Davis v Perry O’Brien Engineering Pty Ltd [2026] QSC 31

SUPREME COURT OF QUEENSLAND CITATION: Roy Steven Davis v Perry O’Brien Engineering Pty Ltd [2026] QSC 31 PARTIES: ROY STEVEN DAVIS (first applicant) COLLEEN DAVIS (second applicant) V PERRY O’BRIEN ENGINEERING PTY LTD ACN 077 375 207 (first respondent) R.B. PERRY INVESTMENTS PTY LTD ACN 607 303 248 (second respondent) M.G. O’BRIEN INVESTMENTS PTY TLD ACN 607 300 201 AS TRUSTEE FOR THE O’BRIEN INVESTMENT TRUST (third respondent) FILE NO/S: BS No 5928 of 2016 DIVISION: Trial Division PROCEEDING: Hearing ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 10 March 2026 DELIVERED AT: Brisbane HEARING DATE: 20 August 2025, 22 August 2025, further submissions filed 12 September 2025 and 18 September 2025 JUDGE: Kelly J ORDER: 1. The answer to the question identified in paragraph 2(a) of the orders made on 17 June 2025 is “No”. 2. The answer to the question identified in paragraph 2(b) of the orders made on 17 June 2025 is “No”. 3. It is declared that the amount of the net proceeds for which the first defendant is liable under Clause 2.2 of the Deed dated 9 December 2015 as referred to in -- 1 of 26 -- 2 paragraphs 3 and 4 of the judgment made in this proceeding on 11 December 2023 is $350,000. 4. I will hear the parties as to any further orders and as to costs. CATCHWORDS: EQUITY – EQUITABLE REMEDIES – ACCOUNTS AND INQUIRIES – where an earlier judgment ordered that an account be taken of the stock sale proceeds – where the judgment referred to an amount of $350,000 plus interest – whether on the proper construction of the judgment the account was capable of exceeding $350,000 PROCEDURE – INHERENT AND GENERAL STATUTORY POWERS – CROSS-CLAIMS: SET-OFF AND COUNTERCLAIM – where judgment had previously been entered on both a claim and counterclaim – where each party obtained monetary judgments and costs orders – whether the Court should exercise its inherent jurisdiction to order that the judgments and costs be set-off Australian Consumer Law (Schedule 2 Competition and Consumer Act) 2010 (Cth) ss 18, 236 Corporations Act 2001 (Cth) ss 440D, 500(2) Aristocrat Technologies Australia Pty Ltd v Allam [2017] FCA 812, cited Australian Energy Ltd v Lennard Oil NL (No 2) [1988] 2 Qd R 230, cited Commonwealth v Sanofi (2024) 282 CLR 30, cited Davis & Anor v Perry O’Brien Engineering Pty Ltd & Ors [2023] QSC 243, considered Davis & Anor v Perry O’Brien Engineering Pty Ltd [2025] QCA 18, considered Davis & Anor v Perry O’Brien Engineering Pty Ltd & Ors (No 2) (2023) 17 QR 313; QSC 281, considered D’Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1, cited Guardianship and Administration Tribunal v Perpetual Trustees Qld Ltd [2008] 2 Qd R 323; [2008] QSC 49, cited Miller v Director of Public Prosecutions (No. 2) [2004] NSWCA 249, cited State Rail Authority of New South Wales v Codelfa Construction Pty Ltd (1982) 150 CLR 29, cited R (Burkett) v London Borough of Hammersmith and Fulham [2004] EWCA Civ 1342, cited Rolleston Coal Holdings Pty Ltd v Graham Anthony McDonald [2024] QSC 310, considered University of Wollongong v Metwally (No. 2) (1985) 59 ALJR 481, cited -- 2 of 26 -- 3 COUNSEL: P McQuade KC with D Ananian-Cooper for the applicants D de Jersey KC for the respondents SOLICITORS: Project Legal for the applicants Shand Taylor for the respondents A hearing of separate questions [1] In July and August 2023, there was a trial of this proceeding. On 1 November 2023, the trial judge delivered reasons (“the initial reasons”)1 and made an order that the parties agree, or otherwise submit, forms of order to reflect the findings contained in the initial reasons. A further hearing followed on 27 November 2023. On 11 December 2023, the trial judge published further reasons (“the further reasons”).2 The second last paragraph of the further reasons provided as follows: “I will allow the parties some time to make appropriate calculations of interest to reflect the date of the judgment and to reflect my conclusions on the availability of set-off, and for a stay on execution of the judgment in favour of the second and third defendants to the extent of $350,000 plus interest pending the taking of an account of the stock sale proceeds which, if a monetary judgment for the amount to be accounted for, would have been the subject of an equitable set-off” [2] A draft form of judgment was annexed to the further reasons. [3] The final form of the judgment, as given, was as follows: “1. Judgment for the first and second plaintiffs against the first defendant in the sum of $299,152, plus interest in the amount of $127,538.14 up to and including 11 December 2023. 2. Judgment for the second and third defendants against the first and second plaintiffs in the sum of $1,526,798 plus interest of $650,923.22 up to and including 11 December 2023. 3. An order that the first defendant account to the plaintiffs for the net proceeds for which it is liable under clause 2.2 of the Deed dated 9 December 2015 being the net proceeds that it received from the use or sale of the Stock particularised in paragraph 38 of the amended statement of claim filed 3 July 2018 (CFI 46), insofar as the Stock. (a) was at the Birkdale and German Church sites and used by the first defendant for specific projects or sold; and (b) had been purchased, and either paid by or invoiced to the first defendant prior to 26 November 2015. 1 Davis & Anor v Perry O’Brien Engineering Pty Ltd & Ors [2023] QSC 243. 2 Davis & Anor v Perry O’Brien Engineering Pty Ltd & Ors (No 2) (2023) 17 QR 313. -- 3 of 26 -- 4 4. A declaration that any amount ordered to be paid by the first defendant to the plaintiffs following the taking of the account referred to in paragraph 3 above, plus interest on that amount at the pre-judgment interest rates applicable from time to time specified in Practice Direction 7 of 2013 from 23 December 2015, is to be set-off against the Judgment in paragraph 2 above. 5. The enforcement of the Judgment in paragraph 2 above be stayed to the extent of the Stock Proceeds Loan of $350,000 plus interest of $149,216.29 up to and including 11 December 20233, pending the finalisation of the account ordered in paragraph 3 above. 6. The sum of $202,208.07 paid into Court on 14 March 2017 plus any accretions be paid to the second and third defendants, in partial satisfaction of the judgment in paragraph 2 above. 7. The first defendant pay 70 per cent of the plaintiffs’ costs of and incidental to the claim to be assessed on the standard basis. 8. The plaintiffs pay 90 per cent of the defendants’ costs or and incidental to the counterclaim assessed on the standard basis.” [4] On 11 December 2023, the Court made directions for the filing and service of the account and verifying affidavit and any statement challenging the accuracy of the account. The matter of the account was listed before the registrar for directions. [5] The plaintiffs appealed from the order in paragraph 2 which gave judgment for the second and third defendants against the plaintiffs in the sum of $1,526,798 plus interest of $650,923.22 up to and including 11 December 2023. The trial judge had assessed the second and third defendants’ damages as the difference between the amount they paid for the shares and associated liabilities they discharged and the true value of the shares at the time of completion. The difference was in the amount of $1,646, 798. The final figure in the judgment of $1,526,798 represented a reduction of $120,000 as a set-off for a loan which the first defendant owed to the second plaintiff (“Mrs Davis”). On the appeal, the plaintiffs contended that the trial judge had not applied the correct measure of damages. They contended that the trial judge had applied the wrong legal test. They also advanced some alternative, less significant, challenges to the judgment. On 28 February 2025, the appeal was dismissed.3 [6] In the meantime, on 28 August 2024, the first defendant had entered voluntary administration. On 3 October 2024 it entered liquidation. Any proceeding in respect of the account was automatically stayed by operation of s 440D and then by s 500(2) of the Corporations Act 2001 (Cth). On 16 September 2024, the conduct of the account proceeding was adjourned by the registrar to a date to be fixed. [7] The parties remain in dispute as to the quantum of the account, the amount to be set- off and whether orders should be made setting off, variously, the judgment on the claim as against the judgment on the counterclaim and the costs orders. 3 Davis & Anor v Perry O’Brien Engineering Pty Ltd [2025] QCA 18. -- 4 of 26 -- 5 [8] On 31 January 2025, the plaintiffs filed an amended application (“the amended application”) which materially sought declarations in equity or the inherent jurisdiction of the court involving set-offs said to reduce or extinguish the plaintiffs’ debt to the second and third defendants arising by reason of paragraph 2 of the judgment. [9] As to the quantum of the account set-off, the plaintiffs contend that the amount of the account is $770,077.33. The second and third defendants concede that the amount is “at least $350,000” but contend that the account cannot exceed that amount. [10] Against that background, on 17 June 2025, the following separate questions were set down for hearing: (a) whether the account ordered by paragraph 3 of the judgment can exceed $350,000? (b) whether there should be orders in the inherent jurisdiction in the terms sought by paragraph 3 of the amended application? [11] The first defendant was served with the amended application and the plaintiffs sought leave to proceed against the first defendant. On 20 August 2025, I granted leave to proceed. The initial reasons [12] Pursuant to a written share sale agreement entered on 4 October 2015 (“the SSA”), the plaintiffs (“the Sellers”) agreed to sell all the shares in the first defendant (“the Company”) to the second and third defendants (“the Buyers”). The Buyers were the respective trustee companies of Mr Michael O’Brien (“Mr O’Brien”) and Mr Robert Perry (“Mr Perry”). The Company conducted an earthmoving and civil contracting business (“the Business”). The SSA was subject to a due diligence period and a finance condition. It was objectively contemplated that the Sellers would provide the Buyers with further financial information about the Company and the Business between the date of the SSA and the transfer of the shares. [13] By the SSA, the Sellers warranted that all written information to be given to the Buyers up to the transfer was true and accurate, that none of the information was misleading “in any material particular, whether by omission or otherwise”, that no information or details that would be material for disclosure to a prudent intending purchaser had been withheld or not disclosed, and that there were no undisclosed facts or circumstances that might reasonably be expected to materially and adversely affect the financial position, operations, profitability or prospects of the Company or the Business (collectively, “the accuracy warranty”). The Sellers also agreed to indemnify the Buyers in relation to any claim arising from any breach of a warranty given by them. [14] The SSA also relevantly provided that: “If, before Completion, the Sellers have knowledge or become aware of any matter or thing which has or may be considered by the [Buyers] (acting reasonably) to have a material effect on the profitability or the value of the Business or the Company, the … Sellers must -- 5 of 26 -- 6 immediately give notice to the [Buyers] fully describing the matter or thing and its likely effect on the Business.” [15] In addition to the accuracy warranty, by the SSA, the Sellers warranted to the Buyers that the ratio of the Company’s current assets to its current liabilities would be at least 1.25 to 1 (“the current asset warranty”). [16] As a result of matters that emerged during the due diligence, the Sellers and the Buyers made amendments to the SSA on 22 October 2015 and 23 November 2015. [17] On 9 December 2015, the Buyers and the Company and the Sellers entered a deed (“the 9 December Deed”). [18] Clause 2.2 of the 9 December Deed provided: “[The Company] will sell the Stock as soon as is possible and will pay the Stock Sale Proceeds to the Sellers as soon as it is received by [the Company]. The stock at Birkdale and the German Church site will be used for specific projects and payments will be made by [the Company] to the Sellers as soon when that Stock is put into the ground and a progress payment is received by [the Company] for that Stock. The Stock on the Land can be applied either to specific project or sold by [the Company]. [The Company] must obtain the Seller’s prior written approval (which must not be unreasonably withheld) of the terms on which it will sell the Stock before the Stock is sold. It is agreed that [the Company] will not repay any of the Assigned Amount until the Total Loan Repayments have been paid in full to the Seller’s and Colleen’s Loan has been repaid in full”. [19] Clause 2.3 of the 9 December Deed provided: “The Total Loan Repayments will be set-off against the Settlement Loan and once the Total Loan Repayments have been paid in full the Outstanding Loan Balance will be assigned by the Sellers equally to the then current directors of [the Company] for $1.00. The Settlement Loan is interest free, unsecured and repayable on the terms of this document”. [20] The trial judge found that the essence of the 9 December Deed was as follows: (a) the Sellers agreed to advance a “Settlement Loan” of $750,000 to the Company but also agreed to assign at settlement $400,000 of their entitlement to repayment of that loan to the incoming directors for a consideration of $1; (b) the parties agreed that the balance of the Settlement Loan would be repaid by the proceeds of sale of certain “Stock” identified in the 9 December Deed; (c) the Company agreed to repay the loan advanced by Mrs Davis to it of $120,000 by four $30,000 instalments. [21] During this period, the parties were also negotiating a “Sponsorship Agreement” whereby the Company would agree to sponsor the motor racing activities of the first plaintiff (“Mr Davis”). Historically, the Company had sponsored this “hobby” in the order of $100,000 per annum. In a commercial sense, the Buyers’ agreement to -- 6 of 26 -- 7 provide the sponsorship was a means by which the Sellers could derive some additional financial benefit from the sale over a five-year period. [22] The SSA, as amended, was due to complete on 23 December 2025. On that date, the Sellers and the Buyers entered into another agreement by way of a Deed of Variation which deleted item G of Schedule 1 to the SSA containing the current asset warranty and amended financing completion dates. [23] On 23 December 2015, transaction completed and the shares in the Company were transferred. [24] Between 3 November and 23 December 2015, the Sellers had provided information to the Buyers that was untrue, inaccurate and materially misleading. The Buyers were found to be entitled to recover damages from the Sellers for their breaches of the accuracy warranty. The Sellers’ conduct had occurred in trade or commerce and in contravention of s 18 of the Australian Consumer Law (“the ACL”). The Buyers suffered loss or damage because of the contravention. The Buyers were entitled to an appropriate order under s 236 of the ACL that would compensate them, in whole or in part, for that loss or damage. [25] The trial judge found that there was a concluded oral agreement which he referred to as the Oral Sponsorship Agreement. That agreement had been constituted by an offer and acceptance communicated at the settlement conference when the shares were transferred. On an objective analysis, there was an offer to proceed to settlement on the basis that the Buyers would sign the Sponsorship Agreement later that afternoon. However, no Sponsorship Agreement was signed that day or subsequently. [26] The Buyers acknowledged that some of the items of stock the subject of the 9 December Deed had been sold. The Buyers did not account for any item of stock that was sold. The trial judge found that the Sellers were entitled to an order for an account in relation to such stock.4 [27] One of the issues which fell to be determined concerned the meaning of “Stock Sale Proceeds” which was defined by the 9 December Deed to mean “the proceeds that [the Company] receives from the sale of the Stock”. [28] The trial judge reasoned as follows:5 “The remaining issue is the meaning of ‘Stock Sale Proceeds’, namely the amount that must be accounted for. The Sellers submit that in its context the proceeds refer to the value or gross sales that were achieved. The first point of reference is the definition in the Deed which refers to “the proceeds that [the Company] receives from the sale of the Stock”. The term “proceeds” differs from the value of the stock. Counsel for the Sellers submits that I should interpret the reference to ‘proceeds’ as being proceeds on a gross basis, rather than a net basis, because the communications at the time suggested that the parties were arriving at an agreed value of the stock. To the extent this extraneous evidence about value is relevant, it begs the question of the value to whom? In its 4 The initial reasons [512]. 5 Ibid [513] to [514]. -- 7 of 26 -- 8 commercial context, the purpose of clause 2.2 was to repay the $350,000 portion of the Settlement Loan by the payment of proceeds, not by way of an accounting for value. Clause 2.2 obliged [the Company] to pay the proceeds as soon as they were received. I am inclined to interpret ‘proceeds’ as referring to net proceeds after deduction of costs associated with the sale. In summary, the Sellers have established an entitlement to an order for an account of the Stock Sale Proceeds … the relevant accounting is for the net proceeds that were received by [the Company] from the sale of that stock”. The further reasons [29] Following the publication of the initial reasons, a further hearing occurred on 27 November 2023. [30] At the trial, the parties had prepared a document headed “Agreed List of Issues In Dispute”, which had been intended to be a working document for the preparation of submissions after the close of evidence and was not a substitute for pleadings. That list included as the last issue: “As to the whole of the [Sellers’] claims against the [Buyers], whether the [Sellers] are entitled to set-off any amount payable to them under those claims against any amounts payable under the [Buyers’] claim, by the [Sellers] to: (a) [the Company] and/or (b) [the Buyers]” [31] The issues which arose for determination at the further hearing may be outlined as follows. The Sellers submitted that the judgment sums on the claim should be set-off against the judgment sum on the counterclaim, whereas the defendants contended that there should be no set -off. The costs of the claim and counter claim were in issue. There was an issue as to whether to release funds held in court. There was then an issue which the trial judge described as follows:6 “The [Sellers] also seek a stay of enforcement of the Buyers’ judgment to the extent of $350,000 being the amount of “the Stock Proceeds Loan”, plus interest. They seek such a stay until the proceeds of sale of certain stock are accounted for under the account I propose to order. Because the amount to be paid by [the Company] to the [Sellers] cannot presently be fixed, any such amount cannot be set off. Hence the request for a stay of enforcement rather than a reduction of the Buyers’ judgment due to an equitable set-off in respect of the proceeds of the stock.” [32] As has already been outlined, the following matters appeared from the initial reasons. Due to the Sellers’ misleading or deceptive conduct and breach of contractual warranties, the Buyers had suffered loss and damage in the amount of $1,646,798. 6 The further reasons [4]. -- 8 of 26 -- 9 As to the claim, the Company had been found liable to pay Mrs Davis $120,000 and was obliged to account to the Sellers for “the net proceeds of the sale of certain stock”. The Company’s breach of the Sponsorship Agreement had rendered it liable to the Sellers for damages for breach of contract in the amount of $299,152. [33] At the further hearing, the Sellers sought “final orders that set off the outcomes on the claim and the counterclaim”.7 As was observed by the trial judge in the further reasons, at the further hearing an issue remained as to “whether the Sellers should be entitled to set-off their claims against [the Company] against their liabilities to the Buyers” (emphasis in original).8 In support of those orders, the Sellers advanced two reasons. First, they contended that at the trial there had been an agreement between the parties that the outcomes of the claim and the counterclaim would be set-off, notwithstanding any lack of mutuality. Second, they submitted that, in any event, the facts, and the trial judge’s findings, satisfied the legal requirements for an equitable set-off. [34] The trial judge was not persuaded that the conduct of the proceedings, the pleadings or the trial submissions constituted an agreement by the parties that the amount of any claim in favour of the Sellers would be set-off against any, and all, amounts awarded on the counterclaim.9 [35] It then remained to be considered whether there should be an equitable set-off despite the lack of mutuality. In respect of that issue, the Sellers submitted to the trial judge that the principles governing an equitable set-off were engaged because their successful claims against the Company were closely connected to the Buyers’ successful claim against them and directly impeached the Buyers’ damages remedy.10 As to the Sellers’ claim to recover the proceeds of the sale of certain stock, the Sellers submitted that “it directly impeaches the Buyers’ right to damages, as assessed.”11 The amount of the proceeds due had yet to be quantified because an account had yet to be taken. In those circumstances, the Sellers sought a declaration that the amount accounted for was to be set-off against the judgment in favour of the Buyers and that the enforcement of that judgment be stayed to the extent of the “Stock Sale Proceeds Loan of $350,000 plus interest pending finalisation of the account”.12 [36] The further reasons observed:13 “One aspect of the Sellers’ case in support of an equitable set-off and other relief is that it would be unjust to permit the Buyers to recover damages on account of a liability, while leaving the Sellers exposed to the risk that they may not recover amounts they are owed from [the Company], notwithstanding that [the Company] is wholly owned by the Buyers. In response to the last point, the Buyers submit that there is no evidence to support the proposition that judgments for the Sellers will 7 Ibid [7]. 8 Ibid [25]. 9 Ibid [26]. 10 Ibid [27]. 11 Ibid [31]. 12 Ibid [32]. 13 Ibid [34] to [35]. -- 9 of 26 -- 10 remain unsatisfied, with the evidence at trial being that [the Company] is still trading.” [37] The trial judge analysed and explained the principles governing equitable set-off. The further reasons referenced authority for the proposition that it is essential that there be such a connection between the claim and cross-claim that the cross-claim can be said to impeach the claim so as to make it unfair for the claim to be allowed without taking account of the cross-claim.14 With reference to the particular facts of this case, the trial judge observed that “the obligations that the Sellers have successfully enforced against [the Company] arose out of the 9 December Deed, which was inextricably linked to the settlement of the SSA”.15 [38] The further reasons then state:16 “There is a close factual connection between the transactions. The issue, however, is whether there is a sufficient connection between one or more of the Sellers’ successful claims against [the Company] and the Buyers’ successful counterclaim that the claim can be said to impeach the counterclaim, so as to make it unfair to allow judgment for the whole of the Buyers’ counterclaim without taking into account one or more of the Sellers’ claims against [the Company]. The set-off that is sought is not a denial of the Sellers’ liability in respect of the Buyers’ successful counterclaim. Rather, it is a plea against enforcement of the counterclaim in full based on a ground for equitable intervention.” [39] The trial judge found that there was an obvious lack of mutuality because of the lack of identity between the relevant parties. His Honour observed that a lack of mutuality is not always fatal to a defence of equitable set-off but remained “a notable feature”.17 In the following passage, the further reasons explained why the lack of mutuality was, in the circumstances of this particular case, “a notable feature”:18 “… [the Company] and the Buyers cannot be equated with each other. The Buyers were not asked to guarantee, and did not guarantee, [the Company’s] performance of its obligations to the Sellers under the 9 December Deed. The Sellers’ case for a set-off does not depend upon the risk that, without a set-off, they may not be able to recover an award from [the Company]. Instead, it turns on the issue of whether each of the claims upon which the Sellers have succeeded impeaches the Buyers’ right to damages. There was a close connection between the SSA, or at least its completion, and the assumption of rights and obligations under the 9 December Deed. The 9 December Deed, in effect, amended the SSA and was designed to ensure its completion. 14 Ibid [42]. 15 Ibid [54]. 16 Ibid [55] to [56]. 17 Ibid [57]. 18 Ibid [58] to [62]. -- 10 of 26 -- 11 The mere fact that, in the absence of a set-off, the Sellers are exposed to the risk that they may not be able to recover a judgment sum from [the Company], which I shall assume for the purpose of argument is still wholly owned by the Buyers, is not a sufficient reason to order a set-off. It is a risk which the Sellers assumed in entering into the 9 December Deed, without obtaining guarantees from the Buyers. Years after the sale transaction and after the expenditure of large amounts on legal and accounting fees in these proceedings, the Sellers face the risk that a judgment against [the Company] will not be satisfied. A set-off should not be used as a remedy to alter the allocation of risk between parties or to belatedly achieve the same result as a personal guarantee. Applying the general principle stated … above, ordinarily it would not be just that the Buyers’ asset (their award of damages against the Sellers) be used to pay [the Company’s] liability. It would not be just to do so because of the way the parties structured their affairs. The legal separateness between the Buyers and [the Company] cannot be ignored.” [40] The trial judge then considered whether there was a compelling factor that called for equitable intervention because one or more of the Sellers’ claims impeached the Buyers’ entitlement to enforce their damages award.19 The trial judge recognised a case for equitable intervention in respect of the $120,000 loan and the stock proceeds but not in respect of the claim for breach of the Oral Sponsorship Agreement. [41] In respect of the case for equitable intervention, the relevant parts of the further reasons may be set out as follows:20 “The $120,000 loan There is a close connection between the $120,000 loan and the quantification of the Buyers’ claim. The compensation that I assessed turned on the price that the Buyers paid and the actual value of the shares. I assessed their value at the time the transaction was completed and assumed that [the Company] owed Mrs Davis $120,000. The price that the Buyers agreed to pay took account of that $120,000 liability. Expressed differently, if Mrs Davis had agreed to forego the entirety of the money she had loaned to [the Company] rather than still being owed $120,000, then the price that the Sellers would have demanded as the value of [the Company] would have increased by $120,000. The damages for breach of warranty and compensation for misleading conduct that I assessed was on the basis that [the Company] had a liability of $120,000 to Mrs Davis, which reduced its value by $120,000. Yet, [the Company] still has not paid Mrs Davis that amount. There is a sufficient connection between the damages that have been assessed in respect of the counterclaim and Mrs Davis’ claim for $120,000, that her claim can be said to impeach the counterclaim and 19 Ibid [63]. 20 Ibid [64] to [71]. -- 11 of 26 -- 12 to make it unfair for the counterclaim to be allowed in full, without taking into account her $120,000 claim. There is a sufficient ground for equitable intervention such that it can be said that the equity of Mrs Davis impeaches the Buyers’ entitlement to obtaining a judgment for damages in an amount that reflects [the Company’s] unpaid liability to her. Judgment on the counterclaim should therefore be reduced by the amount of $120,000 plus interest by way of equitable set-off. The stock proceeds A similar analysis applies in this context. The Sellers advanced a $750,000 settlement loan, $400,000 of which was effectively forgiven at settlement by virtue of the operation of the 9 December Deed. The remaining $350,000 was to be repaid in the form of the proceeds of the sale of certain stock. The settlement loan of $750,000 formed part of the amount that the Buyers paid to acquire the shares. The settlement loan enabled them to pay the balance of the purchase price and the amount payable to the CBA. Simply put, the Buyers were able to pay a purchase price totalling $4,136,315 because they obtained a settlement cheque for $750,000 by virtue of the settlement loan, $350,000 of which was repayable in the form of the sale proceeds of certain stock. The Sellers would have succeeded upon a money claim for the sale proceeds had the Buyers disclosed the amount of the sale proceeds. Instead, their remedy is an order for an account. The Buyers’ claim was made on the basis that they paid $4.1 million for the shares, but they paid that amount because they had a vendor loan. The Buyers had the benefit of $350,000 that enabled them to purchase shares at a price of approximately $4.1 million, but the Sellers have yet to receive anything in return for advancing that part of the purchase price to the Buyers. Had the amount of the stock sale proceeds been quantified by the Buyers, it would have been the subject of an equitable set-off. The amount of the sale proceeds is uncertain. It would be unsatisfactory to set-off an amount as high as $350,000 to later find that proceeds of only, say $200,000 were obtained for the relevant stock. In the circumstances, the Sellers cannot presently set-off a certain amount, notwithstanding that their claim to be paid the proceeds of the sale of the stock impeaches the Buyers’ damages claim, as assessed. Because the amount of the Sellers’ entitlement to be paid the equivalent of the proceeds of sale (together with interest) has yet to be quantified and set-off, the Sellers seek a declaration that the amount to be accounted for is to be set-off against the judgment in favour of the Buyers and a stay on enforcement to the extent of $350,000 plus interest. That relief seems appropriate.” [42] The Sellers’s judgment against the Buyers in the sum of $299,152, plus interest in the amount of $127,538.14 up to and including 11 December 2023 represented the trial -- 12 of 26 -- 13 judge’s assessment of the Sellers’ damages for breach of the Oral Sponsorship Agreement. The Sellers unsuccessfully sought an equitable set-off in respect of those damages. The trial judge reasoned as follows:21 “This amount does not feature as part of the purchase price that was paid at settlement. It was not included in the Buyers’ claim as an amount that was paid to acquire the shares. It does not have the same claim to be the subject of an equitable setoff as amounts that are owed by [the Company] to the Sellers, and which were reflected in my assessment of the compensation to which the Buyers are entitled. The Sellers nevertheless press a claim for an equitable set-off, arguing on the basis of my finding at [536] that they were induced by the promise of the Sponsorship Agreement to settle the SSA, which is the source of the Buyers’ claim. This is submitted to be a sufficiently strong connection to satisfy the requirements of an equitable set-off. … Importantly, the Buyers did not include in their claim for damages a further diminution in the value of [the Company’s] shares because they were induced to commit it at settlement to enter into a sponsorship agreement …. The corporate entity that was taken to have entered into the Sponsorship Agreement at the time of settlement did not bring a claim against the Sellers on the basis that the Sellers’ misleading conduct caused it to enter that contract and assume a liability that would not have been assumed in the absence of the contravening conduct. Simply put, the Buyers’ counterclaim does not include any component in respect of [the Company’s] liability under the Sponsorship Agreement. In the circumstances, the connection between [the Company’s] liability under the Sponsorship Agreement and the Sellers’ liability to pay damages to the Buyers is not sufficient to impeach the Buyers’ counterclaim. I decline to find an equitable set- off that would have the effect of reducing judgment on the counterclaim by $299,152 on account of the Sellers’ damages claim for breach of the Oral Sponsorship Agreement.” [43] In respect of the account and set-off, the Sellers ultimately obtained: (a) an order that the Company account to the Sellers “for the net proceeds for which it is liable under clause 2.2 of the Deed dated 9 December 2015” being the net proceeds that it received from the use or sale of particularised stock. (b) a declaration that any amount ordered to be paid by the Company to the Sellers following the taking of the account, plus interest on that amount at applicable pre-judgment interest rates from 23 December 2015, be set-off against the judgment obtained by the Buyers. [44] In the context of the stay on enforcement, the trial judge reasoned as follows:22 21 Ibid at [73] to [74] and [78] to [79]. 22 Ibid at [80] to [86]. -- 13 of 26 -- 14 “The Sellers seek a stay of enforcement of judgment to the extent of $350,000 being the amount of the Stock Proceeds Loan plus interest, pending finalisation of the order for an account of the proceeds of sale of the stock. They also seek a stay of an order for the sum of $202,208.07 plus accretions that were paid into Court on 14 March 2017 to be paid out to the defendants. At the end of the trial the parties seemed to proceed on the basis that the amount paid into Court would be paid to the side whose monetary claim exceeded the opposing side’s claim. If the proceeds of the sale of stock had been able to be determined and been the subject of a money judgment in the Sellers’ favour, then, for the reasons given, there would have been an equitable set-off. In the circumstances, it seems appropriate to order a stay on enforcement to the extent of $350,000 plus interest pending finalisation of the account. The defendants characterise the Sellers’ position as seeking a stay on enforcement of the Judgment and seek to invoke principles governing the granting of a stay pending appeal. That is a different issue, and if the Sellers decide to appeal they may seek a stay pending any appeal if they can meet the requirements that are established by authorities about what must be shown to deny the Buyers the fruit of their judgment. The Sellers seek a stay of an order releasing the funds held in Court to the Buyers in addition to a stay on enforcement to give effect to their equitable set-off in respect of the amount of the stock sale proceeds. It would be excessive to both deprive the Buyers access to the sum of $202,208.07 and also stay enforcement of the judgment to the extent of $350,000 in support of the Sellers’ entitlement to set-off the amount of the stock sale proceeds. The account cannot yield the Buyers more than $350,000. If I had ordered the $202,208.07 to remain in Court for possible use to meet the amount which will have to be accounted to the Sellers, I would have stayed enforcement to the extent of $150,000 plus interest. Instead, I will stay enforcement to the extent of $350,000 plus interest, pending the finalisation of the account I will order. No proper basis has been made out to stay the judgment pending an appeal which has yet to be instituted. The judgment should not be treated as provisional. Subject to the temporary stay that I will order to the extent of $350,000 plus interest, the Buyers are prima facie entitled to the fruits of the judgment. This includes the amount paid into Court.” The first separate question [45] The question is whether the account ordered by paragraph 3 of the judgment can exceed $350,000. Relevantly, paragraph 3 of the judgment is in these terms:23 23 Ibid [87]. -- 14 of 26 -- 15 “An order that [the Company] account to [the Sellers] for the net proceeds for which it is liable under Clause 2.2 of the [9 December Deed] being the net proceeds that it received from the use or sale of the stock particularised in paragraph 38 of the amended statement of claim…”. [46] The Sellers contend for a positive answer to the question. They submit that the judgment did not provide for “a cap”, that the issue of “a cap” was not raised by the pleadings and that the terms of Clause 2.2 of the 9 December Deed did not impose a “cap” on the obligation to pay the stock sale proceeds to the Sellers. [47] The Sellers effectively submitted that paragraph 3 of the judgment was clear on its face and that its true meaning was immediately plain. I do not accept that submission. Paragraph 3 of the judgment speaks in terms of an account for net proceeds “for which [the Company] is liable under Clause 2.2 of the [9 December Deed]”. Those words are words of description or limitation, the meaning of which is to be discerned from the initial and further reasons. But in any case, the Sellers’ introduction of, or reliance upon, the language of a “cap” is not helpful. The language seems to presume that the account was at large. The account as ordered was an account for net proceeds “for which [the Company] is liable under Clause 2.2 of the [9 December Deed]”. In the initial reasons, the trial judge addressed “the remaining issue is the meaning of ‘Stock Sale Proceeds’” being … “the amount that must be accounted for”. In the context of deciding that issue, his Honour found that the “purpose of clause 2.2 was to repay the $350,000 portion of the Settlement Loan by the payment of proceeds”. His Honour went on to describe the amount of $350,000 as the “true value of the loan” which was expected to be paid from the sale of the stockpiles.24 There was no appeal by the Sellers on the ground that the issue identified by his Honour was not in dispute or was outside the pleadings or that the findings of the trial judge as to the purpose of clause 2.2 was outside the issues in dispute at trial. There is no merit in the Sellers’ contention on this hearing that they lost the right to call evidence relevant to the construction of the 9 December Deed. They did not seek to advance a ground of appeal based on that contention. [48] I was referred by the Sellers to my decision in Rolleston Coal Holdings Pty Ltd v Graham Anthony McDonald.25 It was not suggested by the Buyers that anything in Rolleston was controversial. In Rolleston, I referenced authority and reasoned as follows:26 “A starting point is that if the true meaning of an order is “immediately plain, the terms of the order will speak for themselves”. If the true meaning is not immediately plain, the task of ascertaining meaning is to be approached having regard to what might be described as ordinary rules of construction. The task of construing orders is not concerned to “delve into the subjective intention of the judge pronouncing the order”. Whilst it is appropriate for the judge who made an order to hear an application involving the construction of the order, a judge sitting in my current position “must keep out of his or her mind what 24 Initial reasons [396]. 25 [2024] QSC 310. 26 Ibid at [32] to [34]. -- 15 of 26 -- 16 might have been intended and construe only the words that were used in the order”. If there is ambiguity, extrinsic evidence may be called in aid of the task of construction. The learned authors of Interpretation, note that there is conflicting intermediate appellate authorities on the question as to whether it is necessary to identify ambiguity before considering any extrinsic material. In Australian Energy Ltd v Lennard Oil NL (No 2), Andrews CJ (with whom Kelly SPJ agreed), considered that it was appropriate, in the circumstances of that case, to construe orders made by a judge by reference to the surrounding circumstances and extrinsic evidence acted upon by the judge. In that case, the judge, McPherson J, had made declaratory orders about the defendant’s liability pursuant to a written agreement. In those circumstances, Andrews CJ did not consider it necessary to first establish ambiguity in the terms of the order before regard might be had to the surrounding circumstances and extrinsic evidence. The Chief Justice relevantly observed: “Some argument was at first directed to the effect that it is open to the Court to construe the declaration only if it was shown to be ambiguous. I would hold that its meaning emerges only when considered with the written agreement … of which it is either explanatory or complementary or both. I would further hold that it is necessary in order fully to understand the effect of the declaration to examine the reasons expressed by McPherson J in coming to his decision and the extrinsic evidence and surrounding circumstances relied upon by him. This is not so much to construe the words of the declaration as to understand it in its place in the context of the matter and thus give it its true construction.” In Guardianship and Administration Tribunal v Perpetual Trustees Qld Ltd, Mullins J, as the President then was, considered the construction of an order which had been made in circumstances where there had been no reasons. In that case there was an issue as to what matters could be considered in construing the order. Her Honour framed the issue as “whether the Court is confined now to the terms of the order itself or whether the Court can have regard to other materials, such as the nature of the application that resulted in the order, the affidavits that were before the Court on the application, and the transcript of the hearing of the application”. After having referred to the judgment of the Full Court in Lennard Oil, her Honour relevantly found: “Although there is not an originating judgment against which to construe the orders …, the nature of the application that resulted in the orders, the affidavits filed in support of the application and the submissions made at the hearing of the application (as recorded in the transcript) provide the context for construing the orders.”” [49] In approaching the construction of paragraph 3 of the judgment, I intend to follow the approach of Andrews CJ (with whom Kelly SPJ agreed) in Australian Energy Ltd v -- 16 of 26 -- 17 Lennard Oil NL (No 2).27 I find that paragraph 3 of the judgment contains relevant ambiguity to the extent that it refers to, without identifying or explaining, the company’s liability under Clause 2.2. In any event, having regard to the approach in Australian Energy, irrespective of any ambiguity, the true construction of paragraph 3 of the judgment is revealed by an examination of the initial and further reasons. [50] I see no valid reason to ignore the further reasons. By the time of the judgment, the trial judge had in fact provided the initial and further reasons. One of the issues which remained to be decided at the further hearing, before the publication of the further reasons, was whether the Sellers’ claim to recover the proceeds of the sale of certain stock directly impeached the Buyers’ right to damages as assessed by the trial judge. The issue, as identified by the trial judge, was “whether there is a sufficient connection between one or more of the Sellers’ successful claims against [the Company] and the Buyers’ successful counterclaim that the claim can be said to impeach the counterclaim, so as to make it unfair to allow judgment for the whole of the Buyers’ counterclaim without taking into account one or more of the Sellers’ claims against [the Company]”.28 That issue required an examination of the Sellers’ successful claims. The further reasons went on to find that there was a sufficient connection between the damages that had been assessed in respect of the counterclaim and the Sellers’ claim in respect of the stock proceeds. In the context of identifying that sufficient connection, the trial judge noted that $350,000 of the settlement loan of $750,000 “was repayable in the form of the sale proceeds of certain stock”. In that context, the trial judge considered that a stay on enforcement to the extent of $350,000 plus interest seemed “appropriate”. This had been proposed by the Sellers. Later, in the further reasons, the trial judge stated in terms that the account “cannot yield the Buyers more than $350,000”. It was accepted by the parties that the reference to “the Buyers” was a typographical error and was meant to refer to “the Sellers”. It is difficult to conceive of a clearer statement as to the true meaning of paragraph 3 of the judgment. [51] Finally, calling in aid their own language of a “cap”, the Sellers submitted if the account were capped, that meant the Company had the benefit of the value of the stock in excess of the cap at completion which would have increased the value of the Company’s shares and been relevant to causation and damages. It was said that, in those circumstances, practically, the trial judge could not have assessed damages until the account had been completed. I do not accept the premise that the language of “a cap” is apt. Nor do I accept the premise that if the account could not exceed $350,000, that necessarily meant that the Company had the value of any stock beyond that amount. I note that the trial judge found that the balance of the loan, $400,000, had been assigned to the new directors of the Company. In any case, the trial judge adopted a methodology by which his Honour valued the shares as at 22 December 2015 and adopted that value as their value the next day.29 This methodology was expressed as the preferable method to a method which accounted for the “$750,000 loan” as an amount that was received by the Company on 23 December 2015 which would have increased its assets and the value of its shares by that amount but subject to an obligation to repay the amount. The appeal from the trial judge’s methodology was dismissed. 27 [1988] 2 Qd R 230, 232. 28 The further reasons [55]. 29 Reasons [401]. -- 17 of 26 -- 18 [52] I answer the first question, “No”. The second separate question [53] The question is whether there should be orders in the Court’s inherent jurisdiction in the terms sought by paragraph 3 of the amended application. [54] Paragraph 3 of the amended application seeks orders in this Court’s inherent jurisdiction that: (a) the Company’s debt to the Sellers in paragraph 1 of the judgment of $299,152 plus interest of $127,538.14 up to and including 11 December 2023 is set-off against the Sellers’ debt to the Buyers in paragraph 2 of the judgment; and (b) the Company’s obligation to pay costs in paragraph 7 of the judgment, and the balance of the Company’s debt to the Sellers in paragraph 1 of the judgment after the set-off in paragraph (a) above be set-off against the Sellers’ obligation to pay the Buyers’ costs in paragraph 8 of the judgment. [55] The Sellers’ submissions referenced the inherent jurisdiction which was said to invest this Court with power to prevent misuse of its procedures and processes in a way which would be manifestly unfair to a party. The jurisdiction was said to include the power to order judgments be set-off as against each other. The Sellers advanced a submission that insolvency was a “prima facie basis” for orders for set-off in the inherent jurisdiction. [56] The authorities to which I was referred accept that the exercise of the power in the inherent jurisdiction to order a set-off involves a discretionary judgment, the discretion being described as “broad”.30 The Court is entitled to have regard to a variety of factors including the public interest, the efficient administration of justice and the conduct of the parties.31 There is no strict requirement of mutuality, although a lack of mutuality may be relevant to the exercise of the discretionary judgment.32 The jurisprudence of equitable set-off may have possible relevance as a guide to the exercise of discretion.33 [57] In terms of the public interest and the efficient administration of justice, it may be accepted that the law values finality which is a basic principle of our legal system.34 The High Court has long recognised that there is a public interest in maintaining the finality of litigation.35 The High Court has observed that the importance of finality “pervades the law”.36 30 Miller v Director of Public Prosecutions (No. 2) [2004] NSWCA 249 at [13]; Aristocrat Technologies Australia Pty Ltd v Allam [2017] FCA 812 at [13]. 31 Ibid. 32 Aristocrat Technologies Australia Pty Ltd v Allam [2017] FCA 812 at [14]. 33 R (Burkett) v London Borough of Hammersmith and Fulham [2004] EWCA Civ 1342 at [47]; Aristocrat Technologies Australia Pty Ltd v Allam [2017] FCA 812 at [27] to [28]. 34 Commonwealth v Sanofi (2024) 282 CLR 30 at [12], [31]. 35 University of Wollongong v Metwally (No. 2) (1985) 59 ALJR 481 at 482; State Rail Authority of New South Wales v Codelfa Construction Pty Ltd (1982) 150 CLR 29 at 38. 36 D’Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 at 100 [35]. -- 18 of 26 -- 19 [58] On the hearing of the separate questions, the Buyers read and relied upon inter alia an affidavit of Mr Perry and an affidavit of Mr O’Brien. Mr Perry was cross- examined. [59] In terms of the conduct of the parties, the Sellers sought findings arising out of Mr Perry’s cross-examination which broadly concerned the affairs and financial position of the Company and RBP Civil Propriety Limited (“Civil”), a company owned by Mr Perry as to 990 shares and by the second defendant as to 10 shares. [60] The Sellers sought three “primary” findings arising out of the cross examination. [61] The first finding was that Mr Perry (with at least Mr O’Brien’s acquiescence) from around the time of the hearing in July 2023 engaged in a course of conduct which deprived the Company of the benefit of the business of operating a quarry in Redland Bay (“the quarry”), of the Company’s relationship with Austral Bricks and of the full value of the Company’s equipment on a going concern basis and thereby deprived the Company of funds to pay creditors including the claim judgment. [62] The second finding was that Messrs Perry and O’Brien hindered the Sellers’ recovery of their entitlement to damages recognised by the claim judgment by causing the Company to unsuccessfully defend the claim from the date when the Company was able to pay (on 14 November 2016 when the Oral Sponsorship Agreement was validly terminated for breach) until a date when the Company had been rendered unable to pay. [63] The third finding was that given their conduct with respect to the Company’s business and Mr Perry’s alleged evasiveness in cross-examination, the Court could have no confidence that Messrs Perry and O’Brien will use the proceeds of the counterclaim judgment to repay their loans to the Company. [64] The proposed findings were said to support an order for a set-off because: (a) they would give effect to the position that would have pertained if the Buyers had not used the processes of this Court to delay the Sellers’ recovery of damages for their valid termination of the Oral Sponsorship Agreement; (b) would prevent the Buyers, and their principals, from taking advantage of their deprivation of the Company of its business and assets by preventing them from avoiding the economic effect of payment in full of the claim judgment from the proceeds of operating the quarry and the repayment of the amounts the Buyers each owe to the Company; (c) would prevent the Buyers from giving, if it occurs, the ATO an effective priority when compared to what the ATO would be entitled to receive in the liquidation of the Company; (d) would not give a preference to the Sellers in the liquidation but would rather relieve the Company from its obligation under the claim judgment. [65] On this hearing of separate questions, the following matters were uncontroversial. The Company was placed into voluntary administration on 28 August 2024. The Company was placed into liquidation on 3 October 2024. Mr Hammond was the administrator and then the liquidator of the Company. As at 28 August 2024, the -- 19 of 26 -- 20 second defendant owed money to the Company. As at the time of the liquidation, the Company owed creditors the sum of $3,215,655 including some $1,603,411 to the ATO and had assets of $1,388,675 of which approximately $1,150,719 were debts owed to the Company by the Buyers. [66] In terms of my impressions of Mr Perry’s demeanour whilst giving evidence, to the extent that is relevant to any assessment of his credibility, he appeared to be a witness who was intent on providing his honest recollection of matters. He did not appear to be evasive. His recollection at times was not perfect but, by and large, he appeared as a witness who was doing his best to provide truthful and honest recollections. There was certainly no aspect of the way he gave evidence which could be regarded as significantly detrimental to his credit. [67] Mr Perry’s affidavit contained the following relevant paragraphs: “5. Due to the significant difference between the amount paid for the shares in the [Company] and the true value of the business, from January 2016 onwards the business was affected by a shortage of working capital which impacted the [Company’s] cashflow, which was also affected by the legal costs associated with these proceedings. 6. As a result, the [Company] experienced difficulties in meeting its ongoing taxation payment obligations, although it remained up to date with its ATO lodgements. I am informed by the [Company’s] accountant Martin Bristow and verily believe that he communicated regularly with the ATO about the [Company’s] taxation liabilities with the effect that the ATO did not take formal action against the [Company] in relation to its taxation liabilities prior to July 2024. 7. When the judgment in these proceedings was issued on 11 December 2023, I was confident that the [Company] would be able to come to a satisfactory arrangement with the ATO to resolve all outstanding liabilities because funds could become indirectly available to the [Company] from the judgment via related party loans. 8. In late July 2024, the [Company] received a statutory demand from the ATO claiming the total amount of $1,790,499.97. The demand was issued without warning by the ATO, and I was surprised to have received it in circumstances where Mr Bristow had made the ATO aware of the favourable judgment. …. 10. The ATO [responded] on 14 August 2024 advising the repayment proposal was not acceptable …. 12. Until the ATO issued the statutory demand, I believed that the [Company] was able to pay its debts which were properly due, and would be able to continue trading on the basis that any ATO liabilities would be managed once the judgment proceeds were recovered.” -- 20 of 26 -- 21 [68] The Sellers made a submission to the effect that I should make a finding that the Sellers were not responsible for the Company’s financial difficulties leading to its voluntary administration and liquidation. That submission referred to the period of time between completion of the sale of the shares and entering into voluntary administration. The finding sought by the Sellers was acknowledged to be contrary to the evidence of Mr Perry at paragraphs 5 and 6 of his affidavit. That evidence was not challenged in cross examination. I accept that evidence. [69] Part of the cross-examination was directed to Mr Perry’s or the Company’s dealings with the ATO. That part included questions directed to payment plans with the ATO negotiated by or on behalf of the Company and by or on behalf of Mr Perry personally, as well as on behalf of Civil.37 Mr Perry was taken to paragraph 7 of his affidavit. Notably, it was not suggested to him that, as at the time of the judgment, he was not confident that the Company would be able to come to a satisfactory arrangement with the ATO to resolve all of its outstanding liabilities. Under cross examination, Mr Perry said that as at the time of the judgment he “wasn’t expecting to go into administration … I’d worked closely with the ATO for 8 years on this”. Again, this evidence was not challenged. [70] Rather, it was suggested to him that he was “contemplating by the statement in [paragraph 7] that … if the [Sellers] repaid or paid the judgment sum, that the [Buyers] would use those funds to pay the amount owing to the ATO?”38 Mr Perry accepted that he was contemplating using the funds available from the judgment that the Buyers obtained from the Sellers to pay tax.39 It was suggested to him that, at the time of the judgment, there would not have been sufficient funds available to the Company to pay the judgment in favour of the Sellers if the judgment sum obtained from the Sellers was used to pay the ATO. Mr Perry did not accept that proposition. He gave evidence to the effect that he believed that, with the interest and costs orders, there would have been enough money to pay the Company’s judgment owed to the Sellers.40 He said that he had turned his mind to whether there would be sufficient funds available to enable the Company to pay the amount owing to the Sellers pursuant to the judgment and his belief was that there would be sufficient money.41 I accept his evidence about his state of mind as at the time of the judgment. [71] Mr Perry was asked about his present intentions and the following exchange occurred: “If the judgment sum was paid by the plaintiffs on the counterclaim, whatever is due and owning to the second defendants or one of your companies which is one of the defendants, your intention, isn’t it, is to use that sum of pay the ATO: Correct And your intention is not to pay those funds to the Company? To the company you mean Perry O’Brien Engineering? That’s correct? 37 T2-19.01-.25. 38 T2-12.35-38. 39 T2-13.35-37. 40 T2-15.10-17. 41 T2-15.24. -- 21 of 26 -- 22 Well it’s got to go to the tax office anyway But I’ve asked you a specific question? – yeah Can you answer it please? And as I understand it, the money gets paid to me and my trust – my um Michael’s and my err investment trusts, which we are then obligated to pay the ATO But your understanding is that … if they’re paid by the plaintiffs, won’t be going to the company? Well …. I have to be guided by my Accountants …. I haven’t got – seen any money so I don’t know?” [72] Mr Perry was taken to paragraph 2 of the Buyers’ counsel’s written submissions. He accepted that the Company has a debt due and owing to the ATO which the Buyers wished to discharge with the amounts owed by the Sellers. He accepted that if any judgment payable by the Sellers to the Buyers was used to pay the Company’s ATO and Superannuation Guarantee charges, the Seller would not be paid their judgment sum by the Company. He accepted that as at the time of the Company’s liquidation, the judgment sum payable by the Sellers to the Buyers would not have been sufficient to pay the Company’s priority and non-priority creditors. [73] Mr Perry accepted that from in or about 2018 the Company conducted business from the site. From 2018 the Company had undertaken work involving extracting clay from the site. He was taken to the administrator’s report dated 20 September 2024 which indicated that, by reference to profit and loss statement summaries, the Company had derived income in the year ended 30 June 2022 of $1,669,294, in the year ended 30 June 2023 of $1,220,097 and in the year ended 30 June 2024 of $36,558. It was put to Mr Perry that, as at August 2024, there were two employees employed by the Company undertaking civil works on the Austral site.42 It was suggested to him, and he accepted, that those employees commenced to act for Civil in August 2024.43 He accepted that, as at 15 August 2024, Civil had been using equipment which belonged to the Company at the Austral site and that the equipment had been used by Civil to generate its own revenue. He could not say the exact date when Civil had started to use that equipment generate its own revenue. He accepted that it was at a date “prior to 15 August 2024”. On 23 August 2024, Civil purchased that equipment from the Company pursuant to a written agreement styled “Asset Sale Agreement”.44 The Company had obtained a valuation of that equipment. The valuation had identified the market values and liquidation values of the equipment. The purchase price under the Asset Sale Agreement had represented a figure broadly between those two values.45 At the time of the purchase, the Company was not doing any work, but Civil was performing work. [74] Mr Perry explained that the Company’s income had dropped in the 2024 financial year because the Company had not been supplying material to Austral Bricks and revenue had dropped off as a result. He accepted that Civil had begun to operate civil 42 T2-18.44. 43 T2-18.46. 44 T2-27.04. 45 T2-29.21. -- 22 of 26 -- 23 works at the Austral site prior to 15 August 2024 but he said that it had taken over at a time when he was hoping that the business would improve or he could get “some outside contracts”.46 He accepted that the business improved but that “it’s still going very slowly.”47 [75] Having regard to the evidence, I decline to make the first primary finding. Notably, a proposition in terms of that finding was not actually put to Mr Perry. It was not suggested to Mr Perry that from July 2023 he had engaged in a course of conduct calculated to deprive the Company of funds to pay the claim judgment. Such a proposition should have been put to him as a matter of procedural fairness. Mr O’Brien was not cross examined. The weight of the evidence does not support a finding that the business of the Company was transferred to Civil from 1 July 2023. Indeed, it was put in terms to Mr Perry in cross-examination that in or about August 2024 there were still employees employed by the Company undertaking the civil works on the Austral site and that “those employees commenced to act for [Civil] in August 2024”. The effect of Mr Perry’s evidence was that in or about August 2024, at a time when the relationship with the ATO broke down, some employees of the Company began to work for Civil and he ultimately purchased equipment from Civil in that month for a value between its liquidation value and market value. The evidence does not support a finding that Civil acquired the business of the Company. The Sellers sought what was described as a subsidiary finding to the effect that the Company’s business was profitable and was transferred from 1 July 2023, or at least prior to 15 August 2024, and that Civil generated revenue from the time of the transfer. The reference to “profit” is not particularly helpful. The weight of the evidence favours the following findings which I make. For a period of approximately eight years, the Company’s business had laboured under a financial imperative to negotiate payment arrangements with the ATO in respect of taxation liabilities which it was otherwise unable to discharge without the benefit of arrangements. Since 2016, the Company had experienced a shortage of working capital which impacted its cash flow. The Company always required the support of the ATO in respect of existing, outstanding tax liabilities to continue to trade. The ATO’s support was withdrawn or no longer could be relied upon as at in or about August 2024. As at in or about August 2024, the Company was insolvent. By the Asset Sale Agreement, Civil acquired equipment from the Company for something less than its market value but more than its liquidation value. The liquidator appears to have taken no action, or made any complaint, about the transfer. [76] As to the second primary finding, I decline to make that finding. The Company unsuccessfully defended the claim from 14 November 2016 up until the date of the judgment. Thereafter, the Company and the Buyers did not appeal the judgment. Rather, if any conduct occurred relevant to prolonging the finalisation of the litigation, the most obvious objective conduct is the Sellers’ conduct in relation to their initiation and conduct of their unsuccessful appeal. [77] As to the third primary finding, I decline to make that finding. It was submitted that a payment directly to the ATO in respect of debts owed to the ATO by the Company would improperly bypass the liquidation of the Company and deprive other creditors of their rights to a dividend. Having heard from Mr Perry in cross examination, I am satisfied that upon payment of any judgment on the counterclaim, Mr Perry will cause 46 T2-31.16-.22. 47 T2-31.24-25 -- 23 of 26 -- 24 the first and second defendants to act in accordance with accountancy advice as to how the money will be paid. That is the extent of the finding that I am prepared to make. [78] Based on, and arising out of the evidence of Mr Perry, the findings I make are as follows: (a) Due to the significant difference between the amount paid for the shares in the Company and the true value of the Business, from January 2016 onwards the business was affected by a shortage of working capital which impacted the [Company’s] cashflow, which was also affected by the legal costs associated with these proceedings. (b) As a result, the Company experienced difficulties in meeting its ongoing taxation payment obligations, although it remained up to date with its ATO lodgements. (c) The Company’s accountant communicated regularly with the ATO about the Company’s taxation liabilities with the effect that the ATO did not take formal action against the Company in relation to its taxation liabilities prior to July 2024. (d) For a period of approximately eight years, the Company’s business had laboured under a financial imperative to negotiate payment arrangements with the ATO in respect of taxation liabilities which it was otherwise unable to discharge without the benefit of arrangements. (e) Since 2016, the Company had experienced a shortage of working capital which impacted its cash flow. (f) The Company always required the support of the ATO in respect of existing, outstanding tax liabilities to continue to trade. (g) At the time of the judgment, Mr Perry was confident that the Company would be able to come to a satisfactory arrangement with the ATO to resolve all outstanding liabilities because funds could become indirectly available to the Company from the judgment via related party loans. (h) As at in or about August 2024, the ATO’s support was withdrawn or could no longer be relied upon. (i) As at in or about August 2024, the Company was insolvent. (j) As at August 2024, there were two employees employed by the Company undertaking civil works on the Austral site.48 Those employees commenced to act for Civil in August 2024.49 (k) By the Asset Sale Agreement, Civil acquired equipment from the Company for something less than its market value but more than its liquidation value. (l) The liquidator appears to have taken no action, or made any complaint, about the acquisition of the equipment. 48 T2-18.44. 49 T2-18.46. -- 24 of 26 -- 25 (m) As at August 2024, the sum owed by the Buyers to the Company ($1,643,884) represented the balance of debts reflecting loans which were largely as a result of the Company having paid loan instalments to the external financier which had financed the acquisition of the Company’s shares from the Sellers. (n) As at the time of the Company’s liquidation, the judgment sum payable by the Sellers to the Buyers would not have been sufficient to pay the Company’s priority and non-priority creditors. (o) Upon payment of any judgment on the counterclaim, Mr Perry will cause the first and second defendants to act in accordance with accountancy advice as to how the money will be paid. [79] Approaching the exercise of the power in the inherent jurisdiction to order a set-off as involving a broad discretionary judgment, I am not persuaded that, in the particular circumstances of this case, the set-offs now sought by the Sellers should be ordered. My reasoning may be outlined as follows: (a) I reject the Sellers’ submission to the effect that insolvency is a “prima facie” basis for orders for set-off in the inherent jurisdiction.50 The true position is that the jurisdiction confers a broad discretionary power. Whilst “a common reason” for making a set off is “because of insolvency, an unfair result will be reached”, each case falls to be determined by reference to its own particular facts.51 It has been observed that the discretion is broad and the Court is entitled to have regard to a variety of factors including the public interest, the efficient administration of justice and the conduct of the parties.52 (b) In terms of the conduct of the parties, since the judgment the Sellers have conducted a wholly unsuccessful appeal. That conduct is in my consideration important conduct in the matrix of circumstances which now fall to be considered. That conduct has necessarily involved delay to the resolution of the litigation and the incurring of further expense. (c) At the time of the judgment, Mr Perry was confident that the Company would be able to come to a satisfactory arrangement with the ATO to resolve all outstanding liabilities because funds could become indirectly available to the Company from the judgment via related party loans. His belief appears to have been based on historical dealings between the ATO and the Company’s accountant over a period of years. Further, at the time of the judgment the Company was continuing to trade. There can be no suggestion that any submission made to the trial judge about the Company’s then circumstances was not a proper submission. (d) The Sellers emphasised a statement in R (Burkett) v London Borough of Hammersmith and Fulham53 to the effect that lack of mutuality as a consideration drawn from the jurisprudence of equitable set-off is not relevant to the inherent jurisdiction. It is notable that in that authority, Brooke LJ immediately qualified the statement relied upon by the Sellers by adding “they are irrelevant (except possibly as a guide for the judge to the exercise of his 50 Supplementary submissions of the plaintiffs [10]. 51 Miller v Director of Public Prosecutions (No. 2) [2004] NSWCA 249 at [28]. 52 Ibid at [13]. 53 [2004] EWCA Civ 1342 at [47]. -- 25 of 26 -- 26 discretion) …”. The Sellers submit that because of insolvency an unfair result will be reached. In my consideration in considering whether that submission can be made good by reference to the facts of this case, the lack of mutuality is a matter to which regard may be had as a guide, or a factor to be considered, in the exercise of the discretion and particularly when considering whether, on the facts, “because of insolvency an unfair result will be reached”. At the time of the judgment, the trial judge recognised the Sellers were exposed to “the risk that they may not be able to recover a judgment sum from the Company” but considered that the risk was not a sufficient reason to order an equitable set- off. Rather, the trial judge characterised that risk as one which had been assumed by the Sellers in entering into the 9 December Deed without obtaining guarantees from the Buyers. The following remarks of the trial judge in the further reasons have resonance at this point in time:54 “Years after the sale transaction and after the expenditure of large amounts on legal and accounting fees in these proceedings, the Sellers faced the risk that a judgment against [the Company] will not be satisfied. A set-off should not be used as a remedy to alter the allocation of risk between parties or to belatedly achieve the same result as a personal guarantee”. (e) The law places a value on finality and, in this case, particularly having regard to the conduct of the broader litigation, the interests of finality would be undermined by allowing a set-off at this belated stage. [80] I answer the second question “No”. Orders 1. The answer to the question identified in paragraph 2(a) of the orders made on 17 June 2025 is “No”. 2. The answer to the question identified in paragraph 2(b) of the orders made on 17 June 2025 is “No”. 3. It is declared that the amount of the net proceeds for which the first defendant is liable under Clause 2.2 of the Deed dated 9 December 2015 as referred to in paragraphs 3 and 4 of the judgment made in this proceeding on 11 December 2023 is $350,000. 4. I will hear the parties as to any further orders and as to costs. 54 The further reasons [61]. -- 26 of 26 --