Rules of the Supreme Court 1971 (WA), O 35, O 45, O 51, O 60, O 61, O 67

Supreme Court Act 1935 (WA), s 51

Registrar's Report as varied adopted and to be given effect

1 Before me are competing applications in respect of a report of a Registrar of this court which I ordered following my judgment after a trial.

2 In these reasons for the orders I would make on those applications I first describe the orders for the report of the Registrar and their background.

3 Then I outline the operative parts of the report of the Registrar.

4 I next describe the competing applications before me.

5 That is followed by my review of the principles which apply to such applications.

6 The balance of these reasons is made up of my application of those principles, as well as my consideration of a further matter raised by the defendants at the hearing before me.

The orders for the report of the Registrar and their background

8 On 28 July 2009, by judgment after a trial in the present action before me, I made the following orders (the orders for an account), among others:

1. The defendants account to the plaintiff for the benefits the defendants received from the contract between the second defendant and TJK Pty Ltd trading as Western Xposure entered into for delivery as described in Able Tours Pty Ltd v Mann [2009] WASC 192 [46] [48] (Able Tours WASC).
2. A Registrar of this court take an account of the benefits received by the defendants from the contracts between the second defendant and TJK Pty Ltd trading as Western Xposure and report to the court as to those benefits.

9 The reasons for judgment in the trial, referred to in order 1, Able Tours WASC, indicate the bases for those orders (the judgment orders). Those bases were two.

10 The first basis was that the first defendant had, in respect of the contracts referred to in order 2, breached his fiduciary duty to his employer, the plaintiff, and was liable to orders for an account and inquiry; the second basis was that the second defendant was also so liable, under the second limb of the principles in Barnes v Addy (1874) LR9ChApp 244. See Able Tours WASC [172]; and [187], read with [174], respectively.

11 The writ of summons by which the present action was commenced was filed on 26 November 2007. The trial in the present action, including the presentation of oral closing submissions, took place over the period 27 29 January and 9 February 2009. The reasons for judgment in Able Tours WASC were delivered on 28 July 2009.

12 On 9 April 2010, the judgment in Able Tours WASC was affirmed on appeal sub nom Mann v Able Tours Pty Ltd [2010] WASCA 59 (Pullin & Buss JJA & Murphy J).

13 I turn now to briefly outline the operative parts of the report of the Registrar.

The operative parts of the report of the Registrar in brief

14 The report of the Registrar (the Registrar's Report) was that of Registrar C Boyle (the Registrar).

15 There were hearings on 15, 16 and 17 August 2011 before the Registrar. The evidence before the Registrar was in the form of four affidavits filed for the defendants, on which the deponents were crossexamined; and an affidavit for the plaintiff.

16 The four affidavits for the defendants were respectively an affidavit of the first defendant sworn 5 November 2009 with the annexures (the first defendant's affidavit of 5 November 2009); an affidavit of the first defendant sworn 17 November 2009 with an annexure (the first defendant's affidavit of 17 November 2009); an affidavit of the first defendant sworn 20 July 2011 with annexures (the first defendant's affidavit of 20 July 2011); and an affidavit of Andrew Anthony Mawer sworn 20 July 2011 (Mr Mawer's affidavit of 20 July 2011). Mr Mawer was a director of the second defendant.

17 The affidavit for the plaintiff was an affidavit of Kevin Henk Maria de Bruin sworn 9 May 2011 (Mr de Bruin's affidavit of 9 May 2011). Mr de Bruin was a director of the plaintiff.

18 The parties lodged written submissions 'later' after the hearing before the Registrar (Registrar's Report [3]). In fact, the plaintiff's written closing submissions are dated 29 August 2011 (the plaintiff's written closing submissions to the Registrar); while those of the defendants are dated 19 September 2011 (the defendants' written closing submissions to the Registrar).

19 The Registrar's Report was delivered on 31 August 2012.

20 The operative parts of the Registrar's Report are the following (my numbering):

1. the 'gross benefits' received by the second defendant that the Registrar reports are in the amount of $1,180,950, inclusive of GST (see [28]);
2. a further payment of $50,000 received by the second defendant, which the plaintiff had submitted ought also to be taken into account as part of gross benefits, should not be so taken account of (see [27], read with [21] and [26]);
3. the 'expenses or other allowances' to be set off against the gross benefits in 1 that the Registrar allows are the sum, being $827,282.18 (subject to an alternative form of accounting below), of the following allowances (see [58]):

3.1 for 'purchases' the amount of $652,009.02 ([42]), representing a reduction from the amount claimed by the defendants after certain concessions of $1,154,773.77, that is, a reduction of $502,276.92 (see [38]);

3.2 for 'wages' the amount of $170,698.30, or in the alternative that amount plus $86,747.65, for the second defendant, but with the first defendant liable to account to the plaintiff separately in the latter amount, being the 'total wage or salary payment' to the first defendant for the relevant period plus '[s]uperannuation contributions' for him ([46], read with [47]); and

3.3 for 'insurance' the amount of $4,574.86 ([51]);

1. no allowance should be made for the following items claimed by the defendants:

4.1 no allowance should be made for 'rent' ($25,626.04: [41]);

4.2 no allowance should be made for 'compulsory superannuation payments as required, and eventually paid [to] the Australian Taxation Office' which the second defendant 'initially failed to pay' ($17,134.29: [53]; and see [58]);

4.3 no allowance should be made for 'vehicle payments' ($9,782.76: [54] and [55]); and

4.4 no allowance should be made for 'depreciation' (20% of $34,918.88: [57]); and

1. there was a 'net obligation to account' of $353,667.82 ([58]).

21 It will be seen, in the next section of these reasons, that the focus of the competing applications is on only the following numbered items from this list: 3.1; 3.2; 4.1; and 4.2. However, it will also be seen that a substantial amount in sum is involved.

22 I turn now to describe the competing applications before me in respect of the Registrar's Report.

23 The plaintiff's application is by notice of motion dated 12 November 2012 (the plaintiff's application). The plaintiff's application is for the Registrar's Report to be carried into effect and adopted; for the defendants to pay $353,667.82 and interest at 6% per annum from 28 July 2009; and the defendants to pay the costs of 'the account before Registrar C Boyle heard 15, 16 and 17 August 2011 to be taxed'.

24 The defendants' application is by notice of motion dated 23 November 2012 (the defendants' application). The defendants' application is for orders to vary certain parts of the Registrar's Report (the variation orders); for an order to remit certain parts of the Registrar's Report to Registrar C Boyle for further consideration (the remitter order); and, in the alternative to the remitter order, the sum stated as claimed by the defendants for purchases be allowed as part of the expenses (the alternative order to remitter). I now describe the variation orders, the remitter order and the alternative order to remitter in somewhat greater detail.

25 The variation orders are for the parts of the Registrar's Report concerning rent (see 4.1 above); wages (see 3.2 above); and superannuation (see 4.2 above), to allow the expenses stated as claimed by the defendants before the Registrar in those respects.

26 The remitter order is sought in respect of the part of the Registrar's Report not allowing certain purchase items claimed by the defendants and referred to in certain material before the Registrar on which he drew.

27 The alternative order to remitter is to allow the sum claimed by the defendants before the Registrar as purchases, that is, without the reduction made in the Registrar's Report.

28 From this point I call the plaintiff's application and the defendants' application collectively the parties' applications.

29 I should note that, following the hearing before me on 25 February 2013, I gave the parties liberty to address by written submissions, agreed if possible, a number of matters raised at the hearing. By email from the defendants of 1 March 2013 (the email of 1 March 2013), responses from the parties were set out showing some but not complete agreement between them as to a number of those matters. One of the matters in which there was no agreement went to an aspect of the remitter order which might be seen to represent a modification of it. I return to that matter below.

31 It did not appear to be in dispute that when an order is made following judgment for a registrar of the court to take an account, being an order of the kind in this case, the court is exercising the power in Supreme Court Act 1935 (WA) s 51(1), which reads as follows:

1. Trial of civil matter may be referred to referee etc.

(1) In any cause or matter, other than a criminal proceeding -

(a) if all the parties interested who are not under disability consent; or

(b) if the cause or matter requires any prolonged examination of documents, or any scientific or local investigation, which cannot, in the opinion of the Court or a judge, conveniently be made before a jury or conducted by the Court; or

(c) if the question in dispute consists wholly or in part of matters of account;

the Court or a judge may at any time order the whole cause or matter, or any question or issue of fact arising therein, to be tried before a master, a registrar, or a special referee or arbitrator agreed on by the parties.

32 The result of making an order for a registrar of the court to take an account, being an order of the kind in this case, is that the provisions of the Rules of the Supreme Court 1971 (WA) (RSC), O 35, O 45, O 51, O 60 and O 61 apply 'in so far as they are relevant and with the necessary modifications, to and in relation to' such account: O 67 r 17. Of these orders, only RSC O 35 is material for my purposes. I turn to that order now.

33 RSC O 35 provides for, inter alia, reports by referees. Order 35 r 7 provides for notice of a report of a referee, and O 35 r 9 provides for an application to adopt or vary the report in a cause or matter 'the further consideration of which has not been adjourned', as follows:

Whenever a report is made by a referee he shall cause notice thereof to be served forthwith on all parties to the trial or reference.

...

1. Adoption etc. of referee's report where case not adjourned

Where the report of the referee has been made in a cause or matter, the further consideration of which has not been adjourned, any party may, by an 8 days' notice of motion, apply to the Court to adopt and carry into effect the report of the referee, or to vary the report, or to remit the cause or matter or any part thereof for rehearing or further consideration to the same or any other referee.

34 A judge on an application under RSC O 35 r 9 exercises a judicial discretion as to whether or not the judge will adopt the report of the referee. As to that discretion I note the following, from LexisNexis, Civil Procedure in Western Australia (as at 20 February 2013) [35.9.2], referring inter alia to Wenco Industrial Pty Ltd v WW Industries Pty Ltd [2009] VSCA 191; (2009) 25 VR 119 and Chocolate Factory Apartments Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 [7] (Chocolate Factory Apartments NSWSC) (varied sub nom Westpoint Management Ltd v Chocolate Factory Apartments Ltd; Chocolate Factory Apartments v Westpoint Finance [2007] NSWCA 253), on which Wenco Industrial [17] largely draws:

[35.9.2] Adoption of report

The judge exercises a judicial discretion as to whether or not he or she will adopt the report of a referee. The judge is not obliged to consider afresh all the issues of fact and law dealt with by the referee's report and the application for its adoption is neither an appeal nor a rehearing. The judge will not adopt the report if it is shown that the referee has misapplied the law, or that his or her report reveals some error of principle, some absence or excess of jurisdiction or some patent misapprehension of the evidence or some perversity or manifest unreasonableness. The judge will adopt a wellreasoned report which leaves him or her with satisfaction that the referee has carefully applied his or her mind to the findings of fact in accordance with legal principle: Super Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 at 555, 562, 564, 565; and Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2008] NSWCA 228; BC200808460.

In Wenco Industrial Pty Ltd v WW Industries Pty Ltd [2009] VSCA 191; BC200907761 the Victorian Court of Appeal set out the following guidelines as to how the question of the adoption of a referee's report should be approached at [17] (footnotes omitted):

(a) First, in exercising the power conferred by r 50.04 [O 35 r 9] to adopt the report of a special referee, the Court has a wide power which is to be exercised 'as the interests of justice require'. This broad mandate should not be the subject of restrictions laid down in advance of judges exercising it Re Markbys Renaissance Pty Ltd [1999] 3 VR 851, 859 at [23]. Subject to what follows, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised.

(b) Secondly, the purpose of r 50.01 and r 50.04 [O 35 r 9] is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation. Further, that purpose would be frustrated if the reference were to be treated as 'some kind of warmup for the real contest': Chocolate Factory Apartments Limited v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7].

(c) Thirdly, insofar as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh: Chocolate Factory Apartments Limited v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7].

(d) Fourthly, where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for inquiry and report: Chocolate Factory Apartments Limited v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7].

(e) Fifthly, if the referee's report reveals some error of principle, absence or excess of jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than 'unsafe and unsatisfactory': Chocolate Factory Apartments Limited v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7].

(f) Sixthly, generally, the referee's findings of fact should not be reagitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence: Chocolate Factory Apartments Limited v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7].

(g) Seventhly, the purpose of r 50.01 and r 50.04 [O 35 r 9] would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based: Chocolate Factory Apartments Limited v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7].

(h) Eighthly, the Court is entitled to consider the futility and cost of relitigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire: Chocolate Factory Apartments Limited v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7].

(i) Ninthly, even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not ordinarily be (in the absence of any of the matters referred to in sub para (e) above) a proper exercise of the discretion conferred by r 50.04 [O 35 r 9] to allow matters agitated before the referee to be reexplored so as to lead to qualification or rejection of the report: Chocolate Factory Apartments Limited v Westpoint Finance Pty Ltd [2005] NSWSC 784, [7]; Super Pty Ltd v SJP Formwork (Australia) Pty Ltd (1992) 29 NSWLR 549; Chloride Batteries Australia Limited v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60; White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193; Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615; Nicholls v Stamer [1980] VicRp 46; [1980] VR 479; Westpoint Management Limited v Chocolate Factory Apartments Limited [2007] NSWCA 253; Bellevarde Constructions Pty Ltd v CPC Energy Pty Ltd [2008] NSWCA 228; Re Markbys Renaissance Pty Ltd [1999] 3 VR 851 and Plumley v Adgauge Pty Ltd [1998] VSCA 70 (Plumley was the appeal in Re Markbys Renaissance - Markbys Renaissance having been decided on 16 June 1995, notwithstanding its appearance in [1999] 3 VR).

Further, a court may act upon the opinion of the referee without specific or detailed regard to the primary evidence relied upon by the referee, so long as the referee's reasons logically and cohesively lead to that opinion of fact: Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corp (1992) 27 NSWLR 567 at 575; (1992) 8 BCL 276; Wenco Industrial Pty Ltd v WW Industries Pty Ltd, above, at [36].

The report of the referee is the report of an expert and not the judgment of a court. The report should be considered in that light and not subjected to any overzealous attack: Treacy v Newlands [2008] VSC 395; BC200808585 at [7(b)(g)]; Wenco Industrial Pty Ltd v WW Industries Pty Ltd, above, at [47].

Referees should give reasons for their opinions so as to enable the parties, the court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the court can be satisfied that the conclusions are based upon such an intellectual exercise: Chocolate Factory Apartments Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784; BC200505723 at [7(11)]; Wenco Industrial Pty Ltd v WW Industries Pty Ltd, above, at [47].

35 I will say more about those of these principles of particular significance to me.

36 It is convenient now that I take each of the orders sought by the defendants' application, before considering the orders sought by the plaintiff's application, for the purposes of applying these principles.

37 I turn then to the parties' applications as indicated.

The defendants' application: the variation order for rent

38 The defendants' application in this respect is to allow as an expense the sum of $25,626.04 claimed by the defendants as rent (see 4.1 above).

39 The defendants' case for the variation of the Registrar's Report in that respect is that it appears unreasonable to decline to accept, as the Registrar did, that rent had been paid.

40 That part of the Registrar's Report in which the Registrar stated he made no allowance for rent claimed is as follows:

I make no allowance for the rent claimed of $25,626.04, for which no invoices could be produced. The evidence led in support of this claim, and particularly the excuses for the lack of documentation, left me unconvinced. It had to me an air of artifice. I was left unconvinced that the expense really had been incurred. Even if it had, it seems to me to be an overhead expense of the business, rather than an expense of the contract. Of course, it was necessary for the second defendant to have somewhere to build the buses, but that is not sufficient [41].

41 The basis for the defendants' case, that it appears unreasonable for the Registrar to decline to accept rent had been paid (in the statement of the Registrar that he was 'unconvinced that the expense had really been incurred'), was as follows.

42 First, the Registrar accepted (see Registrar's Report [40]) that the second defendant was doing nothing else for (at least almost) all the time during which consumables were used than working for the contract between the second defendant and TJK Pty Ltd trading as Western Xposure (the contract, which I use collectively to refer to 'the contracts' described below) to which the orders for an account related. The contract was described in Able Tours WASC [46] [48] as follows:

By 22 November 2007 the second defendant had begun building a bus for Western Xposure. For that bus, the second defendant had prepared a number of quotations which, on the evidence of Mr Mawer, were sent by email to Mr Cousins' address at Western Xposure. Two of the emails were dated 16 November 2007, but sent at different times on that date (exhibits 1.21 and 1.22), and one was dated 20 November 2007 (exhibit 1.23). The bus described in exhibit 1.21 was the first bus that Western Xposure ordered from the second defendant. Exhibit 1.21 was prepared by Mr Mawer, who, as he admitted in cross-examination, 'largely copied' it from exhibit 1.11, the plaintiff's quote to Western Xposure dated 17 August 2007. The terms of exhibit 1.21 required Western Xposure to pay a deposit, which the second defendant received on or about 21 November 2007.

The circumstances under which the second defendant came to build this first bus are in sharp contest, and I return to the evidence in relation to those circumstances below. For present purposes, it is sufficient to note my findings that the most important consideration for Mr Cousins of Western Xposure in placing its orders for new buses was the timetable for delivery of the buses, and that the first defendant had indicated to Mr Cousins that the second defendant could deliver the first bus in six weeks.

By 7 November 2008, the second defendant had built and delivered to Western Xposure a total of eight buses, including seven buses built under contracts that I find were entered into after the agreement for the first bus.

It will be noted that the period of the contract was the period 22 November 2007 to 7 November 2008.

43 However, I note in passing that there was evidence from the defendants before the Registrar that the business of the second defendant over that period also included completion of construction of, and making of alterations to, a simulator for the Fremantle Port Authority; the refurbishment of a drill rig; and preliminary construction work for two further buses for Western Xposure. See the first defendant's affidavit of 20 July 2011 [24] [31].

44 Secondly, there was no challenge before the Registrar to the defendants' evidence that the work of the contract was conducted from rental premises. I note there is no express reference in the Registrar's Report to that evidence; at the same time, I accept that the Registrar proceeded on the basis that there was such evidence and that it was unchallenged.

45 Thirdly, there were documents in evidence, the bank statements of the second defendant, as to relevant monthly rental payments. Again, I note that there is no specific reference in the Registrar's Report to that evidence. However, I consider that it was to that evidence the Registrar was referring in the Registrar's Report [41], as '[t]he evidence led in support of [the] claim'.

46 Fourthly, and finally, there was no challenge before the Registrar to the quantum of rent claimed.

47 Before the Registrar the plaintiff had challenged the defendants to produce documents such as invoices to substantiate the defendants' claim to rent. Where an item of deduction is in dispute in proceedings like those before the Registrar, the onus is on the defendants to prove correctness: see Gava v Grljusich (Unreported, WASCA, Library No 970492, 18 September 1997) 6 (Ipp J, Wallwork & Steytler JJ agreeing).

48 In my view, the present matter is not one of a disputed finding of fact involving a choice between conflicting evidence: compare Wenco Industrial [17(f)]. Rather, it is one of a conclusion arrived at as to the sufficiency of evidence before the Registrar, to permit him to conclude that the onus on the defendants had not been discharged. That conclusion was expressed in terms of him being 'unconvinced' by evidence led in support of the defendants' claim for rent.

49 Accordingly, in terms of the law applicable to the defendants' case, I consider that that case reduces to the submission that the Registrar's Report, in stating that the Registrar was unconvinced by evidence in the defendants' bank statements that rent amounts had been paid totalling the amount claimed by the defendants, revealed a patent misapprehension of the evidence or a perversity or manifest unreasonableness in fact finding, as described in Wenco Industrial [17(e)].

50 I am unable to accept the defendants' case so reduced. The Registrar's Report indicates (see [12] [15]) the basis for the Registrar's determination that of the two witnesses before the Registrar, affidavits from whom were relied upon by the defendants 'to provide the necessary accounting' (Registrar's Report [7]), the first defendant and Mr Mawer, the former's reliance on the latter meant the former's evidence on 'financial matters' could not be regarded as of value 'without corroboration'. See for that determination [15]. As to Mr Mawer, the Registrar's Report indicates (see [17]) the basis for the Registrar's determination, set out there, that the evidence of Mr Mawer 'lacked candour and it is to be treated with suspicion where not corroborated'.

51 It was not put to me that those determinations by the Registrar reveal a patent misapprehension of the evidence or a perversity or manifest unreasonableness in fact finding.

52 Those determinations formed part of a general approach the Registrar took to the evidence from the defendants. I consider it important, both to an analysis of the defendants' case in respect of the application for the present variation order, and to an analysis of the defendants' case for the remitter order, below, to set out the relevant paragraphs from the Registrar's Report in full [12] [19]:

[The first defendant] was cross-examined on his affidavits. It rapidly became apparent that he had very little understanding of how the financial data set out in his affidavits and attachments were derived, or what they meant. I made a note in my bench book early on the first afternoon of his evidence that reads,

Taking so long to find invoices it suggest(s) he doesn't know how it is organised.

He was plainly not familiar with the documents - attachments to his own affidavits - to which he was being taken. I was told that, on the day he commenced his evidence, he was unwell. Making every allowance for that, I still conclude that [the first defendant] had very limited knowledge of what expenses were actually incurred in completing [the contract]. He was taken through a list of some 80 claimed expenses for which the plaintiff contended there were no supporting invoices or other documents. He was able to identify some supporting documentation in relation to only five of those expenses, and possible supporting documents in the case of a further three. There were numerous occasions when the question was put to him and it took several minutes for him to produce a response after searching through the affidavits before him.

The closing submissions of the defendants characterise [the first defendant's] oral evidence thus:

The first defendant is, from his evidence and as he appeared in the witness box, a hands-on tradesmen, who in the course of a long crossexamination, did his best to answer the questions put to him. He readily made appropriate concessions. In general, he dealt adequately with the considerable volume of documentation he was taken to.

In my view, that over-values [the first defendant's] evidence. It was apparent that [the first defendant] was completely reliant on Mr Mawer both for the derivation of financial data and his understanding of them: see, for example, ts 494. He was prepared to swear to the accuracy and completeness of material that he did not understand. He changed position between [the first defendant's affidavit of 5 November 2009 and the first defendant's affidavit of 17 November 2009] to the tune of $368,524.43 with no proper explanation. [The first defendant's] evidence on financial matters I regard as valueless without corroboration.

I do accept that [the first defendant] did his best as a witness in relation to how the work in question was performed, and as to practices within the applicable trades. For example, he was crossexamined as to the treatment of electric drills and other small hand tools as expenses for the purposes of the account. The explanation he gave was that contemporary practice is that inexpensive tools are not economically worth repairing (if indeed that is possible); they are used up and thrown away. I accept that. There are, however obvious difficulties in using such evidence in a quantitative way.

Mr Mawer was also crossexamined. It was apparent that he was the more businessminded of the two witnesses, with some understanding of basic bookkeeping. He certainly had a working understanding of how to use the MYOB software that had produced the various reports that went into evidence. However, Mr Mawer's demeanour in the witness box showed an unfailing hostility to the plaintiff's claims and a failure to accept that it was entitled to any remedy. This seriously diminishes his reliability as a witness. In my view, his evidence lacked candour and it is to be treated with suspicion when not corroborated.

It is clear that the business of the second defendant was not conducted in a sophisticated way. It was not a business that made subtle distinctions between capital and revenue, nor was there any considered allocation of expenses to cost centres. The expenses claimed in [the first defendant's affidavit of 9 November 2009] in reality amounted to everything that was spent in or about the business in the period in question. For example, counsel for the plaintiff established in crossexamination that the defendants had not had any employee or contractor called Dan Murphy. Rather, the items appearing under that name in the list of expenses were actually invoices from the eponymous liquor store: ts 481. Similarly, there was a deal of crossexamination concerning fuel expenses for motor vehicles that it was conceded had an element of nonbusiness, private use: ts 496 500.

The conclusions of those observations is therefore that, in my view, it would not be useful to conduct a minute examination of the expenses claimed, because the data are simply not of a quality that would support it.

53 Viewed against the background of that general approach, the Registrar's conclusion he was unconvinced by what I accept for this purpose was the evidence in the bank statements, unsupported by invoices for rent, is in my view to be seen as the Registrar's statement he saw that evidence as insufficient as corroboration of the evidence of the first defendant or of Mr Mawer that rent had been paid in the total amount claimed. It was not in dispute that the information in the bank statements was from the defendants.

54 Where the Registrar was in a position to draw for this conclusion on his appreciation of 'the excuses for the lack of documentation' ([41]), it is not apparent to me that his conclusion revealed a patent misapprehension of evidence that the defendants relied upon, in the sense of a lack of understanding of that evidence, as distinct from according to particular aspects of it different weight (Wenco Industrial [17(e)]); or perversity or manifest unreasonableness, in the sense of arriving at a conclusion no reasonable tribunal of fact could have reached (see [17(e)]).

55 I consider then that the defendants' case for the variation order for rent is not made out.

56 This makes it unnecessary for me to consider the alternative basis for the determination the Registrar made to which the variation order for rent relates.

The defendants' application: the variation order for wages

58 The defendants' application in this respect is to allow as an expense the sum of $277,455.95, claimed by the defendant as wages, a claim noted in Registrar's Report [43], instead of the sum of $170,698.30 allowed in the Registrar's Report in that respect. See 3.2 above.

59 I first note that the difference between the sum of $277,455.95 and the sum of $170,698.30 is greater (by $20,010) than the amount of $86,747.65, which was the sum of the total wage or salary payment to the first defendant in the period of the contract ($79,585) and superannuation contributions for him ($7,162.65) stated in the Registrar's Report [46]. The difference was not explained in the Registrar's Report. Nor was it explained in the defendants' written submissions before me.

60 However, the difference appears to be the result of typographical and arithmetical errors in the Registrar's Report, and the fact the Registrar did not include any allowance for superannuation contributions claimed under the heading of 'wages', whether the claim was for the first defendant or for others. This appears to be confirmed by the email of 1 March 2013. I return to the matter of the allowance for superannuation contributions below.

61 As to typographical and arithmetical errors, there was evidence for the defendants that they claimed as total wages paid in relation to the contract, before allowing for superannuation contributions, the sum of $257,455.95, that is, $20,000 less than the amount referred to in Registrar's Report [43]. See the first defendant's affidavit of 20 July 2011 [16] and [21], which were the paragraphs in that affidavit referred to in the Registrar's Report [43]. If $257,455.95 is reduced by $86,747.65, the total wage or salary payment to the first defendant plus superannuation contributions for him referred to in Registrar's Report [46], the net is $170,708.30, that is, the allowance [46] refers to the Registrar making, plus $10. The latter difference appears to me to be the result of an arithmetical error.

62 At the same time, I note that the figure of $79,585 for wages paid to the first defendant was, on evidence from the defendants before the Registrar, not that which the defendants claimed as the wages or salary payments to the first defendant in total in the period of the contract. The first defendant's affidavit of 20 July 2011 indicates that that figure, which appeared in an earlier affidavit of the first defendant, the first defendant's affidavit of 5 November 2009, should be reduced for wages paid to the first defendant for the six week period prior to 19 November 2007, which that figure had included. The wages paid for that prior period totalled $8,682. See the first defendant's affidavit of 20 July 2011 [20] [21], read with the first defendant's affidavit of 5 November 2009, annexure 'PJM 5'. The net wages or salary paid to the first defendant as finally claimed by the defendants should therefore have been stated in the Registrar's Report [46] as $70,903. (A corresponding adjustment to the figure for superannuation contributions for the first defendant in [46], to which I return below under the variation order for superannuation, would also appear to be necessary.)

63 Of course, correcting for those matters would, on the analysis in the Registrar's Report, result in a higher net allowance for 'wages', not including superannuation contributions, of $186,552.95 (that is, $257,455.95 less $70,903). I will return to that amount below.

64 From this point forward, in accordance with my understanding of the email of 1 March 2013, I will treat the defendants' application for the present variation order as one for the making of an allowance for the amount of $257,445.95.

65 I will deal with the matter of superannuation contributions, including those for the first defendant, under the variation order sought for superannuation, below.

66 The defendants' case for the variation order for wages is that the wages paid to the first defendant were a 'legitimate cost of performing the contract', while the effect of the Registrar's Report was to treat the sum paid to the first defendant as profit. Such treatment, it was submitted, was to punish the first defendant and unjustly to enrich the plaintiff.

67 That part of the Registrar's Report in which the Registrar stated he treated wages paid to, as well superannuation contributions paid for, the first defendant was as follows [43] [47]:

The total claimed is $277,455.95: [the first defendant's affidavit of 20 July 2011] at par 16 and par 21, [the first defendant's affidavit of 5 November 2009] par 28 31 and payroll registers at PJM 5 and PJM 6.

The plaintiff contends (plaintiff's closing submissions par 34) that the court should exercise its discretion not to allow the defendants' claims for wages and superannuation for [the first defendant] and Mr Mawer, because of the breach of fiduciary duty found by the trial Judge.

Mr Mawer is not an accounting party. For present purposes, there is no reason to treat wage or salary payments to him differently from payments to a non-defendant employee or contractor. It does not seem to me that there is any basis not to allow the second defendant the expense it has incurred in making salary payments to Mr Mawer, and compulsory superannuation contributions associated with those.

[The first defendant] is in a different category. The authorities show that it is a matter of discretionary judgment whether any allowance should be made for wage and like payments to a defaulting party. In my view it would be inequitable for [the first defendant] to receive any profit for work in an enterprise that was in breach of his duty. Attachment PJM 5 at page 82 to [the first defendant's affidavit of 5 November 2009] shows that the total wage or salary payment to the first defendant in the period in question were $79,585. Superannuation contributions for [the first defendant] are shown on that page as being $7,162.65. The sum of those two amounts is $86,747.65. The total claimed should be reduced by that amount, resulting in an allowance of $170,698.30.

In this way it is the second defendant that is denied the credit for [the first defendant]'s wages. The alternative would be to allow the second defendant the credit for the wage expense on the basis that the first defendant would separately account to the plaintiff for the wage benefit he derived. It is a question of which pocket the accounting credit comes from. The two methods produce the same net result for the plaintiff. I have made the calculation on the basis I have done, but I respectfully suggest that the trial Judge, when making orders giving effect to this report, may be able to treat it either way.

68 I consider that the defendants' case for the variation order for wages, although not so expressed, goes to both alternatives put by the Registrar.

69 The basis for the defendants' case for the variation order for wages is that there was no challenge before the Registrar to the need to employ tradesmen, whether the first defendant or another, to do work on the contract, at a rate of 10 hours per day, 5.5 days per week, for which the first defendant was paid wages. At the same time, the first defendant was entitled to earn a living and could have earned equivalent wages from another employer.

70 I note for this last purpose that, by the time the second defendant had begun building buses under the contract (22 November 2007), the first defendant had left the employ of the plaintiff (in fact, he left that employ, I had found, on 28 September 2007). See Able Tours WASC [41]. There was no indication in the evidence at the trial before me, or before the Registrar so far as I can readily tell, that the first defendant had other employment during the period of work on the contract than in relation to that work.

71 At the hearing before me the defendants also put their case in terms that the Registrar had not met the standard for reasons to explain his conclusion not to allow wages for the first defendant applicable from Wenco Industrial [47], referred to in Civil Procedure in Western Australia [35.9.2]. I will describe that standard in slightly more detail below, in connection with the defendants' application for a remitter order.

72 I begin the analysis of the defendants' case by noting, as did the Registrar in the Registrar's Report, the basis for the liability to account of both the first defendant and the second defendant, from Able Tours WASC. I consider that the Registrar correctly, and sufficiently for my purposes here, subject to an addition I need to make, set out that basis as follows (Registrar's Report [4]):

The trial judge found that the first defendant breached his duties to the plaintiff, who was his employer. The breach consisted in the misuse of confidential information obtained in the course of his employment for his own purposes: [Able Tours WASC], particularly at [115] [172]. His Honour found that the second defendant was liable under the second limb of the principle in Barnes v Addy ..., having knowledge of the first defendant's 'dishonest and fraudulent' design: [Able Tours WASC] [173] [188]. That is the background to the order that the defendants account for the benefits derived from the identified contracts.

73 To this I add that the misuse pleaded, which at trial I found proved, was in connection with the first defendant causing or procuring the entry into the contract by the second defendant, a company which was formed not long before the first defendant resigned from his employment at the plaintiff and of which the first defendant was a director and major shareholder. See Able Tours WASC [1], read with [146], [162], [173] and [179].

74 I consider that the applicable principle as to whether or not to make an allowance for wages and related payments for the first defendant's work on the contract is that from Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 562 (Mason CJ, Brennan, Deane, Dawson & Gaudron JJ):

Whether it is appropriate to allow an errant fiduciary a proportion of profits or to make an allowance in respect of skill, expertise and other expenses is a matter of judgment which will depend on the facts of the given case ([See McCamus, 'Remedies for Breach of Fiduciary Duty', (1991) Special Lectures of the Law Society of Upper Canada, 1990, Fiduciary Duties 57 at 6263; see also O'Sullivan v Management Agency & Music Ltd [1985] QB 428]). However, as a general rule, in conformity with the principle that a fiduciary must not profit from a breach of fiduciary duty, a court will not apportion profits in the absence of an antecedent arrangement for profitsharing but will make allowance for skill, expertise and other expenses. (emphasis added)

75 In my view, the 'general rule' indicates an allowance for wages is appropriate, as an allowance for 'skill' or 'expertise', absent reason to proceed otherwise.

76 I would add that the 'general rule' would also apply to superannuation contributions for the first defendant. Such contributions, it seems to me, are legally required, like payments for workers compensation cover. As is noted in the Registrar's Report, payments legally required for workers compensation cover in effect are part of the wage and salary cost: see [49]. I return to the variation order sought for superannuation below.

77 However, I determined in Able Tours WASC that the first defendant's breach of fiduciary duty was 'dishonest and fraudulent', as noted in the Registrar's Report [4]: see Able Tours WASC [187]. There is authority that where there is an element of fraud in the fiduciary's breach this is to be taken into account in deciding what allowance should be made for the work and skill of the fiduciary: see Green & Clara Pty Ltd v Bestobell Industries Pty Ltd (No 2) [1984] WAR 32, 36 37 (Brinsden J); Meagher RP, Heydon JD & Leeming MJ, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (4th ed, 2002) [5255]. In particular cases of fraudulent conduct, it may be appropriate to deny any such allowance completely: see United States Surgical Corp v Hospital Products International Pty Ltd [1983] 2 NSWLR 157, 242 243 (Moffitt P, Hope & Samuels JJA) (Hospital Products NSWCA), reversed on other grounds without reaching this point sub nom Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41; Meagher, Gummow & Lehane's Equity [5255].

78 It may be noted that the allowance for wages and superannuation contributions as claimed here appears not to have been treated by the Registrar as including any element of higher reward for being involved in working for a new company, rather than for an established one, like his previous employer, the plaintiff. In Green & Clara (No 2), where the registrar in the report under consideration there had made some, but not a full, allowance for such an element, Brinsden J found that that approach had not been shown to be incorrect (38). I indicated in Able Tours WASC that the breach of fiduciary duty in Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1, on which the obligation to account the basis of the registrar's report in Green & Clara (No 2) rested, was not 'materially distinguishable' from that of the first defendant: Able Tours WASC [186].

79 However, the amounts with which a defaulting fiduciary should be credited in accounting for profits are properly described as 'just allowances', as being everything which a court 'might think just and proper': see Hospital Products NSWCA (241 242) quoting from Re Jarvis, deceased [1958] 1 WLR 815, 820; [1958] 2 All ER 336, 340 341 (Upjohn J) and Lord Provost of Edinburgh v Lord Advocate (1879) 4 App Cas 823, 839 (Lord Hatherley).

80 The just quoted language, and the range of possibilities in respect of a fiduciary acting fraudulently indicated by Green & Clara (No 2) and Hospital Products NSWCA, in my view show that a judgment of a discretionary kind is involved in making a 'just allowance', in this respect at least.

81 It is not evident to me from the former decision that the denial of an allowance in a case such as this one is outside the range of a sound exercise of such a judgment. It seems to me, therefore, that there is no question here of an error of principle within Wenco Industrial [17(e)]. Nor, it seems to me, is there any question here of application of legal standards to established facts such that I am required to consider and determine the matter of an allowance for the wages for the first defendant afresh in accordance with Wenco Industrial [17(e)]. Further, I note that Brinsden J in Green & Clara (No 2) did not so proceed.

82 Further, I consider the Registrar's Report meets the standard for reasons from Wenco Industrial [47]. I so consider in view of the clear acknowledgement of the 'authorities' in relation to the present point in the Registrar's Report [46], even if they were not expressly cited; the reference to the first defendant's '"dishonest and fraudulent" design' in [4], even if it was not repeated expressly in the present context; and the use of the word 'inequitable' in [46]. I note also for this purpose the principle, as referred to in Civil Procedure in Western Australia [35.9.2], that a report like the Registrar's Report should not be subject to 'overzealous attack'.

83 Therefore, I would not make the variation order for wages sought.

84 However, on my analysis in this section of my reasons, the Registrar's Report reveals a 'patent misapprehension of the evidence' within Wenco Industrial [17(e)] as to the wages claim of the defendants, and I would vary the Registrar's Report to make the larger allowance for wages I previously referred to, of $186,552.95.

85 I turn now to the variation order sought for superannuation contributions.

The defendants' application: the variation order for superannuation contributions

86 The defendants' application in the present respect is to allow as an expense the sum of $17,134.29 'claimed by the defendants [by] way of superannuation contributions' (see 4.2 above).

87 The defendants' case appears to be that, if allowance is made for Mr Mawer's wages, superannuation payments made for him should be allowed also; and if allowance is made for the first defendant's wages, superannuation payments for him should further be allowed.

88 At the outset, I should note that the Registrar's Report states that the Registrar's determination is that it

does not seem to me that there is any basis not to allow the second defendant the expense it has incurred in making salary payments to Mr Mawer, and compulsory superannuation contributions associated with those [45].

In the previous section of these reasons I have indicated why this appears to me to be the correct principle in respect of wages for which it is 'just' to make an allowance.

89 However, I note the reference in the Registrar's Report [45] to making an allowance for 'the expense [the second defendant] has incurred' (my emphasis). I consider this raises the question of the sufficiency of the evidence before the Registrar to discharge the onus on the defendants from Gava (6) to show the incurral of expenses claimed for compulsory superannuation contributions associated with wages properly claimed as expenses.

90 In that last respect, I note the following, from the Registrar's Report:

[The first defendant's affidavit of 20 July 2011] at pars 33 38 sets out, among other things, that the second defendant initially failed to pay compulsory superannuation payments as required, and eventually paid the Australian Taxation Office $17,134.29. The second defendant is clearly not entitled to any credit for expenses incurred as a result of its having to meet its statutory obligations as and when required [53].

91 The first defendant's affidavit of 20 July 2011 [33] [38], to which the Registrar's Report [53] refers, describes, in [36] [37], a payment of the sum of $17,134.29 to the Australian Taxation Office on or about 15 June 2009. The context to that identification of that payment indicates, in my view, that the first defendant is deposing that that payment included amounts to discharge the liability for compulsory superannuation contributions for the individuals to whom that context indicates wages were paid in connection with the contract. Further, the allowance the Registrar made for wages expenses (see above) indicates to me that he has accepted an allowance for at least some of those wages should be made.

92 I accept that there is a difficulty on the material referred to in the Registrar's Report [53] and related material in accounting for the sum of $17,134.29 as for compulsory superannuation contributions for wages paid in connection with the contract. However, for reasons which follow I consider that the Registrar's Report [53] appears to indicate that that sum included payment of liability for compulsory superannuation contributions for wages which the Registrar had allowed as expenses of the contract.

93 I note that the first defendant's affidavit of 20 July 2011 [38] states the first defendant's belief that the second defendant paid 'gross wages' in the amounts there described, 'in relation to [the contract]', to three named individuals, being the first defendant, Mr Mawer and Mrs Andrea Mann, who is the wife of the first defendant. The first defendant's affidavit of 20 July 2011 [39] goes on to refer to the second defendant's 'liability to pay a superannuation charge' of 9% of the sum of gross wages, or $16,394.97.

94 However, the first defendant's affidavit of 20 July 2011 [35] (see also [33]) refers to 'compulsory superannuation contributions' in relation to 'wages received by [Mr Mawer, Mrs Mann and the first defendant] from the second defendant', which was the total of 'compulsory superannuation contributions' for those wages, in the amount of $17,435.51. Those paragraphs of the first defendant's affidavit of 20 July 2011 refer for that amount to the first defendant's affidavit of 5 November 2009 [30]. Superannuation contributions shown in [30] of this affidavit presumably (the matter is not made altogether clear in the first defendant's affidavit of 20 July 2011) must be reduced for wages paid to the first defendant and to Mrs Mann, $2,880 and $8,682, respectively, which the first defendant's affidavit of 20 July 2011 [20] states do not relate to the contract, having been paid for a prior period, and apparently having been included as part of the wages on which the superannuation contributions liability total of $17,435.51 is based. These reductions produce a total for compulsory superannuation contributions of $16,394.97, previously referred to.

95 On the basis of those matters, I consider that the evidence the Registrar accepted as payment for compulsory superannuation contributions, in the amount of $17,134.29, is for compulsory superannuation contributions including but not limited to those for claimed wages in relation to the contract of the three named individuals, Mrs Mann, Mr Mawer and the first defendant.

96 However, as to superannuation contributions for the first defendant, I had previously indicated why I would not make the variation order for wages for the first defendant. It follows that that I would not make a variation order for superannuation contribution payments for him.

97 As to superannuation contributions for Mr Mawer and for Mrs Mann, I am unable to see the basis for denying an allowance for such contributions, if there were sufficient proof of incurral of the expense.

98 It might be said, as for the matter of the variation order for rent above, that there was no sufficient corroboration for the evidence from the first defendant and from Mr Mawer as to the amount said to have been paid on that account. This, as I understood it, was the submission for the plaintiff at the hearing before me.

99 However, that submission, it seems to me, does not accord with the language used in [53], which does not appear to be the language of insufficient proof. To the contrary, the Registrar appears, as I have indicated, to have accepted that the amount referred to was paid, on evidence indicating it was paid, in respect of the liability for compulsory superannuation contributions for Mr Mawer, Mrs Mann and the first defendant. It was not in contest that the Registrar made allowance for wages paid to the first two.

100 It follows that I consider that the failure to allow any amount for superannuation contributions reveals either an error of principle that leads me to reject that determination (see Wenco Industrial [17(e)]); or a failure to give reasons for the rejection of evidence of payment of an amount, including to discharge the liability in question, which the Registrar appears otherwise to accept, sufficient to indicate that that rejection was the result of a process of logic and the application of a considered mind to the factual circumstances proved (see Chocolate Factory Apartments NSWSC [7(11)] and Wenco Industrial [47]).

101 At the same time, I consider on the material I have reviewed thus far that I cannot make the variation order sought. Instead, I would make a variation order in the amount for superannuation contributions for those persons for whom proper allowance for wages may be made. Those persons on the material before the Registrar were: Mrs Mann; Mr Mawer; and, apart from the first defendant, three others, all as identified above. However, no superannuation payments or liability for those three appear to have been in evidence before the Registrar or were pointed to by the defendant at the hearing before me or in the email of 1 March 2013.

102 So far as superannuation contributions for Mrs Mann and Mr Mawer are concerned, the evidence is of liability of the second defendant of 9% of the gross wages in relation to the contract for Mrs Mann, of $32,656.56 (superannuation contribution of $2,939.09), and for Mr Mawer, of $78,606.88 (superannuation contribution of $7,074.62).

103 Therefore, there should be a variation order for superannuation contributions raising the allowance in the Registrar's Report from zero dollars (see Registrar's Report [58]) to the sum of the two amounts in parentheses above, or $10,013.71.

The defendants' application: the remitter order

105 The defendants' application in this respect is to remit for further consideration and report by the Registrar the matter of the individual items forming the totals of the various amounts classified under certain headings in the attachment representing a spreadsheet 'KDB 1' to Mr de Bruin's affidavit of 9 May 2011, relied upon by the Registrar for the purposes of his allowance as expenses of certain purchases (see 3.1 above).

106 The headings in question are four, which with their respective total amounts are: 'Pink capital purchases' ($54,728.13); 'Yellow buses nine onwards costs' ($259,882.23); 'Green costs not relevant to buses' ($106,860.46); and 'Orange/pink invoices that may relate to drill rigs' ($3,085.45).

107 Each of those headings, and the others in the relevant part of the spreadsheet 'KDB 1' annexed to Mr de Bruin's affidavit of 9 May 2011, are further explained and addressed in Mr de Bruin's affidavit of 9 May 2011 as follows:

Annexure 'KDB 1' has colour coded entries in the purchases register which are then cross referenced by page numbers to each invoice provided in [the first defendant's] affidavits. The following are the colour codes and their descriptions:

BLUE: Confirmed construction costs that relate to buses one to eight;

ORANGE: Consumable items that should be apportioned between buses one to eight, drill rigs, Fremantle Port Authority simulator and business running costs. Motor vehicle fuel has been included and this should also be further based on a business percentage of the motor vehicle business usage;

PINK: Capital purchase items. The cost allowance should be reflective of a depreciation amount for each item. These are bought at different times in the year and should further be adjusted pro rata for the period of use;

YELLOW: These are costs that have been isolated as being relevant to the production of bus nine onwards;

GREEN: These are costs, in my opinion, that are not relevant to the bus building process. I understand a private vehicle may have been used and hence fuel costs relating to this vehicle have also been included in this column;

ORANGE/PINK: These are for costs that I understand relate to drill rigs;

WHITE: There are two white columns. One column represents all amounts in the purchases register for which no invoice was provided by the second defendant. The other white column represents rental payments for which no invoices were provided by the second defendant [16].

108 Following the hearing before the Registrar and as an attachment to the plaintiff's written closing submissions to the Registrar, a revised spreadsheet (the revised spreadsheet) was provided to the Registrar showing adjustments in light of the crossexamination at the hearing before him and the plaintiff's written closing submissions to the Registrar themselves. The revised spreadsheet showed revised totals for 'Pink capital purchases' ($9,018.52 instead of $54,728.13); for 'Yellow buses nine onwards costs' ($31,760.96 instead of $259,882.23); for 'Green costs not relevant to buses' ($83,349.45 instead of $106,860.46); and 'Orange/pink invoices that may relate to drill rigs' ($3,045.45 instead of $3,085.45).

109 Also following the hearing before the Registrar, as an annexure to the defendants' closing written submissions to the Registrar, a summary response to the revised spreadsheet (the response to the revised spreadsheet) was provided to the Registrar. The response to the revised spreadsheet, when considered with the defendants' closing submissions to the Registrar, indicated that the amounts shown in the revised spreadsheet for the four headings in question should be reduced by the total amounts the defendants conceded should not be allowed as expenses, for 'Pink capital purchases' (by $3200.99); for 'Yellow buses nine onwards costs' (by $10,811.63); and for 'Green costs not relevant to buses' (by $43,411.42). The response to the revised spreadsheet indicated that there was no reduction to be made in respect of the total for 'Orange/Pink invoices that may relate to drill rigs' (that is, the reduction was nil).

110 I note that the total of the respective amounts under the four headings in question from the revised spreadsheet is $127,174.38, while the total from the corresponding four headings in the response to the revised spreadsheet is $57,424.04, yielding a difference of $69,750.34. It might be expected that this difference is that to which the remitter order relates. However, the defendants' written submissions for the hearing of 25 February 2013 before me referred to the total of the costs in question as being $84,062.

111 The defendants in the email of 1 March 2013 indicated that the amount of $84,062 also included the amount shown to the heading in the revised spreadsheet 'White no invoice supplied' ($14,312.63), in respect of which the response to the revised spreadsheet indicated there was no reduction to be made (that is, the reduction was nil). The sum of $69,750.34 and $14,312.63 is in fact $84,062.97.

112 I accept that explanation, although I note, as the plaintiff in the email of 1 March 2013 also appears to indicate, this in effect modifies, in a way the defendants' written submissions for and oral submissions at the hearing before me did not draw attention to, the terms of the remitter order sought. I return to this matter below.

113 The defendants' case for the remitter order is that none of the costs items under the pink, yellow, green and orange/pink headings in the spreadsheet 'KDB 1' annexed to Mr de Bruin's affidavit of 9 May 2011 (and, I presume, the under the 'White no invoice supplied' heading) was allowed as an expense, despite the fact that they were made up of individual items the subject of evidence from the defendants, there was no conflicting evidence from the plaintiff with respect to them, and no reasons were provided by the Registrar for the determination not to allow them as expenses.

114 The treatment in the Registrar's Report of the costs in the spreadsheet 'KDB 1' to Mr de Bruin's affidavit of 9 May 2011 (and the revised spreadsheet) is in [38] [42]. I have already considered [41], which is to do with rent. I consider that the remaining paragraphs should be set out in full, after setting out the Registrar's reasons, in [35] [37], for the approach he took in the former paragraphs.

115 Registrar's Report [35] [40] and [42] are as follows:

Conclusions as to expenses

I have considered the nature and reliability of the evidence led on behalf of the defendants in some detail. That is in order to show why I think it would be an exercise in bogus precision to parse the accounts minutely and rule on the admissibility of each item. I bear in mind the overriding objective to ensure that the account taken reflects the intent of the order of the trial Judge. I bear in mind the authorities I have cited as to the nature and purpose of the remedy of account.

I do not think it is necessary for me to attempt to examine each of the hundreds of individual items appearing in the accounts: My Kinda Town Ltd v Soll (1982) FSR 147, 159; and Hospital Products Limited v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 107, both cited with approval in [Warman International HCA] [[25]].

Taken together, those matters lead me to conclude that it is appropriate that I make an allowance under each of the headings of purchases, wages, insurance, superannuation, vehicle repayments and depreciation. In doing so, I explain in broad terms why I make each allowance, without dealing with each item claimed under that heading.

Purchases

The purchases claimed at the opening of the hearing were $1,180,950, which was reduced to $1,154,773.77 by concessions made in the course of the hearing. That latter figure is used as the control figure in [the spreadsheet 'KDB 1' annexed to Mr de Bruin's affidavit of 9 May 2011]. A revised version of that reconciliation was attached to the plaintiff's closing submissions, and that is the version I use [(the revised spreadsheet)].

I would allow the conceded items (blue in [the spreadsheet 'KDB 1' annexed to Mr de Bruin's affidavit of 9 May 2011]), which total $601,732.10.

I would also allow all the consumable items (orange), which total $50,276.92. It is not clear from the plaintiffs submissions just what the objection to these items is. It was the evidence of [the first defendant] and Mr Mawer (which in this instance I accept) that these were truly consumables; that is, items used up in constructing the eight buses. The second defendant was doing nothing else for (at least almost) all the time during which these consumables were used.

...

The total to be allowed under this head of purchases is therefore $652,009.02.

116 I note that the requirement for reasons for opinions in a report like the Registrar's Report is as I have quoted from Civil Procedure in Western Australia [35.9.2], above, citing Chocolate Factory Apartments NSWSC [7(11)] and Wenco Industrial [47]. It is sufficient I reproduce Wenco Industrial [47] in material part:

The report should be considered in that light and not subjected to any overzealous attack. [See generally Treacy v Newlands [2008] VSC 395, [7(b)(g)] and the authorities referred to therein.] As was said by McDougall J in Chocolate Factory Apartments NSWSC [2005] NSWSC 784, [7(11)]:

'Referees should give reasons for their opinions so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise.'

117 I have noted the authority referred to in Registrar's Report [36], and in particular Warman International (558) [25], the latter which I also reproduce in full:

The assessment of the profit will often be extremely difficult in practice; accordingly it has been said that '[w]hat will be required on the inquiry ... will not be mathematical exactness but only a reasonable approximation' [My Kinda Town Ltd v Soll, [1982] FSR 147, at 159, per Slade J]. What is necessary however is to determine as accurately as possible the true measure of the profit or benefit obtained by the fiduciary in breach of his duty [Hospital Products [1984] HCA 64; (1984) 156 CLR 41, 110].

118 With due respect to the Registrar, I do not consider that the latter source speaks to the requirement for reasons. Wenco Industrial [47] does.

119 However, I do not consider Wenco Industrial [47] requires individual items or even totals thereof to be addressed, at least in every case. At the same time, I consider that the requirement does here demand a statement or statements from the Registrar that indicate, for what in effect is the disallowance as expenses of all the costs described in spreadsheet 'KDB 1' attached to Mr de Bruin's affidavit of 9 May 2011 and the revised spreadsheet other than those under the two headings referred to in Registrar's Report [39] [40], that that disallowance is the result of a process of logic and the application of a considered mind to factual circumstances proved, here in the sense of factual circumstances not contested.

120 I consider that that requirement is met in the Registrar's description of the general approach he took to the evidence of the defendants before him, and the context to the revised spreadsheet and the response to the revised spreadsheet. I deal with these matters next.

121 As to the Registrar's general approach to evidence before him, I have previously described this, in terms of the general approach the Registrar stated he would take to the evidence of the first defendant and of Mr Mawer. I have previously set out in full the description of that general approach in the Registrar's Report [12] [19]. I need only highlight here the principal features of that general approach.

122 The only evidence before the Registrar, apart from that of Mr de Bruin, was in the form of the affidavits of the first defendant and their attachments, and the affidavit of Mr Mawer, on which they were respectively crossexamined. The Registrar determined that the first defendant's evidence on 'financial matters' could not be regarded as of value 'without corroboration' [15]; and that Mr Mawer's evidence 'lacked candour and it is to be treated with suspicion where not corroborated' [17]. And the Registrar further determined that 'it would not be useful to conduct a minute examination of the expenses claimed, because the data are simply not of a quality that would support it' [19].

123 That previous indication was in connection with my consideration of the variation order for rent. However, those paragraphs in the Registrar's Report were clearly of general application.

124 As to the context to the revised spreadsheet and the response to the revised spreadsheet, there were the four affidavits of the first defendant and Mr Mawer between them, referred to by the Registrar as ones 'relied on to provide the necessary accounting' by the defendants (Registrar's Report [7]), being the first defendant's affidavit of 5 November 2009; the first defendant's affidavit of 17 November 2009; the first defendant's affidavit of 20 July 2011; and Mr Mawer's affidavit of 20 July 2011.

125 The only other affidavit evidence before the Registrar, as I have already indicated, was Mr de Bruin's affidavit of 9 May 2011. I note that certain content in Mr de Bruin's affidavit of 9 May 2011 was struck out by the Registrar (see Registrar's Report [8]). However, it seems to me that it cannot be contested that the Registrar was in a position to view the spreadsheet 'KDB 1' annexed to Mr de Bruin's affidavit of 9 May 2011 as follows:

In my view, [Mr de Bruin's affidavit of 9 May 2011], and attachment 'KDB 1' in particular, [is to be taken] not so much as evidence as a way of looking at the evidence. It is a tool that may or may not be useful to classify and analyse the primary evidence [10].

126 I am fortified in that view by the response to the revised spreadsheet. The response to the revised spreadsheet uses most of the same headings or classifications, and describes the concessions the defendants were prepared to make by reference to them. It is clear from the revised spreadsheet and the response to the revised spreadsheet, and recognised by the defendants, that the plaintiff had identified what expenses were in contention. And between the production of the spreadsheet 'KDB 1' annexed to Mr de Bruin's affidavit of 9 May 2011 and the production of the revised spreadsheet there were the first defendant's affidavit of 20 July 2011 and Mr Mawer's affidavit of 20 July 2011.

127 In that context, which is apparent from the Registrar's Report, the Registrar states (at [38] [42]) what expenses he would allow ([39] [40]), and specifies one set of expenses (for rent) that he would not ([41]), indicating by necessary implication (compare [38] with [42], against the revised spreadsheet) the others he would not.

128 There are no express reasons given in those last paragraphs for that last disallowance. However, given the general approach in the context I have described, it is my view that the Registrar was not satisfied that the evidence of the amounts, disallowed by the Registrar, claimed by the defendants and grouped under the headings in the revised spreadsheet the subject of the remitter order (and including those claimed under the heading 'White no invoice supplied') should be seen by the application of the standards set in that general approach to be sufficiently made out.

129 It may be noted again that this is the same reasoning as is made clear in this context for the amounts, disallowed by the Registrar, for rent ([41]). However, in view of the general approach and the context as I have described them I do not consider I should infer from that clear description a different approach was adopted towards the other amounts disallowed.

130 On my view, I consider the Registrar's Report has enabled the parties, the court and disinterested observers to know that the conclusion of the Registrar is not arbitrary, nor influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to factual circumstances proved. See Chocolate Factory Apartments NSWSC [7(11)]; Wenco Industrial [47].

132 I note, as I have at a number of points previously in these reasons, that in the 1 March 2013 email the defendants appear to indicate that the remitter order was also to be seen as going to the disallowance of the expenses classified under the heading referred to in the 1 March 2013 email as 'White no invoice supplied'. Whether or not it would be appropriate in the circumstances to allow modification of the defendants' application in that respect after judgment has been reserved, I consider on the reasoning I have described that that reasoning is equally applicable to any remitter order in that respect. I therefore do not have to further consider the question of whether to allow such modification.

133 I turn now to the alternative order to remitter.

The defendants' application: the alternative order to remitter

134 The defendants' application in this respect is as follows:

In the alternative to [the order for remitter], that the sum of $761,698.05 claimed by the Defendants by way of 'Purchases' (but reduced to the sum of $652,009.02 in paragraph [58] of [the Registrar's Report]) be allowed as part of the expenses incurred by the Defendants in performing [the contract].

135 There is nothing in the written submissions of the defendants before me with respect to that order. The sum of $761,698.05 does not appear anywhere in the Registrar's Report. However it does appear in the written closing submissions of the defendants to the Registrar, as being the difference between the total shown in the 'purchase register' annexure 'PJM 4' to the first defendant's affidavit of 5 November 2009 (see page 81) and the adjustments itemised there. Most of those are adjusted amounts put forward in those submissions for headings in the spreadsheet 'KDB 1' annexed to Mr de Bruin's affidavit of 9 May 2011.

136 I would not make the alternative order. It would entail me arriving at a different conclusion with respect to 'purchases' from that in the Registrar's Report. For the reasons indicated in the prior section of these reasons I would not do that.

137 I turn now to a matter the defendants raised at the hearing, as to the terms of any order to give effect to the Registrar's Report, whether as varied or otherwise.

The matter of the terms of any order to give effect to the Registrar's Report

138 At the hearing before me on 25 February 2013 the defendants asked that I consider requiring an undertaking from the plaintiff in respect of the amount awarded to the plaintiff as a condition of orders to be made on the Registrar's Report, whether or not as varied.

139 For this purpose the defendants drew my attention to WA Fork Truck Distributors Pty Ltd v Jones [2003] WASC 102. That was a case where Pullin J awarded an employer damages for breach of an employment contract and equitable compensation for breach of fiduciary duties by a former employee. In [113] [114] Pullin J said this, referring to Tuite v Exelby (1992) 25 ATR 81; (1992) 93 ATC 4293 and PM Sulcs & Associates Pty Ltd v Daihatsu Australia Pty Ltd [2001] NSWSC 798, among other authorities:

I also invited further written submissions from the parties following a submission by the defendants that any award of compensation should be reduced by the amount of corporate tax which would have been payable by the plaintiff. The defendant referred to Digital Pulse v Harris [(2002) 166 FLR 421] at [107], where Palmer J held that a provision for tax at the corporate tax rate should be deducted from the gross profits of the projects which had been diverted from the plaintiff in that case. As a result, I invited further submissions from the parties. Neither of the parties chose to make any submissions. In Tuite ... at 93, the Court awarded damages without deducting income tax likely to be payable. Shepherdson J quoted the following statement of Diplock LJ in London & Thames Haven Oil Wharves Ltd v Attwooll [1967] Ch 772 at 815 where he said:

'Where, pursuant to a legal right, a trader receives from another person compensation for the trader's failure to receive a sum of money which, if it had been received, would have been credited to the amount of profits (if any) arising in any year from the trade carried on by him at the time when the compensation is so received, the compensation is to be treated for income tax purposes in the same way as that sum of money would have been treated if it had been received, instead of the compensation. The rule is applicable whatever the source of the legal right of the trader to recover the compensation. It may arise from a primary obligation under a contract, such as a contract of insurance, from a secondary obligation arising out of non-performance of a contract, such as a right to damages, either liquidated, as under the demurrage clause in a charterparty, or unliquidated, from an obligation to pay damages for tort, as in the present case, from a statutory obligation, or in any other way in which legal obligations arise.'

In PM Sulcs & Associates ..., Kirby J noted that in Tuite ..., Shepherdson J had formed a view that it was likely that the Commissioner would assess the plaintiff for income tax on the amount awarded, and therefore included that sum in the award. Kirby J noted that Shepherdson J had sought and obtained from the plaintiffs an undertaking to be given in open court that in the event that tax was not assessed, they would refund to the defendants the amount of tax which had been allowed in the judgment. In my opinion, the component of compensation and damages I have awarded, which amounts to $55,207.35, is, in effect, income which the plaintiff should have earned, and as a result it is likely, in my opinion, that income tax will be payable on it at the rate of 30 per cent. The recovery of wages already claimed as a tax deduction will probably be treated in the same way. I will require an undertaking from the plaintiff to be given in open court that in the event that such tax is not assessed at all, or that such tax is assessed at less than 30 per cent, they will refund to the first, second and sixth defendants, the amount by which 30 per cent of $84,133.60 exceeds the tax assessed, as the case may be.

140 I note that the total of the damages and equitable compensation assessed as payable to the plaintiff in WA Fork Truck Distributors, of $84,133.60, was made up of $55,207.35, as loss of income that the plaintiff would have earned (see [108(a)]); and the balance, of $28,926.25, as a portion of the wages the plaintiff had paid to the defendant, its employee, representing payment for work that the defendant did not do for the plaintiff (see [111]).

141 I should note that any amount to be awarded to the plaintiff as result of orders made on the Registrar's Report is neither equitable compensation nor damages, but allowance for profit made by the defendants. It was not made apparent to me what tax, at what rate, the plaintiff would be liable for in respect of that amount. And, unlike Tuite, there is no question here of including a sum for tax in the award for that amount. The plaintiff has not sought any such inclusion, or indeed liberty to apply for such a sum. Compare the order in PM Sulcs [120] (Kirby J).

142 If the plaintiff is liable to tax in respect of the amount awarded to the plaintiff as result of orders made on the Registrar's Report, I have no reason to expect the plaintiff will not discharge that liability in due course.

143 For the reasons in the two previous paragraphs I am of the view that no undertaking is appropriately to be required in this case as a condition of any order made as result of the Registrar's Report.

144 I turn now to the orders sought in the plaintiff's application.

145 On the basis of the foregoing, I would exercise my discretion to carry into effect and adopt the Registrar's Report, with the following variations:

1. I would vary the allowance for wages, to make it $186,552.95;
2. I would vary the allowance for superannuation contributions, to make it $10,013.71; and
3. I would vary the Registrar's Report stating the net obligation to account ([58]), as below.

146 The Registrar's Report [58] as varied would read as follows, showing the variations in amounts I have listed:

Net obligation to account $353,667.82 $ $327,799.46

147 I also consider I should make the order sought for post judgment interest.

148 As to costs, I consider the plaintiff has largely, but not entirely, been successful in having the Registrar's Report carried into effect and adopted by the court. Doing the best I can, I would, at first blush, order the same proportion of the plaintiff's costs before the Registrar be the plaintiff's, as the amount as varied of the net obligation to account bears to the net obligation to account in the Registrar's Report (unvaried) [58]. That proportion is 93%. On that preliminary view I would award the plaintiff 93% of its costs before the Registrar, to be taxed if not agreed.

149 As to the costs of the hearing before me I consider, at first blush, that the plaintiff should receive the same proportion of its costs, on the same basis.

150 However, I will hear from the parties on both of these matters of costs.

151 I will also hear from the parties as to any further orders I should make.

(The Registrar's Report is published as Able Tours Pty Ltd v Mann [No 3] [2013] WASC 196 as an annexure to these reasons.)