WESTERN AREAS EXPLORATION PTY LTD (ACN 076 025 066)

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : WESTERN AREAS EXPLORATION PTY LTD -v- STREETER [No 3] [2009] WASC 213

Fiduciary - Director - Director also an investor - Capacity in which director/investor acts - Executive/Non-executive directors - Conflict of interest - Account of profits - Corporate opportunity - Requirement to plead dishonesty - Laches

First Appellant : Mr C L Zelestis QC & Mr M D Cuerden

Second Appellant : Mr C L Zelestis QC & Mr M D Cuerden

Third Appellant : Mr C L Zelestis QC & Mr M D Cuerden

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Connor v Blacktown District Hospital (1971) 1 NSWLR 713

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1 McLURE P: The appellants, Mr T Streeter, Mr D Cooper and Jungle Creek Gold Mines Pty Ltd (a company controlled by Mr Streeter), appeal against orders made by EM Heenan J imposing in favour of the respondent, Western Areas Exploration Pty Ltd (WAE), a constructive trust over 11,075,000 shares held by the Streeter and Cooper interests in Western Areas NL (WANL) (the initial shares).

2 The initial shares were obtained by the appellants in connection with their contribution to a successful capital raising and listing of WANL on the ASX in July 2000. WANL shares traded for some considerable time under or around their list price of 20 cents. However, between the listing of WANL and the commencement of this litigation in 2006, WANL was spectacularly transformed from a junior mining exploration company to a highly successful mining company with a market capitalisation of more than $900 million. The WANL share price peaked at $11.65 prior to the start of the global financial crisis in 2008.

3 WANL was the corporate vehicle for a nickel project proposal put together and promoted by a group of geologists called the Australian Nickel Project Consultants (ANPC). The success of WANL was not attributable to the mining tenements which featured in the capital raising and float in 2000. Its success was attributable to the acquisition between April 2002 and May 2003, and subsequent development of, the Forrestania mining tenements. WANL's expenditure on the Forrestania project, which was financed by further share placements, rights issues and loans, exceeded $76 million in the period 30 June 2003 to 30 June 2006.

4 At all material times Mr Streeter and Mr Cooper were directors of WAE, which had been dormant since the end of 1998. Mr Streeter and Mr Cooper were directors of WANL from its incorporation in December 1999. The trial judge found that, by virtue of their involvement with ANPC and WANL between December 1999 and May 2000, Mr Streeter and Mr Cooper had breached their fiduciary duties as directors of WAE, with the consequence that the appellants were required to account to WAE for the entirety of the multi-million dollar profit attributable to the increase in value of the initial shares.

5 I agree with Murphy JA for the reasons he gives that the trial judge erred in failing to find that WAE's claim for a constructive trust over the initial shares was barred by laches. However, I have a different view on issues relating to the nature and extent of the fiduciary duties owed by Mr Streeter and Mr Cooper. In order to understand my reasons, it is necessary to provide an outline of the factual background. The full details are set out in Murphy JA's reasons.

6 Mr Streeter had a history of investing in junior exploration companies, in particular nickel mining companies. He was a director and shareholder of Jubilee Goldmines NL (Jubilee) prior to it discovering the rich nickel prospect known as Cosmos in August 1997 and its subsequent successful development. As a result of his investment in Jubilee, Mr Streeter acquired a reputation as a successful major investor in mining in Western Australia and was frequently contacted by persons offering him investment opportunities [149].

7 In early 1998, representatives of WAE approached Mr Streeter with a proposition that he provide seed capital of $250,000 for the purpose of enabling WAE to issue a prospectus in order to raise up to $2,500,000 in working capital and obtain admission to the official list of the ASX. At that time WAE had an interest in 12 mining tenements. If Mr Streeter agreed to subscribe $250,000 for shares in WAE, Mr Brailey and the other promoters of WAE would transfer to him approximately 600,000 additional shares for no further consideration [150]. The arrangement was that Mr Streeter would subscribe for 5 million WAE shares at 5 cents and Mr Streeter and Mr Cooper would be appointed to the board [143]. Messrs Streeter and Cooper were appointed to the WAE board on 15 March 1998. Mr Brailey continued as a director.

8 WAE had an unfortunate history of capital raising. It had an unsuccessful initial public offering (IPO) in May 1997 [135]; a proposed IPO in September 1997 was deferred and subsequently not pursued; and the proposed capital raising in April 1998 to be funded by the capital from Mr Streeter was abandoned [162].

9 From March 1998 Jungle Creek subscribed for capital in, and made loans to, WAE. Jungle Creek also paid and took an assignment of debts owing by WAE. The loans and debts were intended to be converted to equity in WAE [155]. The trial judge found that Mr Streeter continued to owe WAE approximately $118,000 pursuant to 'the March 1998 agreement', being a reference to the arrangement to subscribe $250,000 [176].

10 By 1999 WAE had a total share capital of 9,105,345 shares, of which approximately 18.6% were held by Jungle Creek [179]. Its only asset was an interest in the Cue tenements and its solvency was dependent on continuing financial support from Mr Streeter.

11 The trial judge appears to have accepted that by 1999 there was no hope of attracting investors to WAE unless there was a major reconstruction of its share capital by a reduction in the number of shares on issue. A reduction was required because new investors would suffer a major dilution of the capital invested, to the advantage of existing shareholders [28]. By March 1999 the Streeter interests were seeking a 1:20 reduction in WAE's share capital and shareholder approval to increase its shareholding above 20% without having to make a takeover offer for all WAE shares. This was discussed at a board meeting in March 1999 but no decisions had been taken by November 1999. Mr Brailey favoured a 1:10 reduction in capital.

12 By November 1999, Mr Streeter had since March 1998 been the sole source of WAE's funding. WAE had no capital, no employed staff, did not conduct any trade and had no income. Its only officers were its directors and secretary who were all unremunerated. It had been dormant since the end of 1998.

13 In November 1999 ANPC was seeking to promote a nickel project proposal. The ANPC included Mr Grammer, Mr Hanna and Mr Stuart, all of whom were experienced geologists who were under-employed or unemployed at the time. Mr Grammer had been the geologist at Jubilee and knew Mr Streeter. In November 1999 the ANPC proposal was contained in a document entitled 'Nickel Company Proposal' dated November 1999 (the November proposal). The November proposal was accompanied by two 'Proposed Nickel Company Models'; the first dated 12 November 1999 and the second 18 November 1999.

14 The November proposal was to vend six nickel sulphide projects and one high grade gold project into a listed vehicle to raise $3 million to conduct a two-year drilling programme. The proposed exploration programme was to be managed and carried out by ANPC on a contract basis. Both November models made provision for the allocation of vendor shares to the owners of the mining tenements to be vended into the listed vehicle. Other shares were to be issued by way of remuneration to ANPC, other service providers, a seed capitalist and a capital raising broker. By December 1999 a revised ANPC proposal and accompanying models identified the proposed corporate investment vehicle as a 'new NL co'.

15 In November 1999 Mr Brailey was working as a stockbroker at the broking firm Tolhurst. After a chance encounter with Mr Stuart, who told Mr Brailey that ANPC was looking for seed capital and had been wearing out shoe leather trying to interest stockbrokers in their proposal, Mr Brailey met with Mr Stuart and Mr Grammer on 30 November 1999 at Tolhurst's offices.

16 The trial judge accepted Mr Brailey's evidence concerning the meeting; in particular that Mr Brailey recognised the ANPC proposal as an attractive one suitable for WAE; that he mentioned this to the ANPC personnel and sent them to Mr Streeter expressly for the purpose of having the proposal considered on behalf of WAE. The evidence does not support a finding that Mr Brailey sent the ANPC personnel to Mr Streeter expressly for the purpose of having the proposal considered on behalf of WAE. This relates to what Mr Brailey expressly stated to the ANPC personnel. Separate but related issues (which I address below at [60] - [62]) are what may be inferred as to the capacity in which Mr Brailey was acting, what he expected when he recommended to the ANPC personnel that they meet with Mr Streeter and Mr Streeter's knowledge of those matters.

17 Mr Hanna, Mr Stuart and Mr King (ANPC's corporate adviser) met again with Mr Brailey on 3 December 1999. The trial judge made no express findings as to what was said or resolved at that meeting [243]. It was Mr Brailey's evidence that he did not have any further communications with ANPC representatives about the ANPC proposal after 3 December 1999.

18 The trial judge made no findings as to the purpose of the ANPC representatives in meeting with Mr Brailey.

19 Mr Grammer, Mr Hanna, Mr King and probably Mr Stuart met with Mr Streeter at his business premises on 6 December 1999. The trial judge made no express findings as to what transpired at this meeting. There was a further meeting with Mr Streeter and Mr Cooper on 7 December 1999 attended by Messrs Hanna, Grammer, King and possibly Stuart. The November proposal was discussed at that meeting and Mr Streeter raised the prospect of WAE being brought into the ANPC proposal.

20 After the meeting on 7 December 1999, Mr Cooper prepared a document headed 'TE Streeter Group - Proposed Equity Holding - Nickel Project (using existing shareholding in Western Areas Exploration NL)' (the Streeter Group proposal). This proposal is referred to in the trial judge's reasons as an 'offer'. It is clearly not a contractual offer. The document incorporated the information in the ANPC model dated 12 November 1999 but with WAE as the corporate vehicle. The Streeter Group proposal contained information concerning WAE's issued capital, Jungle Creek's entitlement, subject to WAE shareholder approval, to partly paid shares and to a further 600,000 shares from other existing shareholders. Two options were included; the first assumed a WAE capital reduction of 1:20 and the second, no reduction of WAE capital.

21 The trial judge did not make any express finding as to the capacity in which Mr Streeter and Mr Cooper acted at the meetings on 6 and 7 December 1999. However, he found that the Streeter Group proposal was not made by Mr Streeter acting privately or independently of his role as a director of WAE [244].

22 There was a further meeting between Mr Streeter and ANPC representatives on 10 December 1999. The trial judge found that Mr King said on behalf of the ANPC personnel that they did not wish to use WAE as a vehicle but wanted a new company as a 'cleanskin' [258]. The trial judge also found that ANPC personnel made a 'counter offer' at that meeting. In fact, it was in the form of a further model dated 10 December 1999. That model shows Mr Streeter providing seed capital of $250,000 and taking a placement in the IPO of 1.25 million shares. It also shows an allocation of 600,000 vendor shares; 200,000 for WAE's shareholder base valued at $30,000 and 400,000 for 100% of the Cue gold project valued at $70,000. The content of the models altered from time to time. Generally, they incorporated a capital structure in which Mr Streeter's interests would hold around 20% of the shares in the new company.

23 The structure of the proposed new company was agreed at a meeting between Messrs Streeter, Hanna, Grammer, Cooper, King and Stuart on 20 December 1999. The company structure referred to at the meeting appears to be model 9 which provided that Mr Streeter inject $250,000 seed capital in return for 3.8 million shares and take a placement of 1.25 million shares at the issue price of 20 cents. Model 9 also provided for 1,100,000 vendor shares to WAE, 800,000 of which was for 100% of the Cue tenements and 300,000 for the shareholder base. WAE held a 70% interest in the Cue tenements and Golden Granite Pty Ltd held a 30% interest pursuant to a joint venture agreement.

24 In all ANPC models after 8 December 2000, the calculation of Mr Streeter's interest, direct and indirect, in the proposed new company is shown. In calculating that interest, 80% of the issued shares in WAE are attributed to Mr Streeter. The 80% holding assumes WAE shareholder approval to a 1:20 capital reduction, an increase in the Streeter Group shareholding above 20% without making a takeover offer and that Jungle Creek's entitlement to further shares was accurately reflected in the Streeter Group proposal. Model 9 shows Mr Streeter with 17.8% of the shares in the proposed new company.

25 WANL was incorporated on 29 December 1999 and Mr Streeter and Mr Cooper were appointed to its board.

26 Mr Cooper prepared a document dated 18 January 2000 concerning the proposed reconstruction of WAE. It identifies four options, the first of which was to call an extraordinary meeting of WAE shareholders to pass resolutions (1) permitting Mr Streeter to acquire additional shares in WAE without having to make a takeover offer; (2) approving a reduction in WAE's capital on the basis of one new share for every 20 existing shares; (3) approving the issue of sufficient new shares at a discount to convert Jungle Creek's debt to equity. The final proposed resolution was in terms that:

All shareholders agree to the transfer of their shares in [WAE] for 1,100,000 shares in the new Company - Western Areas NL. The 1,100,000 shares is offered on the basis of 300,000 shares for the issued capital and 800,000 shares for 100% of the Cue Tenement.

27 Option 2 was that 100% of the Cue tenements be vended into the new company for 800,000 shares which would be subject to an escrow period.

28 Mr Brailey accepted that if he had seen the 18 January 2000 document before the WAE board meeting on 28 January 2000 he would have understood that the ANPC proposal was not proceeding through WAE.

29 The minutes of the WAE board meeting on 28 January 2000, attended by Messrs Brailey, Streeter and Cooper, record that Mr Brailey consented to a proposal that 800,000 vendor shares in a new company be accepted in exchange for the Cue tenements, with sufficient vendor shares going to Jungle Creek to satisfy WAE's debt to it and the balance becoming an unencumbered asset of WAE except for any escrow period. The trial judge found that Mr Cooper and Mr Streeter failed to disclose to Mr Brailey the name of the new company (WANL); that they were directors of the new company; or that the Streeter interests had acquired a 30% interest in the Cue tenements which Jungle Creek was vending into the new company in return for an allotment of vendor shares.

30 The trial judge accepted Mr Brailey's evidence that at the WAE board meeting around 14 February 2000, Mr Cooper handed him a copy of the 18 January 2000 document and it was only then he became aware that the ANPC proposal was no longer going into WAE. He also accepted Mr Brailey's evidence that after the February board meeting, Mr Cooper provided him with a draft chairman's notice of an extraordinary general meeting to consider an offer from WANL of 1,000,000 shares on the basis that WANL would take over WAE's interest in the Cue tenements and change its name. Mr Brailey refused to sign the document. Mr Brailey resigned as a director of WAE on 8 March 2000.

31 In February 2000 Mr Streeter became aware that Golden Granite's 30% interest in the Cue tenements was for sale for $5,000. A company controlled by Mr Streeter paid for that interest at the end of March 2000. At no time did Mr Streeter advise Mr Brailey that Golden Granite's 30% interest was for sale.

32 At a WAE board meeting on 28 March 2000 it was agreed that a value of $100,000 be placed on 100% of the Cue tenement and that WAE's 70% interest would equate to 350,000 fully paid shares in WANL. In fact, WAE, WANL and Jungle Creek had earlier on 28 March 2000 executed an option agreement for the sale of the Cue tenements. The trial judge found that $100,000 was very probably a significant overstatement of the value of the Cue tenements [197].

33 In May 2000 WANL issued its prospectus, a copy of which was sent to each shareholder of WAE. The independent valuation of the Cue tenements in the prospectus was between a low of $20,000 and a high of $70,000. WANL's capital raising was completed by July 2000. Mr Streeter ended up contributing $300,000 seed capital for which he received 4.5 million WANL shares at a two-thirds discount to the issue price, 5.625 million options to acquire fully paid WANL shares at an exercise price of 20 cents on or before 31 March 2004 and 400,000 options at an exercise price of 40 cents on or before 31 March 2004. The options were exercised. The Streeter interests also received 150,000 fully paid WANL shares for its 30% interest in the Cue tenements. All of these shares are the subject of WAE's claim.

34 Mr Streeter also subscribed for 2.5 million shares in the IPO at the issue price of 20 cents pursuant to his agreement with ANPC. Mr Brailey and the other WAE shareholders who gave evidence at trial did not subscribe for any WANL shares in the IPO despite receiving the prospectus.

35 The WAE claim against the Cooper interests relates to the grant of 400,000 options at an exercise price of 40 cents, which options were exercised prior to their expiry date.

36 At an extraordinary general meeting of WAE on 15 August 2006, Mr Brailey and another shareholder, Mr Connell, took control of the WAE board and shortly thereafter WAE commenced these proceedings.

An analysis of the trial judge's reasons and findings

37 The trial judge found that Mr Streeter and Mr Cooper as directors of WAE acted in breach of their fiduciary duties in diverting and using to their own advantage 'the opportunity to avail of, or participate in', the ANPC proposal from WAE to the new company formed for the purpose, WANL [485]. He also found that Jungle Creek was knowingly involved in Mr Streeter's breach of duty [486].

38 It is necessary to go elsewhere in the lengthy reasons to attempt to tease out the facts and reasoning on which the findings of breach are based. The steps appear to be as follows. The trial judge was satisfied that there was no real distinction between the nature of the business or the aspirations of the directors of WAE 'and the company into which [Mr Streeter and Mr Cooper] placed the Nickel opportunity, namely WANL' [313]. The quoted words are consistent with an earlier finding that both WAE and WANL were substantially under the control or influence of Mr Streeter who 'chose to put the venture into WANL, rather than into [WAE]' [283].

39 The trial judge's view that Mr Streeter had a choice or the opportunity to elect between WAE and WANL as the vehicle for the ANPC proposal is also apparent in [314]:

It appears to be clearly the case that in December 1999 and January 2000 consideration was given to promoting these prospects via [WAE], then under the control of [Mr Streeter], but that, for various reasons, this was considered to be inexpedient, whereupon [Mr Streeter and Mr Cooper] took the decision to incorporate WANL, float it and place the nickel tenements with it.

40 The trial judge's explanation for the finding of breach of fiduciary duty continues:

There can be no doubt that Messrs Streeter and Cooper were aware that the ANPC proposal had come to them at the direction of Mr Brailey in his capacity as a director of WAE and in the expectation that it would be appraised and, if thought appropriate, developed by Mr Streeter in his capacity as a director of [WAE]. In addition, they used their roles as directors of [WAE] to permit or tolerate the use of the name of [WAE] by WANL and to facilitate the transfer of the Golden Granite 30% interest in the Cue tenements to WANL, taking the profit via Jungle Creek in the process. They realised that some form of remuneration or participation in the ANPC project by WAE was due and necessary, but, in discussions with the ANPC personnel during the evolution of the structure for the new project, they accepted the dilution of that participation while simultaneously negotiating for a controlling interest to be taken in the project by Mr Streeter. Effectively, they took an opportunity which they knew was of the kind being sought by [WAE] through WANL in a manner which secured for themselves major collateral benefits and, thereafter, abandoned any thought of pursuing the same or similar projects by [WAE] [315].

41 The observations in [315] have to be read with the conclusions in [284]:

[T]he promotion of the ANPC proposal by WANL did not and could not have progressed without the utilisation of advantages associated with [WAE]. These were ... the provision of [WAE's] interests in the Cue tenements, and the use of [WAE's] name by the new company as occurred. The use of the Cue tenements ... was not in any way essential or even desirable for the promotion of the ANPC project but it was necessary to secure the effective 20% shareholding, and ensuing control, by Mr Streeter in the flotation which was his price for his overall financial support. Accordingly, the use of [WAE's] assets, and the influence which Mr Streeter and Mr Cooper had over them as directors of [WAE] was an essential and actual part of the implementation of the ANPC proposal and the effective flotation of WANL on the terms which were later implemented.

42 The trial judge concluded that when Mr Streeter and Mr Cooper were considering what if any support would be given to the promotion of the ANPC proposal, they 'as directors of WAE, were in a position of the clearest conflict between WAE's interest, their self interests and then, shortly afterwards, their duties to ... WANL' [316].

43 Further, the trial judge found that 'the strategy' of putting the nickel prospects into WANL, the formation of WANL and the role of Mr Streeter and Mr Cooper as its directors was deliberately kept from Mr Brailey until the WAE board meeting in mid-February 2000 [318]. The appellants challenge (in ground 8) the trial judge's findings of intentional and wrongful concealment. I agree with Murphy JA for the reasons he gives that the trial judge erred in making those findings.

44 The appellants also challenge what they say is a finding that Mr Streeter breached his March 1998 agreement to subscribe $250,000 in WAE. It is difficult to determine whether the trial judge found a breach of a legally binding agreement or simply a breach of a moral obligation. There are strong moral fault overtones in the judgment: [166], [173], [176], [188]. Either way the conclusion is reached without any evaluation of all the relevant evidence, in particular the effect of the failure of the purpose for the subscription. The conclusion cannot stand. On my reading of the reasons, that conclusion was a contributing factor in the trial judge's conclusion that the appellants' breaches were intentional and dishonest.

45 Notwithstanding the repeated statements that Messrs Streeter and Cooper elected to use WANL rather than WAE as the corporate vehicle, the trial judge accepted that there were substantial commercial reasons for not using WAE as the vehicle for the ANPC proposal and in that context noting that WAE could have become a major shareholder in the new company, or its existing shareholders could have become foundation shareholders in the new company on equal terms with Messrs Streeter and Cooper [317].

46 The source of the trial judge's finding of choice or control of options is traceable to [262] in which he concluded:

Effectively, in all these negotiations Mr Streeter held the whip hand. That is not to say that his dealings with the ANPC personnel were other than harmonious but it was he and not they who had access to funds and they had little alternative but to accept his wishes. Had the situation arisen that instead of Mr Streeter himself being the source of the seed capital but Mr Streeter suggesting that seed capital could come from investment via [WAE], which in turn he and all the other shareholders might fund, I have no doubt that that arrangement would also have been acceptable to the ANPC personnel. It would have been treated, in effect, as a Streeter investment because of his assumed control, or capacity to achieve control, of WAE.

47 If [262], [283] and [313] - [314] of the trial judge's reasons are looked at in isolation, it may be thought that he found that Mr Streeter and Mr Cooper had the option to elect between WAE or WANL as the corporate vehicle for the ANPC proposal. Such a finding is against the weight of the evidence. Indeed, the trial judge accepted Mr King's evidence that ANPC did not want to use WAE and found that there were substantial commercial and practical reasons which made it inadvisable for ANPC to use WAE which had a history of unsuccessful attempts at capital raising [458]. He accepted that ANPC would not have used WAE.

48 On a reading of the reasons as a whole, it appears the trial judge regarded the relevant opportunity diverted by Mr Streeter and Mr Cooper as one for WAE to be the seed capitalist for WANL or for WAE shareholders to become foundation shareholders on equal terms with Mr Streeter and Mr Cooper. Neither is a relevant opportunity (or interest) for WAE. The first is well and truly outside WAE's actual or intended business and the second was an opportunity for the shareholders not WAE. The case has to be approached on the basis that WAE was not acceptable to ANPC as the corporate vehicle for the ANPC proposal.

49 There are a number of other threads discernible in the trial judge's finding that Mr Streeter and Mr Cooper breached their fiduciary duties in diverting from WAE to WANL, and using to their own advantage, the opportunity to avail of or participate in the ANPC proposal. The conclusion appears to depend upon the trial judge's findings that (1) Mr Streeter and Mr Cooper were aware that the ANPC proposal had come to them at the direction of Mr Brailey in his capacity as a director of WAE and in the expectation that it would be appraised and, if thought appropriate, developed by Mr Streeter in his capacity as a director of WAE; and (2) that the use of WAE's name and the sale of the Cue tenements were essential parts of the implementation of the ANPC proposal and float of WANL. The appellants challenge these findings.

50 In particular, the appellants challenge (in grounds of appeal 9 - 13) the trial judge's findings concerning the appellants' misuse of their powers in connection with causing or permitting WAE's name to be used by WANL. I agree with Murphy JA for the reasons he gives that the trial judge erred in making these findings and that grounds 9 - 13 should be upheld.

51 The purchase by the Streeter interests of Golden Granite's 30% interest in the Cue tenements which was thereafter vended into WANL was pleaded as an independent breach of fiduciary duty, which claim was upheld by the trial judge. The finding is challenged by the appellants (grounds 14(a), 16, 17(d), 18(e) and 19). I agree those grounds of appeal should be dismissed for the reasons given by Murphy JA.

52 I turn now to the sale by WAE of its 70% interest in the Cue tenements to WANL. WAE affirmed the sale, which is understandable in light of the trial judge's finding that the purchase price of the Cue tenements was very probably a significant overstatement of their value. The sale of the 70% interest in the Cue tenements was not pleaded or litigated as an independent breach of fiduciary duty. The relevant breaches are pleaded in par 17 of the statement of claim which provides:

1. In or about the period December 1999 to May 2000, [Mr Streeter and Mr Cooper]:

17.1 took steps to divert the Nickel Opportunity away from [WAE] to themselves, [Jungle Creek] and Western Areas NL (WANL) and, in doing so:

17.1.1 used information acquired as directors of [WAE] to benefit themselves;

17.1.2 took advantage of an opportunity or knowledge derived from their fiduciary position

17.2 placed themselves in a position of conflict between their fiduciary obligations ... and their personal interests in participating in the Nickel Opportunity other than through [WAE].

53 The expression 'Nickel Opportunity' is defined (par 8) as follows:

In or about December 1999 [WAE] was introduced ... to a business opportunity (Nickel Opportunity) relating to a project identified by a group named Australian Nickel Project Consultants (Nickel Project).

Particulars of the Nickel Project

The Nickel Project was set out in a written document entitled 'Nickel Company Proposal' and dated November 1999 (Nickel Company Document). It included:

(a) a proposal to vend six nickel sulphide projects and one high grade gold project into a listed vehicle to raise $3.0 m to conduct a two year drilling program on existing, high quality targets and two additional high quality nickel sulphide projects to be included into the company, depending on the level of funds raised (Nickel Sulphide Projects);

(b) a $1.5 million per annum exploration programme to be managed and carried out by ANPC on a contract basis for the nickel company at reasonable market rates;

(c) the involvement services expertise and knowledge base of ANPC and the ANPC consultants, Grammer, Hanna and Stuart.

Particulars of Nickel Opportunity

The opportunity comprised of the chance for [WAE] to be the listed vehicle for the Nickel Sulphide Projects and to secure the other benefits of the Nickel Project ... alternatively the chance to otherwise participate in the commercial exploitation of the Nickel Project.

54 The matters pleaded in pars 14A - 14I of the statement of claim relate to the independent claim (in par 17A) that Mr Streeter diverted the opportunity to acquire the 30% beneficial interest from Golden Granite away from WAE to Jungle Creek.

55 Although the transfer of WAE's 70% interest in the Cue tenements was not pleaded or litigated as a breach of fiduciary duty, the circumstances surrounding the vending in of the Cue tenements became relevant to whether the appellants had acted dishonestly in diverting the ANPC proposal from WAE.

56 I turn now to the trial judge's finding at [284] that the utilisation of the assets of WAE was essential to the promotion of the ANPC proposal by WANL. One basis for that finding, the use of WAE's name, falls away. All that is left is the transfer of Golden Granite's 30% interest and WAE's 70% interest in the Cue tenements to WANL.

57 The trial judge draws a distinction in his reasons between the ANPC 'project' and the ANPC proposal. He recognised that the Cue tenements were not essential (or even desirable) for the ANPC project because of their limited value. On my reading of the reasons, what the trial judge intended to convey was that the inclusion of the Cue tenements in the ANPC proposal was necessary to secure to Mr Streeter a 20% shareholding in WANL and thus control; control was essential for Mr Streeter's participation; and Mr Streeter's participation was essential for the implementation of the ANPC proposal.

58 The clear weight of the evidence is against the finding that the vending in of the WAE assets (the Cue tenements or the WAE name) was necessary to secure to the Streeter interests a 20% shareholding in WANL. Mr Streeter, through Jungle Creek, acquired 4.5 million WANL shares in return for the $300,000 in seed capital and 2.5 million WANL shares in the float via subscription through the prospectus, a total of 7 million shares. The prospectus offered 25 million shares, 18,520,000 of which were taken up. Thus without reference to any interest connected with the Cue tenements or WAE, the Streeter interests acquired 28% of the shares offered by the prospectus and about 37.8% of the shares actually issued in the float.

59 Moreover, the calculation of the extent of the Streeter interests in the ANPC models assumed a holding of 80% of the shares in WAE, whereas in fact the Streeter interests never actually held more than 18.6% of the shares. The reconstruction and other steps necessary to achieve a figure of 80% was not pressed or pursued by Mr Streeter or WAE prior to or after the WANL float.

60 The remaining thread forming the foundation for the conclusion of a breach of fiduciary duty was that Mr Streeter and Mr Cooper were aware that the ANPC proposal had come to them at the direction of Mr Brailey in his capacity as a director of WAE and in the expectation that it would be appraised and, if thought appropriate, developed by Mr Streeter in his capacity as a director of WAE. This finding in [315] appears to be the drawing together of findings in [236], [240] and [241], culminating in the findings in [287] that:

I am satisfied Mr Streeter acquired his knowledge of the ANPC proposal and of the opportunity to promote it as a direct and intended result of Mr Brailey's referral of the ANPC personnel to him. I am further satisfied that Mr Brailey referred the ANPC personnel to Mr Streeter with a view to the opportunity being examined, and if thought attractive, being promoted by or on the behalf of [WAE]. I am satisfied that it was never the intention or within the contemplation of Mr Brailey in referring the ANPC personnel to Mr Streeter that the reference was not to Mr Streeter in his role as a director of [WAE] or that it was simply being passed on to Mr Streeter because he was known to be a wealthy investor with an inclination to invest in mining prospects.

61 However, the finding in [315] as to Mr Streeter and Mr Cooper's knowledge of Mr Brailey's actions and motivations is not supported by any earlier finding, or indeed the evidence. There is no evaluation of the evidence relating to the multiple relationships between Mr Streeter and WAE (director, shareholder, creditor, funder, investor). Having regard to the multiple relationships, the acceptance of Mr Brailey's evidence and rejection of Mr Streeter's evidence does not permit the positive finding of knowledge.

62 Moreover, the trial judge did not give reasoned consideration to the evidence relating to what the ANPC representatives were seeking, and why and in what capacity Mr Streeter was approached by them. However, he rejected a submission that the ANPC consultants were seeking seed capital, saying that how the necessary capital was raised was of secondary importance to them [226]. That conclusion is against the clear weight of the evidence which was that the ANPC representatives were seeking a seed capitalist and a stockbroker (to provide shareholder spread) for the ANPC proposal: [4], [174], [224], [226]. They approached Mr Brailey because he was a stockbroker. He was not approached in his capacity as a director of WAE. Whatever Mr Brailey said or intended, the only reasonable inference is that the ANPC representatives went to see Mr Streeter to further their object of obtaining seed capital.

63 As noted earlier, prior to the incorporation of WANL Mr Streeter had four relevant relationships with WAE; that of director, major shareholder, creditor and sole funder of its operations/investor of seed capital. Little attention was given to these distinct capacities in the trial judge's reasons. They should be centre stage in a case which raises frontier issues concerning the scope of the fiduciary obligations of Mr Streeter and Mr Cooper. After December 1999 Mr Streeter (and Mr Cooper) had the additional capacity of director of WANL.

Fiduciary obligations - the conflict and profit rules

64 The legal principles are comprehensively canvassed in the reasons of Murphy JA and I do not propose to cover the same ground. I will confine my remarks to the legal principles that directly impact upon the determination of the issues in this case.

65 Two themes or rules are relevant. They are the conflict rule and the profit rule. The respondent did not rely on any 'business opportunity rule' that is wider in scope than the conflict and profit rules [50]. For useful background on the potential scope of a separate business opportunity rule, see Austin RP 'Fiduciary Accountability for Business Opportunities' in Finn PD (ed) Equity and Commercial Relationships.

66 First the conflict rule. A fiduciary is under an obligation, without informed consent, not to promote the personal interest of a fiduciary by making or pursuing a gain or benefit in circumstances in which there is a conflict or a real or substantial possibility of a conflict between the personal interest of the fiduciary and those whom he is bound to protect: Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 103; Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 [78].

67 Mason J in Hospital Products stated the conflict rule in terms of a conflict between 'interest and interest'. I understand the analysis to be as follows. A fiduciary has (within the scope of his engagement or undertaking) a duty of undivided loyalty to the person to whom the duty is owed, in this case the company of which he is a director. Thus, ordinarily a director cannot have personal interests that conflict with the interests of the company. Although the conflict rule is usually formulated in terms of the need to avoid a conflict of duty and interest, the Mason J formulation assists in the understanding (and application) of the conflict rule.

68 If a director has a positive duty (even if non-fiduciary) to pursue or acquire a particular benefit (which includes an opportunity) or property for the company and seeks that property for his private purposes, there will be a conflict of interest and interest. That is, the existence of a positive duty has the consequence that the company will have a relevant interest in the particular benefit or property for the purpose of the conflict rule. This does not involve the enforcement of a prescriptive fiduciary duty. This analysis may provide an answer to the conundrum about whether the 'duty' with which a fiduciary's interest must not conflict is confined to fiduciary duties and if so, what duties are encompassed within that rubric. The conflict rule also prohibits a conflict of duty and duty.

69 It has been observed that in the case of company directors, the conflict rule is not strictly applied: Ford's Principles of Corporations Law (13th ed) [9.060]. Thus a director can also be a shareholder and act with a personal interest even though the director cannot be shown to have freed his or her mind of that personal interest: Mills v Mills [1938] HCA 4; (1938) 60 CLR 150. It is also said that a director is permitted to occupy board positions in competing companies: London and Mashonaland Exporation Co Ltd v New Mashonaland Exploration Co Ltd [1981] WN 165; Bell v Lever Brothers Ltd [1931] UKHL 2; [1932] AC 161, 195. There are similar examples in other types of fiduciary relationships. For example, real estate agents are entitled to act for multiple vendors of real estate even though the vendors are in competition for purchasers in the same geographic or other relevant market.

70 Of course, the scope of the rules can be narrowed or excluded by contract or other instrument which defines the duties and powers of the fiduciary. There is no suggestion in this case of any relevant provisions in WAE's constitution. However, that is not the only means by which the content of fiduciary duties can be affected. The High Court has said that the content of fiduciary duties are moulded to the character of the particular relationship so that even within an established fiduciary relationship, the content of the duties will not be uniform for all cases: United Dominions Corp Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1, 11. Further, the subject matter over which fiduciary obligations extend can be ascertained from the course of dealing between the parties or the circumstances of the appointment of the fiduciary: Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178, 196 and 204. In my view, these authorities provide the principled basis for any narrowing of the fiduciary rules applying to directors.

71 Having regard to the particular circumstances of this case, I am satisfied that Mr Streeter and Mr Cooper were not prohibited by the conflict rule from investing in, and being a director of, other mining companies in Western Australia, including a start-up mining company in the market for capital with the object of listing. That is, the mere involvement of Mr Streeter and Mr Cooper in the implementation of the ANPC proposal as investors and directors in a company intending to tap into the market for public funding and with the intention of listing was not prohibited by the conflict rule. Thus, if the ANPC proposal had come directly to Mr Streeter and was implemented without any reference to WAE assets, there would be no breach of the conflict rule.

72 The circumstances relied on for that conclusion are as follows. Mr Streeter was known in relevant circles as an investor of seed (risk) capital in mining companies, including junior exploration companies. Mr Streeter was approached by WAE precisely because of his reputation and role as an astute investor of seed capital in the mining industry, the investment of capital being accompanied by board representation. An investment of seed capital in any start-up exploration company is of a speculative nature. That was particularly true of WAE. When Mr Streeter and Mr Cooper joined the WAE board in March 1998 the company had a history of failed attempts to raise funds from the public, limited operations and no employees. It had a suite of mining tenements which were intended to be the platform for a hoped for capital raising in April 1998 which did not proceed. Shortly thereafter, WAE commenced a programme of divesting itself of its mining tenements and was dormant from the end of 1998. It is far-fetched and fanciful to suggest that the parties intended that, from the commencement of Mr Streeter and Mr Cooper's involvement with WAE, all future investments by Mr Streeter (or Mr Cooper) in the mining industry in this State or elsewhere had to be with, or through, WAE.

73 I turn now to the profit rule. The conflict and profit rules overlap, but are not co-extensive. The profit rule is usually formulated by reference to the remedy of an account of profits: Chan v Zacharia (199); Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 557; Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 468. The court in Warman International said:

A fiduciary must account for a profit or benefit if it was obtained either (1) when there was a conflict or possible conflict between his fiduciary duty and his personal interest, or (2) by reason of his fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position (557).

74 As the relief sought in this case was an account of profits as a proprietary remedy (a constructive trust), it can be taken that Mr Streeter and Mr Cooper were prohibited by the profit rule from obtaining a profit by reason of his fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position. That is, the profit rule prohibits a fiduciary from misusing his position for his personal advantage: Chan v Zacharia (199).

75 Thus, where the relief sought is an account of profits, there must be a sufficient connection between the breach of the conflict or profit rule and the profit derived: Maguire v Makaronis (468). It is clear from the terms of the profit rule that there must be a causal connection between the profit and use of the fiduciary office. What is a sufficient connection between a profit and a breach of the conflict rule is not as clear. However, a mere temporal connection would seem to be inadequate.

76 When examining the case law, a distinction needs to be drawn between those cases in which the fiduciary was under a positive duty to acquire or seek to acquire a particular benefit or property for the company (Cook v Deeks [1916] UKPC 10; [1916] 1 AC 554; Chan v Zacharia; Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443; Keech v Sandford [1726] EngR 954; (1726) 25 ER 223) and cases where there is no such positive duty. This case falls into the latter category. Whether there is a sufficient connection in those circumstances can give rise to difficult questions of fact. Indeed, where a complex course of dealing is in issue, as in this case, minds reasonably may differ as to the outcome of the application of the principles: Maguire v Makaronis (468). The principles in this area of the law are easier to state than to apply.

77 The High Court's formulation of the profit rule in Warman International Ltd v Dwyer and Chan v Zacharia focuses attention on the conduct of the fiduciary. There must be a causal connection between the fiduciary office and the receipt of the benefit. The 'opportunity' referred to in the profit rule is that taken by the fiduciary to obtain the profit. If the opportunity is derived by reason of his fiduciary position, it is irrelevant that the company to whom the duty is owed was unwilling, unlikely or unable to make the profits for which an account is taken or that the fiduciary acted honestly and reasonably: Warman International v Dwyer (588); Maguire v Makaronis (468); Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46.

78 However, whether an opportunity was actually or likely to be available to the company can be a relevant consideration in determining whether a company has an 'interest' which conflicts with that of the fiduciary (save where there is a positive duty as discussed above). It would also be relevant if there is a business opportunity rule that is wider in scope than the existing conflict and profit rules due to the absence of any requirement for a relevant connection between the profit and the fiduciary position.

Whether a breach of the conflict or profit rule

79 I have concluded that Mr Streeter and Mr Cooper were authorised and entitled to pursue personal investment opportunities and involvement in the mining industry in Western Australia otherwise than through or with WAE. Something else is required to bring the conduct of Mr Streeter and Mr Cooper within the scope of the conflict and/or profit rules.

80 The salient facts are as follows. When the ANPC representatives approached Mr Streeter, he had four relationships with WAE. They were as director, major shareholder, creditor and sole funder of its operations from March 1998. Only the first of those relationships is fiduciary. Mr Streeter was also a potential investor of further seed capital in WAE and other mining ventures.

81 No one associated with WAE had any involvement in, or in connection with, the development of the ANPC proposal. It had been worked up by ANPC and had reached an advanced stage. ANPC required a seed capitalist and a capital raising broker to advance the proposal to fruition.

82 The ANPC proposal was in the public domain when its representatives approached Mr Brailey. Mr Brailey obtained information about the ANPC proposal in his capacity as a stockbroker not as a director of WAE.

83 The trial judge found that Mr Brailey referred the ANPC representatives to Mr Streeter in his capacity as a director to examine the proposal and, if thought attractive, to promote it by or on behalf of WAE. However, the trial judge's finding that Mr Streeter and Mr Cooper were aware of those matters is without any proper evidentiary foundation. In any event, nothing turns on this error.

84 The ANPC representatives met with Mr Streeter because they were seeking seed capital for the ANPC proposal. It is inconceivable (glaringly improbable) that Mr Streeter met with the ANPC representatives solely or even primarily in his capacity as a director of WAE.

85 If Mr Streeter was prepared to speculate on the success of the ANPC proposal, it was in his best financial interests that WAE be the corporate vehicle. Success would bring a return on his otherwise wasted expenditure in connection with WAE. WAE had no assets of any significant value; it was only solvent because of Mr Streeter's continuing financial support; the Streeter interests were WAE's major creditor but the debts were only convertible to equity in WAE; and Mr Streeter was a significant shareholder in WAE (and entitled to an 80% shareholding). As a significant shareholder in WAE and its only significant creditor, the Streeter interests in the ANPC proposal were identical to WAE's interests.

86 Mr Streeter sought to advance their common interests by proposing that WAE be the corporate vehicle for the ANPC proposal. The trial judge made the unchallenged finding that the Streeter Group proposal was not forwarded to ANPC independently of Mr Streeter's role as a director of WAE [244]. On any view, it was also forwarded in his capacity as a major shareholder in WAE. The document is headed 'Streeter Group proposal'. It was a proposal not an offer and it expressly contemplated the need for aspects of the proposal to be approved by WAE shareholders.

87 The Streeter Group proposal, using WAE as the corporate vehicle, was unacceptable to ANPC for sound commercial reasons. There being no positive duty on Mr Streeter to seek to acquire the ANPC proposal for WAE and there being no opportunity for WAE to be the corporate vehicle, there was no conflict between the Streeter Group's interests and the interests of WAE in WANL becoming the corporate vehicle. Thus, both before and after the rejection of the Streeter Group proposal there was no conflict between Mr Streeter's personal interests in the ANPC proposal and the interests of WAE. The provision of seed capital by WAE to facilitate a capital raising by, and listing of, another company was not a relevant opportunity for WAE, it being outside its actual or intended line of business.

88 Prior to the incorporation of WANL, the ANPC and Mr Streeter were negotiating at arm's length. ANPC's counter-proposal provided a fall back position which contemplated the issue of vendor shares for the shareholders of WAE and 100% of the Cue tenements (overvaluing both). That was in consideration of Mr Streeter's proposed personal financial commitment to the ANPC proposal and was referable to his capacity as a shareholder in WAE. The WAE related aspects of the counter-proposal, which also featured in subsequent models, clearly contemplated the need for WAE shareholder approval. In particular, it was dependent upon the WAE shareholders agreeing to the 1:20 reconstruction and the other matters which would have resulted in the Streeter interests holding 80% of the issued shares in WAE (without having to make a takeover offer).

89 The issue of vendor shares to WAE shareholders disappeared from the proposals following the WAE board meeting on 28 January 2000. However, the negotiations relating to the issue of vendor shares to the shareholders of WAE does not raise any fiduciary issues. In relation to the ANPC proposal, Mr Streeter and Mr Cooper were not in a fiduciary relationship with, and did not owe any fiduciary duties to, the shareholders of WAE. It was not suggested otherwise.

90 The arms length negotiations relating to the Cue tenements were conducted by and on behalf of Mr Streeter in his four capacities. From a practical commercial perspective, it is difficult to identify any relevant conflict of interest. However, it is unnecessary to determine whether a conflict arose prior to the incorporation of WANL. What is clear is that after Mr Streeter and Mr Cooper became directors of WANL there was a conflict of interest and duty (and duty and duty) relating to the proposed transfer of WAE's 70% interest in the Cue tenements. Mr Streeter and Mr Cooper were acting in their capacity as directors on both sides of a transaction which was yet to be the subject of final agreement.

91 The next question is whether that conflict itself entitles WAE to the profit the subject of the claim, being the initial shares issued to Mr Streeter and Mr Cooper on favourable terms (not available to those who participated in the IPO) in consideration of Mr Streeter's personal financial contribution.

92 The conflict is directly connected with the profit that flowed to WAE from the transfer of its 70% interest in the Cue tenements. However, for the reasons given earlier the transfer was not an essential part of the implementation of the ANPC proposal or the successful float of WANL. There was no finding that Mr Streeter's financial support for the ANPC proposal was conditional on the vending in of the Cue tenements. The vendor shares for the Cue tenements was an objectively undesirable add-on given in consideration for Mr Streeter's personal financial commitment. The profit actually received by WAE on the transaction was attributable to Mr Streeter's significant personal investment in WANL; the profit on the initial shares resulting from the personal investment of Mr Streeter (and Mr Cooper) is not attributable to, or relevantly connected with, the vending in of the Cue tenements. Thus there is no sufficient connection between the conflict and the profit claimed by WAE.

93 Further and in any event, having affirmed the transaction and received the very considerable financial benefit flowing from it, WAE cannot approbate and reprobate to rely on the known conflict inherent in that transaction as the basis for taking the profit flowing to Mr Streeter and Mr Cooper from their personal financial support of the ANPC proposal.

94 Mr Streeter also breached his fiduciary duty in relation to Golden Granite's 30% interest in the Cue tenements. However, for the reasons already given in relation to the Cue tenements, that breach is only sufficiently connected with the profit from the 150,000 vendor shares attributable to that 30% interest.

95 The remaining issue is whether Mr Brailey's involvement in referring the ANPC representatives to Mr Streeter is itself a sufficient connection between the profit from the initial shares and the appellants' position as directors of WAE. I would answer that question in the negative. The ANPC proposal was in the public domain. It came to Mr Brailey's attention in his capacity as a stockbroker not in his capacity as a director of WAE. There is no finding that the ANPC proposal was disclosed to Mr Brailey to assist in finding a corporate vehicle. Mr Streeter had (to Mr Brailey's knowledge) a potential interest in the ANPC proposal in four capacities, three of which related solely to his personal interests. There is no finding that the ANPC representatives went to see Mr Streeter for any reason connected with WAE. The fiduciary relationship between the appellants and WAE did not prohibit them from pursuing their personal interests in the ANPC proposal. The connection between the information and the fiduciary office is so tenuous and insignificant (even by Boardman v Phipps standards) that there is no breach of the profit (or conflict) rule.

96 Apart from the 150,000 WANL shares attributable to Golden Granite's 30% interest in the Cue tenements, it cannot in my view be said that there is a sufficient connection between the profit from the initial shares and the role of Mr Streeter and Mr Cooper as a director of WAE. If the claim was not barred by laches, I would confine the constructive trust to the 150,000 shares for the 30% interest in the Cue tenements.

97 BUSS JA: I would allow the appeal. I agree with Murphy JA, for the reasons he gives, that the trial judge erred in failing to find that WAE's claim for a constructive trust over the initial shares was barred by laches. Otherwise, I agree with the reasons of McLure P.

98 This is an appeal by Mr Streeter, Mr Cooper and Jungle Creek Pty Ltd (Mr Streeter's company) in relation to a decision by the learned trial judge in which his Honour found that Mr Streeter and Mr Cooper had breached their fiduciary duties to the respondent (WAE) as directors of that company. The events concerned Mr Streeter and Mr Cooper and Jungle Creek obtaining certain shares and certain options in another company, Western Areas NL (WANL) which the judge found were obtained in breach of fiduciary duty to WAE. The learned judge declared that the appellants hold their interests in WANL resulting from the breach of duty on constructive trust for WAE.

99 The meaning of many of the judge's findings were contested on the appeal, both as to the underlying facts, and his Honour's ultimate findings of breach of duty. As to the latter, there was debate over the true nature of the judge's findings as to the particular obligations owed by Mr Streeter and Mr Cooper, and what particular acts or omissions the judge found as amounting to a failure to discharge those obligations (cf Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 464). As to the former, the judge's reasons do not disclose, in a chronological sequence, his findings as to the underlying events giving rise to the liability found. The events in question spanned nine years between 1997 and 2006, although most of the principal events occurred in 1999 and 2000.

100 Given the difficulties which arose in the appeal in ascertaining a chronological narrative of the findings of fact, and given that many findings, or alleged findings of fact, are under challenge in the appeal, it has been necessary to start these reasons with a detailed outline of the

events between 1997 and 2006 relevant to the disposition of the appeal. The outline attempts to draw together, in a chronological sequence, the facts which, it appears to me, were found by his Honour. There are references to the evidence where that appears to be necessary in order properly to understand his Honour's reasons. Certain events, which are relevant to an understanding of the allegations and issues in the appeal, but which were not expressly adverted to by his Honour, are also set out in the chronological conspectus.

101 After a recitation of the facts in this way, I record the judge's reasons in which his Honour formulated the issues of fiduciary duty and breach, and his Honour's reasons in which his findings in relation to those issues principally appear.

102 I next set out what I understand to be the relevant legal principles concerning fiduciary duties in this context, and the duties of directors.

103 Next, before seeking to deal with the detail of all the grounds of appeal, it is convenient to set out my observations and conclusions concerning breach of fiduciary duty based on the judge's findings of fact to the extent to which I find that they have not been successfully challenged in this appeal. In that section of these reasons, I explain why I consider that based on those findings of fact, it has not been shown that the judge erred in his finding of breach of duty.

104 After that, I address in detail the grounds of appeal on the issue of breach of fiduciary duty.

105 Finally, I deal with the grounds of appeal concerning relief and laches.

106 In summary, I find that the appellants do not succeed on the question of breach of duty, but succeed in the appeal on the basis that WAE's claims were barred by laches.

Chronological recitation of facts History of WAE prior to 30 November 1999

WAE - incorporation 1996 to late 1997; shareholders (reasons [128] - [149])

107 WAE was incorporated on 8 November 1996 as an unlisted no liability company called Bloodhound Gold NL. Its memorandum and articles disclose that the company was formed with a view to obtaining mining tenements, exploring for gold and other minerals, and undertaking associated activities typical of a junior exploration company.

108 Upon incorporation, it raised initial capital of $2,200, by the issue of 2.2 million 20 cent shares at a discount price of one-tenth of 1 cent per share. The original shareholders and promoters were Mr Brailey, Mr Bernard Le Clezio, Mr Evans and two others. Mr Brailey, Mr Bernard Le Clezio and Mr Evans were stockbrokers. The intention was for Bloodhound to acquire mining tenements and to bring Bloodhound to a listing on the Australian Stock Exchange, and to carry out exploration of the tenements. At the time of incorporation, the focus was on goldmining tenements.

109 In January 1997, Bloodhound issued a further 2.6 million 20 cent shares at a discount price of 5 cents each, raising $130,000. It contracted to acquire certain goldmining tenements and a diamond tenement. In order to carry out exploration of the tenements, it issued an initial prospectus in March 1997, by which it issued a further 1.2 million 20 cent shares at a discount price of 10 cents per share, and thereby raised an additional $120,000.

110 In May 1997, Bloodhound lodged a second prospectus for the issue of 15 million 20 cent shares. The prospectus stated that the company's objectives and strategies were as follows [135]:

The principal and main objective with the Directors is to establish Bloodhound as a successful, profitable exploration and mining company with the aim of maximising returns to its shareholders. The strategies to achieve this objective are:

• explore mineral tenements using results from previous exploration, modern cost-effective geochemical, geophysical and geological search techniques and advice from geoscience specialists;
• concentrate activities in prime areas on targets which have a high probability of success.

In the Director's view, there remains considerable scope for further major mineral discoveries within Western Australia and it is the Board's current intention to focus and concentrate on the Company's exploration efforts in this particular State.

111 The share issue was not underwritten and the proposed float did not proceed. The directors withdrew the prospectus on 15 July 1997.

112 As at 30 June 1997, Bloodhound had cash of approximately $21,000. It had shareholder equity of approximately $13,000, although this figure was dependent on the company realising value from accumulated exploration expenditure of nearly $60,000, which had been carried forward as an asset in the balance sheet of the company.

113 On 23 October 1997, the directors changed the name of the company to WAE.

114 On 17 November 1997, WAE prepared another prospectus in which it sought to raise, in effect, seed capital of $250,000 to cover the costs associated with the issue of a contemplated subsequent prospectus. It was contemplated that if the $250,000 seed capital were raised, a subsequent prospectus would be issued to shareholders with a view to raising up to $2.5 million to explore the company's mineral tenements.

115 The directors of WAE decided to defer the issue of the prospectus prepared in November 1997 until the New Year of 1998.

116 In early 1998, the directors of WAE sought to interest Mr Streeter in investing in WAE. Mr Streeter had acquired a reputation as a successful major investor in base metal mining projects. It was of advantage to WAE to have Mr Streeter investing in WAE not merely because of the money, but also because of his reputation and connections.

117 Before agreeing to invest, Mr Streeter went to Kalgoorlie to view a number of WAE's tenements. He subsequently indicated that he would subscribe for 5 million shares at 5 cents per share, thereby contributing $250,000 to WAE. Mr Brailey told Mr Streeter that if Mr Streeter subscribed for the whole $250,000 seed capital that had been sought to be raised by the November 1997 prospectus, he (Mr Brailey) and the other promoters of WAE, would transfer to Mr Streeter 600,000 shares in WAE for no consideration. Mr Streeter sought a place on the board for himself as chairman, that his accountant, Mr Cooper, be appointed secretary, and proposed that Mr Brailey resign and a new managing director be appointed.

118 In view of Mr Streeter's proposed investment, WAE's then directors decided not to proceed with the prospectus of November 1997.

119 Mr Streeter and Mr Cooper were appointed as directors of WAE at a meeting on 15 March 1998, and a Mr Moeller was appointed the new managing director. On 16 March 1998, the minutes of the meeting of directors record that Mr Streeter would provide seed capital of $250,000 within three weeks.

120 Although not mentioned by his Honour, the shares in WAE were held, directly or indirectly, by about 25 shareholders. The evidence establishes that they were all friends, acquaintances, or in some way connected with one or more of Mr Brailey, Mr Evans and Mr Le Clezio (exhibit 155, ts 722 - 726). Each of Mr Brailey, Mr Evans and Mr Le Clezio accepted that this was the case in cross-examination (ts 896, 951, 988). This group has not changed since 1998 (Brailey ts 827).

Mr Streeter - background (reasons [147] - [148])

121 Mr Streeter had, for a number of years, known Mr Bernard Le Clezio and Mr Evans as stockbrokers, and had been a client of Mr Evans. Earlier in the 1990s, Mr Le Clezio and Mr Evans had advised Mr Streeter that a parcel of 6 million shares in Jubilee Goldmines NL was for sale. Mr Streeter, through one of his companies, purchased the shares in Jubilee and took a seat on the board of Jubilee. Jubilee made a significant nickel discovery known as Cosmos, and Mr Streeter's investment in Jubilee proved to be a great success. The success was recognised and, as noted above, Mr Streeter's investment in WAE was of advantage to WAE not merely for the money which he could bring to the company, but also because of his reputation and connections.

The nature and extent of Mr Streeter's investment in WAE, commencing in March 1998 (reasons [152] - [156], [161], [176])

122 In relation to the proposed subscription of $250,000 seed capital, his Honour said [152]:

There is no issue in the present proceedings as to whether or not there was a legally enforceable contract between the plaintiff and Mr Streeter to subscribe $250,000 for shares to be issued in the plaintiff in March 1998, but I am satisfied that it was the unambiguous agreement between the plaintiff, through Mr Brailey, on the one hand, and Mr Streeter, on the other, that that would happen.

It is unnecessary to determine whether or not Mr Streeter was legally obliged to convert the balance of his loan to equity or to make good his promise to subscribe a total of $250,000 for capital in the plaintiff, but I am satisfied that during 1998 and 1999, and during the first months of 2000, the plaintiff, through Mr Brailey, operated on the assumption and expectation that the whole of the $250,000 would be subscribed by Mr Streeter for shares in WAE.

124 It appears that his Honour did not make any finding that there was a binding contract for Mr Streeter to subscribe the $250,000 seed capital in WAE. Nor did his Honour go on to find that any assumption of Mr Brailey on behalf of WAE generated an estoppel. Insofar as his Honour suggested the possibility, without finding, that there was a binding contract to subscribe for $250,000 in seed capital, the reference to an agreement being one just between WAE and Mr Streeter would seem to be incomplete, as it would appear from the judge's earlier findings that Mr Brailey, separately from WAE, agreed, in effect, to transfer or procure the transfer to Mr Streeter of a further 600,000 shares in WAE from Mr Brailey and the other promoters of WAE in consideration for Mr Streeter's agreement to subscribe, or his subscription of, $250,000 for shares as seed capital in WAE.

125 As to the precise terms of the arrangement in relation to the subscription for $250,000 seed capital, the judge said [153]:

The progressive total of the moneys paid by Mr Streeter to the plaintiff [WAE] was recorded in the books of the plaintiff as a loan, convertible to equity, and the understanding appears to have been that at a suitable time, probably when there was a further major share issue or an IPO by the plaintiff [WAE], that loan would be converted to shares. There was no definition of when that would occur, but all indications were that it would take place as soon as reasonably possible having regard to market conditions for conducting a successful share issue.

126 It would appear from this that his Honour found, in substance, that the arrangement was for the money to be a loan, which would be convertible into shares when WAE embarked upon a major capital-raising, which event would itself be dependent upon market conditions. Having regard to his Honour's earlier findings regarding the agreed transfer of 600,000 promoter shares, the arrangement was also presumably dependent upon Mr Brailey procuring the transfer of 600,000 promoter shares to Mr Streeter. Having regard to the judge's reasons in relation to the need for a restructure of share capital, his Honour also implicitly found that the arrangement was also dependent upon a capital reduction and the implementation of a mechanism which ensured that any further investment by Mr Streeter would not infringe the takeover provisions of the Corporations Law.

127 His Honour went on to make reference to Mr Brailey's subjective intentions regarding the proposed payment of $250,000 and to the fact that Mr Cooper, on behalf of Mr Streeter's company, had confirmed that the books and records of WAE, which recorded that the moneys received by WAE from Mr Streeter's company were convertible loans, were accurate. These additional matters do not, however, seem to change the substance of the finding referred to in the preceding paragraph.

128 His Honour found that of the proposed $250,000 subscription for seed capital, Mr Streeter, through his company, Jungle Creek Goldmines Pty Ltd (Jungle Creek), eventually contributed $155,000.

129 The first payment was a loan of $85,000, of which $70,000 was initially contributed on 16 March 1998. This loan was converted into equity by the issue of 1.7 million 20 cent shares to Jungle Creek at a discount price of 5 cents per share. The second loan was for $47,388. This was not converted into equity because the holding of 1.7 million shares gave Mr Streeter, via Jungle Creek, nearly 20% of the issued capital of the company, and any further increase in shareholding could trigger a requirement for a takeover, upon which Mr Streeter was not prepared to embark. There were, at the time, 9,105,345 issued shares in WAE.

130 Although his Honour made no findings concerning a binding obligation to provide $250,000 in seed capital, and as his Honour said, that was not an issue in the case, in other parts of his Honour's reasons, the judge refers to Mr Streeter as not 'having honoured his commitment' [155] or his 'promise' [166], [176], [177], [188], [227], [285]. His Honour, in such passages, is presumably referring to what his Honour considered to be a moral obligation to provide seed capital, rather than a legal obligation.

WAE's April 1998 prospectus - its withdrawal and the abandonment of the proposed capital-raising (reasons [161] - [162])

131 In April 1998, WAE proposed another initial public offering. It prepared another prospectus with a view to raising $2.5 million by the issue of 12.5 million fully paid 20 cent shares, each of which was to carry an option exercisable at 20 cents by 30 June 2001.

132 The market at this time was, however, flat. The appetite for resource stocks was very low. It was impossible to find underwriters to underwrite the proposed float of WAE. Accordingly, on 28 May 1998, the board of WAE abandoned the proposed capital-raising.

WAE's assets, including the Cue tenements, its liabilities and its conditional solvency in the period to 30 June 1999 (reasons [14], [155], [165] - [166], [172] - [173], [176], [184] - [185])

133 In relation to WAE's external creditors, Mr Streeter took steps to reach agreement with, and pay, various debts owed by WAE to its creditors, and took an assignment of those debts. He also deposited sufficient funds with WAE to enable it to pay other creditors.

134 There was, however, one creditor, Roberts, whose debt WAE disputed, in the sum of approximately $13,000. That dispute remained current in the Local Court for a number of years.

135 The various mining tenements which WAE had held in April 1998 were forfeited or lost as WAE did not commit the necessary expenditure to retain them. The judge said that this relinquishment of tenements [166]:

[W]as, in turn, due to the failure of Mr Streeter to honour his promise to subscribe the full $250,000 ... which he had promised in March 1998. Had that been done the company would have been in a position to meet those financial obligations.

As indicated above, the judge is presumably referring, in this context, to a moral commitment rather than a legally-binding promise.

136 By 30 June 1999, WAE's only asset was its interest in relation to exploration tenements near Cue, known as the Cue tenements. WAE was in a joint venture with an entity called Golden Granite Pty Ltd in respect of applications for tenements in Cue. WAE's interest was 70%; Golden Granite's interest was 30%. There were three exploration licences in relation to the Cue tenements. Only one of these was subsequently granted - on 5 August 1999.

137 His Honour recorded the directors' declaration in the 30 June 1999 accounts to the effect that there was 'uncertainty regarding the going concern of the company and if funds are contributed by Mr T Streeter the company will be able to pay its debts as and when they fall due' [172].

138 Although not mentioned by the judge, the directors' report signed by Mr Brailey and Mr Streeter said (par 4, page 940):

Review of Operations: The Company, due to prolonged liquidity problems, was only able to maintain minimum operating requirements and its future ongoing operations are dependant upon the ongoing injections of capital by one of the directors, Mr T E Streeter, or the raising of further equity capital. If such future injections of capital are not forthcoming then the Company will have no option other than to cease operations and go into liquidation.

139 His Honour found that the conditional statement of WAE's solvency was 'the truth', but that 'all the indications were that Mr Streeter intended to continue his support for the company' [173]. His Honour did not seek to reconcile that finding with the earlier findings that Mr Streeter had failed to 'honour' his 'promise' to subscribe for the whole $250,000 in seed capital.

140 His Honour further found that despite WAE having few assets, namely, its interest in relation to the Cue tenements, and despite its dependency on further funds from Mr Streeter, WAE was still 'intent upon ... acquiring interests in mineral tenements, raising further capital via public offers and becoming listed on the ASX'. The judge said that what WAE needed 'was a suitable opportunity which would prompt Mr Streeter and its other shareholders to contribute more capital after a necessary restructuring of the existing shareholding. Such a restructure was not regarded as being a contentious problem' [173].

The necessity to restructure WAE's share capital (reasons [179] - [183], [187])

141 On 22 March 1999, the board of WAE met and discussed a corporate restructure of WAE to 'downsize' the company.

142 Although not referred to in the judge's reasons, Mr Brailey's evidence in cross-examination (ts 828) was to the effect that because WAE had lost all its capital by that time, and WAE had no 'decent' assets, any further contribution of capital was unattractive because it would be diluted by the large number of shares then on issue and that, hence, it became necessary to 'collapse the capital'. In his evidence-in-chief (exhibit 170 par 102) Mr Brailey had said that Mr Streeter had wanted a 20:1 capital reduction and that he (Mr Brailey) had not agreed and had said that the existing shareholders might consider a 10:1 or 5:1 reduction. Mr Streeter also accepted that all the modelling undertaken for the purposes of negotiations concerning the acquisition of shares in WANL, proceeded upon an assumed 20:1 capital reduction in WAE (ts 1178 - 1180). In cross-examination (ts 829, 830), Mr Brailey said that his evidence in his witness statement was in error, and that what he 'really said was that [he] thought the shareholders would be more amenable to a 10:1 or a 5:1 reduction'.

143 In addition to the need to 'collapse the capital' there was also the issue that Mr Streeter, via Jungle Creek, held 18.6% of the shares in WAE and any further significant allotment would take him beyond the takeover threshold of 20%.

144 Mr Brailey was the director responsible for procuring legal advice on these issues. Legal advice on 3 May 1999 was to the effect that a capital consolidation, reducing the number of shares on issue, could be achieved by an ordinary resolution in general meeting. On the takeover question, the advice was that a further general resolution, in general meeting, for which an independent expert's report would be required, could approve Mr Streeter's acquisition of in excess of 20% of the company's issued shares without the need for a takeover by Mr Streeter.

145 At a directors' meeting on 7 May 1999 there was a further discussion on the topic of corporate restructure. (Although not referred to by the judge, the minutes of that meeting (exhibit 45) record that Mr Brailey thought that the other shareholders would not agree to a 10:1 reduction, but would probably accept a 5:1 reduction.) The minutes record, in effect, and the judge found, that the meeting noted that after settlement of the Roberts' claim, the company's solicitor should be requested to prepare the relevant notices, etcetera, to call a shareholders' meeting to consider a reduction in capital and to raise additional funds.

146 The judge found that there was no evidence of any steps thereafter being taken to bring about a capital reconstruction or to authorise Mr Streeter's acquisition of more then 20% of the issued capital of WAE without a takeover offer.

147 The judge also found that there was nothing to suggest that shareholder approval to increase Mr Streeter's stake in WAE beyond 20% 'could not have been readily obtained or that there was any opposition to it', and further, that it would have been a necessary step for Mr Streeter to 'complete the contribution of $250,000 and the conversion of all his loans to equity' [182]. His Honour, in that finding, appears not to have addressed the evidence that, prior to further investment, Mr Streeter wished WAE to undertake a 20:1 consolidation of the share capital. His Honour also found [183], in effect, that Mr Streeter and Mr Cooper were 'satisfied' that a restructure of the issued capital of WAE could readily be arranged on a 10:1 or 5:1 basis. Implicitly, his Honour appears to have found that Mr Streeter would have been satisfied with a 10:1, or 5:1, reduction, before making any further investment in WAE.

WAE's directors and personnel July 1998 to 1999 (reasons [46], [73] - [75])

148 From March until June 1998, Mr Brailey, Mr Streeter and Mr Cooper were the only directors of WAE. Mr Brailey resigned as a director in June 1998 but rejoined the board in July 1998.

149 After Mr Brailey resumed his position on the board of WAE in July 1998, there were still only three directors of WAE, viz Mr Brailey, Mr Streeter and Mr Cooper. Mr Cooper was the company secretary. Mr Brailey was the chairman.

150 All the work of the company was performed by the three directors or by Mr Cooper in his capacity as company secretary.

151 Mr Streeter was the source of all funds for the company.

152 Mr Streeter made or approved all the executive decisions of WAE and he and Mr Cooper discharged its routine responsibilities. Mr Brailey conferred with Mr Streeter and Mr Cooper, and attended the board meetings on the occasions that they were held.

153 Mr Streeter and Mr Cooper were effectively the agents of the company for all purposes and were directly involved in the conduct of all the company's activities.

154 His Honour summarised their position thus [75]:

To the extent that it remained feasible, they were responsible for the company's goals in eventually listing on the ASX, conducting and IPO and, to that end, obtaining suitably attractive mining prospects which could be commended to the market.

155 The judge also found that Mr Brailey had similar responsibilities.

WAE's position as at 29 November 1999 (reasons [45])

156 The judge's findings in the preceding paragraphs are to be considered in the context of the following finding:

In the case of ... WAE, there was no employed staff. The company did not conduct any trade, nor did it have any income. Its only officers were its directors and a secretary who were all unremunerated. During 1999 and 2000 it was dormant or 'on hold' awaiting an opportunity or an investment which would allow it to pursue the plan of conducting an IPO and becoming listed on the ASX. That almost inevitably required the introduction of further capital and the opportunity to acquire nickel mining tenements which were prospective.

The ANPC proponents, the ANPC proposal, February - November 1999 (reasons [4], [148], [174], [206] - [216], [219] - [225])

157 In 1999, the nickel mining industry was depressed. Work for experienced geologists was scarce. In this environment, four geologists, Mr Grammer, Mr Hanna, Mr Stewart and Mr Kelly, formed a group calling themselves Australian Nickel Project Consultants (ANPC). Mr Grammer had been the geologist at Jubilee who had been instrumental in the Cosmos nickel discovery. As a result of that connection, Mr Streeter and Mr Grammer knew each other prior to the events the subject of WAE's claim in these proceedings.

158 The four geologists were unemployed or under-employed and in early 1999 they started meeting to discuss possible employment opportunities. In the period to May 1999, three of them developed the idea of identifying and acquiring an interest in possible nickel sulphide projects for more extensive evaluation and development. At the time, there was a new method of treatment which was under development called pressure acid leach method. The three geologists believed, however, that the new method was fraught with a variety of technical problems and that more traditional nickel sulphide operations would remain of significance and worth. The group operated from Mr Hanna's home. The arrangement was that each of the three would continue to work as an individual consulting geologist with his own clients but simultaneously would seek opportunities to acquire interests in existing nickel sulphide projects. The idea was that they would attempt to reach agreements with the owners of such projects to sell them into an existing listed company, or to be used as an asset base to float a new company on the ASX.

159 The group identified a list of known nickel sulphide and platinum group projects in Western Australia which the group considered to have good exploration potential. Mr Grammer and Mr Hanna approached the tenement owners with a view to negotiating a kind of agreement which would allow the tenements to be put into a listed company in return for an equity interest in the company.

160 At the time of assembling the potential nickel projects, Mr Hanna was also working at Messrs Norgard Clohessy, accountants. Mr Timothy King was one of the partners in that firm.

161 By July 1999 the ANPC group had progressed to the point of preparing a web page. By October 1999 they had proceeded to compose a 'nickel company proposal - October 1999' which included as an object:

To revitalise a currently listed company and raise $4 million by vending six nickel sulphide exploration properties. The proposed fund raising will be by public placement and a rights issue to existing shareholders. The existing company will probably need to be restructured so that the resulting share numbers will be acceptable to the market.

162 The October 1999 proposal identified six specific projects. After detailing the specific targets the October 1999 proposal explained that the exploration strategy would be a two-year exploration programme, to be managed and carried out by ANPC on a contract basis, on behalf of the company at reasonable market rates.

163 In late October 1999, one of Mr Hanna's corporate advisers recommended, as an alternative to vending the tenements into an existing listed company, that a new exploration and mining company be incorporated with a view to it being listed on the ASX after conducting an initial public offering. The ANPC personnel did not immediately act on this advice because Mr King at Norgard Clohessy had prepared a proposed company model dated 12 November 1999. This model proposed vending the nickel projects into a listed vehicle by obtaining seed capital from a major investor, having a public share issue to raise $1.3 million and a placement with a major company to raise another $0.7 million.

164 The ANPC personnel then prepared a second nickel company proposal in November 1999. This was similar to the October 1999 proposal, except that it provided for two additional nickel sulphide projects to be included into the assets acquired by the listed vehicle and it proposed a two-year exploration budget for a fee of $1.5 million per annum to be undertaken by the ANPC personnel.

165 The 12 November 1999 model contemplated that fresh capital would be raised in the sum of $2.5 million after deducting expenses. That $2.5 million, together with drilling services to the value of $0.5 million which would be satisfied by the issue of shares, would contribute $3 million available for exploration. A further version of this model dated 18 November 1999 was also prepared (exhibit 54).

166 The judge found that from the perspective of the ANPC personnel, in November 1999 they had [222]:

[A] definite, feasible proposal which was ready for promotion and development by a corporate vehicle which had, or would be able to raise, about $3 million available for expenditure needed over the first two years of the project. The company which would be chosen to take on the project would also need to issue shares ... to the vendors of the various [nickel] projects in consideration for the sale of their projects. It would need to issue further shares to corporate advisers, accountants and exploration drillers in consideration for the services which they would provide. It would need a commitment to contribute a significant amount of seed capital from one or more major investors before conducting an IPO.

167 His Honour found that there were three ways in which the ANPC proposal could be effectuated. His Honour said that the most desirable vehicle would be a public company already listed with sufficient capital to back the project and an existing capital structure for the issue of vendor shares on the raising of further capital by an Initial Public Offering (IPO). His Honour said that the trouble with that course was that in 1999, such small listed corporations were in short supply and any corporate shells then listed and available for a new enterprise were rapidly being absorbed by the then 'dot-com boom' as vehicles for the promotion of technology and telecommunications ventures.

168 The second way in which to effectuate the ANPC proposal was to incorporate a new public company especially for the purposes of promoting this venture, to conduct an IPO and then to list the company on the ASX. That would need an initial commitment to provide a significant amount of seed capital to cover the costs of incorporation, the IPO and the proposed listing. It would take time to achieve and would involve the risk that the IPO may not be successful and that a listing could therefore not be obtained. That itself would mean that the prospect of securing unconditional contracts with the vendors of the nickel tenements would be jeopardised because so much would depend on the uncertainty of achieving a listing.

169 The third possible course identified by his Honour was for the nickel tenements to be vended into an existing public company, not already listed, but with the support of a retinue of its shareholders and, probably, with the need for further seed capital to undertake the IPO and then to list the company on the ASX.

What [the ANPC proponents] were seeking was acceptance of their November 1999 proposal, or some variation of it, to vend the [nickel] projects into the chosen company and to raise capital to allow a two-year exploration programme to be conducted which would involve their employment. How this was to be done and how the necessary capital was to be raised was of secondary importance.

29 November 1999 (reasons [207], [229] - [231], [237])

171 The annual general meeting of WAE was held on 29 November 1999. No shareholders other than the three directors, namely, Mr Brailey, Mr Streeter and Mr Cooper, attended. Nothing other than formal business was conducted.

172 After the meeting, there was a chance meeting on St Georges Terrace between Mr Stewart of the ANPC group, and Mr Brailey and Mr Le Clezio. Mr Stewart hailed Mr Brailey whilst the latter was standing on St Georges Terrace talking to Mr Le Clezio. Mr Brailey had known Mr Stewart from their association with Western Mining Corporation a number of years earlier. Mr Stewart was a geologist and geophysicist. He was an acquaintance of, and on friendly terms with, Mr Brailey.

173 Mr Stewart told Mr Brailey that ANPC had assembled a number of nickel projects and were looking for seed capital. He told Mr Brailey that he had been 'wearing out shoe leather' trying, in effect, to interest stockbrokers in their proposals. Mr Brailey introduced Mr Stewart to Mr Le Clezio and told Mr Stewart that he (Mr Brailey) and Mr Le Clezio were working for stockbroking firms and that they were looking for 'company makers'. Mr Brailey told Mr Stewart that Mr Brailey would be happy to meet Mr Stewart to discuss the ANPC group's activities at the offices of Tolhurst. Tolhurst was the broking firm for which Mr Brailey was working at the time.

30 November 1999 meeting with Mr Brailey (reasons [232] - [233], [236] - [241], [254])

174 On 30 November 1999, Mr Stewart and Mr Grammer of the ANPC group met with Mr Brailey at the offices of Tolhurst, stockbrokers.

175 The judge found [232] that they gave Mr Brailey a copy of:

(a) the ANPC November 1999 nickel company proposal (see [164] above); and

(b) the nickel company model dated 18 November 1999 (see [165] above).

176 Later in the reasons, his Honour found that the ANPC nickel model dated 12 November 1999 was given to Mr Brailey by Mr Stewart and/or Mr Grammer 'at the first meeting at Tolhurst's office which I have concluded was held on about 29 November 1999' [244]. His Honour's reference in this finding (at [244]) to a meeting 'on about 29 November 1999' is presumably intended to be a reference to the meeting which his Honour found to have occurred on 30 November 1999. It is not clear why his Honour referred, in this finding, to Mr Brailey having been given the nickel company model of 12 November 1999, when his Honour had earlier found that Mr Brailey had been given the model dated 18 November 1999. Mr Brailey's evidence-in-chief was that he was given the model of 18 November 1999 at the first meeting at Tolhurst's offices. The judge's reference in reasons [244] to Mr Brailey having been given the 12 November 1999 model appears to be incorrect.

177 The meeting on 30 November 1999, between Mr Brailey on the one hand, and Mr Grammer and Mr Stewart of ANPC on the other, was one of only two meetings in which Mr Brailey had any communications with the ANPC proponents (putting to one side the casual chance conversation on St Georges Terrace on 29 November 1999). The only other meeting between Mr Brailey and the ANPC representatives occurred on 3 December 1999.

178 In dealing with what transpired at the meeting on 30 November 1999, the judge referred to the conflict between Mr Grammer's evidence and Mr Brailey's evidence [233]. The judge recorded that Mr Grammer's evidence was to the effect that Mr Brailey expressed no interest in the ANPC proposal and made no reference to WAE or to Mr Streeter, or to Mr Streeter's involvement in WAE.

179 His Honour also records [233] - [234] that Mr Brailey's evidence was to the effect that Mr Grammer and Mr Stewart said they were experiencing difficulty in generating interest for the proposal, and that:

• Mr Brailey regarded it as an excellent opportunity for WAE.
• His interest was sparked by, inter alia, a reference to the Cosmos deposit and the obvious experience of Mr Grammer and Mr Stewart as geologists.
• He, nevertheless, regarded the model they were presenting as incomplete and unsophisticated.
• He told the ANPC personnel that he would speak to Mr Streeter about getting WAE involved.
• He told them that he (Mr Brailey) would take the proposal to the WAE board.
• He said that he was the chairman of WAE, that WAE had previously been called Bloodhound, and that Terry Streeter was a major shareholder in, and director of, WAE.
• He told them that he would arrange some meetings in relation to the proposal.
• He believed WAE and its major shareholder, Mr Streeter, would be interested in the proposal.

180 His Honour makes no reference to Mr Brailey informing Mr Grammer and Mr Stewart at the meeting, or recommending to them, that they contact Mr Streeter.

181 The effect of Mr Brailey's evidence, as recounted by his Honour, was that Mr Brailey himself would contact Mr Streeter and bring the ANPC proposal to the WAE board. In this respect, his Honour's record of Mr Brailey's evidence accords with Mr Brailey's evidence-in-chief and is consistent with his evidence in cross-examination.

182 Although it was not part of Mr Brailey's evidence that he recommended to Mr Grammer and Mr Stewart on 30 November 1999 that they contact Mr Streeter, his Honour referred to Mr Streeter's defence in which it was pleaded that [239]:

(c) Brailey suggested to Stewart and Grammer that the first defendant [Streeter] was an individual who may be prepared to provide seed capital for that purpose;

(d) Brailey suggested to Stewart and Grammer that they (ie Stewart and Grammer) meet with the first defendant [Streeter] and ascertain whether the first defendant [Streeter] was prepared to provide seed capital ...

183 His Honour also said that Mr Streeter, after some prevarication, 'had accepted that [the ANPC proponents] had been referred to him by Mr Brailey and that they had not come to him independently' [240]. His Honour said that he was satisfied that the approaches by the ANPC to Mr Streeter 'were directly as a result of Mr Brailey's urgings'.

184 The cross-examination of Mr Streeter, from which his Honour perhaps inferred Mr Brailey's 'urgings' was, relevantly (ts 1154 - 1156), as follows:

You accept, as I understand your case - in fact, you assert, as I understand your case, that Mr Brailey sent Mr Grammer and Mr Hanna to see you. Is that correct?---That was hearsay.

That was hearsay. You say from whom?---Well, I don't know. Grammer, I think.

Mr Grammer told you that Mr Brailey had sent him?---No, this was later on in the piece that Grammer had said they had been to see many brokers in town.

And that Mr Brailey had said go and have a chat with you?---Probably.

When do you say this was said to you?---Well, I can't recall that.

Pick a year?---99.

...

- - -?---It would have been in 99 or 2000.

So in 1999 or 2000 Mr Grammer told you that he had been to see Mr Brailey and Mr Brailey had recommended he come and see you?---Yes.

...

Can I show you a copy of the relevant pleadings in this case?---As at today?

...

Now it has always been your case, Mr Streeter, that the cause of Mr Grammer, Mr Hanna and Mr King meeting with you was the suggestion of Mr Brailey. Isn't that the case?---I think it was probably the suggestion of Mr Grammer because Mr Grammer was a friend of mine and whether Mr Brailey mentioned it to Grammer and Stewart I can't vouch for that. I wasn't at - - -

You positively assert in this case, and have since the earliest pleading, that Mr Brailey's suggestion occasioned the meeting in early to mid December that you had with Grammer, Hanna and King. That's your position. Do you accept that?---That was - I don't accept that Mr Brailey guided - well, I accept that Mr Brailey might have guided Hanna, Stewart and Grammer to my door but I can't say whether that happened or not. I wasn't there. I was only told that later, that they conveyed that was the case.

You've accepted that sufficiently for you to always run that as part of your pleaded case in these proceedings, haven't you? You know it to be true?---Yes, of course.

Thank you. It's your assertion, isn't it, that notwithstanding that you know it to be true, that at the first meeting you had with Grammer, Hanna and King they never mentioned Mr Brailey to you?---No, they didn't.

Could that be because you simply can't recollect the detail of that discussion?---No, they didn't mention Brailey.

185 Also, in the context of his cross-examination on Mr Brailey's fax to him of 12 January 2000, (see [271] below) Mr Streeter said (ts 1183):

It is accepted by your solicitors that you received this on or about the date it was sent for the purpose of these proceedings?---Right.

You have just got no recollection of it?---I can't remember seeing it but I can remember some of the points in it, yes, "strong economic growth, boost metal demands".

It's not consistent with your proposition that Mr Brailey wasn't interested in the company, is it?---Well, he was probably interested in my interest in nickel; nothing to do with the company.

Other than the company was engaged in discussions with nickel vendors, the Australian Nickel Project Consultants at the time?---That's right.

And you accept Mr Brailey sent them to see you?---Yes.

Well, it's directly relevant then for the company's affairs?---That's what they say, yes.

You accept it in your pleadings in this case, Mr Streeter. You accept it and plead it as a fact in this case?---Mm'hm, right.

Are you arguing with your own pleading?---No, I'm not.

All right, then it was directly - Mr Brailey's fax to you was directly related to the topic then of interest to the company, wasn't it?---Well, I don't know whether he was referring to that. He is referring to the London Metal Exchange here.

What has he written on the left-hand side of the page?---"Attention Terry Streeter, from Lex".

That's the right-hand?---A two-page fax.

What's the one?---On the left-hand side "Western Areas?"

Right, so he has referred the nickel price to Western Areas on the fax, hasn't he?---Right.

186 His Honour also referred to diary entries of Mr Grammer on a page dated 1 December 1999 in which there was reference to Mr Cooper, Jungle Creek, Norgard, Tolhurst and WAE [238]. His Honour said that these references were 'all eloquent of a recognised connection between those named and the ANPC proposal'. The meaning of that finding is not entirely clear. It is not apparent what his Honour understood to be the 'recognised' connection, or the nature and scope of any such connection, as at 30 November 1999, between the ANPC proposal and Mr Cooper, or Jungle Creek, or Tolhurst, or WAE.

187 His Honour appears to have summarised his findings in relation to the 30 November 1999 meeting as follows [241]:

(a) Mr Brailey recognised that the ANPC proposal was an attractive one, suitable for WAE;

(b) Mr Brailey mentioned this to Mr Grammer and Mr Stewart; and

(c) Mr Brailey 'sent [the ANPC personnel] to Mr Streeter expressly for the purpose of having the proposal considered on behalf of WAE'.

188 The third of these findings, insofar as it refers to the ANPC personnel being 'sent' by Mr Brailey is, apparently, intended to mean that Mr Brailey recommended to Mr Grammer and Mr Stewart that they contact Mr Streeter. That is how his Honour subsequently referred to it at reasons [255]. However, Mr Brailey clearly had no power to direct or control to whom ANPC submitted its proposal.

189 Insofar as his Honour's third finding refers to them being sent 'expressly for the purpose' identified by the judge, it possibly means that Mr Brailey expressly stated, when recommending to the ANPC personnel that they contact Mr Streeter, that they contact Mr Streeter for the purpose of Mr Streeter considering the proposal on behalf of WAE.

190 As noted earlier, Mr Brailey did not give oral evidence as to the meeting of 30 November 1999 which could sustain the third finding, and there was no written evidence to that effect. Also, Mr Grammer said in-chief (witness statement pars 90 - 95) and in cross-examination (ts 1591) that Mr Brailey was disinterested in the ANPC proposal, and was focussed on dotcom technology companies. Mr Grammer also said that he did not recall Mr Brailey suggesting that the ANPC representatives contact Mr Streeter (ts 1597). The judge expressly rejected Mr Grammer's evidence in this regard (reasons [255]). The judge did not make any findings as to what Mr Grammer or Mr Stewart said to Mr Brailey at this meeting.

191 It may be that this third finding is not intended to refer to the meeting on 30 November 1999, but is intended to reflect the implicit finding that the next meeting, on 3 December 1999, concluded on the basis that Mr Brailey agreed with the ANPC proponents that a further meeting should be arranged between ANPC and the other two WAE board members, Mr Streeter and Mr Cooper (see par [211] below).

192 There was an issue in the case as to whether Mr Brailey spoke to Mr Streeter about the ANPC proposal after the meeting between Mr Brailey, Mr Grammer and Mr Stewart on 30 November 1999, and before Mr Brailey's next meeting with ANPC personnel on 3 December 1999.

193 WAE pleaded (par 9 statement of claim), in effect, that after the meeting on 30 November 1999, and prior to 3 December 1999:

1. Shortly after the Introduction Brailey, in his capacity as a director of the Plaintiff, briefed the First Defendant in his capacity as a director of the Plaintiff, on the Nickel Project.

Brailey communicated with the First Defendant where he reported to the First Defendant in detail the discussions particularised at sub paragraph 8 (b) above and took him through the Nickel Company Document. They discussed the vending of the projects detailed in the Nickel Company Document into the Plaintiff and the attractiveness of the fact that the expectations of the Nickel Group were extremely reasonable and Grammer was a partner of the Nickel Group. They both agreed in effect that it was a great opportunity for the Plaintiff and they should move things forward and organise further meetings with the Nickel Group.

194 That plea was denied by Mr Streeter in the defence.

195 Mr Streeter did not say in-chief that Mr Brailey contacted him after the meeting on 30 November 1999 and when that proposition was put to Mr Streeter in cross-examination, he denied it (ts 1285 - 1287).

196 Mr Brailey, in his principal witness statement (exhibit 170) made no mention of contacting Mr Streeter after the meeting on 30 November 1999 and prior to the meeting on 3 December 1999. In his 'responsive' witness statement, Mr Brailey said:

I had discussed the ANPC proposal with Mr Streeter after my meetings with Mr Stuart, Mr Grammer, Mr Hanna and Mr King in late November and early December 1999. Although I cannot now recall the details, I know that I reported back to Mr Streeter about my discussions with ANPC on 30 November 1999, and 3 December 1999. Of all the projects I had screened for WAE since its inception, this was by far the most exciting I had come across. Because of the significance of the ANPC proposal to WAE, I am sure I communicated with Mr Streeter promptly after each of these meetings.

197 In a further witness statement, described as 'second witness statement', filed a week before trial (exhibit 171), Mr Brailey said:

1. I refer to paragraphs 83 to 90 of my primary witness statement, where I refer to a meeting with Mr Stuart and Mr Grammer, which I believed occurred on Tuesday 30 November 1999. After that meeting, I believe that I contacted Mr Streeter and discussed the ANPC Proposal with him. I further believe that Mr Streeter said words to the effect that I should have further discussions with ANPC, on behalf of WAE. The reason for my belief is that I was excited by the ANPC Proposal, and I thought that it was an excellent opportunity for WAE - the 'company maker' that we had been looking for since Mr Streeter's appointment to the board of WAE. I also formed the view that time was of the essence. I would always contact Mr Streeter in relation to any significant matters affecting WAE, and a potential new project of this calibre was definitely a significant matter. I always consulted Mr Streeter, because of his position in the company, as the effective managing director and the largest shareholder. As well, I always felt responsible for his original involvement in WAE. I would not have entered into further discussions with ANPC on behalf of WAE without having discussed it with Mr Streeter. I am unable to specifically recall contacting Mr Streeter, but for the reasons which I have stated, I believe that I did so.
2. I refer to paragraphs 91 to 97 of my primary witness statement. In which I refer to the second meeting with ANPC, on 3 December 1999. I believe that, for the reasons that I have mentioned, I had discussed the matter with Mr Streeter after the first meeting and before the meeting on 3 December 1999. I would not have had a discussion about a potential IPO and the preparation of a prospectus (as described in my primary witness statement) without Mr Streeter's full knowledge and agreement. (emphasis added)

198 Mr Brailey confirmed in cross-examination (ts 858 - 859, 893 - 894) that he had no recollection of a discussion with Mr Streeter between 30 November and 3 December 1999. He said, relevantly:

And by the time of the second meeting, a few days after the first, you had had no discussion with Mr Streeter about this ANPC proposal at all, had you?---I believe I had.

You have got no recollection of having - - -?---No, I haven't got a recollection, that's correct, and I also believe I had discussions with Mr Cooper. This is not a lightweight thing; it's a very serious situation, as it was at the time.

But it's serious that you can't remember a single discussion with them, can you?---I can remember independent things outside but when you're in a broking firm which is in the middle of dotcom boom and you're being rattled all day - I'm dealing, researching, broking, trying to look after these people - it's a bit hard to remember all those things.

You were in the middle of a dotcom boom, weren't you?---Yes, absolutely.

This was the era when there was much activity on the stock market as regards companies which were investing in telecommunications and internet-based businesses, weren't they?---Yes, that's correct.

And you were heavily involved?---I was heavily involved, yes.

...

Right. Can I direct your attention to paragraph 3 at the top of page 2 [of the second witness statement]?---Yes. The top of the page, yes, I've got that.

Do you see the sentence beginning, 'The reasons for my belief'? Can you read that to yourself?---Yes. Yes, I've read that.

And the next sentence about time being of the essence?---Yes, I believe that.

It's the case, isn't it, that in this statement you say that you were excited by the proposal and that time was of the essence?---Yes, that's correct.

And that you always contacted Mr Streeter in relation to significant matters affecting WAE?---Well, we'd had an annual general meeting on the 29th of the 11th so I mean we were still very conscious of the company's position.

Yes, but you give those three reasons - excitement, time is the essence, always contact Streeter regarding significant matters?---Well, I'd have to because he was the - you know, I'd have to do that, yes.

You say because of those reasons although you can't recall you asked the court to find that you must have had many discussions with Mr Streeter about the ANPC proposals?---This is a supplementary witness statement and it's obvious I guess that many discussions took place.

But do you accept that that's the logic you're putting forward - the attempted logic?---Could you please repeat that?

Right?---Can you start with the reasons for my belief?

In this witness statement you cannot give evidence of an actual recollection of any communication with Mr Streeter about the ANPC proposal. Isn't that so?---I've stated that before, yes.

Yes. And so what you are doing is setting out to explain to the court why you believe some discussions must have occurred. Isn't that so?---Well, that's what this says. That's exactly right.

And the reasons you give are three, are they not - the three I have just drawn your attention to and summarised: 'excitement; time of the essence; usually contact Streeter on significant matters'?---Yes, that's correct.

And you say for those three reasons you would have had discussions with Streeter about the ANPC proposal in December and January?---That's what it says, yes, and that's what I have maintained all the way through.

In point of detail you have no recollection of any discussion with Mr Streeter between the first and the second meeting with the ANPC people in early December, do you?---Well, you've said that, but what I've always maintained is that there were a number of discussions going backwards and forwards during this period.

But you have no recollection of any discussion with Streeter between the two ANPC meetings, do you?---Between 30 November and 3 December?

Yes?---No, I've said that I didn't have a recollection. That's correct.

That's correct. And you have no recollection of ever seeking from Streeter information of a particular kind as to any aspect of the ANPC proposal?---Well, I could've given it to somebody else, I suppose.

But you can't recall discussing any particular aspect of it?---The thing that I do remember very clearly was a very active week and I'm sure I did speak to Mr Streeter, and that's what I'm saying.

You can't recall any particular aspect - - -?---Exact - I can't recall the exact details.

No, but you can't recall any detail of it being discussed, can you?---Well, there's a lot of trust at this stage of the game. You know, I'm ringing him up, 'Quickly, Terry' - quick discussions, and I mean these things are happening. This project is on.

199 The cross-examination continued without any particular resolution, concerning Mr Brailey's stated reasons as to why he had a 'belief' that he would have spoken to Mr Streeter in this period.

The judge'****s findings (reasons [235] - [236])

200 The judge recorded that there was no contemporaneous record of Mr Brailey having contacted Mr Streeter in this period and noted that Mr Brailey had no recollection of any such conversation [235]. His Honour said that this admission reinforced his Honour's opinion of Mr Brailey as a careful, credible and accurate witness.

201 His Honour went on to say (in the first sentence of [236]) that 'on the other hand' Mr Streeter denied that 'he had any such conversation with Mr Brailey'. The reference to Mr Streeter's position as a counterpoint to Mr Brailey's, signified by the words 'on the other hand' seems somewhat unusual in light of Mr Brailey's evidence that he could recall no such conversation.

202 It appears, furthermore, that his Honour has, with respect, conflated the specific question of whether Mr Brailey communicated with Mr Streeter after the 30 November 1999 meeting and before 3 December, with a more general question of whether Mr Brailey contributed in any way to the decision by the ANPC personnel to contact Mr Streeter on 6 December 1999. The conflation appears from the remainder of the first sentence of [236] and the rest of [236] of his Honour's reasons, the focus of which is on why, according to his Honour, the ANPC personnel went to see Mr Streeter.

203 In any event, it appears that his Honour made no finding to the effect that after the meeting on 30 November 1999, and prior to the meeting on 3 December 1999, Mr Brailey spoke to Mr Streeter about, or reported to Mr Streeter on, his meeting with Mr Grammer and Mr Stewart on 30 November 1999.

3 December 1999 meeting with Mr Brailey (reasons [243], [254])

204 There was a second meeting with Mr Brailey at Tolhurst's office. The meeting occurred on 3 December 1999. Mr Hanna, Mr Stewart and Mr King met with Mr Brailey. Mr King was introduced as ANPC's corporate adviser.

205 His Honour referred to some, but not all, of the evidence on this topic.

206 His Honour [243] records Mr Brailey's evidence to the effect that there was a discussion about the preparation of a prospectus for WAE, that Mr King observed that Norgard Clohessy wanted to be involved in preparing and producing the prospectus, that Mr Brailey was not happy with that proposal, but a choice of who would prepare the prospectus was not then pursued, and that the result of the meeting was that all were agreed that a meeting should be arranged between the other two WAE board members, Mr Streeter and Mr Cooper, and ANPC's representatives.

207 In relation to the participants at this meeting, Mr King had passed away before the trial. Mr Stewart was not called as a witness. It will be necessary to address the significance of Mr Stewart's absence as a witness later in these reasons. For present purposes, it is relevant to record the judge's observations [428]:

I have been invited to draw a Jones v Dunkel [1959] HCA 8; [1959] 101 CLR 298 inference in the light of the defendants' failure to call Mr Stewart and I am satisfied that the events are such that an inference can be drawn. However, such inferences and presumptions are often of uncertain and inestimable significance so I do not put great weight on this factor but it is one which leads me to the view that I can rely on the account given by Mr Brailey with some greater degree of confidence.

208 Mr Hanna, who attended the meeting on 3 December 1999, was called as a witness for the defendants. Mr Hanna's evidence, to which the judge made no reference in relation to the 3 December 1999 meeting, was, relevantly, as follows, in-chief (exhibit 286 pars 84 - 89):

1. The only meeting that I recall having with Lex Brailey was the one noted in my diary on 3 December 1999. I met with him, Tim King and probably Terry Grammer and Richard Stuart at D and D Tolhurst's office. The meeting took place in a small meeting room just off the reception area.
2. My recollection is that in substance Tim King and I talked to Lex Brailey about the ANPC assets and the proposal that we were looking for broker support and potential investors in the IPO.
3. I do not now recall the details of Lex Brailey's response but do recall that it was not encouraging and there was little enthusiasm shown by Tolhurst to support the new company.
4. I do not recall Lex Brailey mentioning Terry Streeter by name but I think I recall Brailey mentioning the name Western Areas Exploration. I do not now recall the context or the purpose for which he said it. It may be that I am associating Lex Brailey with Western Areas Exploration NL from things I have later learned.
5. Based upon the meeting, I understood from Lex Brailey that Tolhurst was unlikely to be interested in becoming involved as a supporting or sponsoring stockbroker to the proposed IPO. I do not recall that he personally expressed any interest in the proposal.
6. As we left the lift from the meeting at D & D Tolhurst, I recall that Tim King and I said words to the effect that the meeting with Tolhurst had not been encouraging and that we didn't consider Lex Brailey to be the sort of person we wanted or needed to become involved with in floating a new company.

209 In cross-examination (ts 1702 - 1705), Mr Hanna said:

Your sequence is what I'm interested in. The precise date we can work around from other evidence, Mr Hanna. So your sequence is that you went to meet with Mr Brailey. Can I put to you when you went to meet with Mr Brailey you must have been aware on or about 3 December that he was associated with Mr Streeter and Mr Cooper?---Well, as I said in my witness statement, which I should probably refer to for clarity, my recollection is there was some discussion on Western Areas Exploration, of some comment there on Western Areas Exploration. Mr Streeter, Mr Cooper, I don't recall being mentioned in that meeting.

You had known in advance from your diary at the time you wrote your diary entry on 1 December, hadn't you?---I had known there were two names there, correct.

...

But you didn't know who Mr Brailey was other than he was the man Stuart had worked with at Western Mining and was now a broker?---Stockbroker with D and D Tolhurst.

You didn't know anything about the name David Cooper, whether he was a Tolhurst person or what?---I don't recall.

Then there was discussion with Brailey at that meeting and you ended up with a negative impression of Tolhurst's involvement. That's all you can recollect of that, isn't it, a conversation you had with King in the lift?---As we got out of the lift.

At the bottom of the building?---We didn't see any real reason to pursue this interest. We had other irons in other fires that were more appealing.

Mr Brailey suggested, didn't he, that you should speak with Mr Streeter?---I don't recall that.

That could well have happened?---I don't recall anything of that - detail of that meeting. I just recall the discussion that Tim and I had at the end of it, the conclusion.

...

When you first saw this proposal from Mr Cooper on 8 December it refers to Western Areas Exploration, doesn't it?---It does, yes.

It didn't come as a surprise to you?---I don't recollect. I mean, this came through Terry Grammer. This did not come from me. I would just like to make that point quite clear. This was obviously a proposal or a model prepared by Mr Cooper and sent to Mr Grammer and subsequently sent to me.

I'm only asking you about your recollection?---My recollection is that I don't - - -

You didn't have any surprise at the name Western Areas Exploration?---You know, as I said I think in my witness statement, I think there had been discussion of a company Western Areas Exploration with Mr Brailey on 3 December.

...

You had gone - I suggest this is how it occurred: you had had the meeting with Mr Brailey and as a consequence of your meeting and Mr Grammer's meeting either [you] or Mr Grammer, perhaps Mr Grammer because he had some acquaintance, lined up a meeting with Mr Streeter that occurred in the period between 3 December and 8 December. Would you accept that is likely?---That is more my recollection.

210 In relation to Mr Hanna's evidence generally, his Honour found that he was 'a very careful and scrupulous witness but his recall of detail was, not unnaturally, rather limited and in some cases unreliable' [430]. His Honour also observed that 'not much turns on this because most of Mr Hanna's dealings were with Messrs Streeter and Cooper over the implementation of the ANPC proposal'. That observation by his Honour, however, does not address the meeting of 3 December 1999, in which Mr Hanna participated with Mr Brailey.

211 In the end, it appears his Honour has made no express findings as to what was said or transpired at the meeting on 3 December 1999. It appears, however, that his Honour impliedly found that the meeting proceeded as outlined by Mr Brailey, including the general agreement that a further meeting should be arranged with the other two WAE board members (see [206] above). Also, although not mentioned by the judge, the cross-examination of Mr Hanna indicated an acceptance by Mr Hanna that there was 'some discussion' of WAE.

Mr Brailey's conduct subsequent to the 3 December 1999 meeting

212 His Honour recorded [243] that Mr Brailey's evidence was that following the 3 December 1999 meeting, Mr Brailey:

(a) notified either Mr Streeter or Mr Cooper about the results of the meeting; and

213 As to the second of those matters, the judge appears to have misstated the evidence. Mr Brailey had not given any evidence to the effect that he had pursued negotiations with ANPC after 3 December 1999. He accepted in cross-examination (ts 832) that he had never had any communications with ANPC representatives about the ANPC proposal after 3 December 1999.

214 As to the first of those matters, WAE had not pleaded that Mr Brailey had notified Mr Streeter or Mr Cooper about the results of the meeting on 3 December 1999.

215 In his principal witness statement (exhibit 170 par 96), Mr Brailey had said:

I contacted either Mr Streeter or Mr Cooper after this meeting - probably by telephone - and reported what had happened at the meeting.

216 In par 5 of his second witness statement (exhibit 171), Mr Brailey said:

In paragraph 96 of my primary witness statement I state that I contacted Mr Streeter after this meeting on 3 December 1999. I cannot specifically remember contacting Mr Streeter or Mr Cooper. My reasons for believing that I did so are that, as stated above, it was my practice to always contact Mr Streeter promptly in relation to any matter of significance affecting WAE. (emphasis added)

217 In cross-examination (ts 893 - 897, 913 - 914), it was put to Mr Brailey, in effect, that the bases upon which Mr Brailey stated his belief that he would have contacted Mr Streeter, namely, his 'excitement' with the proposal, that 'time was of the essence' and that he would usually contact Mr Streeter on a 'matter of significance' had no foundation in fact because he had evidently not sought to ascertain from Mr Streeter the progress of the proposal over the following weeks. Mr Brailey did not, however, accept the burden of what was being put to him in cross-examination.

218 Aligned to this issue is whether Mr Brailey sent to Mr Streeter a copy of the ANPC November 1999 nickel company proposal, or its accompanying nickel company model. His Honour's reasons are somewhat difficult to follow on this issue. His Honour's reasons disclose the following:

(a) Mr Brailey sent the ANPC November 1999 nickel company proposal to Mr Streeter [221];

(b) it was possible that Mr Brailey may have sent the 12 November 1999 nickel company model to Mr Streeter prior to Mr Streeter's meeting with the ANPC representatives on 6 December 1999 [244]; and

(c) neither Mr Brailey nor Mr Streeter recalled Mr Brailey sending to Mr Streeter or to Mr Cooper the 12 November nickel model [244].

219 Mr Brailey did not, in any of his witness statements, give evidence to the effect that he had sent the ANPC November 1999 nickel proposal, or any nickel company model, to Mr Streeter. Insofar as Mr Brailey made any reference to a communication with Mr Streeter following the meeting on 3 December 1999, he said that it was 'probably by telephone'.

220 Nor did Mr Brailey give evidence that he received the 12 November nickel model. His evidence was that he had received the 18 November nickel model.

221 In his cross-examination (ts 833), the following exchange occurred:

After those meetings with the ANPC people, you never gave Mr Streeter any document either regarding ANPC, did you?---I deny that because I believe Mr Streeter got those documents from me.

You never gave Mr Streeter any ANPC related document, did you, Mr Brailey?---I deny that I didn't.

You remember no occasion on which you gave Mr Streeter any ANPC document. Isn't that true, Mr Brailey?---No, it's not true.

And you never gave Mr Cooper any ANPC document?---That is true. I didn't - I don't remember seeing Mr Cooper at all but I could have.

You know that your witness statement, your first witness statement, contains no evidence to the effect that you gave Mr Streeter an ANPC document, don't you?---I don't remember. If you're saying that this witness statement doesn't say that, well then it doesn't say it.

And when you sat down to prepare that witness statement, you did your best to recollect these events, didn't you?---Yes, I did.

And you knew they were critical to this claim, didn't you?---The question is this: you have asked that question and I agree that it's a critical claim but I have always believed that I took those documents out to Mr Streeter because I was in and out. I was out there all the time, backwards and forwards, and when I get something like this which is so important and so spectacular, for his benefit, then, believe me, I'm out there. That's the way I say it.

Mr Brailey, you have no recollection of giving Mr Streeter a copy of the ANPC proposal or the business model, do you?---I believe that I gave it to him.

But you have got no recollection of doing so?---I don't have a recollection, a firm recollection, of that trip out there, no, I don't. That's correct. (emphasis added)

222 Although the cross-examiner's questions were directed to Mr Brailey's principal witness statement, as noted above, in none of Mr Brailey's witness statements did he refer to having sent ANPC documents to Mr Streeter.

223 Although not mentioned by the judge, it is, perhaps, this evidence in cross-examination (albeit unsupported by his evidence-in-chief) that the judge drew on to find that Mr Brailey sent the ANPC November 1999 nickel company proposal to Mr Streeter. In so finding, his Honour appears not to have examined why, if Mr Brailey had sent the November 1999 nickel company proposal, he had not, at the same time, sent the accompanying 18 November 1999 nickel company model which he had received at the meeting on 30 November 1999.

224 Nevertheless, the judge seems to have accepted that Mr Brailey dropped off the ANPC November 1999 nickel company proposal document to Mr Streeter. The foundation is presumably Mr Brailey's evidence to being 'in and out' of Mr Streeter's offices, 'backwards and forwards', 'all the time'.

The arrangements for the first meeting between Mr Streeter and ANPC personnel (reasons [247] - [250])

225 The judge found that the probabilities indicate that attempts may have been made to arrange a meeting with Mr Streeter and/or Mr Cooper on 1 December 1999 (ie, before the second meeting with Mr Brailey on 3 December), but 'they did not materialise' (reasons [250]).

226 The judge also recorded the evidence of Mr Streeter, Mr Grammer and Mr Hanna in relation to the setting-up of the first meeting with Mr Streeter. His Honour records that Mr Streeter's evidence was that he received a telephone call from Mr Grammer, who said that he was one of a group which had a proposal concerning nickel tenements and he inquired whether Mr Streeter would be interested in looking at the proposal, that Mr Grammer told Mr Streeter that the group was called the ANPC, and they agreed to meet. His Honour records that, accordingly, Mr Streeter and Mr Grammer made no mention of Mr Brailey or of WAE (reasons [247]). His Honour also records Mr Grammer's evidence to the effect that Mr Grammer did not think that he was the one who contacted Mr Streeter, although his Honour expressed reservations about Mr Grammer's evidence (reasons [248]) in relation to meetings with Mr Streeter.

227 His Honour also records Mr Hanna's evidence to the effect that 'Mr Grammer had mentioned Mr Streeter as a potential investor and had arranged for the group to meet with Mr Streeter'.

228 Although there is no express finding as to how the first meeting with Mr Streeter was set up, his Honour said that he considered Mr Hanna's recollection to be more reliable (reasons [249]). It is to be inferred that his Honour impliedly found that it was arranged by Mr Grammer in accordance with Mr Hanna's evidence referred to above, namely that Mr Grammer indicated that Mr Streeter was a potential investor and contacted Mr Streeter to set up a meeting with ANPC personnel. It is also to be inferred, bearing in mind the finding in relation to the 3 December 1999 meeting (see [211] above), that Mr Hanna and the ANPC personnel were already receptive to the idea that Mr Grammer should set up a meeting with Mr Streeter, given that they had agreed with Mr Brailey on 3 December that they would meet the other directors of WAE, Mr Streeter and Mr Cooper.

Mr Streeter's meeting with ANPC personnel on 6 December 1999 (reasons [245] - [251], [254])

229 The first occasion when Mr Streeter met with the ANPC personnel was at Mr Streeter's business premises, known as Jet Fresh, in Bassendean on 6 December 1999. It was attended by Mr Streeter, Mr Grammer, Mr Hanna, Mr King and probably Mr Stewart.

230 His Honour recites the evidence given by Mr Streeter, Mr Grammer and Mr Hanna concerning this meeting, but his Honour does not make any express findings of fact as to what transpired at the meeting.

231 His Honour appears, however, implicitly to have accepted, and impliedly found, that:

(a) Mr Streeter mentioned that he was involved in a company which had made a failed attempt at an IPO and mention was made of WAE [248]; and

(b) the ANPC personnel presented their 'ANPC proposal' and Mr Streeter said he would consider the proposal and contact them again [249].

232 In relation to the second matter, his Honour did not make a finding as to the precise 'proposal' that was put to Mr Streeter at the meeting on 6 December 1999, but his Honour had earlier said that it was possible that the ANPC proponents had given Mr Streeter the 12 November 1999 nickel model at the meeting on 6 December 1999 [244]. As noted below, it was the 12 November 1999 model that appears to have been available to and used by Mr Streeter and Mr Cooper in subsequently formulating a proposal to the ANPC personnel. It is to be borne in mind that his Honour's finding regarding the date of the relevant proposal in [244] is inaccurate, insofar as it suggests that it was the 12 November 1999 proposal that was given to Mr Brailey at the 30 November 1999 meeting (see [175](b) above).

233 For completeness I mention that in this context, his Honour's finding at [226] might also be thought to be relevant to what occurred at the meeting on 6 December 1999. On balance, I think it is not, for the reasons explained below. The judge said [226]:

What they [the ANPC proponents] were seeking was acceptance of their November 1999 proposal, or some variation of it, to vend the projects into the chosen company and to raise capital to allow a two-year exploration programme to be conducted ... how the necessary capital was to be raised was of secondary importance.

234 Although his Honour does not identify any particular time with respect to the finding referred to above, it might perhaps be that his Honour was indicating that the ANPC personnel conveyed this idea to Mr Streeter at the meeting of 6 December 1999 (or possibly on 7 December 1999). On balance, however, it would appear that the foregoing finding was made with respect to the ANPC group's state of mind, rather than with respect to any communication between the ANPC group and Mr Streeter. The finding appears to be made for the purposes of considering a causative question of whether, had WAE been asked to subscribe for seed capital in any new company which the ANPC group formed and brought to listing, WAE or its shareholders could have raised funds to contribute the seed capital to the new entities [226] - [228].

Mr Streeter and Mr Cooper's meeting with ANPC 7 December 1999 (reasons [245] - [254], [287], [315])

235 There was a meeting between Mr Cooper, Mr Streeter and Messrs Hanna, King, Grammer and, possibly, Stewart on 7 December 1999 at the offices (where Mr Cooper worked) of TA Mairs & Co, accountants, in South Perth (reasons [252], [254]).

236 The judge referred to Mr Cooper's evidence in relation to this meeting, as follows. Mr Streeter observed that he had an interest in a mining company, WAE, and that maybe something could be done with that and maybe it could be brought into the proposal. Mr Cooper said that Mr Streeter remarked that WAE had gold tenements at Cue and that maybe they could be brought into the proposal. Mr Cooper was not sure whether it was at this meeting or later, but there was definitely some point when the name 'Western Areas' was discussed as a name for the new company. He also recalled that one of the ideas then being considered was to bring the WAE shareholders into the new structure. Mr King was concerned about the number of shares WAE had on issue, and, in Mr King's opinion, WAE had too many shares on issue which would dilute the vendors' shareholding in the new company. Attention then passed to making use of the WAE shareholders to provide the necessary 'spread' of shareholders for the new company (reasons [252]).

237 It appears that his Honour found that the meeting on 7 December 1999 broadly proceeded in accordance with Mr Cooper's evidence referred to above.

238 His Honour also found that Mr Streeter and Mr Cooper were aware that the ANCP proposal had come to them from Mr Brailey's referral as a director of WAE (reasons [287], [315]).

239 Although not mentioned by his Honour, Mr Cooper also said (par 186, exhibit 253) that he had given Mr King WAE's financial records and its share register.

7 - 8 December 1999, and the 'offer' of 8 December 1999 (reasons [241] - [242], [244], [253], [255], [313] - ]322])

240 After the meeting on 7 December 1999, Mr Cooper prepared a proposal dated 8 December 1999 and sent it to Mr Grammer, who, in turn, sent it to Mr Hanna. The proposal was described as an 'offer'.

241 The proposal was a development of manuscript notes previously prepared by Mr Cooper, which referred to a date of 30 November 1999. Those notes (exhibit 55) and their precursor (exhibit 242) both used certain figures set out in the 12 November 1999 model (seed capital 0.63 and nickel tenements 1.67). It should be noted that those figures were slightly different in the 18 November 1999 model, thereby indicating that Mr Cooper was not working with the 18 November 1999 model, when the 'offer' of 8 December 1999 was sent.

242 The 'offer' was sent with Mr Streeter's authority. It was not made in Mr Streeter's private capacity, or independently of his role as a director of WAE [244].

243 In the appeal the appellants in effect accepted the finding that the 'offer' of 8 December 1999 was communicated by Mr Streeter and Mr Cooper in their capacity as directors of WAE (ts 135, 162).

244 In relation to the 'offer', his Honour found (reasons [241]) that it expressly proposed that WAE would become the vehicle for the proposal and raising the capital needed by further share issues, that the proposal contemplated Jungle Creek converting its loan to WAE to shares (subject to shareholder approval) and taking a further 600,000 shares (being the shares previously offered to Mr Streeter by Mr Brailey).

245 Although not mentioned by the judge, the following points emerge from a consideration of the 'offer'.

246 The 'offer' (exhibit 56A) provided for WAE (after a capital reconstruction) to issue:

• 8,350,000 20 cent shares in consideration for 'tenement purchase';
• 2,500,000 20 cent shares in satisfaction of drilling liabilities; and
• 3,150,000 20 cent shares for 'seed capitalists'.

247 The 'offer' contemplated an IPO. In its terms it made no mention of who would or may provide seed capital for the purposes of the proposed IPO. (However, in cross-examination (ts 1146) Mr Streeter said in effect that it was his intention to provide the seed capital.)

248 The 'offer' contained, and provided to ANPC, information concerning WAE's existing shareholding, and its liability to Jungle Creek. Although not expressly mentioned in the 'offer', it is to be noted that in the discussion which preceded it on 7 December 1999, Mr Streeter had adverted to the Cue tenements as assets of WAE.

249 Up to and including 8 December 1999, the judge found that 'the matters were dealt with by Messrs Cooper and Streeter on the basis that WAE would be the vehicle for the proposal' (reasons [255]). This finding, and the general findings at [244] and [313] - [322] indicate that the judge found that on 6, 7 and 8 December 1999, Mr Streeter and Mr Cooper were dealing with the ANPC personnel in their capacity as directors of WAE.

The aftermath of the meetings on 6 and 7 December 1999; 10 December 1999 - the ANPC response to the 'offer' of 8 December 1999 (reasons [253], [256] - [258], [430])

250 Following the meetings on 6 and 7 December 1999, the ANPC personnel 'were expecting support from Mr Streeter' (reasons [253]).

251 There was a meeting on 10 December 1999 between the ANPC personnel and Mr Streeter. Mr King said, on behalf of the ANPC personnel, that they did not wish to use WAE as a vehicle, but wanted a new company as a 'clean skin'. Mr Streeter stipulated that he should end up with an interest in the new company as close as possible to 20%.

252 The judge also found that ANPC had respectable reasons for wanting the formation of a new company rather than leaving the ANPC proposal in the hands of WAE (reasons [430])

253 This meeting on 10 December 1999 'resulted in a counter-offer' which did not involve WAE as the vehicle for the proposal. Instead, the judge records, it proposed for 'WAE interests', the following. The 'issue of shares in a new company to the value of $0.1 million totalling 0.6 million 20 cent shares and including the 'Cue gold project' in the proposal (200,000 shares assigned value $30,000 to WAE's shareholder base and 400,000 shares assigned value $70,000 to WAE for the Cue tenements). This also specified an issue of 400,000 shares to WAE' (reasons [256]).

254 His Honour also found that Mr Cooper accepted that the 'ANPC proposal' was in every respect the opportunity that WAE had been searching for since 1998 (reasons [257]). Mr Cooper's evidence, to which his Honour referred in this regard, was as follows (ts 1503):

I think it is going to be suggested to me by some quarter or another in this case later in the piece that the sale of the Cue tenements and the use of the WAE name for what I will call the ANPC project was a policy driven by Mr Streeter and was part of his price for investing seed capital?---Yes.

And if that was the case, is it not open to conclude that he was using and you were assisting him to use WAE assets for the advantage of the new project?---No, I saw it more as an opportunity to obtain some value for the assets in WAE.

I have only heard part of this evidence and I haven't heard the submission from counsel and I haven't formed any definite conclusions about this case but WAE was just waiting for some kind of opportunity to get a basket of plausible tenements together to justify a float?---Yes.

Well, this is exactly that kind of opportunity, isn't it?---It is.

So why give it to strangers rather than develop it through WAE?---The opportunity came to Mr Streeter from ANPC and I saw it as a - that they required a new company, new venture to do it with. They were not interested in using WAE.

Yes, but you were already aligned - you had a series of obligations towards WAE, didn't you?---Yes, I did, I did.

Well, did you not think it desirable to consider whether or not this project should have been put into WAE or even to obtain some legal advice about it?---No, I must I didn't. I did not at the time.

255 The appellants, in this appeal, accepted that Mr Streeter received the ANPC communication of the rejection of the 8 December 1999 'offer' in his capacity as a director of WAE (ts 162).

The development of ANPC's proposal using a new company structure: 10 - 20 December 1999 (reasons [256], [259], [261] - [262])

256 Over the period 10 December to 20 December 1999 the ANPC personnel prepared a series of company models which were developments of the 'counter offer' referred to above.

257 The models, which proposed that a new company be incorporated in which seed capital would be invested and the company brought to a stock exchange listing, involved a proposed capital structure in which Mr Streeter would secure a 20% interest in the new company.

258 Within this period, on or about 13 December 1999, the ANPC proponents took steps to evaluate the Cue tenements following the provision of certain information by Mr Wolzak on behalf of WAE (reasons [259], exhibit 66). Mr Wolzak charged a fee to WAE for his work.

259 Although not mentioned by the judge, Mr Brailey said that around this time Mr Streeter had told him that Mr Hanna had asked for information on the Cue tenements (exhibit 170 reasons [99]).

The agreement of 20 December 1999 of the new company structure and the incorporation of Western Areas NL (WANL) (reasons [261])

260 At a meeting described by its minutes as a meeting of 'promoters, service providers and seed capitalists' (exhibit 64), the structure of the new company was agreed and it was agreed that it would be named WANL. Mr Streeter agreed to provide seed capital up to $250,000, which was later increased to $300,000. The meeting also agreed that Mr Streeter and Mr Cooper would be appointed to the board of the new company, that Mr Streeter through Jungle Creek and other interests would hold 20% of the issued capital, and that WANL was to acquire the Cue tenements.

261 WANL was incorporated on 29 December 1999. Mr Streeter and Mr Cooper were appointed to its board, and took a share each in that company.

The inclusion of the Cue tenements as part of the assets of the new company and the three issues mentioned by the judge in relation to them (reasons [15] - [17], [186], [187] - [191], [197] - [205], [259] - [260], [269], [284], [315])

262 As noted earlier, the idea of bringing the Cue tenements into the vehicle to be used for the ANPC project was first raised as a possibility by Mr Streeter at the meeting on 7 December 1999.

263 The ANPC proponents were then initially disinterested in the Cue tenements and were reluctant to have them introduced into the project.

264 Nevertheless, the counter-offer of 10 December 1999 and the models thereafter referred to above proposed that WAE would vend into the new company 100% of the Cue tenements and be allotted vendor shares in return.

265 There were negotiations and evolutions for the transfer of the Cue tenements. Ultimately they were ascribed a notional value of $100,000, and the new company, WANL, was to issue 500,000 vendor shares in consideration for the transfer of the Cue tenements.

266 Also, ultimately, WAE did not acquire the other 30% of the Cue tenements from Golden Granite, so that WAE did not itself have 100% of the Cue tenements to transfer to WANL. Instead, on or about 28 March 2000, a company associated with Mr Streeter acquired the Golden Granite 30% interest in the Cue tenements, at a price of $5,000, and transferred the interest to WANL, as a result of which Jungle Creek received the vendor shares in WANL attributable to that 30% interest. Mr Streeter had learnt about Golden Granite's preparedness to sell its 30% interest in Cue in February 2000.

267 Thus, in the end, out of the 500,000 shares in WANL 'issued in return for the transfer of the Cue tenements' WAE acquired 350,000 vendor shares in WANL for a 70% interest, and Jungle Creek acquired 150,000 shares in WANL for the 30% interest in Cue.

268 There were three issues addressed by the judge concerning these events. One concerns the separately pleaded allegation by WAE that Mr Streeter used his position as a director of WAE to acquire Golden Granite's 30% interest in the Cue tenements for the benefit of Jungle Creek, and to sell the 30% interest to WANL in return for vendor shares in WANL. His Honour found a breach of duty in that regard (reasons [15] - [17], [204] - [205]). The second is in relation to the sale of the Cue tenements as an asset of WAE, as part of the transaction in which Mr Streeter acquired shares in WANL. The judge found, inter alia, in effect, that not only were the Cue tenements part of the transaction, but, also, were introduced at Mr Streeter's request for the purposes of allowing him to achieve a 20% interest in the new company (reasons [198] - [203], [259] - [260], [284], [315]). The third concerns the value attributed to the tenements for the purposes of the issue of vendor shares in WANL, and Mr Streeter's and Mr Cooper's conduct in acting as a director of WAE on the sale, and as a director of WANL on the purchase, of WAE's 70% interest in Cue. His Honour said that in all probability an excessive value was placed on the Cue tenements, but that that point was irrelevant because the only party that would be thereby prejudiced is WANL and, on the other hand, if the value placed on the Cue tenements was insufficient, WAE had affirmed the transaction in so far as it retained the benefit of the vendor shares allotted to it for the 70% Cue interest (reasons [197] - [198], [202]).

269 It is necessary to return to the second and third of these issues later in these reasons.

270 At this stage, it may be noted that the judge, in effect, found that Mr Streeter and Mr Cooper, in their dealings with WANL, acted on behalf of WAE in relation to the sale of WAE's 70% interest in the Cue tenements

Mr Brailey's facsimile to Mr Streeter - 12 January 2000 (reasons [290])

271 On 12 January 2000 Mr Brailey sent by fax to Mr Streeter a press article about the prospect of increasing world nickel prices. The fax contained in handwriting a reference to WAE. (Mr Streeter in cross-examination ts 1183) accepted that it was 'directly relevant for [sic] the company's [WAE's] affairs'.

The documents concerning the 'Proposed Reconstruction' of WAE dated 11 January 2000 and 18 January 2000 (reasons [264] - [265], [271], [275], [294])

272 In January 2000 Mr Cooper produced two documents, one dated 11 January 2000 and the other dated 18 January 2000, concerning draft proposals or plans for a reconstruction of WAE.

273 The one dated 11 January 2000 (exhibit 69) referred to WAE's share capital, its assets - being the Cue tenements, and its liabilities including the outstanding loans to Jungle Creek. The document referred to a proposal to call an extraordinary general meeting of shareholders of WAE to, in effect, address two issues. The first was a reorganisation and tidying up of WAE's share capital, including the conversion of Jungle Creek debt to equity, reducing the capital on a 20:1 basis and allowing Mr Streeter to acquire additional shares without having to make a takeover bid. The second issue which was to be addressed after the first, involved a proposal for WAE's shareholders to transfer their shares in WAE to WANL, in return for 1.1 million shares in WANL. The shares to be issued by WANL were to be held by WAE shareholders in proportion to their existing shareholding in WAE, after capital had been reorganised in accordance with the first point. The proposal referred to 1.1 million shares in WANL being issued on the basis that 300,000 shares would be offered for the issued capital of WAE, and 800,000 shares for the Cue tenements.

274 The second document, dated 18 January 2000 (exhibit 167), expanded on the proposals referred to in the 11 January 2000 document. In effect, it described and treated the proposals in the 11 January 2000 document as 'option 1'. It also added options 2, 3 and 4. The fourth option was a winding-up. The third option was for Jungle Creek to take over the Cue tenements in satisfaction of the debt owed by WAE and for Mr Streeter and Mr Cooper to resign as directors of WAE. The second option was for the Cue tenements to be vended into WANL in consideration for the issue of 800,000 shares in WANL, such shares to be issued first to Jungle Creek in satisfaction of debt, and secondly to WAE itself, with WAE then holding the shares in WANL as an asset in its balance sheet. In each case the shares would be subject to an escrow period, given that they would be issued on the listing of WANL. This document was prepared following advice given by Mr Thomas, a solicitor who Mr Cooper consulted on 18 January 2000.

275 I would interpose the factual narrative to observe that the significance of the document dated 18 January 2000, and the earlier one of 11 January, is that it shows that a new company, WANL (using the words 'Western Areas' in its name), was in existence, that it was to be listed, and that it was being proposed to issue shares in that company in exchange for WAE's only asset, the Cue tenements. Although it does not refer in terms to WANL acquiring the ANPC tenements, Mr Brailey accepted in cross-examination, in effect, that had he seen it around 18 January 2000, he would have understood from it that the ANPC proposal was not proceeding through WAE (ts 892).

276 The document dated 18 January 2000 has Mr Brailey's handwritten comments or notes on it in various places. Mr Brailey said, and the judge accepted, that Mr Cooper handed Mr Brailey a copy of the 18 January 2000 document at a board meeting of WAE in mid-February 2000 (the date of which Mr Brailey placed as around 14 February 2000). His Honour found that the 18 January 2000 document was not available to Mr Brailey at or prior to the WAE board meeting on 28 January 2000.

The WAE board meeting of 28 January 2000 (reasons [264] - [265], [287], [290] - [291])

277 The minutes of the board meeting of WAE on 28 January 2000 (exhibit 77) record Mr Brailey, Mr Streeter and Mr Cooper being in attendance. The minutes referred to a corporate restructure and a meeting between Mr Streeter and Mr Cooper with Mr Thomas, a solicitor, who had advised that if the company's list of shareholders could be brought below 15, the takeover provisions of the Corporations Law would not apply. It is recorded that Mr Brailey then asked Mr Cooper to review the existing list of members to see if that could be achieved by combining shareholdings.

278 The minutes also record that Mr Brailey advised on the status of the Cue tenements.

279 The minutes also record a 'business proposal' in the following terms:

Mr Cooper advised the meeting that he and Mr Streeter had had a series of further meetings with a new group wishing to set up an [sic] mineral exploration company and this group were now prepared to offer to Western Areas Exploration NL 800,000 vendor shares in the new company in exchange for the Cue tenements held by Western Areas Exploration NL. In view of the fact that these tenement licences if granted would involve the Company in ongoing exploration expenditure, for which it did not have funds, it was felt that this was a good opportunity for Western Areas Exploration NL to benefit from the Cue tenements.

Accordingly the proposal that had at this stage been verbally negotiated was that the 800,000 would be issued with sufficient going to Jungle Creek Gold Mines Pty Ltd to satisfy the Company's debt to it and the balance becoming an unencumbered asset of the Company (except for any escrow period that may be applied to the shares.)

Following general discussion of the proposal Mr Brailey gave his consent to the proposal.

280 His Honour's findings in relation to this meeting are as follows [264], [290] - [291]:

(a) all that Mr Brailey was told at this meeting was that a new company, then unidentified, was wishing to set up a mineral exploration operation and to offer WAE 800,000 vendor shares in exchange for the Cue tenements, and that of those 800,000 shares sufficient would go to Jungle Creek to satisfy WAE's debt to Jungle Creek;

(b) neither Mr Cooper nor Mr Streeter disclosed that each was a director of the new company, or that the new company was using the name Western Areas NL;

(c) neither disclosed that through Jungle Creek, Mr Streeter had acquired a 30% interest in the Cue tenements which Jungle Creek was vending into the new company in return for an allotment of vendor shares as well;

(d) Mr Streeter and Mr Cooper had not disclosed that a decision had been taken for WANL to promote the ANPC proposal;

(e) Mr Streeter and Mr Cooper, in failing to disclose that they were directors and shareholders of WANL, failed to disclose a material personal interest in the transaction involving the sale of the Cue tenements by WAE to WANL in exchange for 800,000 shares in WANL; and

(f) Mr Streeter told Mr Brailey that negotiations on behalf of WAE with the ANPC personnel were on track.

This was nothing more than the implementation of a plan to secure the approval of the transfer of [WAE's] interest in the Cue tenements without revealing the true extent of associated transactions. It reveals a deliberate policy of non-disclosure by Messrs Streeter and Cooper ... .

282 His Honour also recorded (reasons [264]) that Mr Cooper had said that he had assumed that Mr Brailey knew the details of the proposal, not that he had disclosed the details to him.

283 On 8 February 2000 Mr Streeter and Mr Cooper notified the board of WANL that WAE would probably be a shareholder in WANL, and arranged a provisional reserve placement of $200,000 worth of shares in the WANL issue.

WAE board meeting around 14 February 2000 (reasons [275] - [277])

284 There was a meeting of directors of WAE at Tolhurst's offices in mid-February 2000. Mr Brailey, whose evidence the judge accepted, put the meeting at about 14 February 2000 (Brailey cross-examination ts 879, 884 - 886).

285 There is no written record of the board meeting. At this meeting Mr Cooper handed Mr Brailey a copy of the 'proposed reconstruction' document dated 18 January 2000. In doing so Mr Cooper told Mr Brailey that the ANPC deal was no longer going into WAE. Mr Brailey asked why, and Mr Cooper said that ANPC did not wish to deal with WAE. Mr Brailey became angry, the meeting became heated and Mr Brailey brought it to an immediate close. Mr Brailey said that he was extremely angry and disappointed at this revelation.

286 Although not specifically referred to by the judge, Mr Brailey described the meeting as a 'bombshell', where he was told that the ANPC deal would not proceed with WAE (Mr Brailey cross-examination ts 884).

The subsequent meeting in mid February 2000 between Mr Cooper and Mr Brailey and the draft chairman's letter (reasons [272] - [273], [276] - [278])

287 In mid February 2000, after the board meeting on or about 14 February 2000, Mr Cooper met with Mr Brailey at Tolhurst's boardroom. There was a discussion concerning a draft chairman's notice, bearing the date 'February 2000' for signature by Mr Brailey as chairman of WAE (the 'draft chairman's notice').

288 The draft chairman's notice (page 1152 green appeal book vol 6) stated:

The purpose of the attached Notice of Extraordinary Meeting is to discuss and pass the special resolution as described. This notice is to inform you of the reason for the Board requesting the passing of the resolution.

As you would be aware the Board has had a difficult time over the last few years in keeping the Company going because of financial constraints and, as has previously been advised, if it were not for the funds advanced to the Company through a board member's company, Mr TE Streeter, your Company would have been unable to remain viable.

At this stage the Company's only remaining asset is an application for mineral exploration licences over a tenement at Cue in WA. The application consists of three applications for licence[s] of which one has been granted and two are pending. When these are granted the Company will then have to raise funds to provide for anticipated exploration expenditure to maintain these licenses. To date the Company is indebted to Mr Streeter's company for approximately $60000 (The Balance Sheet showed $57000) at the 30th of June 1999.

The Board has now received an offer from a new mineral exploration company, Western Areas NL offering 1000000 fully paid ordinary shares in Western Areas NL on the following basis :-

A) Western Areas NL would take over Western Exploration NL's interest in the Cue licence applications and

B) Western Areas Exploration NL would change its name.

NOTE: Their offer is an overall offer for BOTH the above and is subject to acceptance of both items by Western Areas Exploration NL.

This offer is also subject to the successful float of Western Areas NL on the ASX and the shares offered may be subject to escrow for a predetermined period.

Should the attached Special Resolution be passed and the offer be accepted then sufficient of the shares received would be allocated to Mr Streeter's company at their par value to enable the Company to discharge its debt and the remainder held by the Company as an investment asset. Mr Streeter has in the past advanced sufficient funds to finance the company's day to day operations. These past loans have been converted to equity capital however Mr Streeter's interests now hold the maximum permissible shareholdings without making a full takeover offer for the company.

Because of Mr Streeter's and Mr Cooper's interests in Western Areas NL neither they nor their interests will be able to vote on this resolution so it is imperative that you exercise your voting rights (either in person or by proxy) so that your company can take advantage of this offer. (emphasis added)

289 The draft chairman's notice in evidence was endorsed as follows in Mr Cooper's handwriting:

Lex

Drafts for EGM for shareholders if OK ring me and I will finalise

Will also need suitable date for meeting and place

David

290 Mr Cooper's evidence was that he had sent the draft chairman's notice, probably by fax, to Mr Brailey with a request for him to sign it. The judge rejected Mr Cooper's evidence in this regard and accepted Mr Brailey's evidence to the effect that the document was handed to him at the meeting with Mr Cooper in mid-February 2000.

291 Mr Cooper asked Mr Brailey to sign the notice and said that he wanted to resolve all matters amicably.

292 Mr Brailey terminated the meeting at that point and refused to sign the document.

293 The judge also said, with reference to the draft chairman's notice (reasons [277] - [278]):

How the document came into Mr Brailey's hands is not, however, of any great significance because the importance of the document lies in the clear intention which it reveals (having been prepared by Mr Cooper at Mr Streeter's request) of convening an EGM of the plaintiff to take up 1 million fully-paid ordinary shares in WANL on the basis that WANL would take over the plaintiff's interests in the Cue tenements and that the plaintiff would change its name, all subject to the successful float of WANL. Another point of significance in the draft notice is the final paragraph:

Because of Mr Streeter's and Mr Cooper's interests in WANL, neither they nor their interests will be able to vote on this resolution so it is imperative that you exercise your voting rights (either in person or by proxy) so that your company can take advantage of this offer.

This, even if only a draft, indicates that at least by February 2000 both Mr Streeter and Mr Cooper realised that there was an actual conflict of interest between themselves and the plaintiff arising out of their interest in WANL and their desire to transfer assets of the plaintiff, both the Cue tenements and its name, to WANL. The notice indicates a desire to obtain the informed consent of the shareholders of the plaintiff to the sale of the Cue tenements and the use of the name by WANL which, of necessity, involved disclosure of the fact that WANL would be promoting the ANPC proposal. The acceptance, by this notice, that neither Mr Streeter nor Mr Cooper, nor their associated companies could vote on the proposed resolution is an express admission of a conflict of interest. The proposed issue of 1 million shares in WANL to the plaintiff is also a recognition that some appropriate form of consideration should be received by the plaintiff for these proposed developments which, at 20 cents a share, amounted to $200,000, which was the figure then being attributed to the value of the entirety of the interests in the Cue tenement. (It was later reduced to $100,000 when the transaction occurred.)

Mr Brailey's resignation on 8 March 2000 (reasons [274], [304])

294 On 8 March 2000 Mr Brailey advised of his resignation as a director of WAE. He resigned because of his disapproval of the 'transfer of the opportunity to WANL' (reasons [304]).

The use of the words 'Western Areas' in WANL's name - February-March 2000 (reasons [267] - [270], [279])

295 The draft chairman's notice was drafted on the basis that WAE would need to change its name by resolution of its shareholders. Mr Thomas had formally advised Mr Cooper of this on 21 February 2000 (reasons [267]).

296 On 29 February 2000, there was a meeting of directors of WANL. The minutes record that under the topic 'Western Areas Exploration', it was reported that there could be a problem in WAE giving permission for WANL to have a similar name, that no special resolution of the shareholders of WAE had been held to ratify this, and it could lead to a danger of a claim for passing off by WAE. The minutes recorded that Mr Grammer and Mr Cooper would try to get WAE to accede to WANL having a similar name (reasons [270]).

297 His Honour found that this prompted Mr Cooper to have Mr Brailey sign the draft chairman's notice of February 2000 (reasons [272]).

298 I note that this finding might suggest that the meeting between Mr Cooper and Mr Brailey, in which Mr Cooper sought to have Mr Brailey sign the draft chairman's notice, was held at around the end of February 2000, rather than in mid-February 2000.

299 In any event, his Honour found that after the WAE board meeting on or around 14 February 2000, and the meeting thereafter between Mr Cooper and Mr Brailey in which the draft chairman's notice was provided to Mr Brailey, Mr Streeter and Mr Cooper appreciated that it would not be possible for them to secure any agreement with the majority of WAE's shareholders on matters on which they could not vote their own shares (reasons [279]).

300 Rather than call a general meeting, they sought advice from Freehills as to the potential liability, if any, of WANL using 'Western Areas' in its name. The advice, received on 20 March 2000, was to the effect that it was unlikely that WAE could establish any liability in WANL in respect of the choice and use of its name (reasons [268]).

301 The advice was given after Mr Cooper's instructions indicated that WAE would soon be deregistered after it had sold the Cue tenements.

Those inquiries and activities also reveal the surreptitious nature of the way in which Messrs Streeter and Cooper kept from Mr Brailey and [WAE] details of exactly what transaction they were implementing and how it affected [WAE's] interests.

Golden Granite - 30% interest - Cue tenements, February/March 2000 (reasons [188] - [189], [269])

303 A draft agreement, never implemented, was prepared on or about 15 February 2000 under which it was contemplated that WANL would purchase the entirety of the Cue tenements, and not merely WAE's 70% interest, from WAE. It involved an assumption that WAE was the sole registered and beneficial holder of all the Cue tenements.

304 Mr Streeter became aware in February 2000 that Golden Granite's 30% interest in Cue was for sale for $5,000. Mr Streeter did not report this to Mr Brailey. Instead, according to Mr Streeter, in the belief that WAE did not have the finance to acquire the interest, he made arrangements for another of his companies, Meeka Star Mines Pty Ltd, to pay $5,000 to a related company of Golden Granite, on or about 28 March 2000, for the purchase of the 30% interest. Meeka Star did not, however, take a transfer of the interest in the tenements. Rather, the 30% interest was treated as being available to Jungle Creek. Eventually, transfers of Golden Granite's 30% interest in Cue were executed by Golden Granite in July 2000, but not, it seems, executed by Jungle Creek. The transfers to Jungle Creek, or for that matter to WANL, were never registered.

WAE's board meeting on 28 March 2000 (reasons [288] - [289])

305 Mr Cooper and Mr Streeter held a board meeting at WAE on 28 March 2000. The minutes recorded that Mr Streeter and Mr Cooper had continued to negotiate with the board of WANL in an endeavour to vend the Cue tenement licences into WANL, that following investigations, it was agreed that a value of $100,000 be placed on 100% of the Cue project, that WAE's 70% interest would equate to 350,000 fully paid shares, and that an independent indication of value placed the value of those applications in their present condition in the region of $35,000 to $50,000. The minutes also recorded that it was proposed that the negotiations should continue and that WAE should accept an allotment of shares in the new company.

306 His Honour found that this was 'most disingenuous if not actually false' (reasons [289]). His Honour said that the minutes failed to disclose:

(a) that by this time, 4.30 pm on 28 March 2000, an agreement to sell WAE's interest in the Cue tenements had already been executed;

(b) that Mr Streeter, by his companies, had acquired Golden Granite's 30% interest in the Cue tenements for $5,000 and sold them into WANL for 150,000 vendor shares;

(c) that the recitation that an independent valuation of the shares had been received, and that the valuation placed them in the region of $35,000 to $50,000, was wrong, in that Mr Hanna had advised that there were no signs of the valuation yet; and

(d) how shares, to the nominal value of $70,000 were being allocated in return for tenements worth, on the recited facts, at the most $35,000.

307 His Honour described this as '[f]urther evidence of this veil of concealment' (reasons [288]).

By the end of February 2000 (reasons [6], [318], [442])

308 The judge found, in effect, that in February 2000, it had been disclosed to Mr Brailey that the ANPC tenements were being transferred into WANL, that seed capital was being provided to WANL by Mr Streeter or Jungle Creek, and that WANL would undertake an IPO to raise exploration and development capital.

309 Although Mr Brailey was aware of these matters in February 2000, the judge also said it was not until 'later' that Mr Brailey learned of the 'details' of the shareholding in WANL and how Jungle Creek had acquired the 30% interest in Cue and sold it to WANL for 150,000 vendor shares. His Honour does not indicate expressly the 'later' time to which he referred, but it is presumably a reference to May 2000, when Mr Cooper sent the WANL prospectus to WAE shareholders.

310 By 28 March 2000, the acquisition and advancement of the ANPC proposal by WANL was effectively complete. Arrangements then turned to the IPO for WANL.

April 2000 - Mr B LeClezio and Mr Brailey take legal advice in relation to the conduct of Mr Streeter and Mr Cooper (reasons [449])

311 The judge refers to Mr Brailey's evidence that he and Mr Le Clezio took legal advice in relation to Mr Streeter and Mr Cooper's conduct in April 2000. Mr Brailey's evidence in that regard appeared in his witness statement (exhibit 170 par 117) on which he was cross-examined (ts 899 - 900).

312 His Honour records that Mr Brailey and Mr Le Clezio received legal advice to the effect that they could institute proceedings for an injunction to restrain Mr Streeter and Mr Cooper from implementing the venture in the manner proposed, and their reasons for not taking action at that time.

313 Mr Brailey also said, in effect, although his Honour does not record the evidence, that he was advised that he could call a meeting of shareholders of WAE to remove Mr Streeter and Mr Cooper as directors of WAE. He said that he did not do so because at the time he was 'too exhausted'.

314 As noted below, Mr Brailey eventually took that course six years later, and commenced these proceedings on behalf of WAE.

May 2000 - WANL issues prospectus and letter to WAE shareholders (reasons [292], [297] - [298], [306], [405])

315 In May 2000, WANL issued its prospectus. A copy was sent under covering letter by Mr Cooper to each of the shareholders of WAE.

316 The prospectus showed the shares and options in WANL held and to be acquired by Mr Streeter and Mr Cooper, and the provision of $300,000 seed capital by Mr Streeter to WANL.

317 The independent valuation of the mineral properties, the subject of the assets of the float, attached to the prospectus, stated with respect to the Cue project (green appeal book p 1351 vol 7):

The gold exploration potential of the Cue project is suggested to be very limited, and this needs to be reflected in valuation.

Having considered the poor perceived exploration potential and the low level of exploration maturity, we have elected to assign a range of values from $20,000 to $70,000 with a preferred value of $40,000 to a 100% equity interest in the Cue project.

318 The prospectus also disclosed that WANL had entered into an option agreement to purchase 100% of the Cue tenements from WAE and Jungle Creek, and that WAE held 70% of the Cue interests, and that Jungle Creek was the assignee of Golden Granite's 30% interest in the Cue tenements (green appeal book pp 1260, 1379 vol 7).

319 Although the above matters were not adverted to by his Honour, nevertheless, his Honour found, by reference to the prospectus published and circulated to shareholders of WAE, that 'by this means the course of events came to the knowledge of Mr Cole, Mr Evans and other shareholders of [WAE]' (reasons [450]).

320 In this context, although not mentioned by the judge, Mr Evan's evidence (exhibit 192) was, after referring to the letter enclosing the prospectus, as follows:

1. I recall having a telephone conversation with Mr Brailey where he said words to the effect that Mr Streeter and Mr Cooper had set up WANL and that the Nickel Venture that Mr LeClezio had previously mentioned to me had been acquired by WANL. Mr Brailey also informed me that WAE and its investors were not part of WANL.
2. Mr Brailey also advised me that the sole asset of WAE at that time had been vended into WANL in exchange for shares in WANL. Mr Brailey said words to the effect that he was angry about what had occurred as he thought that the Nickel Venture should have been vended into WAE or at least WAE should have been involved.
3. Following the conversation with Mr Brailey I had a number of conversations with Mr LeClezio where he confirmed what Mr Brailey had told me and expressed his own discontent at what had occurred. I also became aware that Mr Streeter and Mr Cooper were seed capitalists of WANL and were on the board.
4. As a result of my conversations with Mr LeClezio and Mr Brailey I decided not to invest in WANL.
5. After receipt of the letter from Mr Cooper I was aware that WANL had been listed, and that the Nickel Venture had definitely been acquired by WANL.

May 2000 - another WAE shareholder seeks legal advice

321 Although not mentioned by his Honour, in May 2000, another WAE shareholder, Mr Connell, sought legal advice in relation to Mr Streeter's and Mr Cooper's conduct (Connell statement exhibit 190 par 14 - 18; ts 966). Mr Connell, through his company, Sherrifmuir Holdings, held approximately 10% of the share capital in WAE (exhibit 155).

WANL capital raising complete by July 2000; the issue of shares to Mr Streeter and Mr Cooper; the non-participation in the float by WAE shareholders (reasons [8] - [11], [111] - [118], [195], [292] - [293], [301], [307] - [309], [496])

322 WANL issued 18.52 million 20 cent shares on the IPO and raised $3,403,704 net of expenses.

323 As to the costs of the float, although Mr Streeter ended up contributing $300,000 as seed capital, he said that he had initially agreed with the ANPC personnel to provide $250,000 which was intended to cover the preparation of the prospectus and other expenses leading up to the float (exhibit 232, pars 244 - 245, 255 - 256). The prospectus, dated 22 May 2000 (exhibit 111), estimated the total expenses of the float and associated costs at approximately $618,311. Mr Hanna, in cross-examination (ts 1718), accepted that the seed capital requirements had risen unexpectedly in 2000 as a result of exploration expenses associated with some of WANL's tenements, and that someone other than Mr Streeter had provided $50,000 seed capital.

324 Mr Streeter, pursuant to the arrangements made with ANPC personnel, subscribed for 2.5 million of the shares at a price of $500,000, which constituted approximately 15% of the net amount raised in the float.

325 In addition, Mr Streeter paid to WANL $300,000 by way of seed capital. In return, via Jungle Creek, he was entitled to, and subscribed for:

• 4.5 million 20 cent shares in WANL at a discount price of 6.7 cents;
• 5.625 million options at an exercise price of 20 cents per option, exercisable by 31 March 2004; and
• 400,000 options at an exercise price of 40 cents, exercisable by 31 March 2004.

326 In addition, Mr Cooper received 400,000 options in WANL at an exercise price of 40 cents, exercisable by 31 March 2004.

327 Jungle Creek also received 150,000 20 cent shares in WANL in consideration for the 30% interest in the Cue tenements.

328 Mr Streeter and Mr Cooper, in due course, exercised the options they acquired in the float of WANL. Mr Streeter paid $1.125 million to exercise his options in June 2003 and Mr Cooper paid $160,000 to exercise his options in October 2003.

329 The 350,000 shares in WANL issued in consideration for WAE's 70% interest in the Cue tenements were allotted to Candela Pty Ltd. Candela was a company controlled by Mr Streeter. Candela executed a deed of trust in favour of WAE in relation to those shares.

330 None of the shareholders in WAE who gave evidence in the action subscribed for shares in the WANL float, despite receiving the prospectus.

331 The judge found, in effect, that whilst the shareholders in WAE were not interested in subscribing for 20 cents shares in WANL on the strength of the ANPC assets as part of the float, they would have been interested in promoting WANL as seed capitalists, either directly or through WAE, in order to receive directly or share through the medium of WAE in the preferential treatment in the float of WANL which Mr Streeter received as a seed capitalist (reasons [307] - [309]).

332 Although not mentioned by his Honour, Mr Streeter's seed capital was invested in tranches over the period 31 December 1999 to 2 June 2000 (exhibit 115) as follows:

333 It is apparent that the bulk of the seed capital, $280,000, was invested after the 'diversion of the opportunity [was] revealed' (reasons [318]) to Mr Brailey in mid-February 2000.

July 2000 - Mr Brailey consults other solicitors

334 Although not mentioned by his Honour, in July 2000, Mr Brailey consulted other solicitors in relation to the conduct of Mr Streeter and Mr Cooper (Brailey's statement exhibit 170, par 122).

24 July 2000 - draft proposal to wind up WAE (reasons [294])

335 On 24 July 2000, Mr Cooper, after taking advice from a liquidator, drafted a report to WAE's shareholders. The report proposed the convening of an extraordinary annual general meeting of WAE to approve the transfer to Jungle Creek of all of WAE's assets (principally the 350,000 vendor shares in WANL, then held in escrow) in consideration for Jungle Creek releasing WAE from its debt.

337 The judge found that the reason for this was 'to avoid detailed disclosure to shareholders of all that had happened'.

WAE's annual report - November 2000 (reasons [303] - [305])

338 WAE issued its annual report for the year ended 30 June 2000, in November 2000. The judge found it to be disingenuous in material respects:

• There was no mention of WAE's opportunity to acquire Golden Granite's 30% interest in Cue for $5,000 or that the opportunity was taken up by Mr Streeter;
• There was no identification of Candela as the trustee for the 350,000 vendor shares in WANL, or that Candela was a Streeter company, or an explanation as to why Candela held the shares in trust;
• There was no adequate explanation of the value attributed to the Cue tenements, nor that the Cue tenements had been transferred to ensure Mr Streeter acquired a 20% interest in WANL;
• There was no explanation that, at some stage in negotiations with the promoters of WANL, there was a possibility that WAE might be offered 1 million shares in WANL;
• The preferential treatment received by Mr Streeter and Mr Cooper in the float of WANL was not disclosed;
• It failed to mention that Mr Brailey had resigned because of his 'disapproval of the transfer of the opportunity to WANL';
• It failed to accurately state the history and position with respect to the Roberts litigation; and
• It failed to mention that Mr Streeter and Mr Cooper had formulated a plan to put WAE into liquidation.

History of ANPC and Cue tenement after July 2000 (reasons [334] - [349])

339 There were seven sets of tenements included in the assets of WANL when it was floated. Six were ANPC tenements. The seventh was the Cue tenements.

340 In the period mid 2000 to June 2008, WANL spent $5,992,962 on these tenements.

341 Over that period, Cue and two ANPC tenements were surrendered. The other four remained in the balance sheet as assets of WANL, but there has not been any mine established nor nickel-bearing ores mined from any of the tenements.

342 The significance of the remaining four tenements is very minor in comparison with the Forrestania project. However, the remaining four are all under investigation with prospects of some future potential. To that extent, they still contribute to the net assets of WANL, and to the value of the shares in WANL.

The share price of WANL (reasons [21] - [22])

343 The judge found that the 20 cent shares in WANL dropped to a low of 14 cents in June 2001. With the development of Forrestania, however, WANL became a large successful nickel producer. The share price peaked at $11.65 on 12 May 2008 before the marked decline associated with the recent global financial crisis.

344 Although not mentioned by the judge, after the first day of trading, WANL's shares closed at 19 cents, and for most of the period between listing on 31 July 2000, and up to mid November 2002, the share price was below its issue price of 20 cents. Contrary to the judge's finding, the lowest closing price was 12 cents in April and August/September 2001, and its lowest price was 10 cents on 17 September 2001. Notably, the shares did not exceed the price of 40 cents until the end of March 2003 (exhibit 196).

WANL's acquisition and development of the Forrestania project: late 2001 to July 2006 (reasons [350] - [398], [420])

345 WANL acquired rights to an interest in a nickel deposit known as the Forrestania project in April 2002. Negotiations had commenced in December 2001.

346 WANL's expenditure, financed by various loans, share placements and rights issues, in relation to the Forrestania project was as follows:

• Year ended 30 June 2002 - $983,461
• Year ended 30 June 2003 - $4,987,202
• Year ended 30 June 2004 - $12,160,393
• Year ended 30 June 2005 - $24,190,668
• Year ended 30 June 2006 - $35,116, 933

347 The judge records (reasons [382]) that in its annual report for the year ended 30 June 2005, WANL stated:

The company's annual report for the year ended 30 June 2005 (exhibit 149, 7 TB 473) concentrated on the Forrestania project and reported that in a relatively short period the company had been fortunate enough to move from grass roots nickel exploration to the development of one of the highest grade nickel deposits in the country and that the ongoing exploration at Forrestania and development at Flying Fox had led to a 28% increase in the share price during 2005 and a 50% increase in market capitalisation. Furthermore, the total shareholders' equity for the year ended 30 June 2005 was $41 million compared with $23,597,000 for the preceding financial year.

348 In the period 15 March to 31 August 2006, the international price of nickel more than doubled.

349 The judge records (reasons [387], [389]) that:

During the financial year ended 30 June 2006, WANL had spent $35,116,933 on the Forrestania project and in the chairman's letter in that report, exhibit 150 7 TB 743, emphasis was given to the Flying Fox nickel mine at a time of record nickel prices asserting that the mine was one of the highest grade nickel mines in Australia. The chairman reported that it was expected that the first ore would be produced within a few months during the December quarter.

...

In the 2006 annual report, WANL stated that:

'The Board are pleased to report that the ongoing exploration success at Forrestania and the ongoing development at Flying Fox has led to a 53% increase in share price during 2006 and a 79% increase in market capitalisation. Since the end of the financial year both share price and market capitalisation have continued to grow [exhibit 150, 7 TB 473 at page 15].'

Also, as at 30 June 2006, the total shareholders' equity had reached $53,146,000, compared with $43,585,000 for the previous financial year.

350 In summary, the economic development of Forrestania was as follows:

(a) December 2001 - negotiations commenced for the purchase of the Forrestania tenements;

(b) February 2002 - WANL issued shares and raised $670,000 capital in order to proceed with the purchase of the Forrestania project;

(c) April 2002 - WANL contracted for the right to acquire 75% of the nickel rights in the Forrestania project upon, inter alia, fulfilling certain exploration and development expenditure obligations;

(d) July 2002 - WANL announced that it had successfully completed the first stage of a three-stage feasibility study at Forrestania and published the results of certain drilling and metallurgical tests;

(e) January 2003 - WANL reported that the majority of its funds were being directed towards exploration, drilling and feasibility programmes at Forrestania;

(f) May 2003 - WANL entered a further agreement for the right to acquire the remaining 25% interest in the nickel rights of Forrestania;

(g) September 2003 - WANL discovered the 'Flying Fox' deposit at Forrestania;

(h) March 2004 - WANL reported that there had been a significant increase in the indicated mineral resources at Flying Fox and that mine development was expected to commence in July 2004;

(i) June 2004 - WANL announced an agreement with Lion Ore Australia (Nickel) Ltd to treat high grade nickel from Flying Fox at the treatment plant 90 km from Forrestania and that Lion Ore would provide a funding facility of $20 million to assist with early mine development;

(j) March 2006 - WANL announced its decision to proceed with the Flying Fox mine expansion and to construct a nickel processing plant at 'Cosmic Boy';

(k) October 2006 - the first ore was produced by the Flying Fox mine .

History of Mr Streeter's and Mr Cooper's investment in WANL after July 2000 (reasons [111], [113], [355], [359], [363], [368], [372] - [373], [376], [379], [384], [390])

351 Mr Streeter via Jungle Creek subscribed for shares in respect of, or lent, the following amounts to WANL:

(a) $549,309.78 capital in a share placement in June 2002;

(b) $580,680 capital in a share placement in December 2002;

(c) $1,125,000 capital in June 2003 by the exercise of the options exercisable at 20 cents attaching to the subscription of seed capital in July 2000;

(d) $320,000 capital in October 2003 by the exercise of 800,000 options, 400,000 of which were acquired by Mr Streeter as a director in the float of WANL;

(e) $1 million loan in November 2003 which was converted to capital in December 2003;

(f) $2 million loan in April 2004 which was converted to capital;

(g) $150,000 capital by way of exercising certain options in June 2004;

(h) $1,103,958.90 capital in a rights issue in July 2004;

(i) $460,000 capital in the conversion of certain options in December 2004;

(j) $1,129,990 in share capital in March 2006 and a further $691,057 at the same time in a placement of WANL shares on the Toronto Stock Exchange; and

(k) $9,470,440.20 share capital on a rights issue in October 2006.

352 Mr Cooper also exercised, in addition to the 400,000 options he acquired as a director on the float of WANL, various options and subscribed for shares on various rights issues over the period June 2002 to February 2006 (reasons [113]).

353 He contributed, in this regard, in excess of $300,000 capital.

WAE: July 2006 to November 2006; Mr Brailey and Mr Connell take control of WAE and commence proceedings (reasons [402] - [420])

354 In July 2006, Mr Streeter settled the Roberts litigation, thereby, in effect, leaving Jungle Creek (once Roberts had been paid) as WAE's only creditor. WAE's only asset was the parcel of 350,000 shares in WAE, which were held on trust for it by Candela.

355 On 6 July 2006, Mr Brailey and Mr Connell met with Mr Streeter and Mr Cooper and said that they wished to convene a meeting of WAE shareholders to have them appointed to the board of WAE, and to have Mr Streeter and Mr Cooper removed from the board.

356 Mr Streeter and Mr Cooper called an extraordinary general meeting for 15 August 2006. There were, in effect, two competing sets of resolutions put to shareholders. One was for the appointment of Mr Brailey and Mr Connell to the board of WAE and for the removal of Mr Streeter and Mr Cooper. The other, proposed by Mr Streeter and Mr Cooper, was that the company be wound up.

357 In the meantime, Mr Streeter instructed Candela to sell 50,000 of the 350,000 shares in WANL held on trust for WAE, and applied the proceeds to the Roberts' debt, the Jungle Creek debt and miscellaneous small debts of WAE, such as solicitors' and accounting fees.

358 On 15 August 2006, the extraordinary general meeting of WAE was held. The resolutions proposed by Mr Brailey and Mr Connell were passed, and they took control of the board of WAE.

359 On 5 September 2006, Mr Streeter, via Jungle Creek, made a conditional offer to acquire all the shares in WAE, a purpose of which was to gain control of WAE and remove Mr Brailey and Mr Connell from the board. An extraordinary general meeting of WAE was scheduled for 3 November 2006. However, Jungle Creek's offer lapsed, and the meeting did not proceed.

360 On 18 October 2006, Mr Brailey and Mr Connell caused WAE to commence these proceedings.

The issues identified by the judge concerning, and his findings as to, breaches of fiduciary duty (reasons [485])

361 The judge identified three issues concerning breach of fiduciary duty in [24] of his reasons:

1. Were Messrs Streeter and Cooper under fiduciary duties to the plaintiff which precluded them from taking for their private benefit and the benefit of Jungle Creek the allotment of shares and options in WANL in 2000?
2. Was there a wrongful diversion of a corporate opportunity for the acquisition of the 30% interest held by Golden Granite in the Cue tenements by Jungle Creek so as to make Jungle Creek accountable to the plaintiff for the 150,000 shares which it was allotted in consideration of the assignment of its 30% interest in the Cue tenements?
3. Was the ANPC proposal introduced to Messrs Streeter and Cooper by reason of, because of, or in association with, their roles as directors of the plaintiff so as to render it a breach of fiduciary duty for them to take up and exploit that opportunity rather than make it available to the plaintiff?

362 The judge's findings included the general conclusion that Mr Streeter and Mr Cooper were in breach by (reasons [485]) 'diverting and using to their own advantage the opportunity to avail of, and participate in, the ANPC proposal', which seems to be a reference to the third issue.

363 The judge does not appear to have dealt separately with the three identified issues. A review of his Honour's reasons as a whole indicates that the judge's findings on breach of fiduciary duty appear, relevantly, to be as follows:

(a) the appellants were effectively in control of WAE, and approved and undertook all the executive decisions of WAE (reasons [2], [7], [46], [73] - [75] and [314]);

(b) as directors, they were obliged to act in good faith in the interests of the company when dealing with the affairs of the company (reasons [98]);

(c) in their capacity as directors of WAE, the appellants owed fiduciary duties to WAE (reasons [41] - [44], [59] - [99]);

(d) the ANPC proposal came to the appellants on the referral of Mr Brailey (reasons [98], [236] - [240], [287]);

(e) Mr Brailey, in effect in his capacity as a director of WAE, referred the ANPC proposal to Mr Streeter (reasons [241], [287]);

(f) Mr Streeter, and Mr Cooper, considered the ANPC proposal in their capacity as directors of WAE and in that regard despatched the 'offer' of 8 December 1999 (reasons [241] - [242], [244] and [287]);

(g) there was no real distinction between, on the one hand the nature of the business of WAE, and the aspirations of the directors of WAE, and, on the other hand, WANL into which the appellants placed the nickel opportunity, and the ANPC proposal was the very kind of thing that WAE was looking for, as Mr Cooper conceded (reasons [3], [173] - [174], [205], [216] - [217], [256], [257], [263], [282], [283] and [313]);

(h) the appellants used the name and assets of WAE, being the Cue tenements, in connection with, as well as for the purpose of, advancing the transaction with the ANPC proponents, from which the appellant's came to acquire the impugned shares in WANL (reasons [177], [267], [268], [278], [280], [281], [284], [318] and [470]);

(i) their position as directors of WAE, the fact of the referral of the ANPC proposal by Mr Brailey, their use of the name and assets of WAE, and the congruence between the commercial purposes of WAE and WANL, indicate 'a real connection between the activities of Messrs Streeter and Cooper in their roles as promoters of the ANPC venture and later as directors of WANL, and their fiduciary obligations as directors of [WAE]' (reasons [98]);

(j) the appellants concealed their personal involvement in the ANPC proposal and the concealment is, in effect, an admission of their breach of duty (reasons [98], [265], [268], [269], [286] - [291]).

The judge recorded, in effect, that the appellants had not pleaded a case that they had obtained the fully informed consent of WAE (reasons [266]).

Legal principles Fiduciaries - overview

364 The critical feature of a fiduciary relationship is that the fiduciary undertakes or agrees to act for or in the interest of another person. The fiduciary acts in a representative character: Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 96 - 97.

365 The essence of a fiduciary relationship is that one party exercises power on behalf of another and pledges himself or herself to act in the best interests of the other: Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165, 196 - 197 [71].

366 Within the scope of the fiduciary relationship the fiduciary must give undivided loyalty to the person to whom the obligation is owed: Breen v Williams [1996] HCA 57; (1996) 186 CLR 71, 93, 108; Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 465. Within that scope, fiduciaries must subordinate their own interests to the interests of the other person to whom they stand in a fiduciary relationship: Furs Ltd v Tomkies [1936] HCA 3; (1936) 54 CLR 583, 590 (Latham CJ).

367 The undivided loyalty is secured by the general principle of equity concerning the obligation of a person in a fiduciary relationship to account for undisclosed personal benefits or gains. In Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178, 198 - 199 Deane J said:

The variations between more precise formulations of the principle governing the liability to account are largely the result of the fact that what is conveniently regarded as the one 'fundamental rule' embodies two themes. The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage. Notwithstanding authoritative statements to the effect that the 'use of fiduciary position' doctrine is but an illustration or part of a wider 'conflict of interest and duty' doctrine (see, eg Phipps v Boardman [[1967] 2 AC, 123]; NZ Netherlands Society 'Oranje' Inc v Kuys [[1973] 1 WLR, 129]), the two themes, while overlapping, are distinct. Neither theme fully comprehends the other and a formulation of the principle by reference to one only of them will be incomplete. Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it. Any such benefit or gain is held by the fiduciary as constructive trustee: see Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd [(1958) [1958] HCA 33; 100 CLR 342, 350]. That constructive trust arises from the fact that a personal benefit or gain has been so obtained or received and it is immaterial that there was no absence of good faith or damage to the person to whom the fiduciary obligation was owed.

368 Where the breach of duty produces not a gain to the fiduciary, but a loss to the beneficiary of the duty, there is an obligation to account for the loss by the provision of equitable compensation: Breen v Williams (135 - 136).

It may still be arguable in this Court that, notwithstanding general statements and perhaps even decisions to the contrary in cases such as Regal (Hastings) Ltd v Gulliver and Phipps v Boardman, the liability to account for a personal benefit or gain obtained or received by use or by reason of fiduciary position, opportunity or knowledge will not arise in circumstances where it would be unconscientious to assert it or in which, for example, there is no possible conflict between personal interest and fiduciary duty and it is plainly in the interests of the person to whom the fiduciary duty is owed that the fiduciary obtain for himself rights or benefits which he is absolutely precluded from seeking or obtaining for the person to whom the fiduciary duty is owed (204 -205).

See also, in this regard, Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 559.

370 Fiduciaries cannot unilaterally absolve themselves of liability by resigning from fiduciary office in order to take the profit for which they should otherwise account: Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1; Canadian Aero Services Ltd v O'Malley [1974] SCR 592, 613; Ex parte James [1803] EngR 536; (1803) 8 Ves 337; (1803) 32 ER 385, 390 - 391. The last-mentioned case concerned a solicitor for the trustee in bankruptcy purchasing certain property of the bankrupt's estate. There arose a question as to whether the solicitor could, by resigning from his position, divest himself of any liability attaching as a consequence of his breach of fiduciary duty. Lord Eldon said:

With respect to the question, now put, whether I will permit [the solicitor] to give up the office of solicitor, and to bid, I cannot give that permission. If the principle is right, that the solicitor cannot buy, it would lead to all the mischief of acting up to the point of sale, getting all the information, that may be useful to him, then discharging himself from the character of solicitor, and buying the property (390 - 391).

371 Similar observations were made by Wilberforce J (as his Lordship then was) in Phipps v Boardman [1964] 1 WLR 993 at first instance. That was also a case in which the solicitor was held liable to account for a profit gained from acting in his representative capacity as solicitor for a trust. Although no question of his resignation was raised, Wilberforce J considered the extent to which the solicitor had acted in a representative capacity over a period of time and held that the last step in the sequence of events, in which he acquired the shares from which the profit was made, could not properly be regarded as falling outside the scope of his agency as solicitor. His Lordship said:

When the plan was changed to one to buy the directors' shares, too great a part of the essential or 'inside' information had been gained, as a trust asset, for Boardman and Phipps to be able to say: 'From now on we are going to act wholly outside the scope of our agency and we are going to use our knowledge, which up till now has been a trust asset, for our own benefit'. All they could do then was what in fact they did; which was, to seek the beneficiaries' consent (1012).

372 The former of the two themes referred to by Deane J in Chan v Zacharia (often called the 'conflict rule'), expressed in proscriptive form, is to the effect that fiduciaries are under an obligation, without informed consent, not to promote their personal interest by making or receiving a gain in circumstances where there is a conflict or real substantial possibility of a conflict between their personal interests and those to whom the duty is owed: Pilmer v The Duke Group (199) [78]. The conflict may also arise where the fiduciary owes conflicting concurrent duties to different beneficiaries: Pilmer v The Duke Group (199) [78].

373 Liability would not arise where the interest of the fiduciary is remote or insubstantial: Hospital Products v United States Surgical (103); see also Pilmer v The Duke Group (200 - 201) [83].

374 The language of 'conflict' between interest and duty was used by Lord Cairns in Parker v McKenna (1874) 10 Ch App 96. There the directors of a bank resolved to increase its capital by issuing 20,000 new £50 shares. The resolution to increase capital had, in substance, two components. One was a rights issue to existing shareholders whereby each shareholder would pay for each share a £25 premium, and £5 as a first call. The second was an agreement with a third party named Stock, to take up all the shares that were not taken by the existing shareholders at a premium of £30 per share, ie £5 more per share than on the rights issue. Under the agreement, Stock was to take up and pay for the shares not allotted to existing shareholders at the rate of 1,000 shares per month and was required to lodge a guarantee of £25,000 to secure his obligation. There was a shortfall of subscriptions in the rights issue, leaving 10,453 shares untaken. Of this amount, 9,778 shares were allotted to Stock, although he was then unable to pay more than £5 per share out of the £30 per share payable. The bank made a further arrangement with Stock to the effect that the certificates of the shares allotted to him should be held by the bank, that the bank should have a lien on the shares for the sum of £30 per share, and that no transfer from him to any purchaser should be registered until the bank received the sum of £30 per share on the shares so transferred. According to the directors of the bank, even after this arrangement, Stock was still anxious to relieve himself of the burden he had assumed, and requested the directors of the bank to take some of the shares allotted to him for themselves at £35 per share, being the sum of £30 premium, and £5 in respect of the first call. The directors between them acquired 4,300 shares from Stock in this way and sold the shares to subsequent purchasers for a profit. The bank received the £30 premium per share at the time when the shares were registered in the names of the purchasers to whom the directors sold the shares.

It is necessary at this point to observe what was the position of Stock in this matter. The contract at this point was clearly an executory contract. It was a contract of a very peculiar description, running over a considerable time. It was a contract with regard to the performance of which the interests of the bank required to be watched with the greatest jealousy and vigilance. There was the guarantee deposit to be maintained as a guarantee deposit to the end of the transaction; there were the stipulations as to the proportions in which the shares were to be taken up; there was the stipulation that no delivery was to be made until payment was made; there was the approval of the names of persons sent in for shares, which was to come from the directors; and there was the question, of very great importance in a speculation of this kind, how and at what times the calls should be made upon these shares by the directors. The essence, in fact, of the transaction as I view it, and of the bargain with Stock, was this, that Stock was to take all the risks of the market with regard to the disposal of these shares, and the object to be secured was the fixed payment of £30 a share to the bank. Now I ask the question, In the fulfilment and execution of this contract, who was to watch the interests of the bank? Undoubtedly the directors of the bank. They were the agents of the bank for this purpose. If they did not watch the fulfilment of the contract there was no person else to do it. Their agency would not come to an end with regard to these shares until the contract was completely fulfilled; and their agency at the date which I have referred to, namely, the allotment to Stock, not only had not come to an end, but was actually only in reality commencing.

Now that being the position of Stock and the position of the directors, I turn next to the narrative of what the directors, or the four Appellants who were directors, actually did in this matter, ... It is true that the transaction is throughout called by them a purchase of shares from Stock, but Stock had no complete property in any shares to sell. All that he could sell, and all that he did sell, appears to me to have been the right to stand in his place quoad these 4300 shares, which was the total amount of the shares taken by the four Appellants. It is true that Stock was not in any way released from the performance of his contract; but it may be asked how could the directors possibly enforce against Stock the performance of the contract quoad these 4300 shares, when the enforcing of the contract against Stock would, as to those shares, be really the enforcing of it against themselves; for as Stock would be liable to the bank, so these four Appellants would be liable each for his own shares to Stock.

...

Now, the rule of this Court, as I understand it, as to agents, is not a technical or arbitrary rule. It is a rule founded upon the highest and truest principles of morality. No man can in this Court, acting as an agent, be allowed to put himself into a position in which his interest and his duty will be in conflict. If Stock had bought these shares and paid for them, and become the absolute owner of them, the directors were as free as any person in the market to go to Stock and to become the purchasers from him of those shares. The agency in that case would have been over, and there would have been no longer any conflict between interest and duty. Here the agency had not terminated. The Court will not inquire, and is not in a position to ascertain, whether the bank has lost or not lost by the acts of the directors. All that the Court has to do is to examine whether a profit has been made by an agent, without the knowledge of his principal, in the course and execution of his agency, and the Court finds, in my opinion, that these agents in the course of their agency have made a profit, and for that profit they must, in my opinion, account to their principal (116 - 118).

I desire to add but little to what the Lord Chancellor has said. I do not think it is necessary, but it appears to me very important, that we should concur in laying down again and again the general principle that in this Court no agent in the course of his agency, in the matter of his agency, can be allowed to make any profit without the knowledge and consent of his principal; that that rule is an inflexible rule, and must be applied inexorably by this Court, which is not entitled, in my judgment, to receive evidence, or suggestion, or argument as to whether the principal did or did not suffer any injury in fact by reason of the dealing of the agent; for the safety of mankind requires that no agent shall be able to put his principal to the danger of such an inquiry as that (124 - 125).

In my opinion, as long as the contract remains executory, and the trustee or agent has power either to enforce it or to rescind or alter it, as long as it remains in that state he cannot re-purchase the property from his own purchaser, except for the benefit of his principal. It appears to me that that necessarily follows from the established rule that he cannot purchase the property on his own account (125).

378 The directors were liable in Parker v McKenna on the bases outlined above. A case, propounded on behalf of the bank, to the effect that the directors had issued the capital for improper purposes as part of a scheme, involving Mr Stock, for their personal gain, was rejected on the evidence (see Lord Cairns (119 - 120)).

379 In relation to the second theme referred to by Deane J in Chan v Zacharia (often called the 'profit rule'), Professor Finn (as his Honour then was) in 'Fiduciary Obligations' observed [570], that cases in which fiduciaries have been held accountable for benefits obtained by use of their fiduciary position include Cook v Deeks [1916] UKPC 10; [1916] 1 AC 554 and Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134, 144, 154, 158. See also Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46, 100 - 103 (Lord Cohen), 106, 110 - 111 (Lord Hodson), 114 - 115, 117 (Lord Guest).

380 In Cook v Deeks, the plaintiff, a director of the company, sued on behalf of himself and the shareholders in the company, of which the defendants and the plaintiff had been directors at the time of the events in question. The company had carried out a number of construction contracts for a railway company. The defendants had acted as the representatives of the company in all of the negotiations with the railway company and they had caused the company to expedite the last contract prior to the events in question in order, in effect, to demonstrate efficiency for the purposes of securing future work. The 'entire management of the company, so far as obtaining and executing contracts in the east was concerned, was in their hands ... ' (561). The defendants then negotiated for a new contract, purportedly on behalf of the company, but in reality for the purpose of securing the contract for themselves. In so doing, they concealed their endeavours from the plaintiff as co-director. They secured the new contract for themselves. Lord Buckmaster said:

[M]en who assume the complete control of a company's business must remember that they are not at liberty to sacrifice the interests which they are bound to protect, and, while ostensibly acting for the company, divert in their own favour business which should properly belong to the company they represent.

... in the circumstances, the defendants ... were guilty of a distinct breach of duty in the course they took to secure the contract, and that they cannot retain the benefit of such contract for themselves, but must be regarded as holding it on behalf of the company (563).

381 In Regal (Hastings) Ltd v Gulliver, the company sued its former directors for profits which they had made on shares bought and sold at a profit in a subsidiary of the company. The directors were both directors of the company and its subsidiary at the time the subsidiary was set up. The subsidiary was to take a lease of certain cinemas. A funding issue arose in connection with the transaction and the directors themselves, in addition to the company, subscribed for shares in the subsidiary, to assist in the implementation of the transaction. They were held liable to account for the profits derived from the subsequent sale of the shares in the subsidiary, even though the company could not have afforded to take up the shares in the subsidiary and it was in the interests of the company for the directors to subscribe for the shares.

In the result, I am of the opinion that the directors standing in a fiduciary relationship to Regal in regard to the exercise of their powers as directors, and having obtained these shares by reason and only by reason of the fact that they were directors of Regal and in the course of the execution of that office, are accountable for the profits which they have made out of them (149).

We must take it that they entered into the transaction lawfully, in good faith and indeed avowedly in the interests of the company. However, that does not absolve them from accountability for any profit which they made, if it was by reason and in virtue of their fiduciary office as directors that they entered into the transaction.

The equitable doctrine invoked is one of the most deeply rooted in our law. It is amply illustrated in the authoritative decisions which my noble and learned friend Lord Russell of Killowen has cited. I should like only to add a passage from Principles of Equity by Lord Kames, 3rd ed (1778) vol 2, p 87, which puts the whole matter in a sentence: 'Equity,' he says, 'prohibits a trustee from making any profit by his management, directly or indirectly.'

The issue thus becomes one of fact. The plaintiff company has to establish two things: (i) that what the directors did was so related to the affairs of the company that it can properly be said to have been done in the course of their management and in utilisation of their opportunities and special knowledge as directors; and (ii) that what they did resulted in a profit to themselves (153).

That question can be briefly stated to be whether an agent, a director, a trustee or other person in an analogous fiduciary position, when a demand is made upon him by the person to whom he stands in the fiduciary relationship to account for profits acquired by him by reason of his fiduciary position, and by reason of the opportunity and the knowledge, or either, resulting from it, is entitled to defeat the claim upon any ground save that he made profits with the knowledge and assent of the other person (154).

Directors, no doubt, are not trustees, but they occupy a fiduciary position towards the company whose board they form. Their liability in this respect does not depend upon breach of duty but upon the proposition that a director must not make a profit out of property acquired by reason of his relationship to the company of which he is director. It matters not that he could not have acquired the property for the company itself - the profit which he makes is the company's, even though the property by means of which he made it was not and could not have been acquired on its behalf (159).

Regal (Hastings) Ltd v Gulliver was applied by the House of Lords in Boardman v Phipps.

386 In Warman International Ltd v Dwyer (557), the High Court enunciated the law in Australia, in relation to the 'profit' rule, as:

A fiduciary must account for a profit or benefit if it was obtained ... (2) by reason of his fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position.

387 In Maguire v Makaronis, Brennan CJ, Gaudron, McHugh and Gummow JJ, referring to the above passage from Warman International Ltd v Dwyer, said:

Different considerations arise where the plaintiff seeks one or other of the further remedies referred to by the Lord Chancellor in Nocton v Lord Ashburton, namely an account of profits, as a personal rather than proprietary remedy, or, as another personal remedy, compensation for that which the plaintiff has lost 'by [the fiduciary] acting', to use the Lord Chancellor's phrase, in breach of duty. Likewise where what is sought is a proprietary remedy in the nature of a constructive trust. In these instances, there directly arises a need to specify criteria for a sufficient connection (or 'causation') between breach of duty and the profit derived, the loss sustained, or the asset held.

Where the plaintiff seeks recovery of a profit, the necessary connection has been identified in this Court by asking whether the profit was obtained 'by reason of [the defendant's] fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position' (468). (citations omitted)

The overlap between the 'conflict' and 'profit' rules

388 Where the fiduciary agent has made an unauthorised profit beyond the agent's agreed remuneration, the courts have often not sought to characterise the plaintiff's claim in terms of conflict of interest. In this regard see, eg, Hippisley v Knee Brothers [1905] 1 KB 1; Williamson v Hine [1891] 1 Ch 390, 393; PD Finn, Fiduciary Obligations [488] - [489].

389 The overlapping nature of the two themes will often mean that a defendant's liability to account may be characterised as arising from the application of either or both themes. Whilst, as noted earlier, Cook v Deeks has been referred to as a 'profit rule' case, the circumstances upon which liability was grounded, and the language of Lord Buckmaster (referred to earlier), could equally point to the application of the 'conflicts' rule.

390 In Boardman v Phipps, Lord Upjohn said, in relation to Regal (Hastings) Ltd v Gulliver which is also often referred to as a 'profit rule' case:

That was an obvious case where duty of the director and his interest conflicted. The scheme had been that Regal would make the profit, in fact the directors did (124).

391 Moreover, Regal (Hastings) Ltd v Gulliver relied upon Parker v McKenna (to which I have referred earlier) in which Lord Cairns used the language of both 'conflict' and referred to the fiduciary acting 'in the course and execution of agency' to explain the basis for liability. James LJ expressed the relevant principle as one by which 'no agent in the course of his agency, in the matter of his agency' can be allowed to make an unauthorised profit.

392 In Boardman v Phipps Lord Cohen (103 - 104) and Lord Hodson (111) also referred to the potential for conflict between duty and interest.

393 An elucidation of the relationship and interaction between the 'conflict rule' and the 'profit rule' may be seen in the judgment of Dixon J in Birtchnell v Equity Trustees [1929] HCA 24; (1929) 42 CLR 384, referred to below, in relation to unsolicited payments to the fiduciary.

394 Where a fiduciary does not actively pursue an unauthorised profit or gain within the scope of the fiduciary relationship, but receives, eg, 'an unsolicited personal payment ... as a consequence of what was an honest and conscientious performance of a fiduciary duty', there 'may be no breach of fiduciary duty unless and until there is an actual failure by the fiduciary to account for the relevant benefit or gain': Chan v Zacharia (199).

395 In Birtchnell v Equity Trustees a question arose as to whether profits received pursuant to a profit-sharing arrangement between a partner and a client of the firm might simply be regarded as a 'gift' to the partner by the client. In that case, a partnership carried on the business of real estate agents and land speculators. One of the clients of the firm was involved in land development in which the firm acted as his real estate agent. A partner of the firm had a separate arrangement with the client to share, with the client, in the profits made by the client on the sale of certain land through the firm. The court, by majority, held that the transaction was within the scope of the fiduciary relationship and that the errant partner's estate (the partner had since died) was liable to account for the profits.

396 Having first considered that the errant partner 'pursued his separate interests where the joint interests should have been consulted', Dixon J went on to consider the position if the profit-sharing with the client could simply be considered as a gift by the client. Dixon J said:

A supposition which seems extremely improbable, but which is perhaps possible, is that [the client] made a gift to [the errant partner] of a share of the profits. But if this were the true character of the transaction, it can scarcely be differentiated from additional remuneration. Even if the actual object of such a gift was not to induce [the errant partner] to give to [the client's] business energy, time and care which ought to have been more equally distributed over the various concerns of the firm, its tendency would manifestly be to do so.

...

A partner, who is apparently performing the functions undertaken by the firm but is really advancing his separate interest, has a bias against the fair discharge of his duty to his partners. This alone might suffice to disable [the fiduciary partner] from secretly taking the gift supposed, and keeping it for himself. But in fact it is only a part, one aspect, of the considerations from which this consequence ensues. The thing given, a right to participate in the client's profits, was an advantage the pursuit of which fell within the scope of the partnership business. The inducement which the firm could hold out to a client in order to obtain this advantage on the joint account consisted in the promise or expectation of an expenditure upon his affairs of greater energy, time, care and enthusiasm. This is the very thing that the acquisition of such a right would tend to promote in the individual partner, whether he acquired it by gift, contract, or otherwise. Finally, the willingness of the client to divide the profits with one partner formed ground for thinking that he might be ready to make some profit-sharing agreement with the firm itself for their mutual advantage, and this was information which one partner could not suppress to forward his separate interest. These considerations combine to make it inconsistent with his fiduciary obligation to conceal the fact, and to take a separate interest without the partners' knowledge and consent (417 - 418).

The stringent rule that the fiduciary cannot profit from his trust is said to have two purposes: (1) that the fiduciary must account for what has been acquired at the expense of the trust, and (2) to ensure that fiduciaries generally conduct themselves 'at a level higher than that trodden by the crowd' [Meinhard v Salmon (1928) 164 NE 545, 546 per Chief Justice Cardozo]. The objectives which the rule seeks to achieve are to preclude the fiduciary from being swayed by considerations of personal interest and from accordingly misusing the fiduciary position for personal advantage [Chan v Zacharia (198 - 199)].

Thus, it is no defence that the plaintiff was unwilling, unlikely or unable to make the profits for which an account is taken or that the fiduciary acted honestly and reasonably [Birtchnell v Equity Trustees, Executors & Agency Co Ltd (409); Furs Ltd v Tomkies (592); Consul Development (394); Industrial Development Consultants Ltd v Cooley; Canadian Aero Service Ltd v O'Malley]. So, in Regal (Hastings) Ltd v Gulliver, although the directors acted in good faith and in the interests of the company of which they were directors in taking up shares in a subsidiary which the company could not afford to take up, they were held accountable for the profit made on the sale of the shares. And, in Phipps v Boardman [[1967] 2 AC 46], the solicitor was held accountable for the profit he made, notwithstanding that he acted bona fide and in the interests of the trust and that the opportunity would not have been availed of but for his skill and knowledge (557 - 558).

398 In Maguire v Makaronis the plurality, prior to referring to the above passage, said:

[W]hat is clear is that the principles by which liability to account for profits is assessed against errant fiduciaries express the policy of the law in holding fiduciaries to their duty (466).

As already explained, it is firmly established that the liability of a fiduciary to account for a profit or gain made in breach of fiduciary duty does not depend upon the person to whom that obligation is owed suffering a loss or injury [Birtchnell v Equity Trustees (408 - 409) per Dixon J; Consul Developments (394, 395) per Gibbs J]; and it is ordinarily immaterial to the fiduciary's liability to account that the person to whom the fiduciary obligation is owed could not have earned the profit or gain [Birtchnell v Equity Trustees (408 - 409); Furs Ltd v Tomkies (592); Consul Development (394, 395); Industrial Development Consultants Ltd v Cooley; Canadian Aero Service Ltd v O'Malley; Green & Clara Pty Ltd v Bestobell Industries Pty Ltd (4, 20)]. The courts have always insisted on compliance by fiduciaries with strict and rigorous standards with a view to ensuring that they do not expose themselves to a conflict of interest and duty. The point is that a fiduciary is not entitled to make a profit out of, or by reason of, a fiduciary position without the knowledge and assent of the person to whom the fiduciary duty is owed [Phipps v Boardman (105); Consul Development (393) per Gibbs J].

400 The mere use of knowledge or opportunity which comes to the trustee or agent in the course of the trust or agency does not necessarily make him or her liable to account: Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1, 18; Boardman v Phipps (100, 102 - 103, 128).

401 The reach of the equitable principle depends upon 'the precise nature and scope of the relationship in each individual case': Meagher RP, Heydon JD & Leeming MJ_, Meagher, Gummow and Lehane's_ Equity: Doctrines & Remedies (4th ed, 2002) [5-070].

402 In Birtchnell v Equity Trustees, Dixon J said:

Once the subject matter of the mutual confidence is so determined, it ought not to be difficult to apply the clear and inflexible doctrines which determine the accountability of fiduciaries for gains obtained in dealings with third parties (408).

403 The duties of a fiduciary may vary with the circumstances which give rise to the relationship: Hospital Products v United States Surgical (69) (Gibbs CJ). A person may be in a fiduciary position with respect to a part of his or her activities but not other parts: New Zealand Netherlands Society 'Oranje' Inc v Kuys [1973] 1 WLR 1126, 1130; Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1, 15.

404 Accordingly, it is necessary to consider the subject matter over which the fiduciary obligations extend: Breen v Williams (82, 108, 135). Even within recognised categories of fiduciary relationships, it is necessary to ascertain the particular obligations owed to the beneficiary of the duty and give consideration to what acts and omissions amount to a failure to discharge those obligations: Maguire v Makaronis (464).

405 In Birtchnell v Equity Trustees, Dixon J held that the 'subject matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which the partnership exists, and this is to be ascertained not merely from the express agreement of the parties ... but also from the course of dealing actually pursued by the firm'. His Honour continued:

Of the duties imposed by these doctrines, one which is material for the decision of this case is that which forbids a partner from withholding from the firm any opportunity of advantage which falls within the scope of its undertakings, and from using for his own exclusive benefit, information, knowledge or resources to which the firm is entitled. (See Dean v MacDowell [(1881) 6 App Cas 79]; Aas v Benham [(1891) 2 Ch 258, Bowen LJ]; and cf Trimble v Goldberg [(1906) AC 499], and also secs 33 and 34 of the Victorian Partnership Act 1915.) Another duty of present materiality is that which requires a fiduciary to refrain from engagements which conflict, or which may possibly conflict, with the interests of those whom he is bound to protect. (Aberdeen Railway Co v Blaikie Bros [(1854) 1 Macq 461] (408).

[T]he partnership was entitled to avail itself of any opportunity to embark upon such a transaction which came to the knowledge of the partners or any of them, and knowledge and information acquired by a partner as to the readiness of a client to share such profits, as to the conditions upon which he would do so, and generally as to every fact bearing upon the terms which the partnership might negotiate with him were all matters which no partner could lawfully withhold from the firm and turn to his own account. The relation between such a client and the partnership is a matter affecting the joint interests which each member was bound to safeguard and protect, and no member could enter into dealings or engagements which conflicted or might conflict with those interests or which gave him a 'bias against the fair discharge of his duty' in that respect (412).

For my purpose, I rely on part of s 33 and on the rules of Equity saved by s 4, which enable us properly to understand and apply s 33. Section 33 enacts that (1) 'Every partner must account to the firm for any benefit derived by him without the consent of the other partners from any transaction' concerning the business of the firm, etc. The section is not new law (see per Lindley LJ in Aas v Benham [(1891) 2 Ch at p 255], since that case, as pointed out in Pollock's Digest of the Law of Partnership [11th ed], p 95, was commenced before the Act was passed.) The section plainly cannot be confined to matters within the scope of the partnership. The contrary view would open a wide door to fraud, besides being opposed to what Lindley LJ says at the page mentioned. If, for instance, A and B are in partnership as wholesale grocers, and B arranges with C, a retail grocer, to share C's profits if B influences A to agree to supply C, I take it as clear that B's arrangement with C is a 'transaction concerning the partnership,' though C's business itself is wholly outside its scope. The case would fall within the observations of Cotton LJ in Dean v MacDowell [8 Ch D at 354], 'acquired by him by reason of his connection with the firm' (394).

408 In Aas v Benham [1891] 2 Ch 244, to which Isaacs and Dixon JJ referred in Birtchnell v Equity Trustees, the defendant, Mr Benham, was a partner in a firm of shipbrokers, H Clarkson & Co. He played a part in the formation of a company for the building of ships, using information obtained as a partner in the firm, and became a director of the company. His partners claimed an account of his profits and salary earned in connection with the company. Kekewich J held him accountable but the Court of Appeal reversed the decision on the basis that the business of the company did not compete with and was beyond the scope of the business of the partnership. Lindley LJ said:

The answer, however, to this claim is short and conclusive. It was no part of the business of H. Clarkson & Co to promote or reconstruct companies, nor to advise them how to improve the management of them. All such matters were quite foreign to the business of H Clarkson & Co. ... He never was in fact acting for his firm in this matter, nor did his partners ever suppose he was, or treat him as so acting. Nor is it true in fact that Mr Benham or the company for which he was acting ever derived any benefit from his connection with the firm of H Clarkson & Co. It is clear law that every partner must account to the firm for every benefit derived by him without the consent of his co-partners from any transaction concerning the partnership or from any use by him of the partnership property, name or business connection ... As regards the use by a partner of information obtained by him in the course of the transaction of partnership business, or by reason of his connection with the firm, the principle is that if he avails himself of it for any purpose which is within the scope of the partnership business, or of any competing business, the profits of which belong to the firm, he must account to the firm for any benefits which he may have derived from such information, but there is no principle or authority which entitles a firm to benefits derived by a partner from the use of information for purposes which are wholly without the scope of the firm's business ... By 'information which the partnership is entitled to' is meant information which can be used for the purposes of the partnership. It is not the source of the information, but the use to which it is applied, which is important in such matters. To hold that a partner can never derive any personal benefit from information which he obtains as a partner would be manifestly absurd. Suppose a partner to become, in the course of carrying on his business, well acquainted with a particular branch of science or trade, and suppose him to write and publish a book on the subject, could the firm obtain the profits thereby obtained? Obviously not, unless, by publishing the book, he in fact competed with the firm in their own line of business (255 - 256). (emphasis added)

409 Much of the debate in the appeal, and in the court below, centred upon questions relating to a fiduciary's liability to account for the profit derived from a 'corporate opportunity'. In light of the extensive submissions received, it is necessary to consider these cases in some detail. They reflect the application of either or both of the conflict rule and the profit rule, and the potential for overlap between the rules.

410 Canadian Aero was a case where the court found that the errant fiduciaries were 'acting against the interests of their principal' (617). In that case the company (referred to as Canaero), through the defendant fiduciaries, had been pursuing a contract for work in Guyana over a number of years, albeit not continuously, since 1961. That contract was eventually let in late 1966. In describing the company's business, Laskin J said:

Companies like Canaero risked initiative and expenditure in preparatory work for projects without any assurance of return in the form of contracts; they saw their business as not only bidding on projects ripe for realization, but as also embracing suggestion and development of projects for which they would later seek approval and contracts to carry them out. In this latter aspect, the development of a project involved negotiation with officials of the country for whose benefit it was intended and the establishment of a receptive accord with a country offering aid for such matters. Of course, a suggested project was more likely to be viewed favourably if its technical and administrative aspects were well worked out in the course of its presentation for governmental approval (597 - 598).

411 The defendants' pursuit of the Guyana project on behalf of Canaero extended up to 25 July 1966. Shortly prior to that, the defendants learned that the project would proceed. One of them wrote that 'he felt the job was a certainty for Canaero' (601). The defendants thereafter resigned and set up a new company which bid for the contract and was awarded the contract a few months later. The court noted that the strength of the defendants' company's bid 'owed much to [their] long involvement in the Guyana project on behalf of Canaero' (605).

Accepting the facts found by the trial judge, I find no obstructing considerations to the conclusion that [the defendants] continued, after their resignations, to be under a fiduciary duty to respect Canaero's priority as against them and their [new company], in seeking to capture the contract for the Guyana project. They entered the lists in the heat of the maturation of the project, known to them to be under active Government consideration when they resigned from Canaero and when they proposed to bid on behalf of [their new company] (619).

413 In relation to the nature and scope of fiduciary duty involved in that case, Laskin J said:

It follows that [the defendants] stood in a fiduciary relationship to Canaero, which in its generality betokens loyalty, good faith and avoidance of a conflict of duty and self-interest. Descending from the generality, the fiduciary relationship goes at least this far: a director or a senior officer ... is precluded from obtaining for himself, either secretly or without the approval of the company (which would have to be properly manifested upon full disclosure of the facts), any property or business advantage either belonging to the company or for which it has been negotiating; and especially is this so where the director or officer is a participant in the negotiations on behalf of the company (606 - 607).

414 In reviewing the law, Laskin J referred to the New York case of Burg v Horn [1967] USCA2 435; (1967) 380 F 2d 897. Laskin J said (612) that what was involved in the case of Burg v Horn was not the usurpation of an opportunity which the particular company was pursuing, but the 'more far-reaching question' of whether a director was obliged to offer to the company, before taking them for himself, opportunities in its line of business, of which he, rather than the company, became aware and which he pursued. Laskin J noted that the majority in Burg v Horn said that New York law required a determination, in each case, by 'considering the relationship between director and company, whether a duty to offer the company all opportunities within its line of business was fairly to be implied' (612 - 613).

415 In distinguishing Burg v Horn, and Peso Silver Mines Ltd v Cropper (1966) 58 DLR (2d) 1, Laskin J said:

What is before this Court is not a situation where various opportunities were offered to a company which was open to all of them, but rather a case where it had devoted itself to originating and bringing to fruition a particular business deal which was ultimately captured by former senior officers who had been in charge of the matter for the company. Since Canaero had been invited to make a proposal on the Guyana project, there is no basis for contending that it could not, in any event, have obtained the contract or that there was any unwillingness to deal with it (619).

In holding that on the facts found by the trial judge, there was a breach of fiduciary duty by [the defendants] which survived their resignations I am not to be taken as laying down any rule of liability to be read as if it were a statute. The general standards of loyalty, good faith and avoidance of a conflict of duty and self-interest to which the conduct of a director or senior officer must conform, must be tested in each case by many factors which it would be reckless to attempt to enumerate exhaustively. Among them are the factor of position or office held, the nature of the corporate opportunity, its ripeness, its specificness and the director's or managerial officer's relation to it, the amount of knowledge possessed, the circumstances in which it was obtained and whether it was special or, indeed, even private, the factor of time in the continuation of fiduciary duty where the alleged breach occurs after termination of the relationship with the company, and the circumstances under which the relationship was terminated, that is whether by retirement or resignation or discharge (620).

416 Canadian Aero was thus a case where the fiduciary agents were entrusted with and responsible for acquiring the benefit (the contract) for the principal, they acted for a lengthy period in pursuing the benefit for the principal, and the benefit was available to the principal in that the contract would in fact likely have been awarded to the principal. The circumstances there were not dissimilar to those in Cook v Deeks.

417 The principles referred to by Laskin J in Canadian Aero have been cited with approval in Green & Clara v Bestobell (6 - 7) (Burt CJ), (16 - 17) (Kennedy J); Mordecai v Mordecai (1988) 12 NSWLR 58, 65; Lord Corporation Pty Ltd v Green (1991) 22 NSWLR 532, 543 - 544; Pacifica Shipping Co Ltd v Andersen [1986] 2 NZLR 328, 334.

418 Green & Clara v Bestobell involved a senior manager in Victoria tendering for a contract with a third party in Western Australia in competition with his employer. It was a public tender and the manager, through a new company which he formed, became the successful tenderer. The manager's tender was put in at a time when he was still employed by the company as its Victorian manager. Unlike in Canadian Aero, the manager was not personally responsible for, and had not been involved on behalf of his employer in negotiating with the third party in relation to the proposed contract. When the manager tendered in his private capacity, it appears that he knew that his employer, through the Western Australian branch, 'would be likely' to tender for the job (8), or 'would be seeking' the job (19).

419 The manager was held to have breached his fiduciary duty by tendering in competition with his employer. It was held that he was liable to account in that he occupied a fiduciary position with respect to his employer, and by tendering against his employer, he placed himself in a position where his duty and interest conflicted or where there was a real sensible possibility that the two may conflict. It was unnecessary for the plaintiff employer to prove that the manager had made use of knowledge or information obtained in the course of his fiduciary position in pursuing the contract, or that he had obtained the benefit of the contract from the actual use of such knowledge or information: Green & Clara v Bestobell (5 - 7) (Burt CJ); see also (10 - 11) (Wickham J), (19 - 20) (Kennedy J).

420 I would note that a manager, in the position of the one in Green & Clara v Bestobell, would ordinarily be engaged by contract, an implied term of which would ordinarily be that the manager should perform faithfully the services which he agreed to provide, and should not endeavour to prejudice or impede his employer's pursuit of its business: Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359, 370, 372, 378; Boston Deep Sea Fishing & Ice Company v Ansell (1888) 39 Ch D 339, 362; Sanders v Parry [1967] 1 WLR 753, 765 - 766.

421 Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443 is another 'corporate opportunity' case. (The case is also reported in [1972] 2 All ER 162; the All England Report contains a more detailed outline of the facts.) There, a fiduciary (a managing director), whilst still engaged by his principal (the company of which he was managing director), pursued an opportunity which he knew was of interest to his principal and which was the very kind of opportunity he was engaged by his principal to pursue. Like Canadian Aero, the fiduciary was responsible for procuring the benefit (if possible) for the fiduciary. Unlike Canadian Aero, the fiduciary had had limited, and unsuccessful, contact on behalf of the principal with the third party, and the benefit was not in fact available to the principal in the sense that the third party was not interested in dealing with the principal. Like Green & Clara v Bestobell, the benefit was one which the principal wished to pursue as part of its business, to the knowledge of the agent.

422 The defendant had been employed as managing director of the plaintiff, partly because of his connections with public sector utilities. The plaintiff intended to develop contacts with, and seek work from, such public utilities. The defendant, in his capacity as managing director of the plaintiff, sought work from a particular gas board which was contemplating the construction of certain depots. The endeavour, initially, came to nothing because the gas board did not wish to deal with the plaintiff as an organisation. Several months later, however, a representative of the gas board contacted the defendant privately, first by telephone, and then at a meeting at the gas board's offices. Roskill J characterised these communications with the defendant managing director as revealing that the gas board were 'back ... into the market and were considering building [the] depots', and that the gas board regarded the implementation of the project as urgent. The gas board representative also described, in general terms, the size of the capital sum involved. The representative of the gas board also made it clear to the defendant that he did not want any trouble with the defendant's employers, ie the plaintiff, and that any discussions with the defendant had to be cleared with the plaintiff; the defendant said that he fully understood that (All ER 165). The defendant worked on documents over the weekend for the purposes of securing for himself the proposed project for the gas board, and sent them to the gas board shortly thereafter. The defendant then persuaded the plaintiff to relinquish him from his employment on the grounds, which were false, that he was a very sick man and needed to resign on that account as soon as possible.

423 Roskill J referred (449 - 450) to Lord Upjohn's speech in Phipps v Boardman. Roskill J said:

The first matter that has to be considered is whether or not the defendant was in a fiduciary relationship with his principals, the plaintiffs. [Counsel for the defendant] argued that he was not because he received this information which was communicated to him privately. With respect, I think that argument is wrong. The defendant had one capacity and one capacity only in which he was carrying on business at that time. That capacity was as managing director of the plaintiffs. Information which came to him while he was managing director and which was of concern to the plaintiffs and was relevant for the plaintiffs to know, was information which it was his duty to pass on to the plaintiffs because between himself and the plaintiffs a fiduciary relationship existed ...

It seems to me plain that throughout the whole of May, June and July 1969 the defendant was in a fiduciary relationship with the plaintiffs. From the time he embarked upon his course of dealing with the [gas board], irrespective of anything which he did or he said to [his employer], he embarked on a deliberate policy and course of conduct which put his personal interest as a potential contracting party with the [gas board] in direct conflict with his pre-existing and continuing duty as managing director of the plaintiffs. ...

...

Therefore, I feel impelled to the conclusion that when the defendant embarked on this course of conduct of getting information on June 13, using that information and preparing those documents over the weekend of June 14/15 and sending them off on June 17, he was guilty of putting himself into the position in which his duty to his employers, the plaintiffs, and his own private interests conflicted and conflicted grievously. There being the fiduciary relationship I have described, it seems to me plain that it was his duty once he got this information to pass it to his employers and not to guard it for his own personal purposes and profit. He put himself into the position when his duty and his interests conflicted. As Lord Upjohn put it in Phipps v Boardman [[1967] 2 AC 46, 127]: 'It is only at this stage that any question of accountability arises' (451 - 453).

424 In Queensland Mines Ltd v Hudson (1978) 52 ALJR 399, the facts were as follows. Mr Hudson was the chairman and managing director of a company known as AOE. AOE had an option over certain land in Queensland which was known to contain uranium. AOE lacked the finance to take up the option. Mr Hudson developed a relationship with a Mr Korman, who was at the time a leading figure in Australian business and financial circles who was eager to develop a mining industry. Mr Hudson and Mr Korman agreed to set up a joint venture company called Queensland Mines Ltd which would be held as to 51% by Mr Korman's company, and 49% by AOE. Queensland Mines was to be financed by a company within Mr Korman's group of companies. Mr Hudson was appointed as managing director of Queensland Mines. With the provision of finance by Mr Korman's company, Queensland Mines carried out drilling on the area in Queensland over which it had an option and also over another area containing uranium. By mid-1960 Queensland Mines had completed drilling in both areas but the company could do nothing further until a mining lease was taken up to exploit the uranium. At that stage, no further finance was forthcoming and Mr Korman, Mr Hudson and the other directors of Queensland Mines decided to 'mothball' the company, by which they meant to keep the company in being, but inactive until such time as somebody evinced an interest in the uranium tenements which it had drilled. Although Queensland Mines had originally been intended, by its incorporators, only to carry on business in uranium mining, it was used to develop Mr Korman's interests in iron ore mining and a potential opportunity in that regard was explored in New Zealand, although by May 1960 that idea had to be abandoned.

425 Pursuant to Mr Hudson's and Mr Korman's wish to expand their interests in mining, in August 1960 they approached the Tasmanian Government with a view to developing iron ore deposits in the area of the Savage River. Their negotiations with the Tasmanian Government were fruitful, and in January 1961 the Tasmanian Government advised that Mr Hudson and Mr Korman should apply for two licences, to cover coal as well as iron ore. The application was signed in Mr Hudson's name on 31 January 1961. In negotiations with the government concerning the licence application, Mr Hudson and Mr Korman, although intending to form a new company to exploit any licence, nevertheless found it convenient to use Queensland Mines for the time being. Queensland Mines paid for Mr Hudson's expenses, provided an indemnity in respect of the cost of drilling a specific hole at Savage River and Mr Hudson represented to the Tasmanian Government that Queensland Mines had prospected widely and had amassed very considerable knowledge and expertise. The judge found that in these negotiations, Mr Hudson used the resources and 'good name' of Queensland Mines to secure the licences from the Tasmanian Government.

426 The licences were issued on 23 February 1961. At that stage, however, Mr Korman's financial position had deteriorated and in early March 1961 he advised Mr Hudson that there was no possibility of him providing capital resources to exploit the licences. It was not suggested that AOE, or Queensland Mines itself, had, without the Korman provision, funds to develop the project. The Privy Council observed:

That source of finance having dried up, Mr Hudson was left with nothing save only his personal resources and a company which it had already been decided to 'mothball' (402).

427 On 15 March 1961, Mr Hudson resigned as managing director of Queensland Mines to allow him to devote all his energy to the iron ore venture. He continued to conduct correspondence in relation to the project under the name of Queensland Mines until 1 May 1961, but not thereafter. The Privy Council said:

From that date until success ultimately crowned his efforts he was on his own, running all the risks and meeting all the expense (402).

428 In 1963 he succeeded in interesting an American company in the project and ultimately a mining lease was granted to the American company. Mr Hudson's reward was a right under contract with the American company to receive royalties from the ore mined.

429 The Privy Council (403) agreed with the trial judge's conclusion that 'the opportunity to earn these royalties arose initially from the use made by Mr Hudson of his position as managing director of Queensland Mines'. (Mr Hudson remained a director of Queensland Mines until 1971.) Thus, unlike Industrial Development v Cooley, the fiduciary agent had used the name and resources of the principal directly in negotiating with the third party for the purposes of securing the asset, which was then obtained in the agent's name.

430 The Privy Council found that by February 1962, including by reason of a board meeting on 13 February 1962, 'the board of Queensland Mines, fully informed as to all relevant facts, had reached a firm decision to renounce all interest in the exploitation of the licence' and had 'assented to Mr Hudson "going it alone", ie at his own risk and expense and for his own benefit' (403). The Privy Council said:

The position after 13 February can be put in either of two ways. It can be said that from that date the venture based on the licences was 'outside the scope of the trust and outside the scope of the agency' created by the relationship of director and company - a relationship which continued to exist between Mr Hudson and Queensland Mines. Or it can be said that on that date Queensland Mines gave their fully informed consent to pursue the matter no further and to leave Mr Hudson to do what he wished or could with the licences. In their Lordships' opinion it does not matter how it is put. Liability to account must, as Lord Cohen said in Phipps v Boardman, ... 'depend on the facts of the case'. And the facts of this case are that, with the fully informed consent of the Queensland Mines board, Mr Hudson was left on his own, for better or for worse, with the Tasmanian licences ... (403 - 404).

431 In Peso Silver Mines Ltd v Cropper, the defendant was the managing director of the plaintiff mining company. The plaintiff had a number of mineral tenements upon which it was doing field work and exploration. In the course of its business, it received typically two or three offers each week to acquire mining tenements. It had limited financial resources and the acquisition of additional tenements would have increased expenditures and further depleted its cash resources. The company neither needed nor wanted any more tenements at the relevant time. In 1962 a prospector offered to sell certain tenement claims to the company. The offer was considered by the full board of directors of the plaintiff company in March 1962 and was rejected. It was found as a fact that the decision to reject the acquisition was 'an honest and considered decision of the [company's] board of directors as a whole and done in the best of faith and solely in the interest of the [company], and not from any personal or ulterior motive on the part of any director, including the [defendant]' (3).

432 After the plaintiff company had rejected the prospector's offer, a consultant geologist who was retained by the plaintiff company from time to time suggested to the defendant the possibility of a group being formed to acquire the prospector's claims. The defendant then became part of a group which incorporated a new company in May 1962 to acquire the prospector's claims. The defendant remained on the board of the plaintiff company. Some time after this, new directors were appointed to the board of the plaintiff company and there was a falling out amongst its directors. The plaintiff company then commenced proceedings against the defendant seeking a declaration that the defendant's shares in the new company were held on constructive trust for the plaintiff, and an order that the defendant deliver the shares to the plaintiff or account for the proceeds thereof.

433 After referring to various cases including, relevantly, Regal (Hastings) Ltd v Gulliver, the court said:

On the facts of the case at bar I find it impossible to say that the [defendant] obtained the interests he holds ... by reason of the fact that he was a director of the [plaintiff] and in the course of the execution of that office.

When [the prospector] ... offered his claims to the [company] it was the duty of the [defendant] as director to take part in the decision of the board as to whether that offer should be accepted or rejected. At that point he stood in a fiduciary relationship to the [company]. There are affirmative findings of fact that he and his co-directors acted in good faith, solely in the interests of the [company] and with sound business reasons in rejecting the offer. There is no suggestion in the evidence that the offer to the [company] was accompanied by any confidential information unavailable to any prospective purchaser or that the [defendant] as director had access to any such information by reason of his office. When, later, [the consultant] approached the [defendant] it was not in his capacity as a director ... but as an individual member of the public whom [the consultant] was seeking to interest as a co-adventurer (8) (emphasis added).

434 In Peso, unlike in Canadian Aero, Green & Clara v Bestobell and Industrial Development v Cooley, the principal was not, as part of the pursuit of its business, interested in or seeking to develop the proposal at any time. Unlike in Industrial Development v Cooley, the proposal was available to the principal and, indeed, had been presented to the principal and then formally considered and rejected by the principal.

435 A decision on which the appellants particularly relied was the Australian case of S E A Food International Pty Ltd v Lam (1998) 16 ACLC 552.

436 In S E A Food v Lam, Mr Teh controlled the plaintiff company, which carried on wholesale fish processing and exporting. Mr Teh was looking to expand the business of the company with new premises in the Redcliffe area. In May 1994, the defendant, Mr Lam, indicated some interest in investing in the company. Before negotiations in the final nature of the investment were finalised, Mr Lam paid $1 million to the company. Mr Lam regarded the payment as an interim loan pending, in effect, completion of due diligence. Mr Teh treated it as part of the proposed 'investment structure'. By August 1994, the negotiations had soured and Mr Lam sought the recovery of the money he had paid to the company. Shortly after that, Mr Lam had contact with the company's general manager (Mr Bostock). Mr Bostock referred Mr Lam to a seafood market in Redcliffe, the business and premises of which were for sale. Mr Bostock had previously informed Mr Teh of this business, but Mr Teh had shown no interest. In late September 1994, Mr Lam had, in his own right, entered into negotiations to buy the seafood market business and premises in Redcliffe. He signed, on behalf of a company he controlled (Huxham), the purchase contracts on 10 October 1994.

437 Mr Teh learned then of Mr Lam's proposal to buy the seafood market in Redcliffe. By 12 October 1994, Mr Teh and Mr Lam had resolved their differences. It was agreed that Mr Lam, through his company Huxham, would buy the Redcliffe seafood market premises and lease them to the plaintiff company, and the vendors of the seafood market would, in effect, swap locations and occupy the plaintiff's then premises. The previous day, 11 October 1994, Mr Lam and Mr Bostock, through their respective companies, took up shares in the plaintiff company and were appointed directors of the plaintiff company.

438 A few days later, however, the previous acrimony flared up again, and Mr Lam's company, Huxham, refused to lease the Redcliffe premises to the plaintiff. Instead, Huxham carried on a seafood business at the Redcliffe premises itself, and Mr Bostock acted as its general manager. The plaintiff company claimed, inter alia, that Mr Lam had breached his fiduciary duty to the plaintiff in that he preferred his own interests and those of his own company Huxham to the interests of the plaintiff by reneging on the agreement to lease, and by causing Huxham to carry on business in competition with the plaintiff.

439 Cooper J dismissed the action. His Honour said:

What is to be drawn from the authorities is that a director will act in breach of his fiduciary obligations to a company (the scope of which will vary in the circumstances of each particular case) if he or she takes up an opportunity for profit where there is a sufficient temporal and causal connection between the obligations and the opportunity. What is a sufficient connection will depend, in any particular case, upon a number of factors, including the circumstances in which the opportunity arises and the nature of it and the nature and extent of the company's operations and anticipated future operations.

... it is necessary at the outset to determine the scope of the fiduciary obligations owed by the director to the company in the circumstances of the particular case and to identify the conduct or failure to act, which is said to amount to a failure to discharge those obligations. ... Having done so, the question becomes whether there is a sufficient temporal and causal connection in the sense variously expressed in the authorities ... between the fiduciary obligation or obligations and the opportunity for profit which has been or is sought to be taken up by the director (557).

440 His Honour found (558) that the relevant opportunity to profit had no causal connection with Mr Lam's fiduciary duties to the plaintiff in that:

(a) the opportunity did not arise out of or become available to Mr Lam by reason of his position as a director of the plaintiff company, but instead arose prior to his appointment on 11 October 1994, particularly having regard to the fact that he had entered into the purchase contracts for the purchase of the Redcliffe business and premises on 10 October 1994;

(b) the Redcliffe business and premises acquired by Huxham was not an opportunity that the plaintiff had actively been pursuing or which was maturing in the hands of the plaintiff. Also, Mr Teh had thought it was too dear - in that sense, although Mr Teh's attitude was not relevant as showing that the plaintiff could not or would not have taken up the opportunity, it was relevant as tending to indicate that it did not 'belong' to the plaintiff; it was an opportunity which arose and became available for Mr Lam to take up, and for all practical purposes was taken up, prior to Mr Lam becoming a director of the plaintiff; and

(c) at the time of Mr Lam's appointment as a director of the plaintiff on 11 October 1994, each director and shareholder of the plaintiff knew that Mr Lam was a director of Huxham and that it had signed the contracts with respect to the acquisition of the Redcliffe business and premises. Any obligation on Huxham to grant the lease to the plaintiff was in contract (or estoppel), and it was not within the scope of Mr Lam's appointment to the board of the plaintiff to secure for the plaintiff the lease from Huxham.

S E A Food v Lam was not a case in which conflict of interest was argued: (558) (Cooper J).

441 Before leaving this review of the authorities, I would mention two final matters. First, as a general observation, the 'corporate opportunity' cases reflect the application of 'well developed principles, both specific and flexible in character' which 'turn upon close analysis of the facts of the particular case' (adopting, albeit from a discussion on unconscionable conduct, the language of Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ in Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315 [20], [23]).

442 As McLure P has observed, the parties in this appeal did not contend for a 'business opportunity doctrine' different or separate from the conflict and profit rules.

443 Secondly, in some cases, eg Pacifica Shipping v Andersen (340), the determination of the liability of the fiduciary has involved treating information acquired by the director or officer of the company as 'property' of the company, ie an asset of the company, which has been misappropriated.

444 I would respectfully consider that it is unnecessary, and unhelpful, for the purpose of analysing fiduciary liability, to treat information as property in the conventional sense. The difficulties with so treating it were considered by Lord Upjohn in Boardman v Phipps (127 - 128). Treating information as an asset of the company for these purposes may skew the search for the 'necessary connection', which is identified by asking whether the profit was obtained 'by reason of [the defendant's] fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position': Maguire v Makaronis (468).

445 The accepted fiduciary relationships include director and company, and principal and agent: Hospital Products v United States Surgical (96 - 97).

446 The directors of the company control its assets - they have the power to decide what is done with them and who may benefit from them: Woolworths Ltd v Kelly (1991) 22 NSWLR 189, 229. A company is entitled to the unbiased and independent judgment of each of its directors: R v Byrnes [1995] HCA 1; (1995) 183 CLR 501, 516 - 517.

447 The general duty of the director is to act in the best interests of the company and for proper purposes: Mills v Mills [1938] HCA 4; (1938) 60 CLR 150, 163 - 165, 177, 185, 187 - 188; Angas Law Services Pty Ltd (in liq) v Carabelas [2005] HCA 23; (2005) 226 CLR 507 [67]; Permanent Building Society (in liq) v McGee (1993) 11 ACSR 260, 287; The Bell Group Ltd (in Liq) v Westpac Banking Corporation [2008] WASC 239; 225 FLR 1 [4553].

448 See also Lord Cranworth's observations in Aberdeen Railway Co v Blaikie Bros (1854) 1 Macq 461, 471, adopted by Griffith CJ in Ford v Andrews [1916] HCA 29; (1916) 21 CLR 317, 322; Consul Developments (393 - 394) (Gibbs J); and Green & Clara v Bestobell (6) (Burt CJ), (11) (Wickham J).

449 It is unnecessary for present purposes to decide whether the director's duty to act for the benefit of the company and for proper purposes is in substance to be regarded as a proscriptive fiduciary duty, or a prescriptive duty in the exercise of fiduciary power: cf the discussion by Owen J in Bell Group v Westpac [4539] - [4582] and see also Heydon J, writing ex-curially, 'Are the Duties of Company Directors to Exercise Care and Skill Fiduciary', in Degeling & Edelman, Equity in Commercial Law 185, 226 - 234.

450 In considering the nature and scope of the duties owed by a director to the company, it is necessary, in my view, to consider substance over form. Regard should be had to the functions undertaken by the director, and entrusted to him or her, rather than to whether the director, as a matter of nomenclature, is designated 'executive' or 'non-executive'.

451 Ipp J, in Vrisakis v Australian Securities Commission (1993) 9 WAR 390, 452 referred to the discussion by Rogers CJ in Comm Div in AWA Ltd v Daniels (1992) 7 ACSC 395, 867 as to the division of functions between non-executive directors and the chief executive officer or managing director. He said:

Rogers CJ in Comm Div (at 867) also discussed the division of functions between non-executive directors and the chief executive officer or managing director. He said:

'In contrast to the managing director, non-executive directors are not bound to give continuous attention to the affairs of the corporation. Their duties are of an intermittent nature to be performed at periodic board meetings, and at meetings of any committee of the board upon which the director happens to be placed. Notwithstanding a small number of professional company directors there is no objective standard of the reasonably competent company director to which they may aspire. The very diversity of companies and the variety of business endeavours do not allow of a uniform standard.'

...

It is to be emphasised, however, that these remarks are statements of broad principle alone and act merely as signposts in the search for the determination of the ambit of the duties imposed on a particular director and the particular standard of care required to be met. These matters may be influenced by considerations such as whether a director is an executive or a non-executive director, but are always dependent on the particular circumstances.

452 In discussing the particular role of the appellant in that case, who was a non-executive director, Ipp J said (454) that whilst he was a 'non-executive' director in the sense that he was not given responsibility for any part of the day to day operations of the company, he could nevertheless not be regarded as an 'ordinary' non-executive director.

453 The role and functions of a managing director were described by Ipp J in Entwells Pty Ltd v National & General Insurance Co Ltd (1991) 5 ACSR 424, 427:

The task of a managing director is to deal with every day matters, to supervise the daily running of the company, to supervise the other managers and indeed, generally, be in charge of the business of the company: see Principles of Company Law, 5th ed, Ford, para 1425. It is a characteristic of the power of a managing director that he is given powers of day to day management which are exercisable without reference to the board: Pennington's Company Law, 5th ed, 657.

In many instances a company does not formally appoint a managing director, but a director (with the company's approval) may assume the mantle of a managing director and carry out the functions of a managing director: Freeman & Lockyet v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480.

A company may appoint more than one managing director and more than one director may, with the company's approval, assume the powers of a managing director. It is a question of fact whether a person has, with the approval of the company, assumed the powers of a managing director.

454 Where a company receives an offer from a party to acquire all the issued shares of the company, the directors are 'entitled to offer advice, and bound to supply information' to the shareholders: Howard Smith Ltd v Ampol Ltd [1974] UKPC 3; [1974] AC 821, 838; Darvall v North Sydney Brick & Tile Co Ltd (1989) 16 NSWLR 260, 326.

Breach of fiduciary duty based on judge's findings of fact

455 In considering the question of breach of duty based on the judge's findings of fact, insofar as (in my view) they have not been successfully challenged in this appeal, it is convenient, as a preliminary matter, to record some of the appellants' broad criticisms in relation to the generalised finding of a 'diversion' of a corporate opportunity. Whilst in my view, and as discussed below, a number of the appellants' criticisms are valid, they do not lead me to conclude that the judge ultimately erred in finding a breach of fiduciary duty.

Observations on the characterisation of the breach as a diversion of corporate opportunity

456 As noted earlier, as a general conclusion, the judge found Mr Streeter and Mr Cooper liable to account for diverting a corporate opportunity, in the form of the ANPC proposal, away from WAE and to themselves (and to Jungle Creek). At this level of generality, the appellants, in substance, contend that the judge was in error because the ANPC proposal was never in fact available to WAE, and it did not fall within the scope of Mr Streeter's and Mr Cooper's duties as directors of WAE to acquire that opportunity for WAE. On the contrary, they contend that, having regard to the circumstances and nature of their appointment as directors of WAE, and the circumstances of the company in December 1999, opportunities of the kind presented to WAE were expressly recognised by WAE as being available for pursuit by Mr Streeter in his personal capacity.

457 In this context, it is to be noted that the judge in effect held that if the opportunity for the promotion of the ANPC proposal had come to Mr Streeter and Mr Cooper independently of Mr Brailey or of their roles as directors of WAE, they would not have been in breach of fiduciary duty (reasons [281]).

458 In their attack on the general finding that Mr Streeter and Mr Cooper are liable for diverting the corporate opportunity presented by ANPC, the appellants, in my view correctly, contend that it is necessary to identify precisely, inter alia, the nature of the opportunity said to have been diverted, and the nature of the conduct said to constitute the diversion. They contend, in effect, that in determining breach of fiduciary duty, the judge has at various points misconceived the nature of the opportunity presented by ANPC and has mischaracterised the commercial position of the parties and their conduct in relation to that opportunity. I accept those criticisms having regard to the following matters and to the extent referred to below.

459 First, the judge found that ANPC presented WAE with the commercial opportunity 'to secure interests in sufficiently attractive nickel prospects to justify a successful IPO and a public listing' of WAE (reasons [282], and see also reasons [45] and [75] in this context).

460 He also found, in effect, in the context in which this opportunity was presented, that the expectation of Mr Brailey was that Mr Streeter, in his capacity as investor, would provide the financial support to WAE to enable WAE to be brought to a float on the Stock Exchange, and thereby to enable WAE to acquire and develop the suite of ANPC nickel tenements (reasons [2], [149], [316]).

461 Secondly, the judge found, in effect, that on the first occasion that WAE sought to pursue this commercial opportunity presented to it (8 December 1999), its approach was rejected by ANPC. The judge found, in effect, that the commercial opportunity which he found had been presented by ANPC, ie the opportunity for WAE to acquire the ANPC nickel interests and use them to conduct an IPO and float on the Stock Exchange, ceased to be an opportunity for WAE on and from 10 December 1999. Moreover, his Honour also found that even if WAE had tidied up its share structure and had received (as he found it would have) sufficient operating capital from its other shareholders to effectuate a successful IPO and listing of WAE, ANPC would still not have transferred the ANPC tenements to WAE and allowed it to be the listing vehicle for the raising of exploration capital. (See judge's reasons [252], [258], [283(a)], [430], [458]).

462 Thirdly, the judge, with respect, incorrectly directly assimilated the opportunity he had identified, viz the opportunity for WAE to acquire sufficiently attractive nickel tenements to justify an IPO and application for its listing on the Stock Exchange, with a different opportunity, namely an opportunity 'to float a new company' and for that purpose to be an investor of seed capital (reasons [309], [322], [430], [458]).

463 Fourthly, insofar as the judge found that the 'opportunity to take up the ANPC nickel prospects [ie tenements] ... was not offered [by Mr Streeter] to WAE' (reasons [322]), the finding is, in my opinion, in error. Mr Brailey knew of the ANPC proposal and referred it to Mr Streeter with a view to it being examined and, if thought attractive, promoted by or on behalf of WAE. It was subsequently Mr Streeter and Mr Cooper who caused WAE to send the offer of 8 December 1999 under which WAE offered to take up the ANPC nickel prospects. To the extent that there was ever an opportunity for WAE to acquire the ANPC nickel tenements and use them to list on the Stock Exchange, the directors of WAE recognised it and pursued it, albeit to an unsuccessful conclusion.

464 Fifthly, insofar as his Honour found that Mr Streeter and Mr Cooper 'took the decision to incorporate WANL, float it and place the [ANPC] nickel tenements with it' (reasons [314]) and had a 'strategy of putting the [ANPC] nickel prospects into the new company' (reasons [318]), his Honour, in my view, has, with respect, mischaracterised the commercial position of the various parties. The ANPC nickel tenements were not under the control of Mr Streeter to 'place' into a listed vehicle. Nor was he or Mr Cooper capable of 'putting' the tenements into a new company. They were under the control of the ANPC proponents, who wished to transfer the nickel tenements to a company which would list and raise capital to carry out exploration expenditure on the tenements. ANPC was not, as his Honour found, interested in allowing WAE to take up the nickel tenements for that purpose. ANPC wanted a new company to be formed for that purpose, and wanted Mr Streeter to fund the new company up to the point of, and upon, its listing, and to be on its board. Mr Streeter was willing to do that in return for the right to acquire shares in the new company (ultimately WANL) at a discount, and certain options. Whilst Mr Streeter became an incorporator and director of WANL, that company being the new corporate entity acceptable to ANPC as the vehicle to raise exploration capital for the ANPC nickel tenements, Mr Streeter had no ability (let alone a fiduciary power as a director of WAE) to direct ANPC as to the vehicle to be used to acquire and develop the ANPC nickel tenements.

465 The recognition of the above difficulties with the judge's reasons does not, however, lead to the conclusion that the judge was wrong in finding that Mr Streeter and Mr Cooper breached their fiduciary duties to WAE. In my view, a finding of breach remains supportable on the basis that the appellants were liable under a combination of the conflict rule and the profit rule for the reasons set out below. In this regard, it is, I think, of assistance in the analysis to focus on the precise circumstances from which the liability may arise, rather than by employing a descriptor such as diversion of corporate opportunity.

466 At the time that each of Mr Brailey, Mr Streeter and Mr Cooper first became aware of the existence of the ANPC nickel tenements, WAE was not in a position to acquire them for cash. WAE had no available assets and was entirely dependent upon funding from Mr Streeter for its (limited) day-to-day activities. Even if WAE had had the cash available to buy the tenements, however, the ANPC personnel were not in the business of simply selling the tenements. The purpose of the ANPC group in assembling the tenements, and seeking to elicit interest in them, was to attract exploration capital so that the tenements could be investigated and the ANPC personnel could be assured of gainful employment in that regard.

467 Accordingly, in late 1999/early 2000, even if WAE had the cash and the interest to acquire the ANPC tenements, it could not have done so except as part of an arrangement, acceptable to ANPC, under which WAE floated on the Stock Exchange and raised exploration capital for the development of the tenements. With respect to that potential arrangement, it was not possible unless WAE obtained interim funding to meet the expenses associated with a float.

468 It was in this context, and after a period of substantial dormancy in its commercial operations, that WAE became aware, through Mr Brailey and then through Mr Streeter and Mr Cooper, of the existence and potential benefits of the ANPC nickel tenements. Mr Brailey, and Mr Streeter and Mr Cooper, each realised that the ANPC tenements presented a suite of assets of likely sufficient interest to the market that, if they could be acquired, could provide the basis for a potential float of WAE on the Stock Exchange.

469 Mr Streeter was expected to have a personal interest, as an investor, in the provision of seed capital to any float of WAE. The directors of WAE would have been aware that WAE had a wasting asset which required expenditure to maintain it, that the company had lost its capital and that there was a creditor (Jungle Creek) whose continued forbearance was not necessarily unlimited. In Mr Streeter's personal capacity, as an investor in and creditor of WAE, the obverse was the case. He was a shareholder and (through Jungle Creek) a creditor of a company which had lost its capital and had a wasting asset, and from which, realistically, there was no, or minimal, foreseeable return. There was, accordingly, the potential for common benefit if WAE acquired the nickel tenements and used them to float on the Stock Exchange.

470 On 8 December 1999, WAE, through Mr Streeter and Mr Cooper, proposed that WAE would acquire the ANPC tenements for the purpose of floating WAE on the Stock Exchange. The proposal was expressly conditional upon WAE reconstructing its capital, and, moreover, was evidently dependent upon WAE raising its own 'seed' capital sufficient to finance the costs associated with a listing. Had ANPC been agreeable to that course, WAE's directors would have needed to address the issue of capital reconstruction, the raising of the necessary 'seed' capital, and the issue that would arise on Mr Streeter introducing further capital and taking his interest in WAE beyond the takeover threshold of 20%.

471 As it transpired, WAE's offer, made by Mr Streeter and Mr Cooper, was rejected on 10 December 1999 by ANPC. The ANPC representatives said, in effect, that they were not interested in using WAE as the vehicle for raising exploration capital and that they would wish to set up a new company for that purpose.

472 The ANPC counter-proposal, the same day, proposed that Mr Streeter provide seed capital necessary to fund an IPO for the listing of the new company, and subscribe further capital on the listing. It also proposed that WAE agree to sell to the new company its interest in the Cue tenements, in consideration for the new company issuing 400,000 vendor shares to WAE, and that the new company would acquire the issued capital of WAE in exchange for the issue of a further 200,000 shares in the new company. Mr Streeter recognised the importance of the vending of Cue into the float in order to at least extract some value for Cue and to stem the further expenditure otherwise needed to maintain the asset (Streeter statement exhibit 232, pars 256 - 259).

473 Although the details of the transaction evolved over time, the substantive components of ANPC's counter-offer remained the same in the course of the negotiations leading up to the float, viz:

(a) Mr Streeter contributing substantial seed capital (originally $250,000 and ultimately $300,000) in relation to the funding of the upfront costs associated with a float, in consideration for which he would receive on the float shares at a discount (ultimately 4.5 million shares, ie $900,000 worth of 20 cent shares discounted to 6.6 cents per share), and options;

(b) Mr Streeter subscribing substantial capital on the float (ultimately $500,000 for 2.5 million 20 cent shares); and

(c) WAE receiving a parcel of shares on the float (the models used in relation to the negotiations show ranges from 600,000 to 1.1 million shares to be issued to WAE - ultimately WAE received 350,000 shares for 70% of Cue and Jungle Creek received 150,000 shares for 30% of Cue).

474 In relation to Mr Streeter's capacity as an investor in the new company, it is only the contribution of seed capital for which Mr Streeter relevantly received preferential treatment on the float of WANL.

475 No claim is made that Mr Streeter's subscription for 2.5 million 20 cent shares on the float at the capital cost of $500,000 is relevantly a benefit for which he must account, nor is it alleged that all his subsequent investments of capital in WANL represent benefits for which he must account to WAE (see reasons [120]).

Detailed reasoning on breach based on judge's findings of fact

476 In my opinion, Mr Streeter and Mr Cooper were liable (subject to the question of laches) to account to WAE, under the twin themes referred to by Deane J in Chan v Zacharia for benefits obtained by them on the float of WANL. My reasons are as follows. They are based on the judge's findings of fact to the extent to which I find that they have not been successfully challenged in this appeal. They broadly reflect what I understood to be the minimum basis upon which the respondent in effect contended, at the hearing of the appeal, that the judge's findings on breach may be supported.

477 First, Mr Streeter and Mr Cooper, in their capacity as directors of WAE, and on behalf of WAE, conveyed to ANPC the 'offer' dated 8 December 1999. The 'offer' was really a proposal - it was not capable of immediate acceptance to form a contract. I use the term 'offer' in that sense - its significance lies in the capacity in which Mr Streeter caused the 'offer' to be made, and not whether it constituted in a contractual sense an offer capable of acceptance. The offer contained, and conveyed, information as to the share capital of WAE, proposals for arrangements intended to be made within WAE for the reconstruction of its share capital, and the liabilities of WAE, relevantly, the debt to Jungle Creek. The offer was preceded by discussions with the ANPC representatives on 7 December 1999 in which Mr Streeter communicated to ANPC the assets of WAE, being the 70% interest in the Cue tenements, and in which he indicated in effect that the Cue tenements of WAE could be used, together with the ANPC tenements, to enhance the attractiveness of a float. The offer also conveyed to ANPC the number of shares which WAE proposed to issue to the vendors of the ANPC tenements, to the drilling operators in relation to the drilling of the tenements, and to the seed capitalists.

478 Secondly, whilst the offer was rejected by ANPC on 10 December 1999 because WAE was regarded as an unsuitable investment vehicle, the rejection was conveyed to Mr Streeter and Mr Cooper in their capacities as directors of WAE, and the communicated rejection was received by them on behalf of WAE.

479 Thirdly, although ANPC's communication of 10 December 1999 in response to WAE's offer contained a proposal to Mr Streeter to invest seed and other capital in his personal capacity, it also involved a counter-offer (again, in the sense of a counter-proposal) to Mr Streeter and Mr Cooper in their capacity as directors of WAE, and they received the counter-offer on behalf of WAE. The counter-offer involved a proposal for the sale of the Cue tenements. In other words, although Cue was not an essential or even desirable component of their commercial scheme, the ANPC proponents nevertheless incorporated the Cue tenements into their first substantive response to WAE's offer. Thus, although the ANPC proponents in this communication rejected WAE as the purchaser of the ANPC tenements, and proposed that Mr Streeter personally fund the seed capital for a new company to be listed, insofar as they proposed the purchase by the new company of the Cue tenements, they made a counter-offer directed to Mr Streeter and Mr Cooper in their capacity as directors of WAE.

480 ANPC also incorporated into the counter-offer an offer to acquire WAE's share capital which, it was to be expected, WAE's directors would consider and make appropriate recommendations about to the shareholders of WAE. That aspect of the 10 December 1999 communication was also made to Mr Streeter and Mr Cooper in their capacity as directors of WAE.

481 The proposal in the 10 December 1999 communication to Mr Streeter in his personal capacity was accordingly, in my view, inseparable from the part of the communication to WAE rejecting WAE's offer of 8 December 1999, and the part of the communication containing a counter-offer to WAE. The communication of 10 December 1999 was the 'result' (reasons [256]) of the meeting at which WAE's offer of 8 December 1999 had been rejected. It was an integrated proposal for one transaction by which Mr Streeter in his personal capacity, and WAE, would acquire shares in the new entity on its listing.

482 Fifthly, the ANPC counter-offer continued to be developed between the ANPC proponents and Mr Streeter and Mr Cooper over the next few months, on the basis that the Cue tenements would form part of the assets of the float. For this purpose, Mr Wolzak had been asked by, or at the direction of, Mr Streeter on behalf of WAE to obtain tenement information on Cue for Mr Hanna, for which work Mr Wolzak charged WAE a fee. Throughout this period, Mr Streeter and Mr Cooper continued to act in a representative capacity on behalf of WAE as well as in their personal capacities (in the case of Mr Streeter as a potential investor and in the case of Mr Cooper as Mr Streeter's adviser). They also continued to consider, as reflected in the 11 January 2000 document, whether to recommend to WAE's shareholders that they transfer all their shares in WAE to WANL. They also brought into the transaction the 30% interest in Cue, in respect of which, if they were to act at all, it was as directors and on behalf of WAE.

483 Thus, in considering the subject matter over which the fiduciary obligations of Mr Streeter and Mr Cooper extended:

(a) Mr Streeter and Mr Cooper were aware that the ANPC personnel had been referred to them by Mr Brailey as a director of WAE (reasons [287], [315]), and, on 6, 7 and 8 December 1999, acted at least in part in their capacity as directors of WAE in their dealings with ANPC;

(b) Mr Streeter and Mr Cooper had, by their conduct on 7 and 8 December 1999, embarked on a course of dealing on behalf of WAE which was intended to exploit, for the benefit of WAE, the proposal involving the ANPC nickel tenements;

(c) Mr Streeter and Mr Cooper operated as the executive directors of WAE, notwithstanding that, as a matter of title, they were designated non-executive directors;

(d) the proposed float of WANL concerned the business of WAE, as it involved the use of WAE's only asset as part of the float from which exploration capital would be raised for WANL, and the possible acquisition of all of WAE's share capital. For reasons discussed later, whilst I accept that WANL's acquisition of WAE's 70% interest in Cue was not 'an essential part' of ANPC's proposal to Mr Streeter in his personal capacity to invest seed capital in return for discounted shares and options, it was and remained, throughout all the dealings between the appellants and the ANPC proponents, an 'actual part' of the overall arrangement under which Mr Streeter obtained shares at a discount in WANL (the words quoted appear in the judge's reasons [284]).

484 Sixthly, as, in substance, the appellants were executive directors who had made an offer on behalf of WAE, and who had received a counter-offer involving the application of WAE's only asset in a transaction in which they were personally interested, they were not in a position to give undivided loyalty to WAE in the pursuit and development of the transaction. It is not necessary to add, as the judge did in my view wrongly, that Mr Streeter (and Mr Cooper) in effect caused the sale of the 70% interest in Cue for the improper purpose of personal gain in achieving for Mr Streeter a 20% stake in WANL, in the sense that but for the pursuit of personal gain, they would not have exercised their fiduciary powers to sell the asset: Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285, 294. There was nothing to indicate that Mr Streeter could not have acquired a 20% stake in WANL without recourse to the sale of the Cue tenements. It is, nevertheless, sufficient that there be a conflict of interest. In my view there was.

485 I recognise that there was a significant degree of commonality of interest between the personal interests of Mr Streeter, and the interests of WAE, in the sale of Cue to WANL. WAE had an interest in extracting as high a value for Cue as it could, and Mr Streeter, who had an exposure to WAE both as an investor as well as a creditor, also had an interest in WAE achieving a good outcome on the sale of its only asset. Nevertheless, their interests were not coterminous. The only consideration capable of moving from WANL was in the form of an allotment of its shares upon its listing. The judge found that the value attributed to Cue in the transaction reflected 'a massaging' of the values, to give Mr Streeter his desired 20% equity in WANL (reasons [201]), and that 'it was of little importance what the true value of the Cue tenements were' (reasons [202]). The finding that there was a 'massaging' of the value of Cue over the course of negotiations is correct insofar as it is a finding not as to purpose, but as to the process by which the value for the Cue asset ultimately came to be assigned in the transaction. In that regard, it reflects the inherent conflict in Mr Streeter's position at the time. Once he had embarked on the sale of Cue his duty to WAE (and Mr Cooper's) in the sale of WAE's only asset, was to secure the highest allotment of shares possible in exchange for the asset. His personal interest (and Mr Cooper's as Mr Streeter's adviser) was to obtain the best preferential treatment he could, in terms of the issue of shares at a discount price and options, for the provision of seed capital. There was competition, or at least a real substantial risk of competition between the two as there was, commercially, a limit to which WANL could issue shares to vendors of assets (ie to WAE for Cue) and give preferential treatment to seed capitalists (ie Mr Streeter), without compromising the overall attractiveness of the float to the market (Streeter ts 1173 - 1175, exhibit 57).

486 When negotiations for the sale of Cue were seen, as they were, through the prism of Mr Streeter's proposed investment in WANL, in my view Mr Streeter and Mr Cooper had a 'bias against the fair discharge of [their] duty' to WAE (adopting and adapting the words of Dixon J in Birtchnell v Equity Trustees (417)).

487 Seventhly, even assuming, for present purposes, that WAE itself had neither the present means, nor any realistic prospect, of raising seed capital to invest in the WANL float (save through Mr Streeter who had no obligation to fund), and even assuming that Mr Streeter and Mr Cooper believed they were acting in the best interests of WAE in realising value in the Cue tenements by vending them into the WANL float, and even accepting, as the judge found (reasons [202]), that WAE likely obtained a better price for Cue than could otherwise have been expected, those matters did not prevent Mr Streeter and Mr Cooper, as directors of WAE, from being accountable as fiduciaries if otherwise there was sufficient connection between the use of their fiduciary positions and the profit in question: Warman v Dwyer (557 - 558); Regal (Hastings) Ltd v Gulliver; Boardman v Phipps.

488 For these reasons, in my view, the twin themes referred to by Deane J in Chan v Zacharia overlap and combine to make the appellants liable to account (subject to the defence of laches). Mr Streeter and Mr Cooper may be said to have obtained a benefit 'when there was a conflict or possible conflict between [their] fiduciary duty and ... personal interest': Warman v Dwyer (557). Also, in the circumstances outlined, it may be said that a benefit was obtained 'by reason of' their fiduciary position: Warman v Dwyer (557 - 558); Maguire v Makaronis (468), and that the transaction was one 'concerning' the business of WAE (Aas v Benham; Birtchnell v Equity Trustees (Isaacs J)). They did not shed their representative capacity (which commenced with the discussions on 6 and 7 December, and included the offer of 8 December 1999) throughout the course of their dealings with ANPC and WANL. They never acted wholly in a personal capacity.

489 In Warman v Dwyer (565), the High Court said:

In determining the proper basis for an account of profits, it is of first importance in this, as in other cases, to ascertain precisely what it was that was acquired in consequence of the fiduciary's breach of duty. And, in some situations, it may also be relevant to ascertain what was lost by the plaintiff.

490 In my view, properly characterised, the benefit relevantly obtained comprised at least the shares in WANL issued at a discount, and the attendant options exercisable at 20 cents, in consideration for the subscription of seed capital, and the 150,000 shares issued to Jungle Creek for the 30% interest in Cue. Further, his Honour's finding (reasons [292]) that the 400,000 40 cent options were issued to Mr Streeter 'in return for his contribution of seed capital' is not challenged (subject to the general arguments as to laches and relief referred to later). His Honour also found that the 400,000 40 cent options issued to Mr Cooper (reasons [293], [498]) were obtained in breach of fiduciary duty and there was no contention in this appeal by the appellants that those securities stand in a different position (although again, the appellants maintain arguments concerning laches and relief).

Detailed review of grounds of appeal on breach of duty

491 There are 22 grounds of appeal, many containing several subparagraphs. The grounds, as developed in the written submissions and oral arguments, covered, in various ways and permutations, the matters to which I have referred, in the section of these reasons headed 'Breach of fiduciary duty based on judge's findings of fact'. I will not repeat those matters here, although I will set out, where appropriate, some amplification of the views expressed.

492 It is convenient to attempt to group the grounds into a number of categories to record my views on the substance of the points made, with particular reference to my reasons for concluding that the appellants have not succeeded in establishing error with respect to the finding that Mr Streeter and Mr Cooper were in breach of fiduciary duty to WAE.

493 In the final section of these reasons I will address the grounds of appeal concerning relief, and set out why, in my view, the appellants succeed in the appeal on the grounds relating to laches.

494 The first group of grounds of appeal centre, in effect, on the following propositions in the appellants' written submissions (pars 61 - 68):

(a) The relationship between a director and company and the director's role may be such as to allow the director a personal interest in matters affecting the company.

(b) Generally speaking, whether a director owes a duty not to take personal advantage of certain information depends upon whether where there is a sufficient connection between the company and the information to entitle the company to require that the information be available for use solely for the benefit of the company.

(c) Where a director is permitted or expected to consider and pursue a personal interest, that will not be precluded by fiduciary duty unless the connection between the company and the matter is such as to entitle the company to require that any personal interest in the matter only be considered and pursued through the company.

(d) The sufficiency of the requisite connection is to be determined by the approach described by Cooper J in S E A Food (555 - 559).

(e) Applying the correct approach in law, even on the basis of the judge's primary findings of fact, it should be held that no fiduciary duties were owed as regards the ANPC proposal.

(f) Streeter was appointed a director of WAE because he was an established and prominent mining investor in Western Australia and an actual and potential investor of capital in WAE and because it was hoped that he would attract opportunities to, and other investment in, the company.

(g) In other words, the expectation of WAE was that if and when Streeter became aware of a proposal of the kind that was within the business contemplated by WAE, he would assess it as a potential investor.

(h) However, there was no agreement or understanding between WAE and Streeter that he would act exclusively for the benefit of WAE in receiving, seeking out and assessing mining-related opportunities or that his future mining-related investments would be exclusively in WAE. After all, he was a major shareholder in, and director of, a successful nickel miner, Jubilee Goldmines NL.

495 These grounds seek to rely on findings made by his Honour which are uncontested. It is important then, to note that this part of my reasons proceeds on the basis that the judge's findings of fact are accepted.

496 In essence, it is alleged that the judge erred in failing to consider properly, or take into account, the following matters or propositions advanced by the appellants:

(a) Mr Streeter was invited onto the board of WAE because of his background, experience and reputation in the mining industry. He was expected, by WAE, to consider proposals for investment in the mining industry in his personal capacity; he was a non-executive director with no prescriptive duties or affirmative duties to act on behalf of WAE;

(b) whilst the inability of a company to take a profit or benefit is no defence to a breach of fiduciary duty by a director, nevertheless, the content of any fiduciary duty depends upon a consideration of all the circumstances, and one relevant circumstance may be the company's incapacity to pursue the benefit;

(c) the circumstances relevant to a consideration of the existence and content of the fiduciary duty may include the nature and extent of the company's business operations, its financial position, and the presence or absence of any connection between the third party from whom the benefit may be available, and the company;

(d) an important feature in considering sufficiency of connection for the purposes of determining the scope and content of fiduciary duty is what part, if any, the company played in the decision of the third party to seek out the director of the company to discuss the potential opportunity, especially where there is no prior connection between the third party and the company; and

(e) it is wrong to attribute content to the fiduciary duty of a director from the possible interest of some of the company's shareholders in an activity which was not part of the contemplated business activity of the company.

497 It was submitted, in effect, that when regard is had to the foregoing considerations, there was no sufficient connection between the commercial opportunity presented by the ANPC proponents and WAE, to give rise to any fiduciary duties on the part of Mr Streeter and Mr Cooper, or which would preclude them from taking a personal interest in the proposal. It was submitted that his Honour failed to recognise the significance of factors which established the absence of any 'real connection' between the ANPC proposal and WAE, and that WAE, as a company, played no part in attracting the interest of the ANPC proponents. It was submitted, in this regard, that his Honour's reasons reveal that he assumed, wrongly, that fiduciary duties were prescriptive, rather then proscriptive, even though he had (it was submitted correctly) stated the law to be to the contrary, and that the judge's findings on fiduciary duty were, in effect, based on the temporal proposition that the ANPC proponents came to Mr Streeter whilst he was a director of WAE and he thereby became the subject of the alleged fiduciary duty.

498 It was also submitted that WAE had no business and had no assets; that Mr Streeter was understood to be its funder, but he was not obliged to fund WAE; that he was a director, but importantly, he was non-executive, and had been appointed to the board in the expectation that he would continue to carry out private investment; that WAE had done nothing to attract the ANPC proponents to Mr Streeter; and that Mr Streeter had no affirmative duties as a non-executive director of WAE to advance WAE's interests, or to fund it.

Reasons in relation to the first group of grounds

499 In my opinion, these grounds provide an incomplete characterisation of Mr Streeter's and Mr Cooper's activities leading up to the float of WANL. Essentially, for the reasons given earlier in the section headed 'Breach of fiduciary duty based on judge's findings of fact', in my view, the first group of grounds does not establish that Mr Streeter or Mr Cooper did not owe, and did not breach, fiduciary duties to WAE.

500 Three further points need, however, to be emphasised. The first is in relation to the appellants' submission that WAE, as a company, had done nothing to attract the interest of the ANPC personnel. That proposition, whilst correct, ought not be considered in isolation from the broader context. Whilst Mr Brailey, in his capacity as a director of WAE, had not attracted the interest of the ANPC personnel, the judge found, in effect, that Mr Brailey considered the proposal as a director of WAE and, in the same capacity, referred the ANPC personnel to Mr Streeter for Mr Streeter's consideration as a director of WAE. Thus, on the judge's findings, although WAE did not initially attract the attention of ANPC, WAE, by its directors, dealt with the ANPC personnel and the ANPC proposal.

501 The second point is that, as I understand the judge's reasons, he did not treat Mr Streeter and Mr Cooper as owing prescriptive, rather than proscriptive, fiduciary duties. The judge said [281]:

If the position had been that the opportunity for the promotion of the ANPC proposal had come to Messrs Streeter and Cooper independently of Mr Brailey or of their roles as directors of the plaintiff, it would have been unnecessary for them to have attempted to secure the support of Mr Brailey and of the other shareholders of the plaintiff for the proposal. They could simply have maintained that this was an opportunity which had come to Mr Streeter without in any way entrenching [sic] upon his obligations or duties towards the plaintiff and that he was free to develop it through WANL or in any other form which might not involve the plaintiff.

502 As I understand the overall effect of his Honour's reasons, the fiduciary duties to which the appellants were subject were proscriptive, and arose in consequence of having acted in a representative capacity.

503 The third point is in relation to the appellants' submission that Mr Streeter was, and was known by WAE to be, an investor in the mining sector and that he was 'expected' (by WAE) to assess propositions of the kind referred to him by Mr Brailey as a potential investor. I would make the following observations in relation to that submission.

504 First, the ANPC proposal came to Mr Streeter from a director of WAE, and for consideration by Mr Streeter as a director of WAE. It was not received independently of WAE in Mr Streeter's private or personal capacity.

505 Secondly, in these circumstances, if Mr Streeter, as a director of WAE, considered the proposal and decided that it warranted pursuit by WAE, subject to WAE securing finance for a listing, it would be expected that he would proceed to consider and decide, in his personal capacity, whether he would be prepared to put WAE in funds to pursue the proposal. Although similar commercial considerations might be common to each decision, in the former, he would act as a director of WAE, and in the latter case, as a potential investor in WAE. Had WAE been the listed vehicle, Mr Streeter could have negotiated with WAE (presumably with Mr Brailey) for the benefits to be gained by contributing seed capital to WAE. The transaction did not, however, develop that way.

506 Thirdly, had the transaction developed that way, there would have been no obligation on the part of Mr Streeter to put WAE in funds to pursue the project even if, as a director of WAE, he considered it to be of commercial interest to WAE. Conversely, there would have been no obligation on the part of WAE to procure funding from Mr Streeter if WAE could secure seed capital elsewhere on more advantageous terms.

507 Fourthly, if a director in Mr Streeter's position considered it to be in WAE's interest to pursue the proposal, and took steps as a director on behalf of WAE to pursue it on behalf of WAE before, for example, making a final decision in his personal capacity as to whether to fund the investment, the delay in making a decision as an investor would not of itself preclude the operation of fiduciary duties which might otherwise arise from his conduct and activities in pursuing the proposal as a director of WAE.

508 Fifthly, in this case, Mr Streeter and Mr Cooper made the offer to ANPC on behalf of WAE, dated 8 December 1999, for WAE to acquire the ANPC tenements conditional on, in effect, obtaining financing of seed capital and the listing of WAE. Mr Streeter's investment decision did not alter the capacity in which he acted in conveying that offer.

509 Had the matter stopped there, and ANPC had simply rejected WAE's offer, and made no counter-offer involving the use of WAE's assets, the question may have arisen as to whether Mr Streeter would have been free to pursue a personal interest in investing in ANPC's preferred listed entity. In that context, Mr Streeter would not, in my view, have owed any prescriptive duty to WAE to invest in WAE, or come to some mutual arrangement with the other WAE shareholders concerning a capital restructure to make WAE more attractive to ANPC as an investment vehicle, in order to entice a further offer from ANPC or to make ANPC more receptive to a further offer by WAE. However, even absent such duties, the question might remain as to whether, in the circumstances in which Mr Streeter gained knowledge of the ANPC proposal, the duty not to profit without WAE's informed consent would have been enlivened. It is unnecessary to answer that question, because matters did not stop there.

510 In this case, ANPC's rejection of WAE's offer to acquire the ANPC tenements, involved an offer to the effect that a new listed vehicle, to be created, would acquire from WAE its only asset (Cue) in consideration for the issue of shares in the new vehicle, and that the new vehicle would, in addition, issue a further tranche of shares to acquire all of the issued capital of WAE. Both of those matters required, and received, active attention by Mr Streeter and Mr Cooper as directors of WAE over the following months. Both the application of WAE's asset (Cue), and the proposal that the new company (later WANL) acquire all of the issued share capital of WAE, were matters concerning WAE. The former is self-evidently a matter concerning WAE. As to the latter, as noted previously, the directors of WAE were 'entitled to offer advice, and bound to supply information' to WAE's shareholders: Howard Smith Ltd v Ampol Ltd (838); Darvall v North Sydney Brick & Tile Co Ltd (326).

511 It follows, in my view, that whilst it is correct to say that it was to be expected that Mr Streeter would consider his position as a potential investor when the ANPC personnel were referred to him, that fact does not, of itself, lead to the conclusion that no fiduciary duties could be owed by Mr Streeter and Mr Cooper in the circumstances of this case. The analysis undertaken by Cooper J in S E A Food does not lead to any different conclusion.

The second group of grounds (grounds 4, 5(a) and (b) and 6(a))

512 The second group of grounds alleges errors in fact-finding in that, it is said:

(a) the judge wrongly found that Mr Streeter had an obligation to subscribe $250,000 seed capital to WAE which he breached, and which led to WAE's loss of assets and contributed to its weak financial position when he should have found there was no such obligation; and

(b) the judge erred in finding that there was no real obstacle to or opposition by WAE shareholders to a capital reconstruction of WAE or to Mr Streeter acquiring more than 20% of its capital and exceeding the takeover threshold.

513 The appellants contend, in effect, that these alleged errors combined to lead the judge to conclude, impermissibly, that Mr Streeter's failure to 'honour' a promise to subscribe capital of $250,000 in WAE was a factor contributing to the nature and scope of Mr Streeter's fiduciary duty to WAE (appellant's written submissions pars 103 - 118).

514 As to the second matter, its significance, as I understand the appellants' complaint, is that any such capital reconstruction was a condition precedent to Mr Streeter's 'obligation' to subscribe for capital in WAE, and that the second matter was used by the judge to underpin the finding on the first matter.

515 As to the first matter, as indicated earlier ([130] above), I do not accept that the judge found a binding obligation on the part of Mr Streeter to subscribe for capital in WAE. Nevertheless, his Honour evidently thought that there was a moral 'obligation' which informed the content and scope of Mr Streeter's fiduciary duty (reasons [177], [182]). In my view, an arms-length negotiation between a party with capital to invest (Mr Streeter) and a party seeking capital to finance its activities (WAE), which fell short of concluding a binding agreement, could not, at least in the circumstances of this case, enlarge or inform the nature and scope of Mr Streeter's duty as a director of WAE. Accordingly, I accept that the judge was in error with respect to the first matter.

516 In light of that conclusion, it is not strictly necessary to determine whether the judge was in error in relation to the second matter. For completeness, however, I would make the following comments. The judge's inference that Mr Streeter would have been satisfied with a 10:1, or 5:1, capital reduction (see [147] above), is not in my opinion sustainable on the evidence. The evidence was that Mr Brailey and Mr Streeter were in dispute about the level of reduction and in all of the modelling used in negotiations with ANPC, Mr Streeter acted on the assumption of a capital reduction in WAE of 20:1. That error of fact by the judge does not, however, in my view vitiate the ultimate finding that there was no real obstacle to or opposition by WAE shareholders to a capital reconstruction of WAE or to Mr Streeter acquiring more than 20% of its capital and exceeding the takeover threshold. It was still properly open to conclude that despite the dispute, had ANPC been prepared to use WAE as the vehicle for the float, given the parlous state of WAE and the importance of a float in restoring value to WAE for the benefit of all its shareholders and creditors, there would have been some compromise reached on the level of reduction of capital acceptable to Mr Streeter, and a further investment by Mr Streeter, in accordance with the legal advice obtained on 3 May 1999, would have resulted.

517 In summary, the appellants have established error in relation to the first matter, but not the second matter, in the second group of grounds. However, the error is not material, in my view, to the disposition of the appeal on the question of breach of duty.

The third group of grounds (grounds 4, 5(e), (f) and (g))

518 The third group of grounds alleges, in effect, that the judge erred in finding the following three matters, viz that:

(a) Mr Brailey spoke to Mr Streeter about the ANPC proposal in December 1999 and in that regard also erred in drawing an adverse inference in failing to call Mr Stewart;

(b) Mr Brailey sent to Mr Streeter the November 1999 ANPC proposal document; and

(c) Mr Streeter and Mr Cooper knew of the ANPC proposal by reason of their position as directors of WAE.

519 As to the first matter, I have referred (see [192] - [203] above) to WAE's plea that Mr Brailey 'briefed' Mr Streeter after the 30 November meeting, the lack of direct evidence supporting that plea and the fact that the judge made no finding of any briefing or reporting to Mr Streeter after the 30 November meeting and prior to 3 December 1999. I have also referred to the evidence and judge's finding in relation to the aftermath of the 3 December 1999 meeting (see [204] - [211] above). Mr Brailey had no recollection of contacting Mr Streeter, but relied on his evidence of 'practice' by which he believed he would have done so.

520 Evidence of a particular practice or habit will generally be admissible, there being a probability that the general course will be followed in the particular case: Elliott v The Queen [2007] HCA 51; (2007) 234 CLR 38, 47; Avins v Garvey [2001] WASCA 415 [5]; The Queen v Murphy (1985) 4 NSWLR 42, 62 - 63; Connor v Blacktown District Hospital (1971) 1 NSWLR 713, 721. See also Cross on Evidence [1130] - [1135]. However, in order to be probative, such evidence must not be so generalised so as to have no bearing on the situation in which the practice or habit is claimed to have been followed: The Queen v Murphy (63). In Connor v Blacktown District Hospital (721) Asprey JA (with whom Mason JA agreed) stated the principle in the following way:

In my opinion, evidence of a relevant practice may be given by a person who, on a sufficient number of occasions and over a sufficient period, has regularly and uniformly performed acts, or has observed the regular and uniform performance of acts by others, under the same circumstances and upon the same occasions, so as to make it appear probable in the minds of reasonable men that, given the same circumstances and occasions, the like acts will again be performed. Such evidence, if accepted by the tribunal of fact, will enable it to draw the inference that such acts were performed by that person or those others, as the case may be, where the same occasion and circumstances for their performance have subsequently recurred at a point of time connected sufficiently closely with the continuity of acts related in the evidence.

521 Whilst it was not contended in the appeal that the judge erred, over proper objection, in allowing Mr Brailey's statement as to his 'practice', the evidence, even assuming it to be admissible, was too generalised to be given any real weight on the issue of whether Mr Brailey in fact reported to Mr Streeter about the meeting on 3 December 1999. If and to the extent that the finding was simply based on Mr Brailey's 'practice' it is, in my view, insupportable.

522 Nevertheless, there were other findings indicating the topicality of the subject matter from which the judge could have inferred that the ANPC proposal is likely to have been discussed between Mr Brailey and Mr Streeter in December 1999. In this regard there were findings to the effect that:

(a) On 30 November 1999, Mr Stewart and Mr Grammer met with Mr Brailey at Tolhurst's offices. Mr Brailey recognised that the ANPC proposal was an attractive one and suitable for WAE, he mentioned this to Mr Grammer and Mr Stewart, and Mr Brailey recommended that the ANPC personnel see Mr Streeter;

(b) Mr Brailey and Mr Streeter were co-directors of a company, ie WAE, which was looking for a mining project to facilitate an IPO and a listing;

(c) Both Mr Brailey and Mr Streeter regarded the ANPC proposal as a suitable nickel project for that purpose;

(d) There was an unsuccessful attempt to arrange a meeting between ANPC personnel and Mr Streeter on 1 December 1999.

(e) There was a further meeting with Mr Brailey on 3 December 1999 attended by Mr Hanna, Mr Stewart and Mr King. The result of the meeting was that 'all were agreed that a meeting should be arranged' between the ANPC representatives and 'the other two WAE board members, Messrs Streeter and Cooper'.

(f) Mr Brailey subsequently sent to Mr Streeter the fax of 12 January 2000, referring to WAE and drawing attention to nickel prices. (Mr Streeter accepted that this was directly relevant to the company's affairs.)

523 There was also Mr Brailey's evidence that he was 'in and out' of Mr Streeter's offices.

524 These matters are sufficient to sustain the finding made, without reference to the Jones v Dunkel point in relation to the failure to call Mr Stewart (Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298).

525 The judge at [428] drew a Jones v Dunkel inference and said that:

In relation to the ANPC personnel I have already noted that Mr Stewart was not called although apparently available when he could have been expected to be in a position to give evidence about the alleged enthusiasm or lack or shown enthusiasm by Mr Brailey for the ANPC proposal and how the ANPC personnel came to approach Mr Streeter.

His Honour's reference to having earlier noted that matter appears to be the reference at [251] (and possibly [236]) in relation to his discussion of the 3 December 1999 meeting.

526 I consider the judge to have been in error in drawing an inference on the basis of Jones v Dunkel. Mr Stewart, according to the judge, was 'on friendly terms' with Mr Brailey. Mr Stewart is not a defendant in the action, nor an employee of the appellants (defendants). He is an employee of WANL, but no claim is made against WANL. Mr Stewart, who was in the ANPC camp, was at arms-length from both Mr Brailey and Mr Streeter at the time. Mr Streeter was not a party to the conversation involving Mr Brailey and Mr Stewart on 3 December 1999. The conversation was 10 years distant from the trial. This is not a situation where 'the missing witness would be expected to be called by one party rather than another': Payne v Parker (1976) 1 NSWLR 191, 201 - 202.

527 As to the second matter, I have referred to the judge's findings, and the relevant evidence, in [218] - [224] above. Again, in my view, albeit that the evidence was slender, it was open to the judge so to find.

528 In relation to the third finding the subject of challenge, the sequence and subject matter of the events and meetings between 29 November and 6 December 1999 support the finding. The matters referred to below, in the fourth group of grounds, also support this finding.

529 I would not uphold the appeal in relation to the third group of grounds.

The fourth group of grounds (grounds 4, 5(c) and (d), and 6(e))

530 In this fourth group of grounds, the appellants contest findings as to the state of mind of Mr Brailey, Mr Streeter and Mr Cooper.

531 It is alleged in effect that the judge erred in finding that:

(a) Mr Streeter and Mr Cooper knew that the ANPC proponents had been referred to them from Mr Brailey in his capacity as a director of WAE;

(b) Mr Brailey expected that Mr Streeter and Mr Cooper would consider, and if thought fit develop, the ANPC proposal on behalf of WAE.

532 As to the latter, it is said that the judge should have found that Mr Brailey expected Mr Streeter to consider it in his personal capacity as a potential investor of seed capital.

533 The first of these matters contains two elements. One is that Mr Streeter and Mr Cooper knew that Mr Brailey had referred the ANPC personnel to them. The second is that they knew that he did so as a director of WAE. As I understand it, the first element is not challenged. If my understanding in that regard is incorrect, in my view, there was evidence available to make a finding that Mr Brailey had recommended to the ANPC personnel that they see Mr Streeter and Mr Cooper and, having regard to the conjunction of events and the short period of time between 29 November and 6 December 1999, it could properly be inferred that, at the meeting on 6 or 7 December 1999, some mention was made of the fact that Mr Brailey had made the recommendation.

534 As to the second element of the first matter, ie knowledge that Mr Brailey's referral was in his capacity as a director of WAE, there was, in my view, sufficient evidence to sustain the finding. The only connection at this time between Mr Brailey and Mr Streeter and Mr Cooper was that they were directors of the same company, WAE. As directors, they all knew that WAE was a company looking for the opportunity to acquire and develop mining tenements to take to the market in an IPO. The ANPC proposal was of that nature. Accordingly, it is reasonable to infer that Mr Brailey's recommendation was made in his capacity as a director of WAE, and that Mr Streeter and Mr Cooper would have understood it in that way at the respective meetings with ANPC on 6 and 7 December 1999. The fact that Mr Streeter and Mr Cooper made the 'offer' to ANPC on 8 December 1999 on behalf of WAE also tends to indicate an understanding on their part that Mr Brailey's referral of the ANPC personnel was intended to be acted upon by them on behalf of WAE, which, in turn, tends to indicate that they understood the referral to have come from Mr Brailey as a director of WAE.

535 As to the second matter, it is said that Mr Brailey could not have had the expectation found, by reason of the following (appellants' submissions par 143):

(a) the ANPC proponents told him they were looking for seed capital;

(b) they were looking to him for ideas as to where seed capital might be obtained;

(c) he met the ANPC proponents primarily as a representative of his employer, Tolhurst;

(d) he had no recollection of the ANPC proponents telling him they were looking for a corporate vehicle;

(e) he told them virtually nothing about WAE and he had no recollection of giving them any information of the kind they would require if consideration was to be given to them using WAE as a corporate vehicle for their proposal;

(f) he was critical of their business, but never disclosed those criticisms either to ANPC or to Streeter;

(g) he could not recall giving them any information in writing, save in relation to another venture he was promoting. named Nerds & Geeks;

(h) he was told, in terms which did not admit of discussion, that King's firm would be handling all corporate matters relating to the proposed float and prospectus, he was disappointed by that, but did nothing about it ... (the judge's observation at [243] that King merely said that his firm wanted to be involved in those matters, misstates the clear effect of the evidence);

(i) the ANPC proponents did not express any interest in using WAE;

(j) although he claimed that Tolhurst could have been interested in supporting the proposal, he did nothing to ascertain whether Tolhurst was so interested;

(k) he had no recollection of any expectation that, as a result of his discussions with them, the ANPC proponents would take their proposal to Streeter;

(1) after the first meeting, he made no further contact whatsoever with any of the ANPC proponents.

536 The above matters do not, to my mind, establish that the judge's finding is wrong.

537 My reasons, in essence, are as follows. First, once it is accepted that it was open to find that Mr Brailey, in his capacity as a director of WAE, referred the ANPC proponents to Mr Streeter, it is a short step to infer that Mr Brailey expected that Mr Streeter would consider the ANPC matter on behalf of WAE.

538 Secondly, Mr Brailey did not resile in cross-examination from his evidence that subjectively he regarded the ANPC proposal as a good opportunity for WAE to pursue. The judge found Mr Brailey to be a 'credible, accurate and honest witness' [422].

539 Thirdly, having regard to the history of WAE up to 29 November 1999, including the fact that Mr Streeter and Mr Cooper made all the executive decisions in relation to the (limited) operations of the company, the fact that Mr Brailey did not involve himself in the pursuit of the proposal beyond referring it to Mr Streeter does not, of itself, indicate that, at least at the time of the referral, he did not expect that Mr Streeter would consider the proposal on behalf of WAE.

540 Fourthly, insofar as the matters referred to by the appellants are said to indicate that Mr Brailey appreciated from his meetings with ANPC on 29, 30 November and 3 December, that ANPC simply had no interest in using WAE as a vehicle for the investment, the inference, in my view, is difficult to sustain given that, obviously, Mr Streeter did not reach that conclusion from his meetings with ANPC in that he made the 8 December 1999 offer on behalf of WAE. It is difficult to see why Mr Brailey's impression of the proposal would have been any different from Mr Streeter's in that regard.

541 Fifthly, Mr Brailey's facsimile to Mr Streeter of 12 January 2000 is consistent with Mr Brailey expecting that Mr Streeter would consider ANPC's nickel proposal on behalf of WAE, as is his subsequent conduct in obtaining legal advice, which was to the effect that he could apply for an injunction to restrain Mr Streeter and Mr Cooper from proceeding, or take steps to change the board of WAE.

542 Sixthly, for the reasons outlined in respect of the first group of grounds, the fact that Mr Streeter would be expected to consider his position as a potential investor, does not detract from the proposition that it may be inferred in the circumstances that Mr Brailey expected Mr Streeter to consider the ANPC proposal in his capacity as a director of WAE.

543 Accordingly, the appellants have not established these grounds of appeal.

The fifth group of grounds (grounds 6(b), (c), (d) and (f))

544 In this group of grounds, the appellants contend that the judge erred in fact in failing to find that:

(b) the ANPC proponents disclosed their proposal to Brailey in order to seek his assistance to raise seed capital;

(c) the respondent [WAE] did not itself attract the ANPC proponents to provide information concerning the proposal to any officer of the respondent;

(d) the ANPC proponents never encouraged the respondent [WAE] to seek to participate in their proposal;

...

(f) the ANPC proponents presented their proposal to the first appellant [Streeter] because they were seeking seed capital and the first appellant [Streeter] was a potential investor of seed capital, not for any reason connected with the respondent [WAE];

545 In my view, it was not necessary, for the proper disposition of the proceedings, for the judge to have made the findings alleged.

546 It may be accepted that WAE was not the entity which first drew the ANPC personnel to Mr Brailey. It may also be accepted that the ANPC sought to interest Mr Brailey in raising seed capital in order to undertake a prospectus to raise capital to fund exploration work on the ANPC tenements. Seed capital was nevertheless the means to an end for ANPC. The ultimate objective was to transfer the ANPC tenements into a company which had, or could raise, sufficient resources to undertake a substantial exploration programme.

547 It may also be accepted that the ANPC personnel, when they met with Mr Streeter on 6 and 7 December 1999 were, in general terms, seeking seed capital as a necessary adjunct to the raising of exploration capital, and were not specifically seeking to use WAE as an investment vehicle for the raising of exploration capital.

548 However, Mr Brailey, as a director of WAE, saw the ANPC proposal as an opportunity which it would be in the interests of WAE to pursue. He referred the ANPC personnel to Mr Streeter for his consideration as a director of WAE, notwithstanding that he may also have expected Mr Streeter to give consideration to an investment in WAE on the strength of WAE acquiring the nickel tenements.

549 Likewise, Mr Streeter recognised the advantage to WAE in acquiring the ANPC tenements. Mr Streeter and Mr Cooper treated the presentation by the ANPC personnel as something which was of commercial interest to WAE and which should, if possible, be pursued by WAE. Mr Streeter made the 8 December 1999 offer for the purpose of WAE acquiring the ANPC tenements and floating on the Stock Exchange.

550 Accordingly, in my view, these grounds also tend unduly to narrow the focus on the material events, with the result that they serve to detract from a more complete understanding and characterisation of Mr Streeter's and Mr Cooper's activities leading up to the float of WANL. The matters to which I have referred in relation to the first group of grounds are also relevant here.

551 The appellants have not established these grounds of appeal.

The sixth group of grounds (grounds 4, 5(h) and 6(g))

552 By these grounds, the appellants allege, in effect, that the judge erred in finding that Mr Streeter and Mr Cooper falsely told Mr Brailey, on 28 January 2000, that the ANPC proposal was proceeding with WAE, when he should have found that Mr Brailey was aware that it was proceeding through another company to which it was proposed that WAE would sell its interest in the Cue tenements.

553 These grounds are central to a wider issue concerning the judge's findings of concealment - see ground 8 below. I accordingly deal with these matters under ground 8 below.

The seventh group of grounds (grounds 7 and 7A)

554 By these grounds, it is alleged that the judge erred in:

(a) finding that the ANPC proposal represented an opportunity for, or was available to, WAE, when he should have held that that was not so;

(b) the judge erred in fact in failing to find that it had never been part of WAE's actual or proposed business to be an investor, whether of seed capital or otherwise, in another company.

555 I have dealt with the substance of these matters in the section headed 'Breach of fiduciary duty based on judge's findings of fact' and, to the extent therein indicated, I accept the criticisms raised by these grounds.

556 Nevertheless, for the reasons previously given, the acceptance of the appellants' arguments does not mean that the judge ultimately erred in finding that Mr Streeter and Mr Cooper were subject to, and liable for breach of, fiduciary duties (subject to the question of laches).

As regards the finding that the first and second [appellants] breached fiduciary duties to the respondent in relation to the ANPC proposal, the judge erred in finding that:

(a) the first and second appellants had wrongfully concealed from Brailey and other shareholders of the respondent between December 1999 and May 2000 that:

(i) the ANPC proposal was being promoted by WANL and not by the respondent and they were directors of WANL;

(ii) the third appellant had purchased Golden Granite's interest in the Cue tenements and had sold it into the float of WANL;

(iii) the first and second appellants were negotiating for and had agreed to the sale of the respondent's interest in the Cue tenements to WANL;

(b) the first and second appellants' wrongful concealment of the matters set out above was an admission by them that they had breached fiduciary obligations owed to the respondent;

(c) Brailey asked the first appellant at the respondent's directors' meeting of 28 January 2000 whether the ANPC proposal was being promoted or furthered through the respondent and was told that it was;

(d) there was a deliberate policy of non-disclosure or disguise by the first and second appellants evidenced by the minutes of the respondent's directors' meeting of 28 January 2000.

558 As the judge noted, Mr Streeter's and Mr Cooper's case was that they owed no relevant duty to WAE and that they did nothing capable of constituting a breach of any relevant duty. They did not plead a case of having engaged in conduct which would have constituted a breach of fiduciary duty but for their having obtained WAE's fully informed consent.

559 It is apparent, from the nature of the case run by Mr Streeter and Mr Cooper, that the judge needed to consider whether, and if so the extent of, any failure to inform Mr Brailey, after 10 December 1999, of their involvement with WANL in relation to the ANPC project was the product of an innocent (even if the judge considered it to be mistaken) view that they were not obliged to keep Mr Brailey informed, or fully informed, of Mr Streeter's involvement as an investor in WANL after ANPC had rejected WAE as a vehicle for the ANPC project.

560 For the reasons outlined below, I have concluded that the judge, in making findings of concealment, has failed to give any, or any proper, consideration to this question, particularly bearing in mind the seriousness of the findings: Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336.

561 Before considering in detail the findings of concealment under attack in this appeal, the judge's general approach to fact-finding should be noted. His Honour generally accepted the evidence of Mr Brailey (reasons [276], [422]). He nevertheless also said [421]:

The findings so far recorded reflect, but only in part, my impressions about the credibility of material witnesses derived from observation. However, by far the most influential factors leading to the particular findings are the contemporary documents and the natural and probable inferences which can be drawn from the unfolding events.

562 As noted below, the contemporary documents and the natural and probable inferences from the unfolding events do not, in my view, reveal a policy of deliberate concealment.

563 The role of an appellate court in this context should also be noted.

564 In Fox v Percy [2003] HCA 22; (2003) 214 CLR 118, Gleeson CJ, Gummow and Kirby JJ said [25] - [31]:

Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge's reasons. Appellate courts are not excused from the task of 'weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses, and should make due allowance in this respect'. In Warren v Coombes, the majority of this court reiterated the rule that:

'[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it.'

As this Court there said, that approach was 'not only sound in law, but beneficial in ... operation'.

After Warren v Coombes, a series of cases was decided in which this Court reiterated its earlier statements concerning the need for appellate respect for the advantages of trial judges, and especially where their decisions might be affected by their impression about the credibility of witnesses whom the trial judge sees but the appellate court does not. Three important decisions in this regard were Jones v Hyde, Abalos v Australian Postal Commission and Devries v Australian National Railways Commission. This trilogy of cases did not constitute a departure from established doctrine. The decisions were simply a reminder of the limits under which appellate judges typically operate when compared with trial judges.

The continuing application of the corrective expressed in the trilogy of cases was not questioned in this appeal. The cases mentioned remain the instruction of this Court to appellate decision-making throughout Australia. However, that instruction did not, and could not, derogate from the obligation of courts of appeal, in accordance with legislation such as the Supreme Court Act applicable in this case, to perform the appellate function as established by Parliament. Such courts must conduct the appeal by way of rehearing. If, making proper allowance for the advantages of the trial judge, they conclude that an error has been shown, they are authorised, and obliged, to discharge their appellate duties in accordance with the statute.

Over more than a century, this Court, and courts like it, have given instruction on how to resolve the dichotomy between the foregoing appellate obligations and appellate restraint. From time to time, by reference to considerations particular to each case, different emphasis appears in such reasons. However, the mere fact that a trial judge necessarily reached a conclusion favouring the witnesses of one party over those of another does not, and cannot, prevent the performance by a court of appeal of the functions imposed on it by statute. In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge's conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings.

That this is so is demonstrated in several recent decisions of this Court. In some, quite rare, cases, although the facts fall short of being 'incontrovertible', an appellate conclusion may be reached that the decision at trial is 'glaringly improbable' or 'contrary to compelling inferences' in the case. In such circumstances, the appellate court is not relieved of its statutory functions by the fact that the trial judge has, expressly or implicitly, reached a conclusion influenced by an opinion concerning the credibility of witnesses. In such a case, making all due allowances for the advantages available to the trial judge, the appellate court must 'not shrink from giving effect to' its own conclusion. Finality in litigation is highly desirable. Litigation beyond a trial is costly and usually upsetting. But in every appeal by way of rehearing, a judgment of the appellate court is required both on the facts and the law. It is not forbidden (nor in the face of the statutory requirement could it be) by ritual incantation about witness credibility, nor by judicial reference to the desirability of finality in litigation or reminders of the general advantages of the trial over the appellate process.

It is true, as McHugh J has pointed out, that for a very long time judges in appellate courts have given as a reason for appellate deference to the decision of a trial judge, the assessment of the appearance of witnesses as they give their testimony that is possible at trial and normally impossible in an appellate court. However, it is equally true that, for almost as long, other judges have cautioned against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses. Thus, in 1924 Atkin LJ observed in Societe d'Avances Commerciales (Societe Anonyme Egyptienne) v Merchants' Marine Insurance Co (The 'Palitana'):

' ... I think that an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour.'

Further, in recent years, judges have become more aware of scientific research that has cast doubt on the ability of judges (or anyone else) to tell truth from falsehood accurately on the basis of such appearances. Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical.

Reasoning in relation to ground 8 - concealment

565 The appellants submitted that the judge's findings of concealment were substantially based on the events concerning the 28 January 2000 board meeting and the 18 January 2000 document. That proposition was not disputed by the respondent. It is convenient to start with the findings of concealment in relation to the board meeting on 28 January 2000.

566 His Honour's finding in relation to the WAE board meeting of 28 January 2000 is set out in [280] above in the section of these reasons headed 'Chronological Recitation of Facts'. His Honour's findings, referred to in (b) to (e) at [280] above, state, in effect, what the minutes of the meeting do not record. The fact that those matters were not mentioned could not, in my view, without more, be evidence of a 'deliberate policy of non-disclosure' (reasons [265]). The non-disclosure is equally consistent with a failure to appreciate any need or obligation to disclose such details. The matter referred to in (c) of [280] above lacks foundation in that his Honour found that it was in February 2000 that it became known that Golden Granite's interest was for sale, and it was not until 28 March 2000 that Jungle Creek obtained the benefit of the assignment of that interest.

567 The matter referred to in (f) of [280] above is different. It amounts to a finding that Mr Streeter told a deliberate falsehood to Mr Brailey when he asked about the progress of the ANPC proposal, and that Mr Streeter in effect pretended, falsely, that he was still pursuing the ANPC proposal on behalf of WAE. The finding is a serious one, and if properly made, would be capable of sustaining a finding of a deliberate policy of non-disclosure.

568 Mr Brailey's evidence-in-chief in his statement (exhibit 170) was as follows, in relation to what was said at the WAE board meeting on 28 January 2000:

I have a clear recollection at that meeting that the ANPC Proposal was discussed and that either Mr Streeter or Mr Cooper said words to the effect that everything was on track. There was no disagreement with that statement (par 109).

569 In cross-examination (ts 869, 872 - 876) Mr Brailey said:

Mr Brailey, can I interrupt you because you are not responding to my question. My question concerns you in your witness statement, your evidence-in-chief, as regards this set of minutes not saying that as far as the minutes go they are wrong in any respect. You see you haven't said that. Sorry, you see that you make no criticism of the minutes as far as they go, don't you?---All I say is that they're not complete because there's no mention of the ANPC

Right. They are not complete but as far as they go they are not inaccurate in any respect, to the best of your recollection?---We talked about Vince Roberts. We talked about the corporate restructure possibilities. We talked about the Cue tenements, and I received this business proposal which I really do remember vividly. They said that it had a series of meetings with a mineral exploration - a group of people that wanted to start a new mineral exploration company and they were now prepared to offer 800,000 vendor shares for the Cue properties. I remember that very clearly. Absolutely.

Mr Brailey, you don't say that these minutes are wrong in any respect as far as they go, do you?---No, I don't say these four paragraphs are wrong, no.

One of the topics discussed under the heading Corporate Restructure was the question of bringing the number of shareholders in WAE below 15 so as to avoid the operation of the takeover provision, wasn't it?---I don't find that unusual because

I'm not asking you whether it's usual or unusual. I'm just trying to get the nature of the subject?---Yes. No, I'm happy that that was discussed. Yes.

Was the reason that was discussed so that the outstanding shares which were to come to Mr Streeter could be issued to him or his company if the number of shareholders could be reduced to 15?---No. I don't remember the detail of that. It was something left to Cooper and Thomas.

...

But you recall that there was an arrangement as regards 600,000 shares plus attached options?---Yes, I remember that.

And Mr Streeter had put in some capital which hadn't been able to be converted into equity because of the proportion of the capital he already held, which was too close to 20 per cent?---When he - yes, when he, Mr Streeter, first introduced the capital, the corporate management of the company was under Mr Higginson and others, and if Mr Streeter went over 20 per cent, I remember discussions from time to time of how long it would take to get an EGM together and get the shareholders' approval. I remember that.

There were two aspects to the outstanding issuance of shares to Mr Streeter's company, weren't there? There was the 600,000 shares and there was the remaining capital he had put in which hadn't yet been converted into equity?---Yes, that's correct. Yes.

And the item that's recorded as item 2 in the minutes of exhibit 77 is a discussion about what can be done to bring about the position where that can be remedied and the shares can be issued, wasn't it?---No, no, that was - that's not - that's completely incorrect.

Well, what do you say was the reason why you were discussing bringing the number of shareholders in the plaintiff below 15?---Not being a corporate wizard, all I know is that that particularly below - that item below 15 was part of the discussion. Now, I cannot tell you the exact reason but I did know that once Mr Streeter exceeded his 20 per cent, we'd have to go to a quick EGM to get it approved. That was a given.

So you don't recall the reason why you were discussing trying to bring the number of shareholders down below 15?---No, I don't. No. As a matter of fact - yes, I just simply don't remember discussing that part of it.

And you do recall there being a discussion about the sale of the Cue tenements?---Yes, I do. Yes.

And an opportunity was described to you?---Was - sorry, could say that again?

An opportunity to sell the tenements was described to you?---Yes, yes.

And following some discussion of that proposal, you consented to the proposed transaction of sale, didn't you?---No, that's totally wrong. How could I do that? All I would say is, 'Look, let's have a look at it. Let's discuss it. Let's see what we need to do.'

You see that the minutes conclude under item 4 with attributing a consent to you, don't you?---Yes, I do, and I've always denied that that happened, but I don't say that anywhere.

Well, you've already accepted that you don't criticise the minutes for accuracy as they go, Mr Brailey?---Okay. Well, let's get back to this paragraph 108, when I say, 'Above or partially consistent.' You're bringing my - you're certainly stimulating my memory now as I read this again. This document to me - I've always said from day one it's strange. The fact it was signed on the 24th of the 3rd, there's no minutes before this on the 14th of the 6th. It just got a little bit out of shape for me, and as far as I'm concerned, I say - I must say somewhere that I didn't agree that I had agreed to that deal being an acceptable deal.

Well, I can tell you you don't say that in your witness statement, Mr Brailey?---Well, then perhaps I should have.

You recall a discussion about Cue, don't you?---I said that, yes.

And you recall a discussion to the effect that there was an opportunity to sell the Cue tenements?---I remember that and I also remember my response was, 'Let's have a look at it,' because if we can lay off in our risk in that area and get somebody else to pay for it, well, then some vendor stock might be totally acceptable, but we'd like to see the deal.

And you don't recall any statement to Streeter or Cooper at the meeting of the 28th along the lines, 'Well, why would we be selling Cue if WAE is being floated with the ANPC proposal,' do you?---Well, I don't recall exactly, but Cue is a grassroots high risk gold tenement and now it focuses on nickel. So therefore it would be automatic for me to say, 'Well, if we can push that out of the portfolio, that's fine.'

Well, on your evidence you recall someone asking in early December that Wolzak get some information on Cue for Hanna, don't you?---That's correct, yes.

So on your evidence you had in mind that Cue might be included in a float with ANPC, don't you?---I had in mind that at that very early stage - nothing in particular apart from the fact that we had the Cue project inside WAE, and why would I suppose that ultimately if it was all developed the way I thought it was going to develop, it could be in there. Why not?

And what I'm suggesting to you is that come 28 January, when you meet him, you never said anything to Streeter and Cooper along the lines, 'Well, I thought this was going with ANPC into a float,' did you?---No, because things had moved on. It's a state of flux all the time.

And you never asked them - sorry, I withdraw that. Did you ask him at the 28 January meeting who the prospective buyer of Cue was?---No. Why would I? I was just - I was just - - -

It didn't occur to you - - -?---I was just told and I accepted - - -

- - - that that would be important to know?---I would say no, I didn't ask them. Just told me it was just a group that had approached them.

Do you see that in the description of item 4 it's recorded that in view of the fact that these tenement licences, if granted, would involve the company in ongoing exploration expenditure for which it did not have the funds, it was felt that this was a good opportunity for Western Areas to benefit from the Cue tenements?---It's bringing back a lot of memories but that's an area which I don't - I find great difficulty with in these minutes, I must admit.

Do you recall a discussion to that effect?---I recall a discussion that it would be acceptable to think about doing a deal with another group who had approached Streeter and Cooper expressing an interest in our Cue projects and may give us 800,000 vendor shares. So at that stage, in the knowledge that we have got this other thing going on, it would be totally natural for me to say, okay, let's have a look at it and look at the proposal. Had I been of the view that this was the last remaining straw in our pack or card in our pack, I wouldn't have adopted that attitude.

Mr Brailey, I suggest to you that you could not have participated in a discussion about the prospective sale of Cue for vendor shares in a new company without already knowing what the new company was proposed to be or without asking. Isn't that so?---No, I don't agree with that. There's a lot of trust in this game and if your directors say, 'Look, we have got a new group that's approached us,' you just take it.

You knew by 28 January, didn't you, that Streeter was interested in the ANPC proposal?---No. I thought that WAE was interested in the proposal.

And you knew by 28 January that ANPC had no interest whatsoever in WAE, didn't you?---No, I didn't know that.

As regards the Vince Roberts matter, it appears from the entry in exhibit 77 that you made a telephone call to someone and ascertained that it had been deferred until July 2000. Do you see that?---Is this the item 1 on the same document?

Yes?---I do. Which Christmas Eve?

The hearing had been deferred until July 2000. That's what you were told apparently?---That's correct, yes.

And you don't recall any discussion at this meeting on 28 January about seeking to resolve the matter before then, do you?---No, I don't recall any specific discussion.

And you don't recall any discussion at this meeting about taking steps to prepare WAE, Western Areas Exploration NL, for a possible float with the ANPC tenements, do you?---I don't make any specific mention of that but I thought that was a given.

But you don't recall any discussion about taking steps to prepare WAE for the float, do you?---It's not mentioned in this minute but I thought Tolhurst were going to be one of the lead brokers in the situation and by that stage I was waiting for the resolution of the Norgard Clohessy situation with King and it was just an ongoing work in progress as far as I was concerned.

An ongoing work in progress in which you have got no recollection of speaking to either Streeter or Cooper or anyone from ANPC about it after 3 December about the progress, do you?---This doesn't say it but there were discussions, that's for sure, and even though it's not documented, I would not have let that amount of time go past with such an important situation on the plate just letting it vaporise. I don't understand it.

But you've got no recollection of any discussions?---Not specific discussions, no.

570 Mr Streeter, in cross-examination (ts 1217 - 1218) said:

And you didn't, at this meeting, tell him that the new group was ANPC?---It was obvious that that's who they were. Who else would it have been?

A new group?---Yes.

A gold group?---No, a nickel group.

They were buying a gold tenement?---Yes.

Why - you think he should have made the connection and thought 'That's a nickel group'?---Following general discussion of the proposal Mr Brailey gave his consent to the proposal.

Where does it say either you or Mr Cooper said 'It's ANPC'?---It doesn't.

That's because it was never said?---I can't answer that because it probably was said.

If it was said it would have been minuted by Mr Cooper because you needed to minute that, didn't you? That would have been important to minute?---Well, we didn't - I mean, this was the new company. It says 'A new group wishing to set up a mineral exploration company'.

As at 28 January the new company had been set up for a month, hadn't it?---Right.

In fact the day before this meeting you gave it its second lot of $10,000?---Right.

So why would you tell them they wished to set up a mineral exploration company? Why didn't you say, 'A new company has been established, Western Areas NL'?---I'm not sure of that answer.

You knew, didn't you, as a director of Jubilee, the concept of having a material personal interest, didn't you?---But when - yes.

Did you know that there was a concept of having a material personal interest?---Yes.

Did you know that relevantly in 2000 the relevant provisions of the Corporations Act was section 232? For public companies you are obliged to declare your interest, disqualify yourself from voting on a resolution or attending a meeting to discuss a proposal of which you have a material personal interest. It is now section 180, A184 or something. Did you know that?---No.

Did you not know that you should have declared, 'I've got an interest in the purchaser,' and had that minuted?---No.

That had never happened at Jubilee where somebody had to declare a personal interest, in 10 years?---Yes, of course it did.

Well, you knew then. Your experience as a director of a public company had taught you that, hadn't it?---Yes, it did.

But you didn't see fit to declare a personal interest in front of Mr Brailey that would have alerted him to your interest in the purchaser?---He probably already knew that I had a personal interest because he sent these people down to me in the first place.

That's your evidence, is it, on your oath?---Sorry?

Is that your evidence?---Yes.

He probably would have known?---Yes.

So you didn't need to tell him, he probably would have known?---Yes.

571 Mr Streeter, in cross-examination (ts 1220) also said:

Can I put to you that at the meeting on 28 January Mr Brailey asked you and Mr Cooper how the ANPC proposal was progressing and that one of you or Mr Cooper said words to the effect it was on track. That occurred, didn't it, on 28 January?---I can't remember but it might have done.

572 Mr Cooper, in cross-examination (ts 1462 - 1463) said:

So it wasn't in the interests of Western Areas NL for either you or Mr Streeter to tell Mr Brailey about it - about that new company?---I would have thought at that stage Mr Brailey would have known, but I couldn't say for sure.

Why would he have known?---His stockbroker would have known.

He would have heard it on the grapevine?---Well, yes. Mr Leclezio is also a stockbroker.

So you didn't need to say it to him?---I may well have said it to him but probably not recorded it. I don't - not at this particular meeting.

I put it to you that you never said it at this meeting?---At the meeting?

Yes?---Probably right.

And neither did Mr Streeter?---Probably right.

And I also put to you that at this meeting Mr Brailey asked how the ANPC proposal was going and either you or Mr Streeter said it was on track?---No, no.

Mr Streeter's evidence to his Honour is that might have occurred?---Well, it may - he may think it, but as far as I was concerned, no, because otherwise it would have been in the minutes - would have been an item in the minutes.

Well, it wasn't in your interest to put it in the minutes of Western Areas Exploration, was it?---No, but I don't deliberately leave things out of minutes either.

Your minutes are always accurate, are they?---As far as I know. As far as can be recorded.

You don't recollect, do you, that you regarded the comment, "Is it still on track?" as part of a discussion outside the context of the board meeting and not therefore needed to be minuted?---No.

573 In my view, his Honour could not have been satisfied, having regard to the requisite standard of proof, that Mr Streeter deliberately deceived Mr Brailey about WAE continuing to pursue the ANPC proposal on 28 January 2000. My reasons are as follows.

574 First, there is the absence of any contemporaneous record of such a communication. Secondly, the passage of time is significant. The alleged deception was not a pleaded part of WAE's case and the evidence for it appeared in Mr Brailey's statement, served nearly nine years after the alleged event. Thirdly, Mr Brailey did not, in his evidence, actually say what the judge found him to have said, namely that negotiations were on track 'on behalf of WAE'. Fourthly, Mr Brailey's evidence was cryptic. He said that the 'ANPC Proposal' was discussed. He did not relate the discussion. He had earlier defined 'ANPC Proposal' in his statement as the ANPC nickel proposal document of November 1999 handed to him on 30 November 1999 (exhibit 170 par 83) which proposed the vending of the ANPC assets into a listed vehicle which was not identified as WAE. The words he said were spoken by Mr Streeter or Mr Cooper, 'that everything was on track', would be expected to take their significance from the discussion, about which he gave no evidence, which preceded them. Mr Brailey's evidence of what was said, and Mr Streeter's acknowledgement of the possibility that it was said, do not in terms indicate that Mr Streeter or Mr Cooper said that the ANPC proposal was still being pursued on behalf of WAE. The evidence is not inconsistent with Mr Streeter and Mr Cooper conveying the idea that the ANPC project was 'on track', in the sense that preparations were underway for the float of the nickel assets and that WAE would benefit from vending its interest in the Cue tenements.

575 Fifthly, Mr Brailey was unsure in his evidence as to who made the statement he described. He said it was 'either' Mr Cooper or Mr Streeter. The judge did not explain why he attributed the statement to Mr Streeter.

576 Sixthly, prima facie, it strains (to breaking-point) credulity to think that Mr Brailey, knowing that the ANPC personnel were considering acquiring the Cue tenements, knowing that the Cue tenements were WAE's only asset, knowing that both he and Mr Streeter had, in the last month or so, been in discussions with a 'new group', who were 'wishing to set up a mineral exploration company' (being the words used in the minutes), and knowing that ANPC wished to vend their tenements into a company to be listed on the Stock Exchange, would have been indifferent to the identity and details of the entity to which, with Mr Brailey's consent, WAE was proposing to sell WAE's interest in the tenements in return for vendor shares upon that entity listing on the Stock Exchange. The inherent difficulty with Mr Brailey's evidence as to his ignorance on this occasion is compounded by Mr Brailey's evidence, which presumably his Honour had accepted, that Mr Brailey was 'in and out' of Mr Streeter's office and was 'out there all the time, backwards and forwards' (see [221] - [224] above).

577 Seventhly, Mr Streeter's and Mr Cooper's conduct shortly thereafter is inconsistent with a conclusion that they felt impelled to deliberately deceive Mr Brailey on 28 January 2000, in that:

• Even on Mr Brailey's evidence, the truth was, in substance, disclosed two weeks later, at meetings in mid February 2000, in conjunction with the provision of the 18 January 2000 document and the draft chairman's notice. As the respondent said (submissions par 206), Mr Brailey in July 2000 'knew what had happened' and that he had 'found that out at the mid-February Board meeting'.
• By May 2000 Mr Cooper, with Mr Streeter's authority, was writing to the shareholders in WAE inviting them to subscribe for shares in WANL - there was no concealment of their involvement with WANL in the ANPC project, or of the benefits they would obtain through the float of WANL, or of the sale of WAE's 70% interest in the Cue tenements to WANL, or of Jungle Creek's entitlement to 150,000 vendor shares for a 30% interest in the Cue tenements pursuant to an assignment of the interest from Golden Granite.

578 Eighthly, despite Mr Streeter and Mr Cooper not giving positive evidence to the effect that they gave Mr Brailey the 18 January 2000 document - which is not necessarily surprising given the passage of nearly a decade - a number of factors combine to indicate that, objectively, the probability was that Mr Brailey had seen the 18 January 2000 document prior to the board meeting on 28 January 2000. They are as follows: Mr Brailey's handwritten notations on the 18 January 2000 document addressing aspects of the commercial issues raised, the similarity in the subject matter between option 2 in that document and what was resolved at the meeting on 28 January 2000, the fact that the 18 January 2000 document was apparently a precursor to the matters minuted on 28 January, the fact that the draft chairman's notice was clearly a development or emanation from the matters resolved at the meeting on 28 January 2000, and Mr Brailey's lack of clarity in his evidence concerning his receipt of the 18 January 2000 document (ts 886 - 892, 907 - 912). At the very least, his Honour could not, in my view, have been satisfied that Mr Brailey had not seen the 18 January 2000 document prior to the WAE board meeting on 28 January 2000 for the purpose of supporting a finding of dishonesty.

579 Ninthly, his Honour does not explain how his finding that in a 'sense' the appellants thought they were advancing WAE's interests as far as that was possible (reasons [177]), is to be reconciled with a finding of dishonest concealment. Insofar as they thought they were advancing WAE's interests, they had presumably nothing to hide.

580 For these reasons, in my view, bearing in mind the requisite standard, the judge's finding of deliberate deception on 28 January 2000, is glaringly improbable or against compelling inferences to the contrary.

581 If it could not properly be found that Mr Streeter or Mr Cooper deliberately misled Mr Brailey at the meeting on 28 January 2000, it could not, in the circumstances, be found that the minutes of the meeting were devised to disguise the true position. If there was no deception practised at the meeting, it was unlikely to be an occasion for which it was felt necessary to devise misleading minutes. Also, the judge found, the draft Chairman's notice was an 'express admission of a conflict of interest' in causing WAE to transfer its assets, viz its 'name' and 70% of the Cue tenements to WANL (reasons [278]). It was a disclosure of their interest in WANL and a recognition of conflict. It was not an admission of, and was inconsistent with, a policy of deliberate concealment of interest in early 2000.

582 Similarly, the finding of the 'veil of concealment' in the minutes of the meeting between Mr Streeter and Mr Cooper on 28 March 2000 (reasons [288] - [289]) is in substance dependent on the earlier findings with respect to the meeting on 28 January 2000. It assumes a continuation or progression of deception and concealment which first occurred on 28 January 2000.

583 In relation to the finding of the 'surreptitious' activities (reasons [268]) in connection with the use of WAE's name, for the reasons given below in respect of the ninth group of grounds, it was not open on the pleadings for the judge to treat Mr Cooper's conduct as an admission of breach, or the dishonest concealment of breach, of fiduciary duty.

The ninth group of grounds (grounds 9 - 13) - the 'use' of WAE's name

585 By the ninth group of grounds, the appellants contend that the judge erred in finding that Mr Streeter and Mr Cooper owed to WAE, and breached, fiduciary duties not to misuse their positions as directors of WAE, by causing or permitting the name of WAE to be used by WANL. The appellants in their written submissions (pars 220 - 222) contend that in so finding, the judge was in error in that:

(a) There was no finding by the judge as to what use of WAE's name had been made by Streeter and Cooper in the alleged taking or diverting of the opportunity to provide seed capital to further the ANPC proposal. Use was not established merely because the name of the new company, WANL, included two of the words that formed the name of WAE.

(b) Further, there was no finding as to what, if any, significance WAE's name had to the opportunity which was found to have been taken or diverted by Streeter and Cooper.

(c) The judge appears to have equated WAE's name with property, in circumstances where it was a corporate name which was not, and was not claimed to be, a source of goodwill.

586 The appellants also raise a procedural fairness point. They contend (par 219) that in making that finding, the judge did not take into account that:

(a) there was no cause of action pleaded against the appellants for any alleged use or misuse of WAE's name; and

(b) it was never put at trial by WAE that there was a breach of any fiduciary duty on the part of Streeter and Cooper by the use of WANL of part of WAE's name.

587 The appellants contend that the judge, in effect, made the finding referred to as a matter of the proper construction of the judge's reasons.

588 The respondent contends that the judge made no finding to the effect alleged, although, it says, on the evidence, such a finding would have been warranted.

589 WAE did not plead a case to the effect that Mr Streeter and Mr Cooper owed to WAE, and breached, fiduciary duties not to misuse their positions as directors of WAE, by causing or permitting the name of WAE to be used by WANL.

590 Nevertheless, as part of the narrative of the events between December 1999 and July 2000, Mr Cooper gave evidence in chief, which was elaborated upon in cross-examination, as to communications with ANPC regarding the prospect of the new company issuing an additional tranche of shares beyond the tranche proposed for the transfer of the Cue tenements. In the communications with ANPC, consideration was given to WANL issuing this extra tranche of shares either to WAE's shareholders with a view to assisting WANL to achieve the necessary 'spread' for listing, or to WAE itself in exchange for the 'use' of WAE's name. (As to the former, see Mr Cooper's statement, exhibit 252, pars 177 - 182 and ts 1346, 1349, 1416 - 1417, 1419; as to the latter, see exhibit 252, pars 188, 200, 236 - 239 and ts 1427 - 1430, 1448 - 1450, 1457 - 1458, 1467 - 1472. See also Mr Streeter ts 1170, 1187 - 1189, 1194, 1121, 1226 - 1227, 1232 - 1233, 1235, 1237 - 1240; and Mr Hanna ts 1741.)