- ABN Amro Bank NV v Bathurst Regional Council & Others - [2024] NSWSC 1414 - NSWSC 2024 case summary — Zoe

NSWNSWSC

- ABN Amro Bank NV v Bathurst Regional Council & Others

[2024] NSWSC 1414

Supreme Court of NSW|2024-10-15|Before: Black J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2024-10-15

Before

Black J

Catchwords

[2014] FCAFC 65 - Aequitas Ltd v Sparad No 100 Ltd (formerly Australian European Finance Corp Ltd) (2001) 19 ACLC 1006
[2001] NSWSC 14 - Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1
[2018] HCA 43 - Anderson v Canaccord Genuity Financial Ltd (2023) 113 NSWLR 151
(2021) 151 ACSR 98

Source

Original judgment source is linked above.

Catchwords

[2014] FCAFC 65 - Aequitas Ltd v Sparad No 100 Ltd (formerly Australian European Finance Corp Ltd) (2001) 19 ACLC 1006[2001] NSWSC 14 - Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1[2018] HCA 43 - Anderson v Canaccord Genuity Financial Ltd (2023) 113 NSWLR 151(2021) 151 ACSR 98[2021] FCAFC 40 - Australian Securities & Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 3562 ACSR 427[2007] FCA 963 - Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1(2019) 368 ALR 1[2019] HCA 18 - Australian Securities and Investments Commission v National Australia Bank Ltd (2022) 164 ACSR 358[2022] FCA 1324 - Australian Securities and Investments Commission v Westpac Banking Corp (Omnibus) (2022) 159 ACSR 381[2022] FCA 515 - Barnes v Addy (1874) LR 9 Ch App 244 - Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566(2010) 273 ALR 664[2010] FCAFC 133 - Boz One Pty Ltd v McLellan (2015) 105 ACSR 325[2015] VSCA 68 - Briginshaw v Briginshaw (1938) 60 CLR 336[1938] HCA 34 - Bristol & West Building Society v Mothew [1998] Ch 1 - Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64

Judgment (26 paragraphs)

[1]

Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 - Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 - Haiye Developments Pty Ltd v Commercial Business Centre Pty Ltd [2022] NSWSC 937 - Hall v Poolman (2007) 215 FLR 243; [2007] NSWSC 1330 - HBK Master Fund LP v Pivotal Software Inc, Delaware Court of Chancery, 14 August 2023 - Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; [1984] HCA 64 - John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 - JR Consulting & Drafting Pty Ltd v Cummings (2016) 329 ALR 625; [2016] FCAFC 20 - K&A Laird (N.S.W.) Pty Ltd (in liq) v Aidzan Pty Ltd (in liq) [2023] NSWSC 603 - Karzi v Toll Pty Ltd [2024] NSWCA 120 - Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 582; [1995] HCA 68 - Mackinnon as Plaintiff representative of 153 Plaintiff group members v Partnership of Larter, Jones, Miraleste Pty Ltd t/as USG Partner and Johnson, t/as "STC Sports Trading Club" (No 8) [2019] NSWSC 1658 - Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3 - McCrohan v Harith [2010] NSWCA 67 - MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451 - Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449; [1992] HCA 66 - News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410; [1996] FCA 870 - OBG v Allan [2008] 1 AC 1 - Pascoe v Voukidis Holdings Pty Ltd [2024] FCA 915 - Patel v Lal [2011] NSWSC 603 - Porter v Mulcahy & Co Accounting Services Pty Ltd [2021] VSC 572 - Re Alora Davies Developments 104 Pty Ltd (in liq) & Ors v Raphael & Anor [2024] NSWSC 547 - Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 - Re Sirrah Pty Ltd (In Prov Liq) (2021) 152 ACSR 212; [2021] NSWSC 413 - Ridge Estate Pty Ltd v Fairfield Pastoral Holdings Pty Ltd (2024) 302 FCR 375; [2024] FCAFC 17 - Sangha v Baxter [2009] NSWCA 78 - Spencer v Commonwealth of Australia (1907) 5 CLR 418; [1907] HCA 82 - Talacko v Talacko (2021) 272 CLR 478; [2021] HCA 15 - Troulis v Vamvoukakis [1998] NSWCA 237 - Vanguard Financial Planners Pty Ltd v Ale (2018) 354 ALR 711; [2018] NSWSC 314 - Varma v Varma [2010] NSWSC 786 - Watson v Foxman (1995) 49 NSWLR 315 - Wingecarribee Shire Council v Lehman Bros Australia Ltd (in liq) (2012) 301 ALR 1; [2012] FCA 1028 - Zreika v Royal (2019) 271 FCR 65; [2019] FCAFC 82 Texts Cited: - W Bratton, "Fair Value as Process: A Retrospective Reconsideration of Delaware Appraisal" (2023) Del J Corp L 497 - A Damoradan, "Valuing Young, Start-up and Growth Companies: Estimation Issues and Valuation Challenges" (June 12, 2009; SSRN: https://ssrn.com/abstract=1418687) - E Dubiansky, "An Analysis for the Valuation of Venture Capital-Funded Startup Firm Patents" (2006) 12 BU J Sci and Tech L 170 - P D Finn, "The Fiduciary Principle" in T G Youdan (ed) Equity, Fiduciaries and Trusts (1989) - BK Krumm, "Fostering Innovation and Entrepreneurship: Shark Tank shouldn't be a Model (2017) 70 Ark L Rev 553 - A Lynch, "Believing in Unicorns: How to Value Unicorn Companies and Intellectual Property while Encouraging Continuing Innovations and Public Disclosure" (2021) 72 Case Wes L Rev 421 - AF Tuch, "Fairness Opinions and SPAC Reform" (2023) 100 Wash UL Rev 1793 - E Mantell & E Shea, "Development and Application of Business Valuation Methods by the Delaware Courts" (2021) 17 Hastings Business LJ 335 - C Sappideen & Ors, Fleming's The Law of Torts, 11th ed, Lawbook Co 2024 Category: Principal judgment Parties: Luke Bunbury (First Plaintiff) St. Jean CF Pty Ltd (Second Plaintiff) 1derful Pty Ltd (receiver appointed) (Third Plaintiff) The 1derful Group Pty Ltd (receiver appointed) (Fourth Plaintiff) Fletch Capital Pty Ltd (First Defendant) Craig Seymour (Second Defendant) Michael Birch (Third Defendant) Mitchell Warren Ball (Fourth Defendant) Representation: Counsel: B DeBuse (Plaintiff) E A Walker/A H Schatz (First and Second Defendants) A P Cheshire SC (Third Defendant)

[2]

Solicitors: Vobis Law (Plaintiff) Teneo Commercial Lawyers (First and Second Defendants) SM Law (Third Defendant) File Number(s): 2023/353008

[3]

Nature of the proceedings and background

By Originating Process filed on 7 November 2023 ("OP"), the Plaintiffs, Mr Bunbury and others, seek a wide range of relief against the Defendants, Fletch Capital Pty Ltd ("Fletch"), Mr Craig Seymour and Mr Michael Birch.
The First Plaintiff, Mr Bunbury, is a director of each of the Third Plaintiff ("1derful") and Fourth Plaintiff ("1derful Group") (together, "Companies") since 15 June 2021 and owns, with his wife, 17,500 shares each in 1derful Group. He also claims (Statement of Claim ("SOC") [4]) that the Companies are indebted to him for, inter alia, deferred wages in an amount not less than $437,500.05 (gross) and other loaned monies. He brings these proceedings, by leave, as a derivative action. The Second Plaintiff ("St Jean") owns 10,000,000 of the 13,130,540 shares issued in 1derful Group, representing approximately 76.16% of its total shares.
The Plaintiffs allege (SOC [9]) and I find that business operated by the Companies involved proprietary technology and a licensing arrangement with Mastercard and other partners which, subject to regulatory approval, would permit the provision of branded debit and credit products for particular businesses that allowed clients to use branded debit and credit cards to provide instalment and hybrid payment options. Importantly, an agreement dated 25 January 2023 with Mastercard ("Mastercard Agreement") provided for the payment of performance-based incentives by Mastercard to 1derful, although I will recognise the suspension of that agreement and its significance for the value of the Companies' business below. A wholly-owned subsidiary of 1derful, 1derful Lending Pty Ltd ("1derful Lending) held an Australian credit licence from the Australian Securities and Investments Commission ("ASIC") (SOC [10]). The Defendants claim not to know what business the Companies operated and do not admit these paragraphs; those pleadings are plainly improper, where the Defendants had detailed knowledge of the Companies' business by reason of the conduct to which I refer below and procured the transfer of that credit licence to an entity associated with Fletch.
The Second Defendant, Mr Seymour, is the sole director of Fletch and a director of Jigsaw Works Pty Ltd ("Jigsaw Works") which is a shareholder in Fletch. The Third Defendant, Mr Birch, is a director of Midialel Pty Ltd ("Midialel") which is also a shareholder in Fletch. The Fourth Defendant, Mr Ball, was at one point purportedly appointed as receiver to the assets of the Companies. The Plaintiffs do not press a claim for relief against Mr Ball who was excused from attendance at the hearing.

[4]

Affidavit evidence

I now turn to the affidavit evidence and cross-examination. In addressing that evidence, I have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318-319; Varma v Varma [2010] NSWSC 786 at [424]-[425]. I also have regard to the fact that objective evidence, where available, is likely to be the most reliable basis for determining matters of credit that arise as to the affidavit evidence: Armagas Ltd v Mundogas SA [1985] 1 Ll R 1 at 57; Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 ("Colorado") at [10].
I also bear in mind the observations of Bell P (as the Chief Justice then was, with whom Bathurst CJ agreed) in ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [27]-[28]: "Whilst the quality and accuracy of oral recollection of actual conversations should be treated with care and caution given the fallibility of human memory (of which there has been a growing appreciation within the judiciary in recent decades), oral testimony may still be of value and importance, as was recognised in the nuanced observations of Leggatt J (as his Lordship then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC (Comm) 3560 at [22] (Gestmin): "the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose - though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth." [emphasis added] Documents and events have to be understood in their context, and evidence of context will often be furnished by witnesses in their oral evidence. Documents, moreover, will not always present a complete picture of events. Indeed it would be rare that they do. Nor do contemporaneous documents necessarily or invariably convey or record the background or context in which events took place. That background or context will be familiar to the actors at the time of those events but may not always emerge from documents."

[5]

Expert and other valuation evidence

I now turn to the expert valuation evidence led by the parties and other valuation evidence, which is relevant both to the Plaintiffs' causes of action and to their claim for damages or compensation. The Plaintiffs read an affidavit dated 17 March 2024 of Mr Davies and relied on his report dated 17 March 2024. Mr Davies had used revenue per customer figures and identified the number of customers falling within particular cohorts, based upon a third party's contemporaneous projection, to derive an implied enterprise valuation by reference to the Companies' H1 2024 projected revenues. He reached an unadjusted enterprise value of in excess of $33.7 million by that method, which he then increased by applying a control premium of 27.5% and discounted for a lack of marketability by 19.1%, and applied a further discount factor to take account of, inter alia, the risks attached to the Companies' business to achieve present value of the adjusted enterprise value of the Companies of in excess of $29.7 million. Mr Davies alternatively assessed the current value of the Companies, on the basis the revenues were not evident and the relationship with Mastercard had "stalled", as nil.
By a second affidavit dated 23 September 2024, Mr Davies expanded on his qualifications and experience and provided a limited explanation of the basis on which the comparable companies to which he had referred were selected, referring to their "similar profit margin expectations". An immediate difficulty with that approach is that any profit margin expectations of the Companies depended, critically, on their ability to survive their significant financial difficulties By a third affidavit dated 26 September 2024 and a further report attached to that affidavit, Mr Davies expanded on the process which had derived the H1 2024 revenues used in his report, by a method described as "cohort modelling". It is not necessary to address that method at any length, where the assumptions which underlay it were plainly not established for the reasons noted below. Mr Davies also explained the approach to growth adopted in that report, but the basis of that approach was also not established, where it assumed the Companies' ability to acquire further customers which also depended on their capacity to fund their ongoing business. Mr Davies also explained the approach which he had adopted to a control premium and to a discount for lack of marketability, at least to some extent, and the role of a chartered accountant, Mr Tan, who had assisted him with the financial modelling undertaken for the purposes of his report.

[6]

Chronology

I now set out the chronology of events, for which I have drawn upon the pleadings, the parties chronologies, the affidavit evidence and cross-examination and documents tendered. This chronology incorporates my findings as to contested matters as necessary.
The Companies were both incorporated on 3 October 2019 (Ex P1, CB 109-130) and, on 15 June 2021, Mr Bunbury was appointed as the director of each of the Companies. The Companies received both client revenue and refundable R&D tax offset payments over the relevant period. In the financial year ending 30 June 2020, 1derful received a refundable R&D tax offset in the sum of $307,032.57 (Ex P2, CB 640, 646). In the financial year ending 30 June 2021, 1derful received a refundable R&D tax offset in the sum of $977,584.64 (Ex P2, CB 642-643, 646). In the financial year ending 30 June 2022, 1derful received a refundable R&D tax offset in the sum of $1,515,132.41 (Ex P2, CB 645). In the financial year ending 30 June 2023, a Research and Development Tax Incentive Schedule was prepared, estimating the sum of 1derful's 'Refundable R&D tax offset' to be $573,586.22 (Ex P2, CB 647-649).
Mr Birch's evidence (Birch [12]) is that he had a conversation with Mr Bunbury in early February 2020 in which Mr Bunbury requested "help with finding short term capital for my new business 1derful", which he described as a "new fintech business", and Mr Bunbury then outlined the services which 1derful was to provide. Mr Bunbury denies (Bunbury 21.6.24 [34]) aspects of that paragraph of Mr Birch's affidavit. Mr Birch's evidence is that he then introduced Mr Bunbury to several of his contacts, including Mr Dahan from HCP and that Mr Dahan helped Mr Bunbury raise capital for 1derful and also for Mr Bunbury's personal purposes. His evidence (Birch [16]) is that, from 2020 to mid-2022, he introduced Mr Bunbury to business contacts, but he was not involved in discussions between Mr Bunbury and those other contacts and that (Birch [17]): "At no time did Mr Bunbury keep me informed as to where his discussions were at with regard to any potential members or investors."
In December 2020, Mr Birch and Mr Bunbury had an inconsequential exchange as to the form of Mr Bunbury's business card which referenced other entities, including a company associated with Mr Birch, Handy Payments (Ex P4, CB 1035) and they then had subsequent dealings in respect of Handy Payments (Ex P4, CB 1037, 1115).

[7]

Claim for breach of fiduciary duty by Mr Seymour

The Plaintiffs seek (OP [8], SOC [1]) a declaration that, relevantly, Mr Seymour breached fiduciary obligations owed to the Companies. The Plaintiffs plead that Mr Seymour was engaged for reward by the Companies and possibly Mr Bunbury from in or around July 2023 to provide advice and assistance in relation to solvency refinancing and capital raising for the Companies (SOC [17]). Mr Seymour and Fletch deny this claim and plead that Green Jigsaw was engaged jointly by MDC and HCP from 20 June 2023 to 17 July 2023, and Jigsaw Works was then engaged by FIFO Capital (D1/2 Defence [17]).
This first step of the Plaintiffs' claim for breach of fiduciary duty against Mr Seymour is somewhat narrowly pleaded, with the claim that Mr Seymour was engaged "for reward" by the Companies. Mr Walker submits, in closing, that the Plaintiffs have departed from their pleaded case in closing submissions by contending that, between April and September 2023, Mr Seymour was engaged by the Companies to act for them in relation to corporate advice, raising funds, and other issues and that the sale of the Companies' business to Fletch was at a known undervalue and in breach of Mr Seymour's fiduciary duties. Mr Walker submits that the Plaintiffs have not sought to amend their case, and no departure from the pleaded case has been "agreed to or permitted".
It is therefore necessary to addresses the function of pleadings here. I proceed on the basis that the role of the pleadings is to promote the just resolution of the proceedings. That proposition emerges clearly enough from the judgment of the Full Court of the Federal Court in Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356; (2010) 273 ALR 664; [2010] FCAFC 133 at [49]ff ("Betfair"), as follows: "The basic function of pleadings is to identify the issues which require a court's attention and determination (see Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279 (Banque Commerciale) per Brennan J quoting Jessel MR in Thorp v Holdsworth (1876) 3 Ch D 637 at 639). In Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd (1991) 217 ALR 171 French J, when a member of this Court, said (at 173): "A material fact is one which is necessary to formulate a complete cause of action. It is to be distinguished from particulars which are not part of the pleading. Material facts must be pleaded with the degree of specificity necessary to define the issues and inform the parties in advance of the case they have to meet. There are certain levels of generality in pleading which while they may bring in all facts necessary to establish a cause of action, are insufficient for that purpose: Bruce v Odhams Press Ltd [1936] 1 KB 697 at 705, 712; [1936] 1 All ER 282 at 289, 294; Ratcliffe v Evans [1892] 2 QB 524 at 532; [1891-4] All ER Rep 699 at 704; Farrell (formerly McLaughlin) v Secretary of State for Defence [1980] 1 WLR 172 at 179-80; Charlie Carter Pty Ltd v SDAEA (WA) (1987) 13 FCR 413." … Pleadings provide a structure for a proceeding for the purpose of the attainment of justice. The pleadings identify the material facts upon which the parties rely and the issues the parties seek to have determined. Because the pleadings require the parties to identify all material facts and issues, the pleadings provide the benchmark for discovery before trial and the admissibility of evidence at trial. Parties are required to plead the material facts upon which the party relies and the issues which that party seeks to have resolved for the further purpose of giving the opposing party fair notice of the case to be met at trial thereby minimising any risk of injustice by taking the opposing party by surprise. Pleadings incidentally are the record of the proceeding for the purpose of any subsequent arguments relating to res judicata or issue estoppel or any like issue. At trial a party is entitled to have the opposing party confined to that party's pleadings because the first party is entitled to come to trial to meet only the issues raised on the pleadings. However, if the first party does not seek to so confine the opposing party but allows the other party to raise other material facts and issues for the determination of the Court, then in our opinion the Court is permitted and possibly obliged to decide the proceeding on the further material facts and issues raised and addressed at trial: Banque Commerciale at 296-297; Gould v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490 at 517. If it were otherwise, the party who has failed to plead all of the material facts or issues upon which the party's case relies, but has brought those material facts or issues to the attention of his or her opponent at trial, would be denied natural justice if at the end of the trial the Court decided the proceeding on the pleadings without notice to that party. The first party in those circumstances would have been denied the opportunity to apply to amend those pleadings so as to formalise what was in fact addressed at the trial. Pleadings are a means to an end and not an end in themselves (Banque Commerciale per Dawson J at 292-293). As early as 1916 Isaacs and Rich JJ said, in Gould (at 517): "Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest.""

[8]

The applicable principles

I now address the applicable principles in respect of the claims for breach of fiduciary duty. In Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; [1984] HCA 64 ("Hospital Products"), Mason J observed (at 96-97) that "the critical feature" of the traditional fiduciary relationship was the undertaking or agreement by the fiduciary to "act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense" and that: "The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position … It is partly because the fiduciary's exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owed and because the latter is at the mercy of the former that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed …" Deane J similarly there observed (at 141-142) that, although no single test would identify a fiduciary relationship: "There is, however, the notion underlying all the cases of fiduciary obligation that inherent in the nature of the relationship itself is a position of disadvantage or vulnerability on the part of one of the parties which causes him to place reliance upon the other and requires the protection of equity acting upon the conscience of that other ..."
Professor Finn subsequently observed in his essay, "The Fiduciary Principle" in T G Youdan (ed) Equity, Fiduciaries and Trusts (1989) at 46, in a passage cited with approval by the Full Court of the Federal Court in News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 541; [1996] FCA 870, and by Ball J in DIF III - Global Co-Investment Fund LP v Babcock & Brown International Pty Limited [2019] NSWSC 527 ("DIF III") at [145], that fiduciary duties can arise where: "[T]he actual circumstances of a relationship are such that one party is entitled to expect that the other will act in his interests in and for the purposes of the relationship. Ascendancy, influence, vulnerability, trust, confidence or dependence doubtless will be of importance in making this out, but they will be important only to the extent that they evidence a relationship suggesting that entitlement."

[9]

Submissions as to the claim for breach of fiduciary duty against Mr Seymour

Mr DeBuse recognises that the existence of a retainer is disputed by, relevantly, Mr Seymour, notwithstanding references to payment and invoices rendered to the Companies in his affidavit evidence. As I noted above, the existence of a retainer is not necessary to the existence of fiduciary obligations owed by Mr Seymour to the Plaintiffs, and I have found that Mr Seymour was not caught by surprise by the wider case that was brought against him. Mr DeBuse submits that there is evidence that the Plaintiffs reposed trust and confidence in Mr Seymour, of which he knew, and that trust and confidence was sufficient to require him to act in a manner which did not permit him to take advantage for his personal profit of the confidential information of the Companies of which he was aware; prefer his personal interests to that of Mr Bunbury and the Companies; and let his duty as agent and confidant of Mr Bunbury and the Companies conflict with his obligations to other third parties.
As I noted above, Mr Walker responds that the Plaintiffs' breach of fiduciary duty case is brought against Mr Seymour on the basis that he was "engaged" by the Companies "for reward" in or around July 2023 to advise and assist them in relation to solvency, refinancing and capital raising (SOC [17]) and the Plaintiffs contend that Mr Seymour became aware of the nature of the Companies' business and its financial circumstances in that way (SOC [18]) and I have addressed that pleading point above. Mr Walker also submits that there is no contract or other contemporaneous record of the terms of the alleged engagement or the reward said to have been offered to Mr Seymour on his engagement, although he acknowledges that, as I noted above, on 10 July 2023, Mr Bunbury advised Mr Seymour that he "would welcome an opportunity to compensate you for your help" (Ex D1/2, CB 2050) and, I should add, Mr Seymour invoiced the Companies for the work he had done in respect of the winding up. Mr Walker also submits that Mr Seymour's involvement with the Companies, and the information he discovered about the Companies, came about through the appointment of Green Jigsaw by HCP in June-July 2023 and Jigsaw Works by FIFO Capital from 18 July 2023 until 27 September 2023. I have addressed the evidence concerning those matters above.
Mr Walker also submits that Mr Seymour informed Mr Bunbury of his engagement by HCP on 20 June 2023, and reiterated that again on 6 July 2023 and also advised third parties of his engagement by HCP. Mr Walker also points to the email drafted by Mr Seymour then sent by Mr Kopp for FIFO Capital to Mr Seymour on 18 July 2023. Mr Walker also draws attention to an email from Mr Seymour to Mr Bunbury on 1 September 2023 attaching a letter sent by Mr Seymour to a third party, Techwondoe, which advised that "Jigsaw Works is engaged by FIFO Capital" and to other communications referring to FIFO Capital and sent to FIFO Capital. I have addressed these engagements above.

[10]

Claim for breach of fiduciary duty by Mr Birch

The Plaintiffs seek (OP [8], SOC [1]) a declaration that, relevantly, Mr Birch breached fiduciary obligations owed to the Companies. The Plaintiffs plead (SOC [13]-[14], denied D3 Defence [13]-[14]) that, between April and May 2023, the Companies and Mr Bunbury in his personal capacity engaged Mr Birch for reward to provide advice and assistance in the raising of debt and equity and to develop business for the Companies and that Mr Birch was engaged to negotiate with PIL and to find alternative finance for the Companies, until August 2023 when Mr Birch failed to respond to communications from the Companies. I accept that Mr Birch's engagement, although in informal terms, contemplated that he would be paid for his services and he was, at least once, paid for those services. The Plaintiffs also plead (SOC [15]) that Mr Birch did not inform them that he had ceased working to achieve a capital or debt raising or negotiating with PIL for the benefit of the Companies. I have not accepted Mr Birch's evidence that he did tell Mr Bunbury of that matter above and I have found that, at least by mid-August 2023, Mr Birch was advancing his own and the other Defendants' interest in achieving a forced acquisition of the Companies' assets, rather than any refinancing proposal in any usual sense.
The Plaintiffs also allege (SOC [16], largely denied D3 Defence [16]) that Mr Birch only became aware of the details of the existence of the Companies' debts, the nature and financial circumstances of its business and the opportunity that it involved, by reason of his engagement to provide assistance to them. It is not necessary to determine that question, given the findings that I reach on other grounds, although I accept that he plainly obtained information about the Companies in dealing with them.
The Plaintiffs plead (SOC [20]; denied D3 Defence [20]) that, by reason of the circumstances of their retainer and the trust and confidence reposed in, relevantly, Mr Birch of which he was aware or should have been aware, he owed a fiduciary obligation to Mr Bunbury and the Companies. They plead (SOC [21]; denied D3 Defence [21]) that those fiduciary obligations included obligations not to take advantage for their personal profit of the confidential information of the Companies of which they were allegedly aware; not to prefer their personal interests to that of Mr Bunbury and the Companies; and not to let their duty as agents and confidants of Mr Bunbury and the Companies conflict with their obligations to other third parties. They also plead (SOC [33], denied D3 Defence [33]) that, relevantly, Mr Birch aided and abetted, procured and counselled or was knowingly involved in the Scheme in breach of, inter alia, his fiduciary obligations. While this pleading is oddly phrased, I understand it to be an allegation of breach of fiduciary duties owed by him, not an allegation of knowing assistance in a breach of fiduciary duty owed by a third party.

[11]

Claim against Fletch for knowing assistance or knowing receipt

The Plaintiffs also seek a declaration (OP [2]), SOC [2]) that Fletch was knowingly concerned or has knowingly benefitted from breach of fiduciary obligations owed by Messrs Seymour and Birch to the Companies. They plead (SOC [37(b)], partly not admitted and partly denied D1/2 Defence [37], D3 Defence [37]) that Fletch's acquisition of the Companies' business was obtained by it in circumstances where it knew that it had acquired the business through the breach by Messrs Seymour and Birch of their fiduciary duties. I have held above that Mr Seymour had assumed and breached such duties.
In Ancient Order of Foresters at [71], Gageler J observed that liability for knowing assistance will arise under the second limb of Barnes v Addy (1874) LR 9 Ch App 244 where the conduct which constitutes the breach transgresses ordinary standards of honest behaviour, and the participant has knowledge of circumstances which would indicate the fact of the dishonesty on behalf of the fiduciary to an honest and reasonable person. I also summarised the applicable principles in Re Sirrah Pty Ltd (In Prov Liq) (2021) 152 ACSR 212; [2021] NSWSC 413 at [151]-[152] as follows: "There is, of course, a considerable body of authority as to the circumstances in which liability for knowing receipt may arise ... Broadly, under the first limb of the rule in Barnes v Addy (1874) LR 9 Ch App 244 (Barnes), a person who receives company property from a director will hold it on trust for the company if he or she knows, or the circumstances are such that he or she ought to know, that the director is acting in breach of duty in respect of the relevant transaction. In Kalls Enterprises (NSWCA) above at [152]-[159], the Court of Appeal examined the case law in which the first limb of Barnes above had been applied to breach of fiduciary duty by a company director. In order to succeed in a claim for knowing receipt, the Plaintiffs must establish the relevant breach of fiduciary duty by WH and that HHC received the relevant property by reason of the breach of duty and, at the time of receiving that property, knew of the relevant duty and of the misapplication of the relevant property: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; 236 ALR 209; [2007] HCA 22 (Farah Constructions); Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1; 89 ACSR 1; [2012] WASCA 157; Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; 287 ALR 22; 87 ACSR 260; [2012] FCAFC 6 (Grimaldi). I have drawn on my summary of the relevant principles in Gordon (in his capacity as liquidator of Lyon Form Pty Ltd (in liq) v Leon Plant Hire Pty Ltd (in liq) [2015] NSWSC 397 at [61] in this respect. A third party may be held liable under the second limb of the rule in Barnes above if he or she knowingly assists a director in a transaction which is in breach of duty to the company. In Farah Constructions above, the High Court emphasised (at [179], [183]) that its earlier decision in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; 5 ALR 231 (Consul Development) established a requirement that any breach of trust or breach of fiduciary duty relied on to establish liability for knowing assistance must be dishonest and fraudulent, so that the impugned conduct must involve circumstances attracting a degree of opprobrium beyond an innocent breach of trust or duty. In Ramsay v BigTinCan Pty Ltd (2014) 101 ACSR 415; [2014] NSWCA 324 at [30], Macfarlan JA (with whom McColl and Gleeson JJA generally agreed) referred, without disapproval, to the trial judge's treatment of Farah Constructions above as authority that the elements of a knowing assistance claim were (1) a dishonest and fraudulent breach of duty by the fiduciary; (2) knowledge of that dishonest and fraudulent breach by a third party; and (3) assistance in that breach by that third party, and also referred to Consul Development above as authority that conduct may be "dishonest and fraudulent" for the purposes of liability for knowing assistance where it can be described, in ordinary language, as morally reprehensible. In Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; 311 ALR 494; 101 ACSR 167; [2014] NSWCA 266 at [124], Leeming JA held (Barrett and Gleeson JJA agreeing) that, in order to establish knowing assistance, a breach of trust must be dishonest as well as fraudulent, with dishonesty amounting to "a transgression of ordinary standards of honest behaviour", although it is not necessary to demonstrate that the relevant individual "thought about what those standards were". I have drawn on my summary of the relevant principles in Australian Worldwide Pty Ltd (in liq) v AW Exports Pty Ltd [2019] NSWSC 1475 at [87] for this summary."

[12]

Claim under s 37A of the Conveyancing Act

The Plaintiffs also seek (OP [4(a), SOC [4(a)]) an order that the transfer of the business of the Companies to Fletch is void or voidable pursuant to s 37A of the Conveyancing Act 1919 (NSW) ("Conveyancing Act"). The Plaintiffs plead (SOC [31], denied D1/2 Defence [31], D3 Defence [31]), inter alia, that the Scheme was in breach of s 37A of the Conveyancing Act.
Section 37A of the Conveyancing Act relevantly provides that: "(1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced. (2) This section does not affect the law of bankruptcy for the time being in force. (3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors."
In Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3, the High Court observed (at [20], [31]-[32]) that the section is to be accorded a "liberal construction" and extends to prohibit conduct which may "delay, hinder or defraud" a creditor or potential creditor, and the Court may infer an intention by the transferor of property to defeat or delay creditors, even in the absence of direct evidence of that intention where that outcome was the necessary consequence of a voluntary settlement.
In Patel v Lal [2011] NSWSC 603 at [6], Biscoe AJ similarly observed that: "Section 37A should receive a liberal construction in effecting its purpose of suppressing fraud. The term "defraud" in s 37A means to delay, hinder or otherwise defraud: Marcolongo v Chen [above] at [19], [20], [58]. It is unnecessary to show that the debtor wanted creditors to suffer a loss or that the debtor had a purpose of causing loss. It is necessary to show the existence of an intention to hinder, delay or defeat creditors and in that sense to show that accordingly the debtor had acted dishonestly. If the debtor disposes of an asset which would be available to creditors with the intention of prejudicing them by putting it, or its worth, beyond their reach, he is in the ordinary case acting in a fashion not honest in the context of the relationship of debtor and creditor. In cases of voluntary disposition that intention may be inferred: at [32]. A person may have acted dishonestly, judged by the standards of ordinary, decent people, without appreciating that the act in question was dishonest: at [33]. The party seeking to avoid the disposition bears the onus of proving an intent to defraud. While the existence of the intent may be inferred from the evidence, it is to be found as a fact: at [34]. Sections [sic] 37A does not require the intent to defraud to be the sole or predominant intent: at [57]."

[13]

The statutory unconscionability claim in respect of Mr Seymour

The Plaintiffs also seek (OP [5]-[6], SOC [5]-[6]) an order setting aside the BSA. and an order (or possibly more precisely a declaration) that the BSA between the Companies and Fletch was the result of unconscionable conduct either at general law or under the ASIC Act. The Plaintiffs relevantly plead (SOC [19]) that Mr Seymour did not inform them that, relevantly, he had ceased working to achieve a capital or debt raising for the Companies; and that (SOC [31], denied D1/2 Defence [31], D3 Defence [31]) the Scheme was unconscionable (within the meaning in the ASIC Act) both at general law and by virtue of s 12CC of the ASIC Act. The latter reference plainly should have been to s 12CB of the ASIC Act, as Mr Walker rightly recognised.
Mr DeBuse submits that: "in all the circumstances the transfer was unconscionable. In respect of this contention all of the earlier grounds are relied upon but additionally the fact that the [S]cheme until implemented was conducted in secret by [Fletch, Mr Seymour and Mr Birch] is an additional factor with respect to its unconscionability."
Mr Walker submits, for Mr Seymour and Fletch, that the Plaintiffs make a bare assertion in the SOC that the Scheme was unconscionable within the meaning of s 12CC of the ASIC Act (SOC [31(b)]) and rightly points out that the relevant section is in fact s 12CB of the ASIC Act. He submits the Plaintiffs have not identified whether the impugned conduct relates to the supply or possible supply of "financial services" to a person, the acquisition or possible acquisition of "financial services" from a person, who the relevant parties to the relationship of supplier and acquirer are said to be, or what the "financial service" is said to be having regard to the variety of forms of "financial service" contained in s 12BAB of the ASIC Act. Mr Walker rightly anticipated in his opening submissions that the Court would also have regard to the corresponding provisions contained in s 21 of the ACL, although he retreated from that recognition in closing submissions. He submits that any assessment of unconscionable conduct under the ASIC Act will involve a wide-ranging inquiry because the section stipulates that the conduct must be unconscionable in all the circumstances. Mr Walker also submits that that necessitates a person alleging unconscionable conduct to plead, with clarity, the factual basis on which section 12CB of the ASIC Act is said to apply and, it is suggested, that requires that the unconscionable conduct claim under s 12CB of the ASIC Act must be dismissed.

[14]

The statutory unconscionability claim against Fletch

Turning now to the position in respect of Fletch, it knew, from the date of its incorporation on 22 September 2023 with Mr Seymour as its sole director and company secretary, the matters then known to Mr Seymour. However, it seems to me clear that Fletch did not provide financial services or services to the Company, where it was established to acquire the Companies' business and had no other relationship with the Companies or Mr Bunbury. The claim under s 12CB of the ASIC Act (or s 21 of the ACL) against Fletch must fail on that basis.

[15]

The statutory unconscionability claim in respect of Mr Birch

Turning now to the position in respect of Mr Birch, I have referred above to the Plaintiffs' pleading (SOC [15]) that Mr Birch did not inform the Plaintiffs that, relevantly, he had ceased working to achieve a capital or debt raising for the Companies and their pleading (SOC [31], denied D1/2 Defence [31], D3 Defence [31]) that the Scheme was unconscionable (within the meaning in the ASIC Act) both at general law and by virtue of s 12CC of the ASIC Act. The Plaintiffs plead (SOC [33], denied D3 Defence [33]) (in the same form as the corresponding allegation against Mr Seymour) that Mr Birch aided and abetted, procured and counselled or was knowingly involved in the Scheme "so as through [his] unconscientious conduct result in injury to the Plaintiffs." While this pleading is again oddly phrased, I understand this to be an allegation of unconscionable conduct on Mr Birch's part arising from his involvement with the Scheme.
I have referred to Mr DeBuse's submissions above. Mr Cheshire submits that the Plaintiffs' case is no more than a pleading of unconscionability without identifying the relevant material facts and particulars; as to unconscionability under the general law, there is no pleading (with the necessary material facts and particulars) of a special disadvantage under which any of the Plaintiffs were suffering or of any of the Defendants having unconscientiously taken advantage of it; and, as to unconscionability under the ASIC Act, there is no pleading (with the necessary material facts and particulars) of each of the ingredients of s 12CB of the ASIC Act. He also submits that Mr Bunbury would have no actionable remedy to found this cause of action, because his position is no more than an impermissible claim for reflective loss.
Mr Cheshire also submits that: "Insofar as [Mr Birch] maintains an objection based upon a lack of pleading, he is entitled to do so, not having been put on notice of the case he has to meet and not having consented to any expansion of the case against him (T31) (Karzi v Toll Pty Ltd [2024] NSWCA 120 [("Karzi")]; Harris v Harris [2021] NSWCA 329; Stefanovski v Digital Central Australia (Assets) Pty Ltd (2018) 368 ALR 607, [2018] FCAFC 31)."
I understand the decisions to which Mr Cheshire refers to reflect familiar and well-established principles as to the function of pleadings; for example, in Karzi, Leeming JA observed (at [7]) that an issue was plainly not pleaded; Adamson JA (at [130]) defined the role of pleadings in uncontroversial terms by reference to well-established case law; and Basten J accepted (at [176]) that a matter was not pleaded. Here, by contrast, the relief sought in the Originating Process identified a claim for unconscionability under the ASIC Act; relevant facts including non-disclosures by Mr Birch and the elements of the alleged Scheme were pleaded, albeit briefly; a claim that the Scheme was unconscionable under s 12CC of the ASIC Act was pleaded, and it was not hard to recognise (as Mr Walker did) that this was intended to be a reference to s 12CB of the ASIC Act; it was also not hard to recognise (as Mr Walker also did in opening submissions) that there were corresponding provisions in the ACL; and the real question is whether the claim was sufficiently pleaded to give fair notice of the case that Mr Birch had to meet. However, that question turns upon the matters addressed in the case law to which I have referred above and depends upon questions of procedural fairness and practical injustice identified by the Court of Appeal in Gerrard Toltz to which I also referred above. Mr Birch cannot establish that he lacked fair notice of the case against him, or a lack of procedural fairness or practical injustice, by merely asserting his intent to hold the Plaintiffs to their pleading at the commencement of the hearing, for the reasons I have also noted above. It does not seem to me that there was ever any real doubt as to the scope of the unconscionability case against Mr Birch or the conduct which underpinned it.

[16]

Applicable relief for statutory unconscionability

The Court may grant an injunction in respect of conduct which would contravene ASIC Act s 12CB (or the corresponding provision in s 21 of the ACL) under s 12GD of the ASIC Act (or the corresponding provision in s 232 of the ACL), against a person who contravened the sections or a person who was knowingly involved in the contravention. A person who suffers loss or damage by conduct of another person that contravenes s 12CB of the ASIC Act (or the corresponding provisions in s 21 of the ACL) may recover the amount of the loss or damage by action against that other person or any other person involved in the contravention under s 12GF of the ASIC Act (or the corresponding provisions in s 236 of the ACL). The Court may also order relief under s 12GM of the ASIC Act (or the corresponding provisions in s 243 of the ACL) in respect of a contravention of ss 12CB of the ASIC Act (or the corresponding provisions in s 21 of the ACL) including, importantly, making an order declaring a contract void or varied. An order may also be made against a person who was involved in the contravention.
Mr DeBuse submits that: "The consequence of setting aside of the transfer of the business to Fletch is that a severely damaged business will be returned to the control of the 1derful Companies. … Any complaint that Fletch has paid for the security should be disregarded because it did so in the circumstances, which if established, show that [Fletch] was prepared to act unconscionably, mala fide and for an improper purpose. If it has paid consideration to third parties for the opportunity to carry out the [S]cheme, then it bore the risk and any loss which was occasioned by it. Additionally, if the ultimate conclusion is that there was a [S]cheme as alleged the Court is entitled to treat this as a situation where the court would not lend its assistance to the recovery of the purchase price by Fletch. If the ultimate conclusion is that the sale agreement is unenforceable by reason of the entry into a contract that was against conscience/was unlawfully conducted/had as its object unlawful economic harm or was the use of a power of sale for an object other than satisfying a security but for another purpose then the First Defendant should be enjoined from pursuing its alleged debt."
I accept that the assignment of the loan from PIL to Fletch cannot be set aside, where PIL has not been joined as party to the proceedings, and the Plaintiffs no longer pursue that relief. However, an order could be made under s 12GM of the ASIC Act (or the corresponding provision in s 243 of the ACL) setting aside the BSA so that the Companies regain control of their business and Fletch is reinstated as a lender to the Companies and any consequential orders necessary to bring about the retransfer of assets from Fletch to 1derful could be made, although that order would potentially be inconsistent with the equitable relief by way of constructive trust that is also sought by the Plaintiffs. I address the question of the Companies' claim for damages against the Defendants below.

[17]

Alleged contravention of s 420A of the Corporations Act

The Plaintiffs also seek (OP [7]) a declaration that, in exercising a purported power of sale as a controller of the Companies' business and the transfer of credit licenses held by 1derful Lending, Fletch breached its obligations to the Companies as a controller pursuant to s 420A of the Corporations Act and acted mala fide and against good faith and without a proper purpose. They plead (SOC [27], not admitted D1/2 Defence [27], D3 Defence [27]) that the Scheme has resulted in the business of the Companies being transferred to Fletch at less than its market value and (SOC [28], denied D1/2 Defence [28]) that the Scheme had, as its object, the defrauding of the other creditors and members of the Companies; the acquisition of the business of the Companies at an undervalue; and the breach of the obligations of a controller pursuant to s 420A of the Corporations Act.
The Plaintiffs also plead (SOC [34], denied D1/2 Defence [34]) that the sale of the business was undertaken by Fletch as a controller in breach of the duty of care imposed by s 420A of the Corporations Act. They particularise that allegation on the basis that: "The sale occurred without any marketing campaign, attempts at sale to other potential purchasers, or seeking advice or inquiry of [Mr Bunbury or the Companies] as to potential buyers."
Mr DeBuse also draws attention to the observations of the Court of Appeal in Boz One Pty Ltd v McLellan (2015) 105 ACSR 325; [2015] VSCA 68 at [167] that: "In deciding whether there has been a breach of s 420A, a court assesses the process that a controller has undertaken in selling the property. The inquiry is whether, in the course of that process, the controller has taken all reasonable care to sell the property for not less than its market value. However, it is not necessary for the court to decide what actually was the market value of the property in order to find that s 420A(1)(a) has been breached - all that the court needs to decide is that the process that was followed was not one where all reasonable care was taken to sell the property for its market value, whatever that market value might be." The Court also there noted (at [168]) that a breach of s 420A(1)(a) of the Corporations Act is not established merely because a receiver fails to realise the property for its market value; but, if it is proved that the price obtained at sale was substantially below the market value of the property, this may be evidence that proper steps were not taken. Obviously enough, this section also invokes the concept of market value and I have regard to the well-established case law as to that concept, including Spencer v Commonwealth of Australia (1907) 5 CLR 418 at 432; [1907] HCA 82 and MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451 at [55], where Spigelman CJ (with whom Mason P and Hodgson JA agreed) described the nature of a "market value" test as follows: "A test of a "market value", whether in a statutory or contractual context, usually invokes the test long established and frequently applied in Spencer v The Commonwealth of Australia (1907) 5 CLR 418 esp at 432 and 440-441 of a willing but not anxious purchaser and vendor, bargaining with each other. This approach was most recently expressed in a joint judgment of three judges of the High Court in Marks v GIO Australia Holdings Ltd [1988] HCA 69; (1998) 196 CLR 494 at 514: "… The value … is to be identified according to what price freely contracting, fully informed parties would have offered and accepted for it.""

[18]

Claim in respect of APL Lending

The Plaintiffs also seek an order (OP [9], SOC [9]) that the Australian credit licence now held by APL Lending be transferred to the Companies and (SOC [10]) an order that Mr Seymour and Fletch do all things necessary to transfer the shares in APL Lending to 1derful. I would make that order against Mr Seymour and Fletch under s 12GF of the ASIC Act or the corresponding provision of the ACL given the findings I have reached above, but for the fact that APL Lending is not party to the proceedings. The proper course in these circumstances will be now to make an order joining APL Lending as party to the proceedings and relist the matter to allow it to lead evidence and make submissions if it resists such an order.

[19]

Claim for further injunctive relief

The Plaintiffs seek (OP [10]-[11], SOC [11]-[12]) an order that Fletch and Messrs Seymour and Birch be permanently restrained from using or transferring any proprietary code developed for or by the Companies and that they destroy and provide an affidavit to the Court attesting to the destruction of any proprietary code developed for or by the Companies. That order should be made under s 12GD of the ASIC Act or the corresponding provision of the ACL in order to support the return of the Companies' business to the Companies, if the Plaintiffs elect for that remedy.

[20]

Claim in conspiracy

The Plaintiffs seek (OP [12], SOC [8]) a declaration that Fletch and Messrs Seymour and Birch engaged in a conspiracy to unlawfully injure the Plaintiffs. The Plaintiffs plead (SOC [31], denied D1/2 Defence [31], D3 Defence [31]) that the Scheme was unlawful and was in breach of s 37A of the Conveyancing Act and was carried out to defraud creditors and was unconscionable within the meaning in the ASIC Act both at general law and by virtue of s 12CC of the ASIC Act. The Plaintiffs then plead (SOC [32], denied D1/2 Defence [32], D3 Defence [32]) that the Scheme was a conspiracy between Fletch, Mr Seymour and Mr Birch to injure the Plaintiffs by unlawful means. In oral closing submissions, Mr DeBuse pressed this claim (T498) although recognised a possible overlap of damages awarded for conspiracy with compensation that may be order for breach of fiduciary duty.
Mr Walker submits, in opening, that the elements of such a conspiracy are summarised in Haiye at [510] as the entry into an agreement or combination to perform unlawful acts; by the agreement or combination, an intention to injure the plaintiff; that the agreement or combination be executed in whole or in part; and by their execution of the agreement or combination the defendants have caused loss or damage to the plaintiff. Mr Cheshire also refers to the observations of the High Court in Talacko v Talacko (2021) 272 CLR 478 at [25]; [2021] HCA 15 (omitting citations) as follows: "[i]f two or more persons agree to effect an unlawful purpose, whether as an end or a means to an end, and in the carrying out of that agreement damage is caused to another, then those who have agreed are parties to a tortious conspiracy". The agreement or common design between the parties is necessary for them to be jointly liable for the unlawful means. ... The agreement which is carried out must be "aimed or directed" at the plaintiff."
Mr Cheshire also submits that the relevant acts must be unlawful towards, and therefore actionable by, the plaintiff and the plaintiff must establish that the defendant knew both that the conduct in question was unlawful and that it was the unlawful part of it that would cause loss to the plaintiff: OBG v Allan [2008] 1 AC 1 at 32; C Sappideen & Ors, Fleming's The Law of Torts, 11th ed, Lawbook Co 2024 at [28.230] and the cases there cited.
Mr Walker submits that conspiracy, like fraud, is an allegation which should not be lightly made, and ought to be pleaded with precision. I bear in mind that, in Haiye at [495], Kunc J observed that: "Conspiracy, much like fraud, is not an allegation that should lightly be made and ought to be pleaded with precision and particularity: Hughes v Western Australian Cricket Association Inc (1986) 19 FCR 10 at 54; [1986] FCA 465 per Toohey J; Australian Wool Innovation Ltd v Newkirk [2005] FCA 290 at [59] per Hely J ("Australian Wool Innovation"); Andrianakis v Uber Technologies (Ruling No 1) [2019] VSC 850 at [39] per Macaulay J; see also Uber Australia Pty Ltd v Andrianakis (2020) 61 VR 580 at [51]-[52]; [2020] VSCA 186 per Niall, Hargrave and Emerton JJA ("Uber"). …"

[21]

Claim for invalidity of appointment of receiver to 1derful

The Plaintiffs also sought (OP [13], SOC [13]) an order that the appointment of Mr Ball as receiver is void or voidable and invalid. The Plaintiffs plead (SOC [43], denied D1/2 Defence [43], D3 Defence [43]) that the power to appoint a receiver contained in the general security documents purportedly assigned by PIL to Fletch was to be used in good faith and for a proper purpose and, in appointing Mr Ball as receiver, Fletch did not act in good faith or for a proper purpose. The appointment of Mr Ball as receiver was part of the course of conduct that I have found contravened s 12CB of the ASIC Act or the corresponding provision in s 21 of the ACL. My preliminary view is that that appointment should be set aside to give effective relief against that conduct, but I should allow Mr Ball a further opportunity to be heard prior to making that order, where he has not actively participated in this hearing.

[22]

The Plaintiffs' claim for damages

The Plaintiffs claim (OP [14]-[16], SOC [14]-[16]) damages against each of the Defendants, including for trespass and exemplary damages; compensation pursuant to s 1317H of the Corporations Act and equitable compensation, or alternatively, an account of profits. The Plaintiffs plead (SOC [39]-[40], denied D1/2 Defence [39]-[40], D3 Defence [39]-[40]) that, by reason of the Scheme, the alleged breach of fiduciary obligations or the unlawful conspiracy, they have suffered loss and damage and they are entitled to damages or account or equitable compensation from the Defendants. I assume this claim extends to a claim for damages arising from the alleged breach of s 12CB of the ASIC Act (and, by extension, the corresponding provision in s 21 of the ACL) by way of statutory unconscionability. The Plaintiffs also plead (SOC [41], denied D1/2 Defence [41], D3 Defence [41]) that there should be an inquiry as to such amount as is due as damages or equitable compensation following the reconveyance of the business from Fletch to the Companies. The parties ultimately accepted that there would be no need for a separate inquiry as to loss so long as the loss following from a sale of the business at undervalue could be readily calculated.
Mr DeBuse draws attention to the observations of Mason CJ and Dawson J in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at [83]; [1991] HCA 54 that: "The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can: Fink v Fink (1946) 74 CLR 127, at p 143; McRae v Commonwealth Disposals Commission (1951) 84 CLR 377, at pp 411-412; Chaplin v Hicks (1911) 2 KB 786 , at p 792. Indeed, in Jones v Schiffmann (1971) 124 CLR 303, Menzies J. went so far as to say that the assessment of damages … does sometimes, of necessity involve what is guess work rather than estimation": at p 308. Where precise evidence is not available the court must do the best it can: Biggin and Co Ltd v Permanite Ltd (1951) 1 KB 422, per Devlin J. at p 438. And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages: see McGregor on Damages, 15th ed. (1988), pars 357-359."
I accept that this is not a case where an assessment of the amount of damages recoverable by the Companies has no rational basis or would be a mere guess, although that assessment will be made on incomplete or imperfect evidence where, for the reasons noted above, I do not accept the valuations of the Companies' business made by Mr Davies or Mr Kompos and prefer Mr Seymour's contemporaneous assessment of its value as not less than $2 million: contrast the position where no rational basis for an assessment of damages is available, recognised in Troulis v Vamvoukakis [1998] NSWCA 237 and McCrohan v Harith [2010] NSWCA 67 at [128].

[23]

Exemplary damages, set-off and other matters

The Plaintiffs have established their claim for conspiracy against Fletch and exemplary damages may be ordered against Fletch on that basis, as sought by the Plaintiffs. However, I should allow submissions as an award of exemplary damages and its quantum, prior to making orders, where that issue was not sufficiently addressed by the parties in closing submissions.
The Plaintiffs also plead (SOC [42], denied D1/2 Defence [42], D3 Defence [42]) a set-off of such damages or equitable compensation as are due from Fletch in equity against any amount that may be found by this Court to be due in respect of the debt assigned to Fletch by PIL. No submission was put that set-off would not be available and the amount of damages awarded to the Companies substantially exceed the amount of that loan.
Mr Bunbury also claims (SOC [44], not admitted D1/2 Defence [44], D3 Defence [44]) a lien on all of the information and knowledge he has acquired by reason of his employment with the Companies, as against Mr Ball as receiver who it is alleged continues to seek such information, where Mr Bunbury has not been paid his deferred wages and other loaned monies and the disclosure of further information to the receiver will assist in the Scheme. It is not necessary to determine this claim, at least if Mr Ball's appointment as receiver will be set aside in any event.

[24]

Whether the matter should be referred to ASIC

It appears that Messrs Seymour and Birch are active participants in the Australian financial services or Australian credit industries. I raised with each of them, at the close of their cross-examination, the possibility that findings might be made, inter alia, that they had not acted honestly or in accordance with their moral obligations. Findings of that kind would be relevant to the question whether a banning order could or should be made by ASIC in respect of either of them. I have considered the question whether this judgment should be referred to ASIC and allowed the parties an opportunity to be heard in that regard. I have ultimately concluded that it is not necessary to do where the judgment, the affidavits that were read and the evidence that was tendered are now all matters of public record. It is open to the Plaintiffs to draw this judgment to ASIC's attention if they wish to do so and then open to ASIC to take such steps as it considers appropriate in respect of the matters addressed in this judgment. There is no need for the Court to take any further steps in that regard.

[25]

Orders

The Companies will need to elect between potentially inconsistent remedies, for example, a constructive trust or an injunction requiring return of the business and compensation for the loss of value of the business while it has been in Fletch's hands, or an account arising from a breach of s 420A of the Corporations Act as quantified above. I understand it to be common ground that, where the Companies recover their loss, it will not be necessary to determine Mr Bunbury's claims since he would have no recoverable loss other than that deriving from the Companies' loss.
I direct the parties to submit to my Associate agreed short minutes of order to give effect to this judgment (including as to any election between remedies, any consequential steps and exemplary damages) and as to costs or, if there is no agreement between them, their respective short minutes of order and submissions not exceeding 15 pages (in Arial font 12, one and a half spacing) by 4pm on 22 November 2024, and their respective submissions in reply not exceeding 8 pages (in Arial font 12, one and a half spacing) by 4pm on 29 November 2024.

[26]

Endnotes

A Damoradan, "Valuing Young, Start-up and Growth Companies: Estimation Issues and Valuation Challenges" (June 12, 2009; SSRN: https://ssrn.com/abstract=1418687).
E Mantell & E Shea, "Development and Application of Business Valuation Methods by the Delaware Courts" (2021) 17 Hastings Business LJ 335; HBK Master Fund LP v Pivotal Software Inc, Delaware Court of Chancery, 14 August 2023.
For example, E Dubiansky, "An Analysis for the Valuation of Venture Capital-Funded Startup Firm Patents" (2006) 12 BU J Sci and Tech L 170; BK Krumm, "Fostering Innovation and Entrepreneurship: Shark Tank shouldn't be a Model (2017) 70 Ark L Rev 553 at 573; A Lynch, "Believing in Unicorns: How to Value Unicorn Companies and Intellectual Property while Encouraging Continuing Innovations and Public Disclosure" (2021) 72 Case Wes L Rev 421 at 430-431; AF Tuch, "Fairness Opinions and SPAC Reform" (2023) 100 Wash UL Rev 1793 at 1817-1819 and note the valuation commentary cited at footnote 92.
1 For example, in Pascoe v Voukidis Holdings Pty Ltd [2024] FCA 915 at [170], Button J permitted a plaintiff who sought relief under 12CA of the ASIC Act, on an oral application, to rely on the equivalent provisions of the ACL, if the respondents in that case were correct in their contention that the ASIC Act provisions did not apply because the company did not provide a "financial service" pursuant to s 12BAB of the ASIC Act. Counsel in that case rightly did not resist that approach. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 November 2024

However, there were fundamental difficulties with the assumptions Mr Davies had made in valuing 1derful's business. First, as I noted above, Mr Davies applies a multiple to a contemporaneous projection made by a third party of 1derful's future sales and revenue for H1 2024 to derive his valuation; however, there is no evidence that supports the correctness of that projection and no evidence of any substantive review or testing of it by the Companies' management. The revenue involves implied assumptions as to the Companies' future customer numbers and revenue per customer, and the same difficulties arise with those assumptions. Second, although Mr Davies was not entirely consistent in his evidence in this respect, he appears to have assumed that the Companies would be able to reinstate their agreement with Mastercard for the purposes of the valuation and the evidence also does not establish a reasonable basis for that assumption, although a third party acquiring the business might well have been able to do so. I recognise that, as I noted above, Mr Cheshire cross-examined Mr Bunbury at length as to the issues in the Mastercard relationship and his closing submissions advance detailed criticisms of Mr Bunbury's evidence and deal, at length, with Mastercard's then unsatisfied requirements before it would exercise any discretion to reinstate that relationship. It is not necessary to address those issues or those submissions at length where, even apart from them, the evidence does not provide a sufficient basis to find that relationship would be reinstated while the Companies retained the business, and were in real financial difficulty, rather than after a sufficiently funded third party had purchased that business. Third, Mr Davies' valuation assumed the continuance of the Companies' business in circumstances that their substantial financial difficulties suggested a probability that it would fail in the short to middle term. Fourth, there is no basis to think that his discount figure was sufficient to adjust for the substantial risk that then existed in the Companies' business. These matters are sufficient, without more, to have the result that I could not accept Mr Davies estimated fair enterprise value of the Companies as at 31 August 2023 in the amount of $29.7 million, or any figure of that magnitude, and I could not adjust that figure in any way that would allow it any reasonable basis.

I have considered whether, notwithstanding that I cannot accept either of the parties' expert evidence, I can proceed by reference to the value of the Companies' business that was recognised by Mr Seymour, when he repeatedly told FIFO Capital that the value of that business was not less than or in excess of $2 million. I should here summarise the evidence as to that matter, which I have addressed in the chronology above. On 28 August 2023, and after a meeting with Mastercard to discuss the proposed acquisition of the Companies' business and potential reinstatement of the Mastercard Agreement, Mr Seymour had advised Mr Kopp of FIFO Capital that, if the valuation of the Companies "comes back at $2 million, then there would be enough money to pay FIFO Capital" and that "[i]f or when Mastercard turns the agreement back on, then the value of the assets is still significantly higher" (emphasis added) (Kopp [11(f)]). Although that observation contemplated a future valuation made under the BSA, which Fletch did not later complete, it was plainly directed to the value of that business before the suspension of the Mastercard Agreement was lifted, likely taking into account the prospect that it would be lifted, which would be increased if and when that Agreement was reinstated. On the same day, Mr Seymour again advised Mr Kopp and another director of FIFO Capital of his assessment that the Companies' assets "are worth at least $2 million every day of the week" and that he could not see the assets "being worth less than $2 million", comprising value for the customers, the strategy, the credit licence, the agreements and the code (Kopp [11(f)]). Mr Kopp's unchallenged evidence (Kopp [14]) is also that Mr Seymour made several statements to him during the months prior to October 2023 that "1derful was worth at least $2 million" and, in an email dated 6 October 2023 (Ex D1/2, CB 2318), Mr Kopp reminded Mr Seymour that he had several times expressed that view and Mr Seymour did not deny doing so in his email in response.

On 19 May 2023, Mr Birch emailed an application for short-term debt funding for 1derful to a potential lender (Ex P4, CB 1048). He advised the potential lender that: "Company is 1derful, I have only sent this through to you today as I signed a Heads of Agreement with 1derful last night as my technology partner to deliver an end-to-end payment and lending solution to estate agents, landlords and tenants. I am looking to roll this out for The Agency Real Estate Group by August this year. Given that we are looking like having almost 20,000 landlords and tenants by the end of the year and 600 real estate agents, it is huge opportunity for 1derful. So I am a believer in 1derful and a client (not yet mentioned in the deck attached). 1derful currently has a facility with a first ranking charge held by [PIL]. Given recent customer signings and expected growth, 1derful is looking to refinance this facility out and increase it to $2m. This also being handled by Sequoia Corporate Finance. Whilst this is being set up, 1de[r]ful requires some short term funding to cover some immediate expenses and that is the ask today. This is the $200K he is asking for. 1derful also has a receivable finance facility which is backed by payments from Mastercard - 1derful's payment partner. The key differentiator from other fintechs with 1derful is that it is a B2B offering and so is not spending in-ordinate amounts of capital on customer acquisitions. For me it offers speed to market, one of the best UX I have seen and allows us to offer our clients a unique financial services product that will make them stickier and hopefully attract new clients through the wards feature also available on the 1derful platform. The principal on 1derful - who I have known for the last 12 years (our daughters star[t]ed school together) is looking to raise some short term funding for his business growth as a pre-cursor to a broader recapitalisation of his business which is being managed by Sequoia Corporate Finance. With regard to the capital raise, I have attached a recent IM and investor deck for your information. I can arrange Luke Bunbury to run through if your investor is keen to do some additional due diligence." Mr Birch then referred to the proposed terms of the short term debt raising, including a high interest rate that plainly indicated that it involved significant risk and added: "Rationale: Mastercard has a contract with 1derful which we can show you backing these payments, examples of invoices previously paid etc (under NDA). Mastercard take a while to make these payments which is why 1derful gets these financed because they are milestone driven."

Mr Seymour then sent an email dated 28 August 2023 (Ex D1/2, CB 2210) to Mr Kopp and another representative of FIFO Capital which he says outlined his recommended approach and his assessment of the situation. That email addressed the likely position if 1derful was placed in liquidation and PIL appointed a receiver or some other type of controller or took direct possession of all of its assets; the position if PIL acted before a liquidation; and the possibility of action by FIFO Capital with the result that PIL would likely then exercise its rights to protect its position. Mr Seymour then observed that: "We believe that the most likely transaction is that a new consortium will buy the debt off [PIL]. Defaults are evident and irretrievable, and all documentation is in place. Let's call that an SPV for the purposes of this analysis. The SPV will then demand repayment and, when that does not occur, will seize the assets of 1derful one way or another (receiver, controller or direct). As a matter of prudence, they will then commission a valuation of the assets. Now, to rebuild the Code will cost about $1.5 million, so that's the value of the asset pool, less any issues with Code such as being buggy or incomplete. The questions are 'what is the brand worth' and 'what are the customers worth'? This gives a guide to the enterprise value. The core problem is that Luke Bunbury is so well known and the 1derful brand is heavily tainted. As a B2B business, the brand value is limited. This leaves the customers. Douugh has may be 60 days of funds left before it becomes insolvent. 1deful has not yet turned on [Handy Payments]. MyBudget looks like a commercially strong deal but is probably a year (and several funding steps) away from being profitable. On balance, the customers will be valued on a discounted cashflows methodology and an assessment of risk. Right now that is very high because Mastercard is turned off. So that brings us back to Mastercard. The Australian President of Mastercard, Richard Wormald, has directly advised us today that Mastercard will negotiate with the first ranking secured creditor if there is a plan for the future of the business involving a new management team, demonstrated capital and appropriate corporate governance and discipline. We understand they have lost interest in attempting to deal with 1derful because [Mr Bunbury] simply has not been able to deliver promised outcomes. As we've discussed previously, the Singapore team is separate but we understand that, with Richard Wormald's personal involvement, this is no longer an impediment to an overall solution. Those discussions are expected to progress further tomorrow and there are really only three options, of which two have any merit to FIFO [Capital]."

Shortly after the purported sale, Axiom, which was the majority shareholder in Fletch, made an announcement (Ex P2, CB 661) to the Australian Stock Exchange which emphasised the benefits of the forced acquisition of the Companies' business by Fletch as follows: "Fletch Capital Axiom interest up to $2m loan for 70% - 87.5% Fletch Capital is a new business seeded and funded by Axiom by way of an initial loan facility of up to $2m. The core objective of Fletch Capital is to provide strategic direction, human resources and financial capital to develop fintech business opportunities consistent with Axiom's recent employment of Rob Towey as CEO of Axiom's prop tech business. Fletch has been able to secure the ownership of financial and lending software technology and payment platforms as well as an Australian Credit Licence (ACL) and preferential supply-side partnerships. These assets are expected to form the backbone of Fletch Capital's new architecture and payment platform and will be supplemented by further investments into strategic product and technology development to deliver a comprehensive business model. Initially, Fletch Capital has secured a conditional Preferred Provider Status with the rent roll payment platforms of two major groups. Combined, the 2 platforms represent ~12,500 properties and approximately $500m of rental payments per annum, placing them amongst the highest processors of aggregated rent rolls in Australia. Having secured a conditional Preferred Provider Status, the Fletch Capital business is currently engaged in a process to deliver a highly compliant, robust B2B platform, with the aim of commencing the on-boarding of the first B2B customers for the processing of rental payments in the coming quarters. After establishing the rental payments platform as described above, the next stage for Fletch Capital involves offering multi-layered, higher yielding financial products encompassing KYC / AML capabilities, credit decisioning and recovery, credit and debit cards, and other consumer credit products, capable of fuelling new growth and revenue opportunities for Fletch Capital and its B2B customers within the property industry and into new markets and verticals both domestically and internationally. Fletch Capital is also exploring wider opportunities in the global digital lending and payments sector, with a view towards providing new and innovative solutions to overcoming various strategic and operational inefficiencies now evident in the fintech environment."

In Bathurst Regional Council, Jagot J similarly held that a financial adviser to local councils owed them fiduciary duties and breached the prohibition on conflict of interest by reason of undisclosed commercial pressures upon it to distribute relevant products in order to restore the success of its business. The Full Court of the Federal Court dismissed an appeal from that decision in ABN Amro Bank NV v Bathurst Regional Council & Others (2014) 309 ALR 445; [2014] FCAFC 65 and, as Mr Walker notes, there summarised the applicable principles (at [1066]) as follows: "1. The "critical feature is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person": Hospital Products Pty Ltd v United States Surgical Corp (1984) 156 CLR 41 at 96-97; Pilmer v Duke Group Ltd (2001) 207 CLR 165 at 196-197 [70]-[71] and Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35 at 76 [270]-[275] and 77 [283]. 2. It is the element of undertaking (from the point of view of the fiduciary) or obligation (for and on behalf of the beneficiary) that has the consequence that equity insists that the principal must act in the "interests of" or "for the benefit of" the beneficiary rather than in the principal's own interests: Breen v Williams (1996) 186 CLR 71 at 113, approved in Pilmer at 196-198 [70] and [74]. 3. Whether a fiduciary relationship exists in a particular case, and if so, the scope of that fiduciary relationship, are matters which depend critically upon the particular circumstances of the case: In Re Coomber [1911] 1 Ch 723 at 728-729, approved in Hospital Products at 102; see also Pilmer at 198-199 [77]-[78] and Citigroup at 76 [285], 78 [287]-[288]. 4. The characteristics which define a fiduciary relationship cannot be exhaustively defined. It is inappropriate to treat the existence of a fiduciary obligation as being dependent upon whether the principal and beneficiary fall into a particular status relationship: James Edelman, "The Role of Status in the Law of Obligations: Common Callings, Implied Terms and Lessons for Fiduciary Duties" (Paper presented at the University of Alberta, 18 July 2013, and DePaul University conference, Chicago, 19-20 July 2013). 5. Similarly, whether a fiduciary relationship has come into existence does not depend upon the motivation or desire of one party to establish a relationship of trust or confidence. What matters is whether there is a relationship involving the requisite undertaking, determined as a matter of objective characterisation, rather than by having regard to the subjective expectations of the parties: Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at 45 [188] and 46 [194]; P D Finn, Fiduciary Obligations (Law Book Company, 2nd ed, 1977), para 14ff; James Edelman "The Importance of the Fiduciary Undertaking" (2013) 7 Journal of Equity 128 (see also, James Edelman "When Do Fiduciary Duties Arise" (2010) 126 Law Quarterly Review 302) and, in the context of a contractual relationship, Citigroup at 77 [281]."

In Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43 ("Ancient Order of Foresters") at [67] to [70], Gageler J in turn explained that the duty of loyalty is imposed, in equity, on fiduciaries "by means of two overlapping 'proscriptive obligations'", observing that (footnotes omitted): "'The first', often referred to as the 'conflict rule', '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 unconscionability which attracts equitable remedies in circumstances where the conflict rule alone is invoked lies not so much in receipt by the fiduciary of the benefit or gain (over which the fiduciary need not have control) as in retention by the fiduciary of the benefit or gain which in conscience ought to be disgorged to the principal. 'The second', often referred to as the 'profit rule', 'is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of [the] fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing [the fiduciary's] position for [the fiduciary's] personal advantage.' The unconscionability which attracts equitable remedies in such circumstances lies in pursuit by the fiduciary of self-interest, or, more precisely, in pursuit of an interest other than the exclusive interest of the principal. Consistently with the objective of imposing each obligation, in neither case does the benefit or gain to the fiduciary need to be at the expense of the principal, though it may be. And in neither case does the fiduciary need to act dishonestly or fraudulently, or otherwise than in good faith, though again the fiduciary may do so…"

I have summarised the early work done by Mr Seymour to assist the Companies, in connection with HCP's engagement of Green Jigsaw, above. By his email dated 30 June 2023 to Mr Bunbury, copied to Mr Birch (Ex P4, CB 1022), Mr Seymour offered to assume an oversight role "so that you don't get taken advantage of" in dealing with HCP and "assured" Mr Bunbury that he was "on the case." I noted above that Mr Seymour accepted in cross-examination (T276) that his reference to "get taken advantage of" involved his suggesting to Mr Bunbury that Mr Bunbury could rely upon Mr Seymour as somebody who would be honest and take care of his interests, and the reference to his being "on the case" provided assurance to Mr Bunbury that he was providing assistance to Mr Bunbury and the Companies. I have found that, in mid-July 2023, Mr Seymour advised Mr Bunbury that, although he was attempting to have FIFO Capital engage him, he would "still be working for 1derful to achieve its aims". I have also found above that, by his email dated 19 July 2023 to Mr Bunbury (Ex P1, CB 291; Ex D1/2, CB 2114) in connection with the engagement that he sought out for Jigsaw Works by FIFO Capital, Mr Seymour represented to Mr Bunbury that "our interest lies in ensuring 1derful's survival, recapitalisation and success"; and that, notwithstanding that creditors would perceive him as "one of "them" and not "1derful's man … [n]othing changes in my approach." I have also found above that, by his text message on 20 July 2023 (Ex P1, CB 321-322), Mr Seymour advised Mr Bunbury that, inter alia, "I'm on your team - emphasis on YOUR". I have rejected Mr Seymour's attempt in cross-examination (T287) to limit this commitment to Mr Bunbury personally rather than the Companies. I also noted above that Mr Seymour ultimately accepted in cross-examination (T331-332) that Mr Bunbury trusted him and continued to trust him into September 2023, although he sought to place that trust in the context that he was working on the overall engagement from HCP. While a party's trust in another is not sufficient to establish a fiduciary duty without more, it here plainly arose from the undertakings that Mr Seymour had in fact given to act in the Companies' and Mr Bunbury's interests which I have noted above.

I now turn to the relevant case law. The scope of s 21 of the ACL was considered by the High Court of Australia in Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; (2019) 368 ALR 1; [2019] HCA 18. The several judgments there recognise that the section requires the Court to have regard to specified factors, which will be relevant to whether statutory unconscionability will be found. Keane J there held the section was not limited to conduct that was "unconscionable" under the general law, but the term "unconscionable" in the section had its ordinary meaning, including exploiting or unconscientiously taking advantage of a special disadvantage; and Gageler J held that the section was not limited by equitable standards, but the use of the term "unconscionability" nonetheless "signif[ied] the gravity of the conduct necessary to be found by a Court in order to be satisfied of a breach of that standard", and the section was not confined to circumstances where the defendant had exploited a special disadvantage. His Honour observed (at [87], [93]) that: "The correct perspective is that s 12CB operates to prescribe a normative standard of conduct which the section itself marks out and makes applicable in connection with the supply or possible supply of financial services. The function of a court exercising jurisdiction in a matter arising under the section is to recognise and administer that normative standard of conduct. The court needs to administer that standard in the totality of the circumstances taking account of each of the considerations identified in s 12CC if and to the extent that those considerations are applicable in the circumstances. The judgment required of a court exercising jurisdiction in a matter arising under s 12CB is a heavy one. For a court to pronounce conduct unconscionable is for the court to denounce that conduct as offensive to a conscience informed by a sense of what is right and proper according to values which can be recognised by the court to prevail within contemporary Australian society. Those values are not entirely confined to, or entirely removed from, the values which historically informed courts administering equity in the development of the unwritten law of unconscionable conduct. ..."

In Australian Securities and Investments Commission v National Australia Bank Ltd (2022) 164 ACSR 358; [2022] FCA 1324 at [299], Derrington J summarised the applicable principles as follows: "(a) Neither the boundaries nor content of the equitable doctrine of unconscionability defines or limits the scope of statutory unconscionable conduct. (b) The requirement in s 12CB that the evaluative judgment is to take place in "all the circumstances" necessitates a close consideration of the facts in light of the factors identified in s 12CC. That said, an atomistic approach, which only considers each of the factors separately, is inappropriate. (c) The application of an appropriate value construct to the evaluation of conduct requires that attention be paid to the "values explicitly or implicitly enshrined in the text, context and purpose of the ASIC Act, the Corporations Act and any other relevant statutory framework". That, however, does not exclude the relevance of societal or community values to the determination. (d) Section 12CB imposes a normative standard of conduct which the section itself marks out in relation to the supply or possible supply of goods and services. It is the task of the court to apply that standard to the circumstances of the particular case. (e) The judicial exegesis of "moral obloquy" should not be a substitute for the words of s 12CB. At best, statutory unconscionability may accommodate a flavour of it in the sense that it means more than "unjust", "unfair" or "unreasonable". (f) The underpinning values and conceptions in s 12CC(1) are fairness and equality, asymmetry of power and information, a lack of understanding or ignorance of a party, the risk and worth of the bargain, and good faith and fair dealing: Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 , 265-276 [259]-[306]. (g) Unfair conduct does not, alone, amount to unconscionable conduct, even if establishing its presence is a step along the way to demonstrating unconscionability where it results in the exploitation of a person's vulnerability and amounts to unjustifiable self-interest. Similarly, establishing hardship is not alone sufficient although it, too, may constitute a step in the evaluative process. (h) The actual state of mind of the alleged contravener is relevant to the question of whether they have engaged in unconscionable conduct, although it should not be the sole focus. What is required is a broader evaluation of the behaviour, including its causes and reasons for it, and its effects or likely effects. … (j) The boundaries and content of any applicable statutory regime beyond that of the ASIC Act and the Corporations Act is an important contextual matter. (k) It is not necessary to show that a person who is subject to the alleged conduct is under a disadvantage or that any particular person has been disadvantaged by conduct (s 12CB(4)(b)). Further, an inequality of bargaining power does not automatically lead to the conclusion that one person is in a position of substantial disadvantage, nor does it establish that the party which enjoys the superior power acts unconscionably by exercising it. (l) In the technical application of s 12CC(1) it is necessary to consider each of the non-exhaustive matters set out in s 12CC(1) to the extent to which each might be relevant. It is inappropriate to focus on one or more of those matters to the exclusion or unjustifiable expense of others. (m) Conduct which attracts the operation of s 12CB is assumed to be of sufficient seriousness to warrant the imposition of a pecuniary penalty. That perspective is not irrelevant to the construction and application of ss 12CB and 12CC(1)."

As I noted above, Counsel also drew attention to Kunc J's helpful review of the applicable principles in Haiye which I adopt with gratitude. His Honour there noted (at [408]-[410]) that: "In Ward v Lewis [1955] 1 WLR 9 ("Ward v Lewis"), the Court of Appeal heard an appeal from a decision granting leave to amend a statement of claim alleging slander and conspiracy to commit slander. In allowing the appeal and striking out the paragraphs that pertained to the alleged conspiracy, Lord Denning (with whom Lord Morris agreed) relevantly said (at 11): "It is important to remember … that when a tort has been committed by two or more persons an allegation of a prior conspiracy to commit the tort adds nothing. The prior agreement merges in the tort. A party is not allowed to gain an added advantage by charging conspiracy when the agreement has become merged in the tort. It is sometimes sought, by charging conspiracy, to get an added advantage, for instance in proceedings for discovery, or by getting in evidence which would not be admissible in a straight action in tort, or to overcome substantive rules of law, such as here, the rules about republication of slanders. When the court sees attempts of that kind being made, it will discourage them by striking out the allegation of conspiracy, on the simple ground that the conspiracy adds nothing when the tort has in fact been committed." A similar conclusion was reached by Adam J in Rubenstein v Truth & Sportsman Ltd [1960] VR 473 where, in an action predominately alleging libel yet also alleging conspiracy to commit libel, his Honour struck out paragraphs of a statement of claim alleging conspiracy to commit libel. See also Sorrell v Smith [1925] AC 700 at 716 per Lord Dunedin; Cabasi v Vila (1940) 64 CLR \130 at 142-143; [1940] HCA 41 per McTiernan J, 151 per Williams J; O'Brien v Dawson (1942) 66 CLR 18 at 27; [1942] HCA 8 per Starke J. In Trade Practices Commission v Allied Mills Industries Pty Ltd (1980) 32 ALR 570 ("Allied Mills"), Sheppard J also reached a similar conclusion. …"

His Honour also helpfully summarised the elements of a claim for an unlawful means conspiracy as follows: "(1) Two or more persons have entered into an agreement or combination to perform unlawful acts: see Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173 at 188 per Lord Diplock ("Lonrho (No 2)"); McKernan v Fraser (1931) 46 CLR 343 at 362; [1931] HCA 54 per Dixon J (with whom Rich and McTeirnan JJ agreed), 378 per Evatt J; Dresna Pty Ltd v Misu Nominees Pty Ltd [2003] FCA 1537 at [99]-[104] per Weinberg J ("Dresna FCA"); Uber at [31]. It is not necessary that the agreement be contractual (see Fatimi at [104(1)]), nor that there be evidence of an express agreement. As Hely J said in Australian Wool Innovation at [62] (see also Uber at [55]): "A court is entitled to have regard to the overt acts pleaded, and to infer from those acts that there was an express agreement to further the common object of the combination." (2) By the agreement or combination, the defendants intended to injure the plaintiff: Dresna FCAFC at [7]. It has, at least since Lonrho Ltd v Shell Petroleum Co Ltd [1981] 1 QB 358; Com LR 74 ("Lonrho"), been accepted that the intention to injure need not be the sole or predominant motive. As his Lordship said in Lonrho (at 75): "I would suggest that a conspiracy to do an unlawful act - when there is no intent to injure the plaintiff and it is not aimed or directed at him - is not actionable ... But if there is an intent to injure him then it is actionable. The intent to injure may not be the predominant motive. It may be mixed with other motives ... It is sufficient if the conspiracy is aimed or directed at the plaintiff, and it can reasonably be foreseen that it may injure him, and does in fact injure him." His Lordship's observations have since been endorsed in this country on several occasions including by the Victorian Court of Appeal in Uber, where the Court said (at [42]): "…to establish an unlawful means conspiracy, a plaintiff is required to establish that the purpose of the defendants in combining to engage in or to be complicit in the unlawful conduct included an intention to injure the plaintiff, and that the plaintiff in fact suffered injury by reason of the unlawful conduct. The defendants' intention to injure the plaintiff need not be the predominant motive for engaging in the unlawful conduct, but may be mixed with other purposes or motives - such as the pursuit of gain for the defendant or others - which may be the predominant motive." (3) Quite unlike its criminal law counterpart, the agreement or combination to injure ought to have been executed in whole or in part: see Lonrho (No 2) at 188 per Lord Diplock. (4) By their execution of the agreement or combination, the defendants have caused loss or damage to the plaintiff: see Fatimi at [104(3)], quoting Marrinan v Vibart [1963] 1 QB 234 at 238 per Salmon J."

- ABN Amro Bank NV v Bathurst Regional Council & Others

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