Case: Briginshaw v Briginshaw [1938] HCA 34 ; (1938) 60 CLR 336
Outcome: referred to
Mr Rambaldi argued that bad faith is a serious allegation and that the Court must reach a comfortable satisfaction that the case is made out in accordance with the Briginshaw test: see Briginshaw v Briginshaw [1938] HCA 34 ; (1938) 60 CLR 336 (" Briginshaw ") at 361-362 per Dixon J. He submitted that, as there is no precise definition of bad faith, whether the case is made out will depend on the particular facts. Mr Rambaldi contested that there were any grounds in this case for concluding that he had acted in bad faith. Mr Spalla had failed, so Mr Rambaldi said, to adduce evidence to satisfy the Court, on the balance of probabilities, that, in entering into the irrevocable offer, Mr Rambaldi was actuated by bad faith. 148 Further, counsel for Mr Rambaldi contended that Mr Rambaldi, at all times, acted in good faith. Counsel asked for a positive finding that Mr Rambaldi was acting in good faith when he entered into the offer and recommended to his partners that it should be given effect. A key element of Mr Rambaldi's submissions was his claim that a liquidator who is not funded or is without indemnity is not expected to continue a proceeding. Accordingly, Mr Rambaldi could not have been expected to continue his involvement in the primary proceeding beyond 6 May 2005. Mr Rambaldi noted that Mr Borden, who was the lawyer of Mr Rambaldi and Mr Spalla jointly, had said that Mr Rambaldi could not be expected to continue the proceedings without an indemnity and would be entitled to accept a walk-away offer in those circumstances. 149 Mr Rambaldi argued that, once he was informed on 29 April 2005 that his indemnity was to be withdrawn, he knew that he would not be able to continue with the litigation after 6 May 2005 and he behaved reasonably to protect the interests of creditors in those circumstances. He said that he procured an offer at the mediation that would stay open for seven days, thereby providing an opportunity for options for continuing the litigation to be explored. He claimed that he procured his partners' consent to the Deed only after no reasonable way to continue the litigation was found. He said that his conduct was consistent with the LFA. Mr Spalla was utterly wrong to characterize what he did to preserve Mr Spalla's position for seven days as a "facade". 166 Mr Spalla has attempted to satisfy this standard of review by showing that Mr Rambaldi acted in bad faith in executing the Deed. This is a serious allegation, involving the imputation of moral turpitude. The standard of proof to be applied is proof on the preponderance of probability with due regard to the seriousness of the particular issue being determined. As Dixon J said in Briginshaw at 361-362: " [W] hen the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality. ... Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature or consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters 'reasonable satisfaction' should not be produced by inexact proofs, indefinite testimony, or indirect inferences." An allegation of bad faith is a serious claim affecting reputation and the Court should have regard to this when considering the evidence. 167 Section 181(1) of the Act relevantly provides that an officer of a corporation a term that includes a liquidator (s 9) - must exercise powers and discharge duties in good faith in the best interests of the corporation and for a proper purpose. Whether there has been bad faith will depend on the particular circumstances of the case.