to dividends, but extend to other direct and indirect benefits gained by virtue of the control that some of the shares in question gave in respect of the companies. It is said that it will become apparent that numerous payments not included in the accounts were made to the first defendant, sometimes denoted as dividends, sometimes as loans and sometimes in other capacities. 5It is also to be remembered that at the principal trial and in the judgment given on 23 August 2012 (Grace v Grace [2012] NSWSC 976) the plaintiff's oppression claim failed, and I concluded that the plaintiff had not established a case for relief for oppression. 6As it seems to me, the intent of the orders that an account be taken was not that the defendants be required to give, in effect, an account of their stewardship as directors while in control of the relevant companies, but that they be required to give an account of the particular benefits that they derived from holding the shares, when those shares and the benefits attached to them ought to have been held by the plaintiff and not by them. 7While it would be entirely permissible, in the course of this examination, for any payments that had been recorded or denoted as dividend in the original accounts but not now disclosed as dividend to be the subject of examination, and also for other payments to be examined on the basis that they ought to have been treated as dividend, I do not agree that the taking of accounts extends to include benefits not attached or not flowing from the rights attached to the shares, but rather flowing from the control that those shares gave. To take the other course would effectively reinstate the unsuccessful oppression case. 8For those reasons, I propose to disallow the line of questioning currently under objection.