Anderson v Canaccord Genuity Financial Ltd

Solicitors: McLachlan Thorpe Partners (Plaintiff) Clayton Utz (First Defendant) Piper Alderman (Second and Third Defendants) Corrs Chambers Westgarth (Fourth Defendant) Moray & Agnew (Fifth Defendant) Kennedys Law (Sixth Defendant) Brown Wright Stein (Seventh and Eighth Defendants) File Number(s): 2015/00285816 Publication restriction: Nil

INDEX JUDGMENT - WARD JA [1] Parties [11] Plaintiff's complaint [18] Chronology of Events [32] Formation of Ashington group - 1994-2005 [33] Establishment of ADF - May 2006 [40] Establishment of Cross+ Trust - 19 May 2006 [53] Establishment of Potts Point Trust - 19 May 2006 [55] St George Facility for Potts Point Trust - 30 May 2006 [57] St George Facility for Cross+ Trust - 10 November 2006 [58] Investec Facility re Wylde Street Property - March 2007 [59] Information Memorandum for ADF2 - 2007 [60] Establishment of ADF2 - 20 September 2007 [62] Establishment of Project X Hotel Trust - 20 September 2007 [64] Establishment of Noosa Trust - 12 March 2008 [65] Establishment of Stonington Trust - 23 May 2008 [68] Fees [73] Global Financial Crisis - 15 September 2008 [75] Proposed third fund (ADF3) [76] Compliance breaches - 30 September 2008 [78] Project X Hotel Trust finance - 30 September 2008 [79] 10 Wylde Street Trust finance - 2 October 2008 [88] 8th drawdown for ADF2 - 3 November 2008 [89] Request for increase in fund equity in ADF2 - 10 November 2008 [90] Superannuation fund investors' response to $20 million capital call - November to December 2008 [92] Westpac Stonington Facility - 18 November 2008 [95] Hamton Vendor Finance - 12 December 2008 [96] Ashington Capital Board meeting - 16 December 2008 [98] Investec indicative term sheet - 23 December 2008 [99] Applications for units in ADF2 pursuant to First Additional Equity Request - 23 December 2008 [102] Email from Mr Steel to Mr Anderson - 27 December 2008 [105] Ms Garrett approached re possibility of working with Ashington - late December 2008 [107] HESTA Side Letter - January 2009 [111] HESTA's application for additional units in ADF2 - 4 February 2009 [127] 11th drawdown of ADF 2 - 18 February 2009 [128] Stonington Property purchase - 25 February 2009 [129] Investec Stonington Facility - 25 February 2009 [130] Preparation of Stonington site for construction - February to June 2009 [139] Ms Garrett and Mr Renauf's employment with Ashington - 25 February 2009 [140] Ashington Capital board meeting - 26 February 2009 [143] Cashflow - March 2009 [144] 12th drawdown of ADF2 - 24 March 2009 [148] Ms Garrett's involvement with Ashington - April 2009 [149] Ashington Capital and Ashington Group board meetings - 4 May 2009 [158] Trip to Hong Kong - May 2009 [159] Legal Advice re Investec Stonington Facility - 31 May 2009 [164] The position of Ashington - mid-2009 [168] Request for a further $15 million in equity - 1 June 2009 [170] Communications between superannuation fund investors - early June 2009 [177] Winding up application - 7 June 2009 [187] Ms Garrett comments on business plan - 8 June 2009 [188] Mr Anderson's response - 10 June 2009 [189] Meeting between investors/Mr Anderson - 12 June 2009 [197] Steps taken after 12 June 2009 meeting with superannuation fund investors - mid June 2019 [205] Ms Garrett's planning for funds management decision - 18 June 2009 [209] 13th drawdown of ADF 2 - 19 June 2009 [210] Information about Stonington - 19 June 2009 [211] Further communications between asset consultants - 19 to 23 June 2009 [214] Response to ADF2 investor information request - 25 June 2009 [218] Meeting of asset consultants to discuss additional equity request [221] Asian road show - 26 June 2009 [222] Response to Mr Anderson's 25 June 2009 email - 26 June 2009 [223] Cancellation of 13th capital drawdown - 26 June 2009 [226] 28 June 2009 [227] Conference call between Ashington and superannuation fund investors - 29 June 2009 [228] Military Super portfolio snapshot - 30 June 2009 [232] Amended 13th capital call - 30 June 2009 [233] Response to Mr Stagg's email of 30 June 2009 - 1 to 4 July [240] Further cashflow difficulties - 1 July 2009 [246] Concern re potential breach of obligations to investors - July 2009 [247] Ms Garrett and Mr Renauf carpark - 3 July 2009 [251] Financial issues re Hamton Vendor Finance - 3 July 2009 [252] Superannuation fund investors meeting - 7 July 2009 [253] Proposed meeting with asset consultants - 7 July 2009 [259] Ms Garrett and Mr Renauf - 8 July 2009 [261] LUCRF concerns - 8 July 2009 [263] Board meeting of Ashington Capital - 9 July 2009 [264] Military Super's position - 10 July 2009 [268] Ashington's recognition of breach of covenants - 10 July 2009 [269] Compliance and Communication Paper - 10 July 2009 [271] Internal Ashington communications re investors - July 2009 [280] PPB Mandate - July 2009 [286] Signing of PPB Mandate - 16 July 2009 [291] Meeting with asset consultant representatives - 16 July 2009 [296] Initial meeting PPB/Ashington - 17 July 2009 [300] PPB Confidentiality Agreement - 20 July 2009 [302] Amended 13th drawdown notice - 21 July 2009 [305] Advice sought from Mallesons - 21 July 2009 [306] LUCRF report to HESTA's board re appointment of PPB - 22 July 2009 [307] Communications within Ashington re liquidity issues - 22 July 2009 [308] Valuation Report for Stonington - 22 July 2009 [309] Investec Security documents sent to PPB - 23 July 2009 [310] Meeting of superannuation fund investors representatives/PPB - 29 July 2009 [311] Concerns expressed by Mr Bouris (then chairman of Ashington) - 4 August 2009 [318] Investors considering change of trustee - 5 August 2009 [321] Variation of St George facility re Potts Point Trust - 6 August 2009 [322] Ms Garrett - 8 to 9 August 2009 [323] PPB communications - early August 2009 [324] Mallesons advice on structuring of funds - 14 August 2009 [330] PPB Strategy Report No 1 - 14 August 2009 [331] The URGENT ATTENTION email - 16 August 2009 [342] Meeting of Mr Gavin and Ashington - 17 August 2009 [345] Investec calls on $6 million outstanding equity - 18 August 2009 [347] 14th drawdown on ADF 2 - 18 August 2009 [348] Anderson's email to superannuation fund investors - 18 August 2009 [349] Update to LUCRF Investment Committee - 18 August 2009 [350] Meeting of PPB, Ashington and superannuation fund investors - 18 August 2009 [351] HESTA board report - 19 August 2009 [352] Email from Mr Steel to Mr Bouris - 19 August 2009 [353] Investec notice of default, demand for payment and cancellation of facility - 19 August 2009 [354] Bouris resigns as chairman and director - 19 August 2009 [357] Westpac response to request for extension of Westpac Stonington Facility - 19 August 2009 [358] PPB draft mandate letter - 20 August 2009 [359] Steel seeks advice as to his position - 20 August 2009 [360] Anderson's request for better communication of PPB's role - 20 August 2009 [361] Advice from Ms Briggs re entitlement to fees if new trustee appointed - 21 August 2009 [362] PPB Strategy Report No 2 - 21 August 2009 [366] Superannuation fund investors' position - late August 2009 [372] 24 to 25 August 2009 [375] PPB Mandate - 25 August 2009 [380] Ashington liquidity issues - 26 August 2009 [384] Request by Ashington for copy of Second PPB Report - 26 August 2009 [385] Superannuation Fund Investors' meeting - 26 August 2009 [387] Ashington's recommended short-term strategy - 27 August 2009 [390] Response to Ashington's recommendation - 28 August 2009 [394] Westpac's position - 28 August 2009 [399] Draft letter to Investec - 28 August 2009 [400] Expanded scope of PPB engagement - 31 August 2009 [401] Ashington's strategy - 31 August 2009 [402] Liquidity issues - 31 August 2009 [403] St George offer to vary Cross+ Trust facility - 31 August 2009 [404] Letter from PPB to Investec - 31 August 2009 [405] Ms Garrett commences with Ashington - September 2009 [407] Investec's position - early September 2009 [409] HESTA consent to provision of PPB's report to Ashington - 1 September 2009 [410] Conference call superannuation fund investors - 2 September 2009 [411] Letter to Investec from lawyers for superannuation fund investors - 3 September 2009 [412] 14th drawdown letter from Investec to unitholders - 7 September 2009 [415] Investec breach notices - 7 September 2009 [416] Investec reference to proposed appointment of receivers - 9 September 2009 [417] HESTA "impaired" investments - 9 September 2009 [418] Request for extension of time by Ashington - 9 September 2009 [419] Ashington response to request by PPB for update - 10 September 2009 [420] Meeting of superannuation investors/consultants - 10 September 2009 [425] Proposed mandate for Patersons to raise $15 million for Stonington - 11 September 2009 [426] Establishment by Mallesons of Stonington Data Room - 11 September 2009 [432] Position in relation to Investec - 11 September 2009 [433] Sunsuper write-down of investment - 11 September 2009 [439] Proposed structure of mezzanine refinance deal - 13 September 2009 [440] Stonington Data Room - 15 September 2009 [441] Investec's response to PPB's proposal - 16 September 2009 [442] Request for extension re Double Bay facility - 16 September 2009 [443] Stonington Data Room - 16 September 2009 [444] HESTA update - 16 September 2009 [445] Westpac Stonington Facility in default - 17 September 2009 [446] Letter from Norton Gledhill - 18 September 2009 [447] 14th drawdown notice issued by Ashington Capital - 21 September 2009 [448] Legal advice on 14th drawdown - 21 September 2009 [451] PPB proposed superannuation fund investors' meeting - 21 September 2009 [452] Ashington account overdrawn - 21 September 2009 [453] Development of the Patersons Mandate - 21 September 2009 [454] PPB email in relation to 21 September capital call - 22 September 2009 [459] Proposed mandate re mezzanine finance - 22 September 2009 [460] Investec advise no extensions to Investec facility for Wylde Street - 22 September 2009 [470] Advice sought re use of funds from 21 September capital call - 23 September 2009 [471] Draft proposal to Investec - 23 September 2009 [472] Updates to Patersons Mandate - 23 September 2009 [479] Signed Patersons Mandate - 23 September 2009 [486] Valuation of Wylde Street - 23 September 2009 [503] Communications with Investec - 23 September 2009 [504] Modifications to Patersons Mandate and Investec Proposal - 24 September 2009 [505] Stonington Capital Raising - 24 September 2009 [506] Process re Wylde Street sale - 24 September 2009 [511] Issues re 21 September 2009 capital call - 25 September 2009 [512] PPB request advice as to Investec fixed charge and Garrett made point of contact - 25 September 2009 [513] Review of refusal of development application re Double Bay - 25 September 2009 [517] Draw request re Double Bay - 26 September 2009 [518] Emails Ms Garrett/ Mr de Rooy - 27 September 2009 [520] Draft proposal for investors re Stonington Capital Raising - 28 September 2009 [521] Formal refusal of Double Bay development application - 28 September 2009 [525] Direction that Ms Garrett generate Investor correspondence - 28 September 2009 [527] Communications with superannuation fund investors - 28 September 2009 [528] Ms Garrett organises meetings with investors - 29 September 2009 [529] Emails Ms Garrett/Mr de Rooy - 29 September 2009 [531] Updated Patersons Mandate - 29 September 2009 [532] Meetings with superannuation fund investors - 29 to 30 September 2009 [535] Patersons Stonington Term Sheet - 30 September 2009 [540] Email to Mr Routley - 30 September 2009 [543] Investec's position on Stonington Capital Raising - 30 September 2009 [556] HESTA's position on Stonington Capital Raising - 30 September 2009 [558] Initial advice on appeal of Double Bay development refusal - 30 September 2009 [559] Creditors - 30 September 2009 [560] Failure to meet $3 million uncalled capital call - 1 October 2009 [562] LUCRF write-down of investment - 1 October 2009 [564] Apex Capital Partners Pty Ltd - 1 October 2009 [565] Emails refer to "plan" discussed with PPB - 2 October 2009 [567] "Opportunity to invest into manager" - 2 October 2009 [574] Investec update - 2 October 2009 [582] Other potential investors - 2 October 2009 [583] APEX Capital - 2 October 2009 [584] NAB/St George default notices - 2 October 2009 [585] Communications between Mr Steel and Ms Garrett - 3 October 2009 [586] Debt schedule for ADF and ADF2 - 3 October 2009 [589] Stonington model - 3 October 2009 [591] Stonington PowerPoint - 3 October 2009 [593] Stonington Data Room - 4 October 2009 [610] Email Mr Steel to Ms Garrett and Mr Renauf - 4 October 2009 [611] Meetings in Melbourne - 5 October 2009 [612] Garrett provides update on Melbourne meetings - 6 October 2009 [625] Investec update - 6 October 2009 [626] Information provided by Albany - 6 October 2009 [627] Mr Anderson's position re Wingate and Icon Constructions - 6 October 2009 [628] Confidentiality agreements sent to Acorn/Albany - 6 October 2009 [631] Notices of default re Double Bay sent to PPB and asset consultants - 6 and 7 October 2009 [633] PPB internal update re "Newco" opportunity - 6 October 2009 [636] PPB email re CV's - 6 October 2009 [638] Garrett sends progress report to Investec - 6 October 2009 [640] Meeting with St George - 6 October 2009 [641] Conference call with Mr Ko and Mr Routley - 7 October 2009 [642] Investec responds to progress report - 7 October 2009 [646] Double Bay media release - 7 October 2009 [647] Apex Capital - 7 October 2009 [648] Rumours of insolvency - 7 October 2009 [649] Wingate sign confidentiality agreement - 7 October 2009 [650] Arnold Bloch Leibler advice - 7 October 2009 [651] LUCRF write-down - 7 October 2009 [652] PPB requests update of creditors - 8 October 2009 [653] Acorn/Albany confidentiality agreement - 8 October 2009 [654] Discussion between Mr Routley and Mr Ko - 8 October 2009 [659] Swan Email - 8 October 2009 [660] NAB/St George - 8 October 2009 [664] PPB seek update re Stonington/Wylde Street - 8 October 2009 [669] Ashington staffing issues - 8 October 2009 [670] Valuation of Stonington - 8 October 2009 [671] Investec update - 8 October 2009 [672] Further developments with Albany - 8 and 9 October 2009 [673] NAB formal notice of default - 9 October 2009 [678] Offer re Wylde Street - 9 October 2009 [679] Wylde Street progress report - 9 October 2009 [680] Access to Stonington Data Room - 9 October 2009 [681] Investec - 9 October 2009 [682] Discussion with superannuation fund investors - 9 October 2009 [683] Albany/Acorn seek additional documents - 10 October 2009 [686] Garrett re update sought by Anderson - 10 October 2009 [688] Response to Acorn/Albany's request for documents - 11 October 2009 [690] Stonington Tour - 12 October 2009 [692] Investec update - 12 October 2009 [693] Legal proceedings - 12 October 2009 [695] Writedown of HESTA Investment - 12 October 2009 [696] Thorney - 12 October 2009 [697] Draft Albany/Acorn offer - 12 to 14 October 2009 [698] Investigating accountant KordaMentha engaged by NAB - 12 October 2009 [701] Sale of Stonington put "on hold" - 12 October 2009 [702] Military Super - 12 October 2009 [703] Ms Garrett updates Mr McCabe - 13 October 2009 [704] Investec - 13 October 2009 [706] Creditors - 13 October 2009 [707] Smorgon access to Stonington Data Room - 13 October 2009 [709] Ms Garrett's "salary" - 13 October 2009 [711] Acorn/Albany prepare letter to investors - 13 October 2009 [712] Meeting of PPB, Investec and Albany - 13 October 2009 [713] The Stonington Data Room - 14 October 2009 [714] Stonington Project - 14 October 2009 [715] Albany/Acorn letter of offer - 14 October 2009 [718] Smorgon - 14 October 2009 [721] Meeting of Albany/Investec/Ms Garrett - 14 October 2009 [722] Application to extend - 14 October 2009 [723] McCabe organises meeting in London - 15 October 2009 [724] Media - 15 October 2009 [725] Meeting with KordaMentha organised - 15 October 2009 [726] Wingate sent Stonington PowerPoint - 15 October 2009 [729] PPB/Albany/Acorn - 15 October 2009 [730] Investec querying standstill arrangement - 15 October 2009 [735] Albany list of issues - 15 and 16 October 2009 [736] Albany/Acorn confirm interest in replacing Ashington - 16 October 2009 [738] Wylde Street change of agent - 16 October 2009 [739] Information to Albany - 16 October 2009 [740] PPB Key Issues Paper - 16 October 2009 [744] Westpac extension - 16 October 2009 [747] Icon Constructions - creditor's statutory demand - 16 October 2009 [748] Investec update re Stonington Capital Raising - 18 October 2009 [749] KordaMentha - 19 October 2009 [750] PPB/Acorn/Albany - 19 October 2009 [754] Investec/Albany/Acorn - 19 October 2009 [761] Ms Garrett/Mr Renauf's proposed new salary arrangements - 19 October 2009 [762] NAB send Ashington the KordaMentha engagement letter - 19 October 2009 [765] Investec update from Ms Garrett - 19 October 2009 [767] PPB/Garrett/Albany/Acorn - 20 October 2009 [768] PPB and Ashington - 20 October 2009 [774] KordaMentha - 20 October 2009 [775] Acorn/Albany indicative offer - 20 and 21 October 2009 [780] Superannuation fund investor's response to Acorn/Albany indicative offer - 21 October 2009 [785] Garrett and Anderson discuss PPB involvement - 21 October 2009 [791] Mr Renauf organises Albany site visit - 21 October 2009 [794] Sale of Wylde Street moves to open market - 21 October 2009 [795] Ko seeks advice on response to PPB - 22 October 2009 [796] "Hit and Run" email - 22 October 2009 [799] PPB update asset consultants - 22 October 2009 [802] Ko details plan to Investec - 22 October 2009 [803] PPB/Acorn/Albany - 22 October 2009 [805] Ko responds to PPB - 22 October 2009 [806] Ko/Garrett/Renauf - 22 October 2009 [809] Sunsuper Investment Recommendation Form - 22 October 2021 [810] Superannuation fund investors and PPB discussion - 23 October 2009 [811] Garrett and Renauf - 23 October 2009 [813] KordaMentha - 23 October 2009 [817] DTZ sign confidentiality agreement - 23 October 2009 [819] Update re Wylde Street - 23 October 2009 [820] Acorn/Albany/PPB - 23 October 2009 [821] Garrett/Renauf/PPB - 23 October 2009 [825] Garrett and Renauf meet with McCabe in London - 24 October 2009 [828] Wingate term sheet - 26 October 2009 [829] Internal PPB - 26 October 2009 [830] Response to Norton Gledhill - 26 October 2009 [831] Acorn/Albany communications - 27 October 2009 [833] Wylde Street - 27 October 2009 [834] "Boutique incubator" model - 27 October 2009 [836] Anderson seeks update on Alter family - 28 October 2009 [837] Wingate extend Wylde Street offer - 28 October 2009 [838] Acorn/Albany "conceptual plan" - 29 October 2009 [839] Investec - 29 October 2009 [843] Ashington unable to pay rent - 29 October 2009 [844] HESTA - 29 October 2009 [845] Wylde Street update - 30 October 2009 [846] Acorn/Albany proposal - 30 October 2009 [847] Anderson informs PPB of Wingate offer - 30 October 2009 [848] Investec update - 30 October 2009 [849] Quarterly investors' report - 30 October 2009 [850] Ashington's auditor to contact ASIC - 30 October 2009 [851] Garrett emails Investec - 1 November 2009 [852] 2 November 2009 [853] 3 November 2009 [859] Investec notice of default - 4 November 2009 [861] Preparation for meeting with superannuation fund investors - 4 November 2009 [862] Mr Anderson collaborates with Mallesons - 4 November 2009 [865] Wingate - 4 November 2009 [866] Information sent to PPB - 4 and 5 November 2009 [867] Ashington meets with auditors - 5 November 2009 [869] Wylde Street sale progress - 5 November 2009 [870] Garrett informs PPB of Investec notice - 5 November 2009 [871] KordaMentha - 5 and 6 November 2009 [872] Presentations to superannuation fund investors - 6 November 2009 [875] Wingate developments - 6 November 2009 [882] Wylde Street has positive response rate - 6 November 2009 [884] Mr Carolan [885] Mr Anderson pressing for information - 6 November 2009 [888] PPB weekly update - 6 November 2009 [889] 8 November 2009 [890] Hamton winding up application - 9 November 2009 [893] Superannuation fund investors/Investec - 9 November 2009 [895] Ko sends draft term sheet to Investec -9 November 2009 [896] Wingate Proposal - 9 November 2009 [897] Auditor's draft letter to ASIC - 9 November 2009 [898] Ms Garrett/Mr Renauf's trip to Melbourne - 10 November 2009 [899] Parissen developments - 10 November 2009 [900] Investec query re Wingate Proposal - 10 November 2009 [905] Hamton proceeding adjourned - 10 November 2009 [906] Draft letter to ASIC re Investec's position - 10 November 2009 [908] Anticipation of celebration - 10 November 2009 [909] Norton Gledhill request information re Wingate - 10 November 2009 [910] Ashington cashflow problems - 10 November 2009 [912] Further steps re Acorn/Albany proposal - 10 November 2009 [915] Land and Environment Court Appeal re Double Bay - 10 November 2009 [919] St George records loan breaches by Ashington - 10 November 2009 [920] Internal Ashington communications re consequences of removal as trustee - 10 November 2009 [921] Wingate Proposal - 11 November 2009 [924] Ashington cash flow problems - 11 November 2009 [928] Acorn/Albany term sheet sent to PPB - 11 November 2009 [929] LUCRF reference to proposal for Parissen to take over as trustee/manager - 11 November 2009 [930] HESTA's valuation of ADF2 investment - 11 November 2009 [931] Possible AFR story - 11 November 2009 [932] Wingate revise proposal re Wylde Street - 11 November 2009 [933] Judgment entered for Savi Communications - 11 November 2009 [934] St George to engage Grant Thornton - 11 November 2009 [935] Internal Ashington concerns about liquidity - 12 November 2009 [936] Events of 12 and 13 November 2009 [937] Parissen funding developments - 14 November 2009 [946] Mr Carolan's "we will be shot" email - 16 November 2009 [951] Ashington overdrawn accounts - 16 November 2009 [952] Ms Garrett decides not to "formalise" her employment with Ashington - 16 November 2009 [953] Investec - 16 November 2009 [955] Alter - 17 November 2009 [958] KordaMentha informed of Parissen Proposal - 17 November 2009 [960] KordaMentha/Parissen Proposal - 18 November 2009 [964] Concern re Ashington balance sheet - 18 November 2009 [968] PPB position re Alter/Acorn proposal - 18 November 2009 [969] Amendments to Wingate Proposal - 18 November 2009 [971] PPB Strategy Update No 3 - 18 November 2009 [972] Parissen Proposal accepted by superannuation fund investors - 19 November 2009 [977] Parissen Group incorporated - 19 November 2009 [981] 20 November 2009 [982] Shortfall in capital raising for ADFIT - 20 November 2009 [983] Investec contemplate appointment of receiver - 20 November 2009 [984] Mr Ko updates Investec of superannuation fund investors' acceptance of Parissen Proposal - 22 November 2009 [985] Acceptance of Wingate Proposal - 20 November 2009 [986] Wingate establishment fee - 23 November 2009 [988] Investec re 30 November deadline [989] Ashington updates PPB - 23 November 2009 [990] Offer re Wylde Street - 23 November 2009 [992] KordaMentha report - 23 November 2009 [993] Meeting to be arranged with Ashington re its removal as trustee/manager - 24 November 2009 [994] PPB Amended Report No 3 - 25 November 2009 [997] Communications re Parissen Proposal - 25 November 2009 [1002] Investec's understanding of the position as at 25 November 2009 [1005] Consent provided by LUCRF, Sunsuper and HESTA - 26 November 2009 [1007] Parissen - 27 November 2009 [1007] Further communications re ADF/ADF2 and Wingate Proposal - 27 November 2009 [1010] PPB informs Mr Anderson of proposal to remove Ashington - 27 November 2009 [1012] Superannuation fund investors formalise approval - 27 November 2009 [1013] PPB update investors on removal of Ashington - 30 November 2009 [1016] PPB communications with Mr Ko - 30 November 2009 [1017] Termination of Mr Carolan's employment with Patersons - 30 November 2009 [1018] Ko sends Ashington's documents to Baker McKenzie - 1 December 2009 [1019] Wylde Street outstanding land tax - 1 December 2009 [1020] Mr Anderson's communication with superannuation fund investors - 2 December 2009 [1021] LUCRF and Military Super approve removal of Ashington - 2 to 3 December [1025] Investec looking to appoint receiver - 3 December 2009 [1026] Further steps re removal of Ashington - 3 to 4 December 2009 [1027] Expression of interest re purchase of assets of ADF and ADF2 - 4 December 2009 [1029] Valad assert consent required to change trustee of Noosa Trust - 4 December 2009 [1030] Wingate Proposal - 7 December 2009 [1031] Arnold Bloch Leibler deliver documents for Ashington's removal - 7 December 2009 [1032] Hamton judgment - 7 December 2009 [1033] Sale of Wylde Street Property - 7 December 2009 [1034] Arnold Bloch Leibler rejects Ashington's assertions as to PPB's conduct - 7 December 2009 [1035] PPB prepare for court action against Ashington - 8 December 2009 [1036] Communications between Mr Anderson and Mr King - 9 to 11 December 2009 [1037] Parissen informed of Ashington's proposal - 11 December 2009 [1040] Rose and Jones negotiations - 14 December 2009 [1041] Ashington considers elevating Wingate to head trust level - 14 December 2009 [1042] Communications between Mr Steel and PPB - 14 and 15 December 2009 [1043] Investec does not support Wingate Proposal - 15 December 2009 [1046] Anderson signs variation of trust deeds - 15 December 2009 [1047] Ko seeks banks' consent for Parissen's appointment - 16 December 2009 [1048] Investec consider arrangement with Wingate - 17 December 2009 [1050] Resolutions for Ashington's retirement - 17 December 2009 [1051] PPB update Investec - 18 December 2009 [1052] Possible collaboration between PPB and Parissen - 20 December 2009 [1053] Ashington confirms imminent retirement - 22 December 2009 [1054] Ashington letter to investors - 22 December 2009 [1055] KordaMentha questions Parissen Proposal - 22 December 2009 [1056] Mr Ko meets with lenders - 22 December 2009 [1057] PPB updates Investec - 22 December 2009 [1058] NAB/ St George provide proposal to Parissen - 23 December 2009 [1059] Arnold Bloch Leibler letter to Ashington - 23 December 2009 [1060] Ashington retires as trustee of ADF and ADF2 - 23 December 2009 [1061] Acorn sets out investment requirements - 31 December 2009 [1066] Parissen due diligence progress - January 2010 [1067] PPB Strategy Update No 4 - 13 January 2010 [1069] Mr Shorrocks informed as to Acorn investment - 8 February 2010 [1070] Parissen receive legal advice - 11 February 2010 [1071] Further steps for removal of Ashington - 23 and 24 February [1072] PPB Strategy Report No 5 - 10 March 2010 [1075] Presentation by Parissen to Acorn - 26 March 2010 [1076] Further steps to transition - March to August 2010 [1079] Liquidation of Ashington Capital and Ashington Management - 14 April 2011 [1087] Mapeline Proceeding - 2013 to 2015 [1088] Deed of Option Agreement - 29 September 2015 [1093] Key Dates [1099] Most likely genesis of the "plan" to remove Ashington as trustee/manager [1204] State of ADF and ADF2 as at September 2009 [1224] ADF [1225] ADF2 [1231] Plaintiff's claims [1235] Summary of conclusions [1240] Issues as to assignment of choses in action to plaintiff [1265] (i) Failure to comply with s 12 Conveyancing Act [1269] (ii) Inability to assign fiduciary duty/knowing assistance claims [1271]] (iii) Standing [1288] Plaintiff's response [1295] Determination as to these issues [1302] Evidence [1312] Lay evidence [1312] Mr Anderson [1312] Ms Briggs [1328] Mr Shorrocks [1333] Representatives of the superannuation fund investors [1335] HESTA [1335] Military Super [1340] LUCRF [1344] Sunsuper [1364] Conclusions to be drawn from superannuation fund investors' evidence [1373] Jones v Dunkel inferences [1379] Transcripts of liquidator's examinations [1397] Ms Garrett - Ex A [1974] Mr Ko - Ex B [1405] Expert evidence [1409] Mark Wist and Stephen Gray - Evidence as to property market conditions [1412] Mr Wist [1412] Professor Gray [1436] Determination [1446] John Melluish and Peter Gothard - insolvency practitioners [1449] Brendan Halligan and Jeffrey Hall - valuation experts [1455] Expert Witness Code of Conduct [1464] Mr Halligan's reports [1477] (i) The financial statements of Ashington Group and its controlled entities (which are unaudited, special purpose financial statements for the 2008 financial year and unaudited, consolidated management accounts for the 2009 financial year) present fairly the financial performance and financial position of Ashington Group and its controlled entities. [1478]] (ii) But for the "wrongful conduct", the ADF and ADF2 development projects and associated funds in progress at the valuation date would have continued to run their course as stated in Mr Anderson's affidavit of 19 December 2017 [1482] (iii) The forecasts of the amounts and timing of development management fees, sales commissions, return on equity of the projects in ADF and ADF2 are as set out in the project cost reports dated June 2009 for each project are reasonable and appropriate [1488] (iv) But for the wrongful conduct, AOF3 would have been constituted in January 2010, with equity commitments of $200 million [1489] (v) After the creation of AOF3, the consolidated Ashington group would create a new development fund every 2 years with equity commitments of $200 million and a new opportunistic fund every 2 years with equity commitments of $250 million (the future funds). [1501] Conclusion as to Mr Halligan's reports [1504] Mr Hall's reports [1505] Determination [1527] Provisional and deferred evidentiary rulings [1532] Loss of trust and confidence in Ashington [1534] Defendants' submissions on loss of trust and confidence [1537] The plaintiff's submissions on loss of trust and confidence [1543] Findings as to loss of trust and confidence [1562] Perceived breaches of trust [1564] Use of the December 2008 capital raising for purposes other than the purpose in the subscription documents [1573] Failure to quarantine costs and assets within each sub-trust [1576] Entry into undocumented "loans" to ADF and Ashington Group [1581] Failure by Ashington Capital and Ashington Group to contribute capital in cash for the subscription price for units [1584] The double pledge of uncalled equity in relation to the 2008 Double Bay capital call [1590] Anderson's personal guarantee over the Hamton Vendor Finance [1593] Payment of "bonuses" when Mr Anderson knew there was no entitlement to the funds [1596] Remaining breaches [1597] PPB's breach of trust pleading [1602] Plaintiff's response to allegations of breach [1604] Solvency issues [1610] Defendants' claim Ashington insolvent as at 30 September 2009 [1610] Solvency of Ashington Management [1632] Determination as to solvency [1642] Attribution of knowledge and vicarious liability issues [1643] Attribution of knowledge [1646] Patersons' submissions as to attribution of knowledge [1646] Plaintiff's submissions as to attribution of knowledge [1663] Patersons' supplementary submissions as to attribution of knowledge [1668] Determination [1676] Vicarious Liability [1685] Patersons' submissions - vicarious liability [1686] Plaintiff's submissions - vicarious liability [1694] Patersons' supplementary submissions - vicarious liability [1712] Determination [1728] Claims [1774] Fiduciary duties [1775] Ms Garrett and Mr Renauf [1776] Summary of the fiduciary duty claim against Ms Garrett [1776] Summary of the fiduciary duty claim against Mr Renauf [1780] Ms Garrett and Mr Renauf's employment status [1783] Did Ms Garrett and Mr Renauf owe fiduciary duties? [1806] Ms Garrett and Mr Renauf's submissions [1820] Nature of any fiduciary duties owed [1831] Determination [1834] Patersons [1858] Patersons' submissions [1863] Determination [1871] Breach of fiduciary duties [1872] Ms Garrett and Mr Renauf - breach of fiduciary duty [1873] Submissions of Ms Garrett and Mr Renauf as to alleged breach [1911] Determination [1937] Patersons - breach of fiduciary duty [1939] Claim for breach of alleged term of good faith/confidentiality - Ms Garrett and Mr Renauf [1946] Determination [1954] Claim for breach of Patersons Mandate - Patersons [1966] Determination [1985] Knowing assistance claims [1988] Knowing assistance claims against Ms Garrett and Mr Renauf [1993] Determination [1996] Knowing assistance claim against Patersons [1997] The pleaded case [1998] Plaintiff's submissions [2009] Mr Carolan's knowledge and assistance [2010] Mr Doherty's knowledge and assistance [2015] Patersons' submissions [2019] Mr Shorrocks' knowledge and assistance [2022] Mr Doherty's knowledge and assistance [2032] Mr Carolan's knowledge and assistance [2063] Determination [2085] Knowing assistance claim against PPB - Ms Garrett/Mr Renauf's breaches of fiduciary duties [2092] Plaintiff's submissions [2093] PPB's submissions [2101] Determination [2148] Knowing assistance claim against Acorn - Ms Garrett and Mr Renauf's/Patersons' breaches of fiduciary duties [2158] Plaintiff's submissions [2163] Acorn's submissions [2170] The pleaded case as to knowledge [2189] Imputed knowledge [2266] Assistance [2274] Determination [2280] Knowing assistance claim against Albany - re Ms Garrett's and Mr Renauf's and Patersons' alleged breaches of fiduciary duties [2284] Plaintiff's submissions [2285] Albany's submissions [2288] Assistance [2385] Determination [2386] Breach of contract and duty of confidence claims [2394] Claim for breach of contract against Patersons [2400] Determination [2404] Claim for breach of contract against PPB [2407] PPB's submissions [2416] Determination [2452] Claim for breach of contract against Acorn [2453] Determination [2462] Claim for breach of contract against Albany [2467] Albany's submissions [2471] Determination [2492] Relief claimed by the plaintiff [2493] Causation [2496] Principles of causation and loss in equitable compensation claims [2496] Principles of causation at common law [2507] Pleading [2509] Plaintiff's submissions on causation [2512] Defendant's position on causation [2533] The Stonington Capital Raising would have involved breaches of trust [2538] Funds raised by the Stonington Capital Raising would have been insufficient [2567] No evidence that the Stonington Capital Raising could have succeeded [2594] Financiers would have enforced securities [2627] No ongoing business capable of being "lost" [2628] Defendants did not cause reputation damage [2631] Defendants' counterfactual scenario [2640] Ms Garrett and Mr Renauf's pleading submissions - causation [2656] Determination - causation [2660] Loss [2672] Plaintiff's submissions on loss [2672] Going concern and recapitalisation [2682] Lenders would not have exercised securities [2689] AOF3 [2698] Ashington's units in the trusts [2709] Fees to be earned by Ashington companies other than Ashington Capital or Ashington Management [2610] Value calculations [2711] Defendants' submissions on loss [2718] Loss limited to Ashington Capital and Ashington Management [2721] Units [2730] Limited evidence of future funds [2731] Superannuation fund investors' ability to remove Ashington Capital and Ashington Management [2732] Limitations of plaintiff's expert evidence [2733] Ashington not a going concern/insolvent [2734] Appropriate valuation method [2743] Future fund and loss of opportunity [2763] Determination - Loss [2775] Proportionate liability [2792] Patersons supplementary submissions - equitable contribution [2796] Acorn's supplementary submissions on equitable contribution [2804] Plaintiff's supplementary submissions as to proportionate liability in equity [2810] Determination - proportionate liability [2819] Costs [2820] Orders [2821]

Judgment

1. HER HONOUR: This matter involves a dispute between several parties arising out of events occurring in 2009 as a result of which the plaintiff asserts that the defendants caused the destruction of the property acquisition, development and funds management business of the Ashington group of companies.
2. The background to the dispute (which I will set out more fully in due course) is not uncomplicated. In summary, the plaintiff (Mrs Daniela Anderson) brings the present proceeding as the assignee of causes of action from the liquidator of Ashington Capital Pty Ltd (Ashington Capital) and Ashington Management Pty Ltd (Ashington Management), two companies in the Ashington group of companies.
3. The Ashington group of companies at the relevant time included Ashington Group Pty Ltd (Ashington Group), Ashington Capital, Ashington Management and Ashington Real Estate Pty Ltd (Ashington Real Estate). As adverted to above, each of Ashington Group, Ashington Capital and Ashington Management is now in liquidation. Broadly speaking, the Ashington companies carried on a property development business through two wholesale unregistered unit trusts (Ashington Development Fund) (referred to here as ADF and ADF2) and associated sub-trusts, through which the core of the Ashington group business (the property development projects) was conducted.
4. Companies in the Ashington group held units in ADF and ADF2. Ashington Capital was the trustee of each of the trusts and sub-trusts; and it appointed Ashington Management as the development manager of each of the trusts and sub-trusts.
5. The primary equity investors in ADF and ADF2 trusts were large superannuation funds - Sunsuper Pty Ltd as trustee for Superannuation Fund (Sunsuper); LUCRF Pty Ltd as trustee for LUCRF Super (LUCRF); Commonwealth Superannuation Corporation as trustee for Military Superannuation and Benefit Fund No 1 (Military Super) and HEST Australia Pty Ltd as trustee for the Health Employees Superannuation Trust Australia (HESTA). I refer to those investors as the superannuation fund investors (in distinction to the minority Ashington unitholders in those unit trusts).
6. As noted, Ashington Capital acted as trustee for ADF and ADF2; and earned trustee and management fees in that role; and Ashington Management acted as development manager for the property development activities carried on within the funds and earned development management fees in that role. As at 2009, Ashington Capital and Ashington Management were respectively entitled to receive trustee fees of approximately $1.6 million and management fees of approximately $4.8 million annually for the property development projects undertaken through the respective unit trusts and associated sub-trusts.
7. Ashington Real Estate acted as a real estate agent for the sale or leasing of completed projects and collected sales commissions.
8. Another entity within the Ashington group, Ashington Capital Int. Pty Ltd (ACIL), was established to act as a trustee and manager for a proposed new investment fund (originally proposed to be called ADF 3 but which in due course became referred to as the Ashington Opportunistic Fund No 3, to which I will refer as AOF3). I understand the reference to an opportunistic fund, as its name indicates, to be one that invests "opportunistically" in properties or projects in, say, a distressed market.
9. The plaintiff here claims equitable compensation and damages from the various defendants, alleging that they wrongfully caused the destruction of the Ashington business. In particular, the plaintiff alleges that a "Consortium" was formed between various of the defendants in October and November 2009 with the objective of taking Ashington's business (there referring to Ashington as a collective term to include both Ashington Capital and Ashington Management) for their own benefit. The plaintiff essentially alleges a conspiracy unlawfully to take Ashington's business from it.
10. The value of the business is a matter in contention. The plaintiff's expert, Mr Brendan Halligan, initially valued it as being some $140 million. However, in the course of the hearing Mr Halligan accepted that if the value of AOF3 and future funds was removed from that figure then the value of the business was reduced to somewhere in the range of $5.25 and $16.9 million (T 1259). By contrast, the defendants' expert, Mr Jeffrey Hall, values the business at nil.

Parties

1. The plaintiff is the wife of Mr Craig Anderson (a discharged bankrupt) who was the founder and driving force behind the Ashington group. Mr Anderson is the principal protagonist in the proceeding and was cross-examined at some length. I will refer to his evidence in due course. Mr Anderson is a former director and shareholder of Ashington. Mr Craig Minahan, another director of Ashington, also gave evidence in the proceeding. The plaintiff was represented at the hearing by Mr Braham SC with Mr Kabilafkis and Mr Bhasin of Counsel.
2. The first defendant, Patersons Securities Ltd (Patersons) (now known as Canaccord Genuity Financial Ltd), is a stockbroking and financial services/corporate advisory firm. For ease of reference, I will continue to refer to it as Patersons (since that is the name by which it was known at the relevant time). Mr Raymond Shorrocks, who gave evidence in the proceeding, was a director of Patersons from 12 July 2004 to 30 January 2009 and an alternate director of Patersons from 17 March 2009 until around April 2018; and its Head of Corporate Finance - Sydney at the relevant time (Mr Shorrocks' affidavit affirmed 7 September 2018 at [2]-[4]). Other employees of Patersons at the relevant time who feature in the relevant events were Mr Martin Carolan (Ms Garrett's then husband) and Mr Paul Doherty. Patersons was represented at the hearing by Mr Redwood SC with Ms Bathurst of Counsel.
3. The second defendant, Ms Nicola Garrett (Ms Garrett) held a role within the Ashington group in the second half of 2009 until 16 November 2009. The third defendant, Mr Samuel Renauf (Mr Renauf), also held a role within the Ashington group from around July until on or about 22 December 2009. Whether Ms Garrett and Mr Renauf were employees or consultants of Ashington is a matter in dispute. Ms Garrett and Mr Renauf are, in essence with the fourth defendant (see below), alleged to have been the architects of the plan wrongfully to take Ashington's business. It is alleged that they supplied confidential information with respect to Ashington's business to the fifth and sixth defendants (see below) and facilitated contact between those defendants and the superannuation fund investors who were members of the ADF and ADF2 unit trusts. It is alleged that both Ms Garrett and Mr Renauf were to benefit from the taking of Ashington's business as it was proposed that they would be employed by the new entity taking control of the business. Ms Garrett and Mr Renauf were jointly represented in the proceeding by Ms Painter SC with Mr Bagley of Counsel. Neither Ms Garrett nor Mr Renauf gave evidence at the hearing though there was no suggestion that they were incapable of so doing.
4. The fourth defendant, PPB Pty Ltd (PPB), is an insolvency firm. Mr Peter Block and Mr Brett Lord of PPB were involved in the relevant events. PPB was represented at the hearing by Mr Ng with Mr Sud of Counsel. No one from PPB gave evidence at the hearing.
5. The fifth defendant, Acorn Capital Ltd (Acorn), is an investment company. Relevant persons at Acorn were Mr Robert Routley and Mr Matthew Sheehan. Neither gave evidence at the hearing. Mr McGrath SC with Ms Williams of Counsel represented Acorn at the hearing.
6. The sixth defendant, Albany Capital Investors Pty Ltd (Albany), is a company engaged in funds management and associated with a well-known family in Victoria, the Alter family. Relevant persons at Albany were Mr Byron Ko and Mr Neil Tremaine. Neither gave evidence in the hearing. Albany was represented at the hearing by Mr Sexton SC with Ms Cameron of Counsel.
7. Ashington Capital and Ashington Management are the seventh and eighth defendants, respectively. No claims were made against those companies (both of which are in liquidation) and they took no part in the hearing.

Plaintiff's complaint

1. In summary, the plaintiff complains that, as a result of the wrongful conduct of the respective defendants, the business of Ashington was destroyed; and that Ashington lost the opportunity of a successful outcome to what is referred to as the Stonington Capital Raising (that being the attempt to refinance existing mezzanine facilities in respect of the acquisition of the Stonington Property - see below), which was the subject of a mandate known as the Patersons Mandate). It is said that the Patersons Mandate was converted into a vehicle for advancing the defendants' own plan to take over Ashington's business; that this resulted in the loss of Ashington's existing income stream in the form of trustee and management fees; and that it also destroyed Ashington's ability to establish future funds (in respect of which it is noted that in 2009 plans were already in development) and to earn the associated management and trustee fees therefrom, including loss through the damage the defendants' actions caused to Ashington's reputation in the market.
2. The plaintiff accepts that, in the aftermath of the global financial crisis (in 2008), the Ashington business faced difficulties securing debt financing that it needed to finance the purchase of three properties (the Noosa, Double Bay, and Stonington properties) in respect of which it had exchanged contracts to purchase before the collapse of Lehman Brothers. The purchases of all three properties were completed in November 2008, December 2008, and February 2009, respectively. However, the plaintiff concedes that there were features of the finance in relation to the acquisition of the Double Bay and Stonington properties that led to problems in 2009.
3. The plaintiff also accepts that the request by Ashington in June 2009 for the mezzanine facilities to be repaid through the injection of additional equity by ADF2 unitholders created "disquiet" amongst the superannuation fund investors about the terms of the Investec Stonington Facility and as to the quality of communication by Mr Anderson with superannuation fund investors. However, the plaintiff maintains that at this stage there was still significant value in Ashington's business (and it must be said that Mr Anderson himself appears to have been confident - although perhaps optimistically so - that the superannuation fund investors' concerns could be adequately addressed or assuaged). It is said that Ashington's business still involved (through ADF and ADF2) the management of a portfolio of high-quality assets with sound fundamentals; and that, provided that Ashington could resolve its immediate funding difficulties, it had strong prospects of restoring investor confidence and maintaining and developing its business.
4. In particular, the plaintiff says that the fortunes of Ashington depended upon it being able to refinance the Investec Stonington Facility (and it contends that the actions of Ms Garrett and Mr Renauf, with the knowing assistance of the other defendants, destroyed that prospect). The key aspects of Ashington's strategy in that regard were identified as being to raise alternative mezzanine financing through a capital raising to be conducted by Patersons under the Patersons Mandate (and to "manage" the superannuation fund investors and financiers to gain time for this to occur).
5. Mr Anderson's evidence is that he reposed considerable trust in Ms Garrett, who "formally commenced" as Head of Funds Management with Ashington in mid-September 2009, and gave her primary responsibility for managing the Stonington Capital Raising on behalf of Ashington. Ms Garrett's responsibilities included liaising with Patersons, meeting with prospective investors, overseeing access to an electronic data room established for prospective investors, and keeping Investec informed of the progress of the capital raising.
6. The plaintiff says that, from late September until late November 2009, Mr Anderson relied almost entirely on Patersons, Ms Garrett and Mr Renauf to conduct communications with PPB and the superannuation fund investors, and to raise the finance to retire the Investec debt, recapitalise the Stonington Trust, and release the uncalled equity into the Double Bay (Project X Hotel) Trust. It is said that the Ashington business depended for its survival on those critical steps and that Mr Anderson had no reason to believe that Patersons, Ms Garrett and Mr Renauf were not "up to that task".
7. The plaintiff accepts that Ashington was unable to repay the respective Stonington facilities when they fell due at the end of August 2009; and that Ashington Capital therefore fell into default. However, the plaintiff says that the lenders were willing to allow time for a refinancing solution to be found. In this regard, the plaintiff notes that, even though Investec issued notices of default when unitholders did not meet calls made in September 2009 for the remaining $6 million of uncalled equity from the unitholders in ADF2, Investec did not otherwise take steps to enforce its security while Ashington was exploring options to refinance the Investec Stonington Facility.
8. As to the prospect of Ashington being able to establish future funds and earn ongoing trust and management fees, the plaintiff emphasises that, in the months following the collapse of Lehman Brothers, Ashington continued successfully to raise bank debt project funding for its projects, raising approximately $206 million, comprising: (a) in relation to the Project X Hotel Trust, $50.375 million in senior debt from National Australia Bank (NAB) and St George Bank (St George) and $14.62 million from NAB in late September and early October 2009 (the Project X Facilities); (b) in relation to the Stonington Trust, $23 million in senior debt from Westpac (the Westpac Stonington Facility), and $10 million in mezzanine debt from Investec in December 2008 (the Investec Stonington Facility); (c) in relation to the Noosa Trust, $65.1 million in senior debt from Suncorp Metway in around October 2008; and (d) in relation to the 10 Wylde Street Trust, an offer in October 2008 of $37.44 million in senior debt from Westpac and $5.03 million in mezzanine debt from Investec.
9. The plaintiff says that Ashington's strategy for the refinancing of the mezzanine facilities ultimately failed because, unbeknownst to him, Ms Garrett was pursuing her own venture (with the assistance of the other defendants). In particular, the plaintiff's complaint is that, soon after Ms Garrett and Mr Renauf commenced working on the Stonington Capital Raising, PPB suggested to Ms Garrett and Mr Renauf that they would be better off working to replace Ashington (rather than to save it). It is said that, from no later than 2 October 2009, rather than performing their fiduciary obligations to Ashington, Ms Garrett and Mr Renauf took advantage of their unique position of trust within Ashington to work to establish a competing venture that would replace Ashington as manager of the developments and as trustee of the trusts (and which would effectively hand the management of the trusts to Ms Garrett and Mr Renauf themselves).
10. The plaintiff says that this scheme was dishonest both in concept and execution. It is said that, over the next eight weeks, Ms Garrett and Mr Renauf repeatedly lied to Mr Anderson as to their intentions, their actions, and the progress and likelihood of completing the original capital raising (which they had in fact abandoned). The plaintiff contends that Ms Garrett and Mr Renauf (and PPB) also lied to the existing superannuation fund investors by telling them that there was no interest in providing finance for the Stonington Trust unless the manager was replaced; and lied to the incoming investors (Acorn and Albany), at least initially, by telling them that the existing superannuation fund investors had unanimously decided to replace Ashington (when no such decision had been taken).
11. The plaintiff says that Ms Garrett and Mr Renauf were given critical assistance by employees of Patersons. In particular, it is said that Mr Carolan and Mr Doherty facilitated the scheme by arranging a crucial introduction for Ms Garrett and Mr Renauf with the potential replacement managers, and by quelling any interest in the Stonington Capital Raising that was, or would have been, expressed by the many potential financiers available to Patersons, and which would have provided superannuation fund investors with an alternative to changing managers. Indeed, as noted above, the plaintiff says that, after 2 October 2009, the Stonington Capital Raising was abandoned entirely.
12. The plaintiff contends that Ms Garrett and Mr Renauf were also assisted by PPB in important respects. It is said that PPB "pitched" the replacement manager scheme to Ms Garrett and Mr Renauf on 1 October 2009 (notwithstanding that PPB was aware that they were employees of Ashington and bound by fiduciary obligations owed to Ashington) and that PPB then arranged to provide Acorn and Albany with information they required to determine their interest in replacing Ashington (notwithstanding that to do so was in breach of obligations of confidence that arose in equity, and pursuant to their agreement with Ashington). It is said that PPB participated in misleading the superannuation fund investors in emails in the period from 6 to 9 October 2009, and subsequently in November 2009, when the superannuation fund investors relied on PPB to tell them the "pro's and con's" of the (competing) Parissen Proposal.
13. The plaintiff says that a key aspect of the development of the "Garrett plan" (to replace Ashington - see the pleading at [99]) was the disclosure of a significant amount of Ashington's confidential information to Albany and Acorn, in breach of fiduciary, contractual and equitable obligations owed to Ashington. It is said that this included Albany and Acorn accessing information contained in a data room set up for the purpose of the Stonington Capital Raising, which access was facilitated by Patersons and Ms Garrett, despite it being clear that Albany and Acorn were not interested in pursuing the mandated Stonington Capital Raising. The plaintiff says that this also included the provision of a large volume of Ashington's confidential information to Acorn and Albany by PPB in 33 emails sent on 16 October 2009 in response to Mr Routley's request (in which he confirmed Albany and Acorn's interest in replacing Ashington as the manager of ADF and ADF2).
14. Mr Anderson complains that he was kept in the dark as the "plan" to replace Ashington developed, believing throughout that Patersons, Ms Garrett and Mr Renauf were working on the Stonington Capital Raising in accordance with the Patersons Mandate (with Albany and Acorn as potential lenders for the mandated mezzanine facility), while PPB was advising the superannuation fund investors. Mr Anderson says that he was encouraged in that belief by Ms Garrett, including through periodic updates provided by her to the effect that discussions with potential investors for the mandated Stonington Capital Raising (including Albany and Acorn), were ongoing, without revealing that Ms Garrett was in fact pursuing an alternative agenda.

Chronology of Events

1. At this stage, suffice it to note that the persons associated with the superannuation fund investors and their advisers were as follows. Sunsuper (whose representatives included Ms Megan Chan and Mr David Hartley) was advised by Sovereign Investment Research (Sovereign) - Mr Ray King, Ms Helen Murdoch and Mr Danny Cohen; LUCRF (whose representatives included Mr David McCusker and Mr David Tieu) was advised by Arcadia Funds Management Ltd and Arcadia Advisory Pty Ltd (together, Arcadia) - Mr Hamish Flett and Mr Gerald Daly; HESTA (whose representatives were Mr Scott Hastings and Mr Robert Fowler) was advised by Frontier Investment Consulting Pty Ltd (Frontier) - Mr Leigh Gavin, Mr Jonathon Stagg and Mr Tom Frederick; and Military Super (whose representatives included Mr Paul Watson and Mr Peter Hodgson) was advised by Strategic Capital Management (SCM) - Mr Peter Dedes. A number of the advisers to the superannuation fund investors gave evidence at the hearing; relevantly, as to the superannuatin fund investors' lack of confidence in Ashington and Mr Anderson towards the end of 2009. I refer to that evidence in due course.

Formation of Ashington group - 1994-2005

1. Mr Anderson founded the Ashington group and was the Managing Director of each of the companies in that group at all relevant times. In around 1994, Mr Anderson commenced his property development business with the redevelopment of a hotel and office block in Sydney's CBD which was marketed as "Ashington House". Mr Anderson redeveloped six other commercial and retail buildings in the Sydney CBD in the period up to 2003.
2. In 2003, Mr Anderson incorporated a number of companies in the Ashington group, including Ashington Management, which was established to employ staff necessary for the Ashington group's property development business.
3. In 2005, the Ashington group decided to target industry superannuation funds to fund its property development projects. In November 2005, Ashington Capital was incorporated; and thereafter two wholesale unregistered property investment unit trusts were established: the Ashington Development Fund (ADF), which raised just over $50 million from investors, closing in May 2006 (see below); and the Ashington Development Fund No 2 (ADF2), which raised some $80 million from investors, closing in September 2007, for the purpose of acquiring and developing property assets on the eastern seaboard of Australia (also see below). ADF and ADF2 used a combination of unitholder equity and third-party debt to finance the acquisition and development of various properties.
4. A number of sub-trusts were established, each in respect of a particular property development project. Ashington Capital was the trustee of each of the various sub-trusts of ADF and ADF2. The sub-trusts below ADF were the Cross+ Trust; the Potts Point Trust; the 10 Wylde Street Trust; and the Project X Hotel Trust (in the last, ADF had a 25% interest) (see below). The sub-trusts below ADF2 were the Stonington Trust and the Noosa Trust (and ADF2 had a 75% interest in the Project X Hotel Trust) (see below).
5. Each of the sub-trusts of ADF was also an unregistered unit trust. Ashington Capital (as trustee of ADF) held 100% of the units in the Cross+ Trust, the Potts Point Trust and the 10 Wyle Street Trust, and 25% of the units in the Project X Hotel Trust. Ashington Capital (as trustee of ADF2) held the remaining 75% of the units in the Project X Hotel Trust.
6. The superannuation fund investors had ultimate control over the Ashington funds insofar as they had the ability to require the compulsory retirement of the trustee on a 75% vote (a matter admittedly known to Mr Anderson at all relevant times since inception of the funds).
7. Also, it is relevant to note that cl 16.4 of each of the constitutions of the respective sub-trusts provided that: Control of Members Subject to clause 16.5 the Trustee must act in accordance with the directions given from time to time by the sole Member (if any) or jointly by all Members, including in relation to the exercise of any discretion conferred on the Trustee by this deed or by law, so as to allow the Members acting together to have day to day control over the operation of the Trust. The Trustee may seek direction from the Members on any matter.

Establishment of ADF - May 2006

1. ADF was constituted on 19 May 2006. As noted above, Ashington Capital was appointed the trustee. The units in ADF were held by the following entities: Sunsuper (as to $20 million), LUCRF (as to $15 million), Military Super (as to $10 million), Ashington Group (as to $2 million), Ashington Capital as trustee for ADF Investment Trust (ADFIT) (as to $3 million), Lantern Super Pty Ltd (as to $100,000) and Henelait Pty Ltd (as to $100,000), totalling $50.2 million. Between them the superannuation fund investors held 90% of the units of ADF. Ashington Capital as trustee of ADFIT and Ashington Group were minority unitholders in ADF (between them holding approximately 10% of the units).
2. Under ADF's constitution, Ashington Capital was required to hold the Assets on trust for the Members (see cl 2.1) ("Assets" being defined in cl 27.1 as "all the property, rights and income of the Trust, but not application money or property in respect of which Units have not yet been issued, proceeds of redemption which have not yet been paid or any amounts in the distribution account or uncalled amounts on Partly Paid Units"); and any Assets held by Ashington Capital as trustee of ADF were required to be "clearly identified as property of the Trust and held separately from the assets of the Trustee and any other managed investment scheme" (cl 2.2). Clause 6 dealt with the application procedures in respect of the units: cl 6.1 provided that an applicant for units must complete an application in a form approved by the Trustee (if the Trustee so requires), the terms of the application form being approved by Ashington Capital; and, under cl 6.2, payment for the units was required to be in cash accompanying an application for units or "be received by, or made available to, the Trustee or the Custodian within such period before or after the Trustee receives the application as the Trustee determines from time to time". Pursuant to cl 6.6, units were taken to be issued on the later of: (a) acceptance by the Trustee of the application; or (b) receipt by the Trustee of the application money.
3. Clause 7 dealt with "Partly Paid Units". Under cl 7.1, the Trustee was entitled to determine that any unit or class of units be partly paid. If it did so and there was an Uncalled Amount in respect of a unit, by giving 14 days' notice, Ashington Capital could call on a Member to pay all or any part of the Uncalled Amount, subject to the rights, obligations and restrictions attaching to any units or Class (cl 7.3(a)). It should be noted that, under cl 7.3(b), Ashington Capital could only make such a call if it also made the same call on all other members who held units of that class which were similarly partly paid. (Complaint is here made that in relation to various calls on uncalled capital at least in relation to ADF2, the Ashington investors did not in fact contribute any capital themselves; rather, it appears that there was a retrospective book entry to offset management or other fees against uncalled capital contributions.)
4. Clause 13 dealt with the powers of the Trustee. Clause 14 dealt with the retirement of the Trustee, providing, relevantly, that: 14.2 Voluntary retirement - Trust not a Registered Scheme While the Trust is not a Registered Scheme, the Trustee may retire on three months' notice to Members (or such shorter period as they agree)… 14.4 Compulsory retirement - Trust not a Registered Scheme While the Trust is not a Registered Scheme, the Trustee must retire from the office it holds under this constitution if required by law or if directed to retire in writing by a Resolution where the "required majority" is 75%. The Trustee and its associates may not vote on such a proposal. 14.5 New responsible entity Any proposed replacement Trustee must execute a deed by which it covenants to be bound by this Constitution as if it had originally been a party to it.
5. Clause 19 of the constitution of ADF (mirrored in the later constitution of ADF2) provided, relevantly, that: 19.3 Liability limited to Assets To the maximum extent permitted by law, the liability of the Trustee to any person other than a Member in respect of the Trust (including in respect of any contracts entered into as trustee of the Trust or in relation to any Assets) is limited to the Trustee's ability to be indemnified from the Assets. 19.4 Indemnity in favour of Trustee The Trustee is entitled to be indemnified out of the Assets for any liability incurred by it in properly performing or exercising any of its powers or duties in relation to the Trust. … 19.6 Indemnity continues This indemnity is in addition to any indemnity allowed by law. It continues to apply after the Trustee retires or is removed as trustee of the Trust. 19.7 Right of indemnity not affected by unrelated breach Where a Liability is incurred pursuant to a proper exercise of the Trustee's powers under this constitution or at law, the Trustee may exercise any of its rights of indemnification or reimbursement out of the Assets to satisfy that Liability to any creditor or the Trustee (in its capacity as trustee of the Trust), despite any loss the Trust may have suffered or any diminution in the value of Assets as a consequence of any unrelated act or omission by the Trustee or by any person or entity acting on behalf of the Trustee.
6. Clause 21 dealt with the remuneration and expenses of the Trustee. Pursuant to cl 21.1, Ashington Capital, as trustee for ADF, was entitled to be paid a management fee of 1.25% per annum of Paid-up Equity (less any amounts of the Trust capital which had been returned to Members and less any realised capital losses of the Trust). Further, pursuant to cl 21.2, all expenses incurred by the Trustee in connection with the Trusts were payable or reimbursable out of the Assets but such reimbursement or payment was only available in relation to the proper performance of the Trustee's duties as trustee of the Trust and could only be paid out of the Assets to the extent that such reimbursement was not prohibited by the Corporations Act 2001 (Cth) (Corporations Act). That included expenses connected with the fees of any development manager, including fixed fees and incentive-based fees paid pursuant to a development management agreement (cl 21.2(f)).
7. Clause 27.4 provided that the constitution was legally binding and bound the Trustee as well as all of the Members.
8. The Information Memorandum for ADF was issued in 2006 (see Ex M at 139). It included the following statements.
9. First, that the "Primary Objective" of ADF was to "provide investors with a 20% pre-tax return on invested capital after fees and other costs" (although it noted that this was not a forecast). The fund structure and size was said to be up to $100 million and it was stated that "[n]o subscriptions will be accepted unless the Minimum Capital Commitment of $60 million is achieved". (Patersons here points out that only $50 million of capital was committed.)
10. Under the heading "Ashington Fees will Align with Investor Returns", the Trustee Fee was described as per cl 21.1 of the constitution and the Development Management Fee was described as "2.75% for projects with a projected life of less than 2 years and 4.25% for projects with a projected life of more than 2 years". There was also an "Incentivised Performance Fee" which was described as "50:50 sharing of profits after Investors have received a 15% pre-tax IRR after all fees and expenses".
11. Section 4 of the Information Memorandum dealt with "Project Investment Criteria". Under the heading "Project Debt", it stated: To maximise equity returns to the investor, the Trustee will leverage each project to a maximum of 70% of LVR. On average the manager expects an LVR of approximately 65%. Each acquisition and development will occur in a SPV which is a 100% subsidiary or sub-trust of the Trust. All borrowings and liabilities (with the exception of the likely tax liability) associated with each acquisition/development will occur at the SPV level.
12. (For the later ADF2, the terms of the constitution and the Information Memorandum mirrored those of ADF as set out above.)
13. The application form for units in ADF (and later ADF2) confirms the applicant's knowledge and understanding of the Information Memorandum and binds the applicant to the terms of the ADF constitution (Ex M at 204).

Establishment of Cross+ Trust - 19 May 2006

1. The Cross+ Trust was established by a Deed Poll dated 19 May 2006 in relation to the purchase and development of a property at Kings Cross Road, Potts Point (the former Millennium Hotel in Kings Cross) (Kings Cross Property). This property was redeveloped (by 2008) into a 78-room luxury boutique hotel, office suites, retail premises and a penthouse residential apartment.
2. Ashington Capital held 100% of the units in the Cross+ Trust as trustee of ADF. Ashington Capital appointed Ashington Management as development manager of the Cross+ Trust.

Establishment of Potts Point Trust - 19 May 2006

1. The Potts Point Trust was established also by a Deed Poll dated 19 May 2006 in relation to the purchase and development of a property at Macleay Street, Potts Point (the former Potts Point post office - Potts Point Property). This property was redeveloped, between 2006 and 2009, into an "Emporio" style neighbourhood retail market, seven high-end retail stores and 41 luxury strata office suites over five floors.
2. Again, Ashington Capital held 100% of the units in the Potts Point Trust as trustee of ADF; and Ashington Capital appointed Ashington Management as development manager.

St George Facility for Potts Point Trust - 30 May 2006

1. On 30 May 2006, St George Bank Ltd (St George) offered Ashington Capital a facility in the sum of $31.3 million for the Potts Point Trust (Ex M at 243).

St George Facility for Cross+ Trust - 10 November 2006

1. On 10 November 2006, St George offered a facility in the sum of $39,107,000 for the Cross+ Trust (Ex M at 295).

Investec Facility re Wylde Street Property - March 2007

1. On 15 March 2007, Investec Bank (Australia) Ltd (Investec) provided a term sheet to Ashington Group offering an initial facility of $10.78 million towards the purchase price of $15.5 million for a property at 10 Wylde Street, Potts Point (a 38 serviced apartment complex in Potts Point) (Wylde Street Property). The maturity date of the facility was 24 months from the initial drawdown date (Ex M at 320ff).

Information Memorandum for ADF2 - 2007

1. In 2007, an Information Memorandum was issued for ADF2. Relevantly, it included the statement that: Each material acquisition and development will occur in an SPV [Special Purpose Vehicle] which in the majority of cases will be a 100% subsidiary or sub-trust of the Fund. All borrowings and liabilities (with the exception of the likely tax liability) associated with each material acquisition/development will therefore occur at the SPV level.
2. Investors were thus advised that all funding for development projects carried out through ADF2 would be obtained at the level of the sub-trusts, and that the liability for any borrowings would not be visited on Ashington Capital in its capacity as trustee of ADF2. This became an issue of no little contention with the superannuation fund investors, as I will explain in due course. Suffice it here to note that Ashington Capital did not honour the commitment made in the Information Memorandum insofar as the Information Memorandum represented that borrowings and liabilities (other than tax liability) would be confined to the sub-trust level. The structure of the trusts and sub-trusts also caused a potential problem in that regard (which the plaintiff contends explains references in various of the superannuation fund investors' contemporaneous documents as to removal of the trustee - to which I refer in due course).

Establishment of ADF2 - 20 September 2007

1. On 20 September 2007, ADF2 was constituted. Ashington Capital was appointed trustee. The units in ADF2 were held by the following: Sunsuper (as to $20 million), LUCRF (as to $15 million), Military Super (as to $15 million), Ashington Group (as to $2 million), HESTA (as to $25 million) and Ashington Capital as trustee for ADF Investment Trust (No 2) (as to $3 million), totalling $80 million. Between them the superannuation fund investors thus held 93.75% of the units of ADF2.
2. As noted, the superannuation fund investors (HESTA, Military Super, Sunsuper and LUCRF) thus held the majority of the units in each of ADF and ADF2; and Ashington group entities held 10% of the units in ADF and 6.25% of the units in ADF2.

Establishment of Project X Hotel Trust - 20 September 2007

1. The Project X Hotel Trust (sometimes referred to as the Double Bay Trust) was established by a Deed Poll in relation to the purchase of a property at Cross Street, Double Bay (the Sir Stamford Hotel) (Double Bay Property), for which development approval was sought for a mixed-use five-star boutique hotel of 60-80 rooms, 40-50 apartments and retail space (with a "fall-back" strategy to refurbish the building and convert it into strata apartments). The units in the Project X Hotel Trust were held as to 25% by Ashington Capital as trustee for ADF and 75% by Ashington Capital as trustee for ADF2. Ashington Capital was appointed trustee of the Project X Hotel Trust and it appointed Ashington Management as development manager.

Establishment of Noosa Trust - 12 March 2008

1. The Noosa Trust was established by a Deed Poll dated 12 March 2008 in relation to the acquisition of a 50% interest in the Sheraton Noosa Hotel in Noosa (Noosa Property) (as part of a joint venture with the Valad Property Group (Valad) which held the other 50% interest in the property). There was a longer-term plan to demolish and rebuild the Noosa Property as a mixed-use project incorporating retail, a boutique hotel and apartments. Ashington Capital was appointed trustee of the Noosa Trust and appointed Ashington Management as the development manager of the trust.
2. On 14 March 2008, Ashington Capital, Ashington Management and Trust Company Ltd entered into a Development Management Deed for the Noosa Trust (Ex M at 869).
3. On 5 May 2008, Ashington Capital, as trustee of the Noosa Trust, entered into a Fee Agreement with Valad Funds Management Ltd (Valad Funds Management) (see Ex M at 19490). By this agreement, Ashington Capital was obliged to pay Valad Funds Management a fee of $20 million on the date five years after the completion of the acquisition of the Sheraton Noosa resort by a joint venture vehicle established by Ashington Capital and Valad "[i]n consideration of Valad introducing Ashington to the Project, by arranging for the issue of units in the Trust and shares in the Company to Ashington" (cl 2.1). The $20 million fee was not disclosed to the superannuation fund investors.

Establishment of Stonington Trust - 23 May 2008

1. The Stonington Trust was established by Deed Poll on 23 May 2008 in relation to the purchase of a property at Glenferrie Road, Malvern, Victoria (the Stonington Property). Ashington Capital held 100% of the units in the Stonington Trust as trustee of ADF2. Ashington Capital was appointed trustee of the Stonington Trust and appointed Ashington Management as development manager.
2. Ashington Capital issued an Information Memorandum in respect of the Stonington Trust. Consent had been obtained for the contemplated property development which included a master planned luxury residential development consisting of 14 apartments in a four-storey building, 12 duplex-style apartments over five mansion style dwellings and 50 townhouses and an existing heritage building known as "The Stables".
3. On the same day (23 May 2008), Ashington Capital, Ashington Management and Trust Company Ltd entered into a Development Management Deed for the Stonington Trust (Ex M at 1007).
4. The vendor of the Stonington Property was Hamton JV (Malvern) Pty Ltd (Hamton). Ashington Capital, as trustee of the Stonington Trust, entered into a Contract of Sale with Hamton and The Trust Company Ltd (as Custodian) on 28 May 2008. That contract provided for a sale price of $46.5 million, a deposit of $4.65 million, and a settlement date of 3 November 2008. The contract of sale was then varied by a Deed of Variation of Contract dated 14 August 2008, pursuant to which, amongst other things, the purchase price was amended to $47,469,890 and the deposit varied to $4,546,989. A final set of variations to the contract was effected by means of a Second Deed of Variation of Contract dated 12 December 2008, pursuant to which, amongst other things, the deposit payable by Ashington Capital, as trustee of the Stonington Trust, was increased from $4,546,989 to $9,196,989 and the date for payment of the balance of the purchase price varied to 30 January 2009.
5. The funding for the purchase of the Stonington Property was obtained by Ashington Capital, as trustee of the Stonington Trust, from various sources (which I explain in more detail in due course): first, from Westpac Banking Corporation (Westpac) pursuant to a facility agreement entered into on 18 November 2008 (Westpac Stonington Facility); and the balance through agreements entered into on the day of settlement (which ultimately was 25 February 2009), those being a facility agreement with Investec, by which Investec provided mezzanine finance of $10 million (Investec Stonington Facility) and vendor finance from Hamton. Establishment of 10 Wylde Street Trust - 12 August 2008 The 10 Wylde Street Trust was established by Deed Poll on 12 August 2008 to hold the Wylde Street Property referred to above. Ashington Capital held 100% of the units in the 10 Wylde Street Trust as trustee for ADF. Ashington Capital was appointed trustee of the trust and it appointed Ashington Management as development manager. Development consent was obtained in 2008 to demolish the existing structure and build a new residential apartment complex (for which a construction debt facility was obtained but not ultimately utilised following sale of the site at the request of the superannuation fund investors (see below)).

Fees

1. At this point it is convenient to note that, as trustee of the ADF and ADF2 trusts, respectively, Ashington Capital was entitled to an annual trustee fee of 1.25% of drawn equity less any capital returned to investors and realised net capital losses. As at December 2009, Ashington Capital claimed an entitlement to an annual trustee fee of $562,000 in respect of ADF (representing 1.25% of drawn capital of $45 million); and, in respect of ADF2, an annual trustee fee of $1 million (representing 1.25% of drawn capital of $80 million).
2. Ashington Capital (as trustee of each sub-trust) entered into development management agreements with Ashington Management under which Ashington Management would manage the development of each project undertaken by the ADF and ADF2 sub-trusts and was entitled to a fee of 4.25% of development costs over the forecast life of each project. The plaintiff has calculated that, as at December 2009, Ashington Management was entitled to receive annual management fees of approximately $4.8 million comprising $1.56 million in respect of the Stonington Trust, approximately $1.8 million in respect of the Noosa Trust and $1.42 million in respect of the Project X Hotel Trust. (The development of the other projects of ADF and ADF2 had by then either concluded or all budgeted management fees had already been earned, with the result that no other management fees were payable to Ashington Management.)

Global Financial Crisis - 15 September 2008

1. On 15 September 2008, the collapse of Lehman Brothers precipitated the Global Financial Crisis of 2008 (the GFC). It is not disputed that, following the commencement of the GFC, the Ashington Funds came under considerable financial strain. At that stage, as noted above, Ashington Capital had already entered into commitments for the purchase of the Stonington Property and in relation to the acquisition and proposed development of the Double Bay Property.

Proposed third fund (ADF3)

1. At around the time of the GFC, Ashington Capital had been developing a strategy to establish a third fund, initially intended to be called Ashington Development Fund 3 (ADF3) but later revised to be the Ashington Opportunistic Fund 3 (AOF3). The board minutes for the board meeting of Ashington Capital on 24 July 2008 recorded fund raising activity for proposed AOF3 (then referred to as ADF3); and the board papers for the board meetings of Ashington Group and Ashington Capital on 18 September 2008, noted a proposal to increase the size of AOF3 from $150 million to $200 million and that presentations had been made to current investors. Mr Anderson's evidence is that he intended AOF3 to raise US$200 million and to target international investors. In late 2008, Jones Lang LaSalle was appointed to represent Ashington in its international capital raising.
2. However, towards the end of 2008, a decision was made to defer the establishment of AOF3. Minutes of a board meeting of Ashington Capital on 18 September 2008 included, as to the proposed new fund, that due to heavy falls in equity markets and investors being overweight in property, "there are few or no investments for the remainder of the calendar year and ADF No.3 would be deferred until next year" (Ex M at 1415).

Compliance breaches - 30 September 2008

1. On 30 September 2008, a Compliance Report to the Board of Ashington Capital recorded known breaches during and since the end of the quarter as including "ADF2 investment in Double Bay Project exceeding $30M"; and noted that audited financial statements were not issued to ADF and ADF2 investors by 31 October 2008 (Ex M at 1590-1591).

Project X Hotel Trust finance - 30 September 2008

1. Also, on 30 September 2008, NAB and St George wrote to Ashington Group attaching a revised term sheet offering senior debt of $50.375 million to fund the acquisition of the Double Bay Property (Project X Facility) (see Ex M at 1531). The maturity date of the facility was 31 December 2008.
2. On 3 October 2008, NAB Capital wrote to Ashington Group providing a term sheet for finance of junior debt of $14.62 million for the Double Bay Property. The maturity date of the facility was 31 December 2009. A subsequent review of Ashington Capital's records performed by KordaMentha indicates that $14,635,000 was advanced under the Project X Mezzanine Facility from NAB.
3. The terms of the Project X Facility are set out, in part, in a Security Trust and Intercreditor Deed dated 15 October 2008 entered into by Ashington Capital, as trustee for each of the Project X Hotel Trust, ADF and ADF2; and by NAB, St George and Ashington Stamford Issuer Pty Ltd (Ashington Stamford) (Project X Security Deed). The terms of the principal facility are set out in: (a) a Note Facility Deed - Senior Note Facility (NAB) dated 15 October 2008 between Ashington Capital as trustee of the Project X Hotel Trust, Trust Company Ltd as custodian of the Project X Hotel Trust, Ashington Stamford and NAB (Project X NAB Facility), under which the facility limit was $25,187,502 and the Facility End Date was 31 December 2009 (Ex M at 1891); (b) a Note Facility Deed - Senior Note Facility (St George) dated 15 October 2008 between Ashington Capital as trustee of the Project X Hotel Trust, Trust Company Ltd as custodian of the Project X Hotel Trust, Ashington Stamford and St George (Project X St George Facility), under which the facility limit was $25,187,502 and the Facility End Date was 31 December 2009 (Ex M at 10578); and (c) a Note Facility Deed - Mezzanine Note Facility dated 15 October 2008 between Ashington Capital as trustee of the Project X Hotel Trust, Trust Company Ltd as custodian of the Project X Hotel Trust, Ashington Stamford, National Australia Bank Ltd (NAB) and nabCapital (a division of NAB) (Project X Mezzanine Facility), under which the facility limit was the lesser of $14,625,000 and the difference between 84% of the value of the Double Bay Property and the limits in the senior facilities (Ex M at 10610); (together, the Project X Note Facilities).
4. The principal security contemplated under the Project X Security Deed was a first ranking real property mortgage over the Double Bay Property. A mortgage in favour of NAB over the Double Bay Property was registered on 15 October 2008. Ashington Capital as trustee for each of ADF and ADF2 also granted an equitable mortgage over all the units in the Project X Hotel Trust.
5. Pursuant to cl 23.8 of the Project X Security Deed, Ashington Capital, as trustee of ADF2, was required to ensure that at any given time it had minimum uncalled capital or free cash of not less than $15 million (less certain amounts) "which in the records of ADF2 is allocated solely to its obligations under the Finance Documents" (the Project X Uncalled Capital Undertaking). The amounts deducted from the $15 million requirement included interest and line fees paid under the Project X Facility (such that the amount of uncalled capital the subject of this undertaking would reduce over time).
6. Pursuant to cl 33.1(d), a default would occur under the Project X Security Deed if, among other things, Ashington Capital was in breach of any obligation under a Finance Document (which would include the Project X Uncalled Capital Undertaking) and remained in breach for 10 business days after the earlier of being notified of the failure to comply or becoming aware of the breach.
7. The Project X Note Facilities each adopted the defined terms used in the Project X Security Deed. The term "Finance Document" was defined in the Project X Security Deed so as to include that deed as well as each of the Project X Note Facilities. The Project X NAB Facility and the Project X St George Facility each provided that a "Default" under those deeds occurred if "(whether or not within an Obligor's control) an event or circumstances specified as a 'Default' or 'Event of Default' (however described) in a Finance document occurs" (see, for example, cl 16.1 of the NAB Facility). Therefore, a breach of the Project X Uncalled Capital Undertaking would constitute a default under the Project X Security Deed and the two senior note facilities.
8. The Project X NAB Facility and the Project X St George Facility each provided, at cl 16.2, that if a "Default" subsisted, NAB or St George could, in effect, cancel all or any part of the Facility Limit, terminate their obligations under the Finance Documents, and demand immediate repayment of all money owing to them in connection with the Finance Documents. Following this, NAB as Security Trustee under the Project X Security Deed could enforce the securities granted under the Project X Facility, including the first ranking mortgage over the Double Bay Property, in accordance with the process set out in the Project X Security Deed.
9. As will become apparent in due course, an issue arose with the superannuation fund investors as to the implications for the funds arising out of the Project X Uncalled Capital Undertaking.

10 Wylde Street Trust finance - 2 October 2008

1. On 2 October 2008, Investec wrote to Ashington Capital as trustee for the 10 Wylde Street Trust, attaching a term sheet offering a $42.47 million facility to fund the refinance of the existing Investec facility and to finance construction of the development (Wylde Street Facility) (Ex M at 1593ff). The facility comprised a $37.44 million Westpac senior debt facility and a $5.03 million Investec junior debt facility. The maturity date of the facility was 22 months from initial drawdown.

8th drawdown for ADF2 - 3 November 2008

1. The 8th drawdown for ADF2 was made by Ashington Capital on each of the unitholders' existing capital commitments on 3 November 2008.

Request for increase in fund equity in ADF2 - 10 November 2008

1. On 10 November 2008, and hence only shortly after the 8th drawdown for ADF2, Ashington Capital, as trustee for ADF2, wrote to the asset consultants for each of the superannuation fund investors in ADF2, advising that the Double Bay Project was now likely to require an additional $18 million in equity above that forecast in the Information Memorandum and asking that all of the superannuation fund investors commit to increasing the fund equity in ADF2 by $20 million to comply with covenants (i.e., the Project X Uncalled Capital Undertaking) under the finance facilities for the Double Bay Project (Ex M at 1960). The letter stated that ADF2 was not "capitalised sufficiently to continue meeting this banking covenant" and that "it is not intended to draw on the majority of this increased commitment (as it is our intention to replace it by sale of a 50% interest in the project)".
2. At the time of this (the first) additional equity request, Ashington was negotiating with financiers for loan facilities to acquire the Stonington Property and had engaged the firm then known as Mallesons Stephen Jaques (Mallesons) to assist with those negotiations.

Superannuation fund investors' response to $20 million capital call - November to December 2008

1. Various of the defendants have pointed to the evidence of discontent on the part of the superannuation fund investors in respect of the $20 million funding request as demonstrating that (contrary to the plaintiff's submissions) investor "disquiet" with the actions of the Ashington group preceded the request for additional equity that Ashington Capital made in mid-2009.
2. On 13 November 2008, Mr Gavin (principal adviser to HESTA), sent an email to Mr Fowler and Mr Hastings explaining the request for extra capital raising and saying that the only alternative to providing extra capital raising was to find a buyer prior to receiving development approval (noting that most returns in a development are earned by getting the planning approval). Mr Gavin stated that "I don't know if we have much choice but it is very disappointing" (Ex M at 1419). The email stated: As discussed wth Scott today, I'm attaching the e-mail dialgoue I've had with Craig Anderson in the last two days, as well as the original letter that he drafted and I assume he'll give you tomorrow I've spoken to him 3 or 4 times and asked for more detail, which you'll see in the e-mail chain. Essentially, the lending environment for development projects· has got very tight and, while NAB and St George aren't asking for a lower LVR, they are asking for $15m i(l extra undrawn equity or free cash as a reserve for the project. Ashington also need some extra equity for extra project costs it seems. Craig's e-mails should explain the rest. Give me a call on the mobile (0416 080 499) tonight or tomorrow morning if you want to discuss before your meeting. Otherwise, let's discuss on Monday after you've met with them. I think the only alternative is for them to try and find a buyer before the DA is approved, which could be difficult and at a much lower price than post-DA. As we know, most of the returns in a development are often earned by getting the planning approval (like ISPT DOF I making a 60% equity IRR on Stonnington). I don't know if we have much choice, but it is very disappointing.
3. On 3 December 2008, Mr Gavin sent an email to Mr Anderson, copied to Mr Fowler and Mr Hastings, stating that HESTA would not contribute more equity unless all unitholders did so (Ex M at 1975). On 4 December 2008, Mr Gavin sent an email to Mr King (Sunsuper's adviser), copied among others to Mr Fowler and Mr Hastings, stating broadly that HESTA would only commit extra equity if more than 75% of the unitholders in ADF2 agreed to do so (Ex M at 1977).

Westpac Stonington Facility - 18 November 2008

1. As part of the funding for the acquisition costs of the Stonington Property, Ashington Capital entered into a facility with Westpac (pursuant to an offer dated 7 November 2008) as senior lender for $23 million on 18 November 2008 (the Westpac Stonington Facility).

Hamton Vendor Finance - 12 December 2008

1. On 12 December 2008, Ashington Capital, as trustee for the Stonington Trust, entered into a loan agreement with Hamton (the vendor of the Stonington Property) to borrow $1,968,032.33. This loan was amended on 10 February 2009 to increase the borrowing to $2,188,546.33 (see Ex M at 2382).
2. On 25 February 2009, Hamton and Ashington Capital, as trustee of the Stonington Trust, agreed terms that Hamton would provide Ashington Capital vendor finance of $2,621,103 (by way of deferral of part of the purchase price), repayable on 1 July 2009 with an applicable interest rate of 20% per annum (Hamton Vendor Finance), as well as reimbursement of an expense in the amount of $258,607 (see Ex M at 2428). Mr Anderson personally guaranteed the Hamton Vendor Finance.

Ashington Capital Board meeting - 16 December 2008

1. Minutes of a board meeting of Ashington Capital on 16 December 2008 recorded that: following meetings with existing and new investors there were one or two genuine prospects for ADF3; however, "virtually all Australian investors are overweight in property investment and as a result it is unlikely that any domestic investors will make a commitment to ADF No 3. before mid 2009"; that ADF was "drawn fully on its investor capital and is now operating from Sale proceeds and short-term loans from ADF2"; and that ADF was experiencing a fund performance downgrade and liquidity issues.

Investec indicative term sheet - 23 December 2008

1. On 23 December 2008, Mr Anderson signed the indicative term sheet sent by Investec (on 11 December 2008), proposing a senior debt facility from Westpac of $23 million and a junior debt facility from Investec of $10 million in order to fund the purchase of the Stonington Property.
2. The indicative term sheet identified the borrower as Ashington Capital, as trustee for the Stonington Trust. However, while the proposed borrower was at the sub-trust level for the Stonington Trust, the proposed security for the finance facility was at the head trust and sub-trust level as it included: a first ranking fixed and floating charge over Ashington Capital, as trustee for ADF2; a guarantee and indemnity by ADF2; and ADF2 to have made a capital call of no less than $10 million to be paid on the last day of the facility for the sole purpose of repaying the facility. It also provided for Investec to obtain security which included a second ranking mortgage over the Stonington Property; a second ranking fixed and floating charge over the assets and undertakings of Ashington Capital as trustee for the Stonington Trust; and for the entry into a priority deed between Investec and Westpac (which held the first ranking mortgage over the Stonington Property).
3. The terms of the Investec indicative term sheet and the fact that it had been signed by Mr Anderson were not communicated to the superannuation fund investors until about June 2009. Relevantly, the ADF2 Quarterly Investor Report No 5 for the period ended 31 December 2008 to unitholders, made no mention of the Investec indicative term sheet although did record that "[f]inance offers have been received from Westpac (Senior) and Investec (Mezzanine)" (Ex M at 2146).

Applications for units in ADF2 pursuant to First Additional Equity Request - 23 December 2008

1. On 23 December 2008, the following investors applied for units in ADF2 equal to each investor's pro-rata share of the $20 million to be raised: each of National Nominees Ltd, as nominee for both Military Super ($3.75 million) and Sunsuper ($5 million); JP Morgan Chase Bank as custodian for LUCRF ($3.75 million); Ashington Capital ($750,000); and Ashington Group ($500,000).
2. Application for Units forms included the statement that they were "subject to the terms of the Fund constitution, and the information memorandum" (see, for example, Ex M at 2109).
3. I interpose here to note that, following the contribution by the superannuation fund investors of $20 million of additional equity in December 2008 for the purpose of compliance with the Project X Uncalled Capital Undertaking, an issue arose whereby the trust comprised in ADF2 had contributed the whole of the additional $20 million raised such that the equity in the Project X Hotel Trust was no longer contributed by ADF and ADF2 in their unit proportions of 25% to 75% (see the 18 June 2009 email from Ashington's Chief Financial Officer, Mr Scott Steel, to Mr Anderson, copied to Mr Tony Marsden (Ashington's accountant), Ms Elizabeth Briggs (an Ashington funds manager) and Mr Minahan, in which Mr Steel explains this issue - see below).

Email from Mr Steel to Mr Anderson - 27 December 2008

1. On 27 December 2008 at 8.20pm, Mr Steel emailed Mr Anderson (copied to others at Ashington), expressing his concerns about the impact of the Stonington acquisition on ADF2, stating (with emphasis as per the original) that (Ex 17 at 173-175): Normally I would not interrupt the break; however, we have a critical business issue that needs to be understood clearly so that a very important decision can be made. It has to do with our current capacity within ADF2 and the impact the Stonington acquisition will have on the fund. Basically, I am recommending that we do not proceed with Stonington. … We were … successful in obtaining a Mezz facility from Investec (the only mezz provider in the market) on 11 Dec, in which they laid out certain conditions that I have been working through with Mallesons. The key issues in the offer are: ● Requirement of a Capital Call of $10M- (not practical for us, we countered with an undertaking to have $10m uncalled capital available - accepted by Investec) … When you combine the undertaking required for the Stonington Mezz with the undertakings required for Double Bay, we are not in a position to realistically meet the covenants that will be in place for the duration of the Mezz facility… Could you clarify as I don't follow what you mean? Settling on the Stonington Property will put too much strain on the business. So much so, that it is my view it could be crippling. We would be stretching the funds too thin and as a result end up delaying creditors and making decisions under pressure, breaching covenants, etc etc We will be over committing the fund. We will be exposing the directors including M Bouris in any month we are offside We don't have the cash to withstand any emergency. (Cross price adjustment, poor sales, post debt refinancing, etc etc) It could be said many different ways. … Is there any way we can proceed without putting the health of the company at risk? In my opinion, no! … What about selling down double Bay…wont that help? This would certainly help the overall cash position of both ADF and ADF2. And once we had a signed offer, we would be able to satisfy the covenants, but, until then we would need to convince our lenders to rely on our ability to deliver. I have received verbal comments from Investec that they will not relax their covenant on the Mezz loan and it will have to go back to credit should we wish to try. Therefore, it is my view the chances of success here are nil … What about getting Investec to ease up on the covenants to allow us to find a JV Partner? See my answer above Investec originally shut the door on this deal because they did not want to rely on us finding a JV partner. The only reason they came back with an offer was due to the increased equity in ADF2. They have made it very clear that they want out in 6 months firm. Secondly, this offer would have to go back to credit if any of the terms change. I do not believe we will have success here. … What happens when we are in breach of our covenants? It usually triggers a review event by the Banks which allows them to step in and make unilateral decisions to protect their interest. Most of all it effects [sic] our credibility and future borrowing power - this could basically put us out of business … So what are you recommending? We walk from the Stonington deal and focus on rescinding the contract to get out $9.3M deposit back. This will at least allow us to focus on our existing projects without compromise. Even if it means we lose $3 or $4M on the deal? Yes.
2. In cross-examination, Mr Anderson justified the course he had adopted, of proceeding to settle the Stonington acquisition, as follows (T 461.18-23): As the trustee, we had to make a decision between settling or not settling on the acquisition. If we did not settle, we would have breached the contract, lost $12 million of equity and been sued by the vendor. The alternative option, which we decided was the best option, was to settle on the property and pay [out] Investec, or refinance them, within the six month term of their facility; because that was the best way to protect [investors'] equity in the fund.

Ms Garrett approached re possibility of working with Ashington - late December 2008

1. Mr Anderson's evidence is that in late December 2008 he approached Ms Garrett, who was then responsible for global capital raising at Valad, proposing that Ms Garrett join Ashington as its Head of Funds Management, which role would include assisting Ashington to raise capital for AOF3. Mr Anderson has deposed that he met with Ms Garrett in late December 2008 at the Westin Hotel and discussed the possibility of Ms Garrett working with Ashington (see [130] of Mr Anderson's 19 December 2017 affidavit).
2. Mr Anderson has also deposed that, in January 2009, he and Mr Peter Seaton (of Ashington) met with Ms Garrett at the Westin Hotel and proposed that they send her an offer of employment (see [131] of Mr Anderson's 19 December 2017 affidavit).
3. According to Mr Anderson, Ms Garrett asked that Mr Renauf, with whom she worked at Valad, also join Ashington.
4. Ms Garrett denies that she was employed by Ashington Management but "admits that she was engaged as a contractor by [Ashington Management] from on or about 1 September 2009 until she became a consultant to [Parissen] on or about 16 November 2009"; Mr Renauf denies that he was employed by Ashington but admits that he was "engaged as a contractor by [Ashington Management] during 2009 until he became a consultant to Parissen on or about 22 December 2009".

HESTA Side Letter - January 2009

1. While, over the period from late December 2008 to early 2009, the superannuation fund investors all subscribed for the $20 million additional capital in ADF2 in shares pro rata to their respective shares in the total number of units in ADF2, it is relevant to note that HESTA did so only on the basis of a side letter from Ashington Capital. This occurred in the following circumstances.
2. From 22 December 2008 to 15 January 2009 there was correspondence between HESTA, Frontier and Ashington in relation to HESTA's concern that the December 2008 additional capital only be used for the Double Bay Project.
3. On 6 January 2009 at 12.14pm, Mr Gavin sent an email to Ms Briggs and Mr Anderson, copied to Mr Hastings and Mr Fowler. In that email, Mr Gavin stated that HESTA had received legal advice from Freehills about the additional equity request and raised the issue as to whether those funds could be quarantined to the Double Bay Project and not be used for another project, saying that: …we need to understand if the debt on the other projects has or is likely to have (when signed) any recourse to the Head Trust, specifically the undrawn commitments at the Fund level? If so, I think we need to find a way to quarantine this $20m additional commitment to the Double Bay sub-trust level only.
4. On 6 January 2009 at 3.41pm, Ms Briggs responded to Mr Gavin's question by email (also sent to Mr Anderson). Ms Briggs dismissed Mr Gavin's concerns, stating that it was "not possible for the additional equity to be quarantined to the Double Bay sub trust as this would not satisfy the covenant for Double Bay which sits at the head trust level" and "[t]o quarantine the $20M in this way would effectively defeat the purpose of the capital raising". Mr Gavin replied by email to Ms Briggs and Mr Anderson that day asking, "[h]ow are you ensuring the uncalled equity at the head trust level set aside for Double Bay is "protected" from the other projects? Investors can't be put in a situation where they need to replenish the head trust level guarantee for Double Bay if another project performs very poorly and the creditor takes action against Ashington such that it erodes the uncalled equity at the head trust level".
5. On 7 January 2009, Mr Anderson and Ms Briggs received legal advice from Mallesons about the proposed HESTA Side Letter and schedule 1 accompanying the Written Resolution of Members to the effect that (Ex 17 at 39): Hesta has amended paragraph (b) of the schedule so that the $20m can only be used for Double Bay. This change should not be accepted since some of the $20m may be needed for Stonington (and for other as yet unforeseen events).
6. On 9 January 2009 at 6.44pm, Mr Gavin emailed Ms Briggs (copied to Mr Anderson as well as Mr Hastings and Mr Fowler of HESTA), repeating his concerns about the First Additional Equity Request and asked to be sent or told about the covenants or guarantees that Ashington had or were likely to give to the banks in relation to Stonington. (Acorn points out that, despite that direct request, no one at Ashington told Mr Gavin or anyone else at HESTA about the details in, or provided a copy of, the Investec indicative term sheet. Acorn says that this is contrary to Mr Anderson's self-serving evidence in cross-examination that if a request for information was received from one of the superannuation fund investors he would provide that information.)
7. On 12 January 2009 at 11.59am, Ms Briggs replied to Mr Gavin (copied to Mr Anderson, Mr Hasting and Mr Fowler), again dismissing Mr Gavin's concerns and stating that: We appreciate your concerns but they are unfounded. Ashington would not promise equity two or three times, nor will investors need to be replenishing the Double Bay undertaking.
8. Ms Garrett and Mr Renauf say that this statement was at the very least misleading (and they point out that, by February 2009, the uncalled capital had been double pledged to secure Double Bay and also to secure the Investec Stonington Facility). Ms Briggs' evidence in cross-examination was that this email appeared to be an "important communication" and that based on her usual practice at the time, the email would have been checked before it was sent or it would have been dictated to her (T 803). Acorn notes that Mr Anderson did not contact Mr Gavin to correct that response; and Acorn says that Ashington had no reasonable basis on 12 January 2009 to assert that Mr Gavin's concerns were unfounded.
9. On 13 January 2009 at 5.46pm, Mr Gavin replied to Ms Briggs' email, stating: …if Ashington is to reallocate any of the additional $20m in commitments committed for Double Bay to another project (e.g. as an undertaking for Stonington), you will need to return to the investors to ask permission to do so…. … I'm not very good at drafting up side letters, but I think you should send something to all unitholders stating a sole purpose nature (i.e. Double Bay) for the $20m additional commitment… I think it goes without saying that the $20m additional equity is absolutely not to be used to acquire another asset, but perhaps include that in the side letter too, for clarity. I have spoken with Ray King and he agrees with us. Sunsuper has certainly committed their extra amount on the basis that it would be used for Double Bay and Double Bay only....
10. On 14 January 2009, Mr Anderson said that the "primary purpose" of the $20 million increase in commitment to ADF2 was "unequivocally for the Double Bay project" and explained the position as follows (Ex M at 2319; see T 338.23-6): - Double Bay is the only project within ADF No. 2 forecast to require an increase in equity. - We did make very clear in each of our meetings with investors that a significant change in the lending environment saw the reintroduction of limited guarantees e.g. for interest payments. We flagged the possibility of having to provide such guarantees but were confident it could be done so within the additional $20M equity proposed. - We were questioned thoroughly by some investors as to whether we believed there would be a risk of requiring additional equity for other projects in the fund to meet such guarantees. We were of the opinion that we could manage comfortably within the additional $20M. E.g. this was discussed directly with Megan Chan at a meeting at Sunsuper (Ray King was not present). - Other investors were happy for us to work with lenders within the scope of the increased fund equity because of an appreciation of the extreme difficulty of working with lenders in the current environment. This is evidenced by their execution of the resolution. - Notwithstanding the above comments, the primary reason for the request for an increase in commitment to ADF No. 2 was for the additional equity the project requires.
11. Mr Anderson proposed a meeting on 19 January 2009 to "reach an agreement that is in the best interests of investors". On 15 January 2009 at 11.35am, Mr Gavin sent an email to Mr Anderson and Ms Briggs, in which he repeated his position, stating: I can tell you that HESTA won't be changing its position, so you better come on Monday with a suggested side letter. You came asking for an extra $20m for a specific purpose. Re-opening the fund was the easiest way to do this, but you made it very clear to us (at least) that it was for a special purpose, not just growing the fund from $80m to $100m and you could use the $20m however you see fit….I think the undertakings you have given to banks in recent weeks (in advance of approval from the investors) have put the investors in a difficult position, which is regrettable to say the least. … You've got yourself into this situation because you've treated the equity as your money, not the investors' money. If you want me to elaborate on this, I'm happy to do so on Monday morning.
12. HESTA's position was that it would only pledge the additional equity if it was used for the specific purpose of the Double Bay Project (Ex M at 2319).
13. On 16 January 2009, at the time that Mr Anderson was meeting with Mr Gavin to discuss his concerns about the use of the funds, Mr Steel emailed Mr Paul Hameister from Hamton (the vendor of the Stonington Property) and said "[i]n order to secure a Mezz offer from Investec, we offered to secure their position with a guarantee from the head trust (ADF2)" (Ex M at 2340). (Ms Garrett and Mr Renauf point to this as indicating that Mr Anderson was deliberately misleading at least HESTA about the purpose of the capital raising.)
14. On 21 January 2009, the Ashington Development Fund No 2 Supplementary Agreement was executed by HESTA, JP Morgan Nominees Australia Ltd as custodian for HESTA and ADF2 (the HESTA Side Letter), concerning the use of additional capital only for the Double Bay Project. The HESTA Side Letter contained the statement that the "The Trustee will use the Additional Capital to meet the existing bank finance covenant … for the [Double Bay Project]" (cl 1.1; Ex M at 2344). On 12 February 2009, Ms Briggs wrote to Mr Hastings enclosing the HESTA Side Letter executed by Mr Anderson as director of Ashington Capital in its capacity as trustee of ADF2.
15. Subsequently, the 29 January 2009 Investments and Governance Report to the HESTA Board, including the statement (Ex M at 2355): Commit $6.25m additional capital to the Ashington #2 Fund … HESTA and Frontier are ensuring the documentation reflects that the capital may only be used for the Double Bay project.
16. Ms Garrett and Mr Renauf submit that Mr Anderson executed the side letter with no intention of ever complying with it. At [224] of his 9 December 2019 affidavit, Mr Anderson deposed that: I understood at the time that the side letter could not bind Ashington in respect of contributions from other superannuation funds such that it only related to HESTA's proportion of the $20 million capital raising and, on that basis, I reluctantly agreed.

HESTA's application for additional units in ADF2 - 4 February 2009

1. On 4 February 2009, HESTA applied for additional units in ADF2, attaching a resolution of members of the same date. Schedule 1 to the resolution titled "Terms of the Proposed Offer" confirmed that the "Trustee intends to use the [$20 million] to meet bank finance covenants on the Double Bay project" (Ex M at 2369).

11th drawdown of ADF 2 - 18 February 2009

1. On 18 February 2009, Ashington Capital made the 11th drawdown for ADF2 on the unitholders.

Stonington Property purchase - 25 February 2009

1. Settlement of the purchase of the Stonington Property was due to take place on 25 February 2009. As above, Ashington Capital financed the purchase with the Westpac Stonington Facility, the Hamton Vendor Finance and the Investec Stonington Facility (see below).

Investec Stonington Facility - 25 February 2009

1. On 25 February 2009, Ashington Capital, as trustee of ADF2, and Investec entered into a facility agreement whereby Investec provided mezzanine finance in the sum of $10 million for the Stonington Property (the Investec Stonington Facility). The Investec Stonington Facility was to be repaid within 6 months (i.e. by 25 August 2009).
2. As security for the $10 million facility, Ashington Capital granted Investec: (i) a first ranking fixed and floating charge over all the property, assets and undertakings of ADF2 (with the exclusion of the units held by ADF2 of the Noosa Trust and Project X Hotel Trust and of the benefit of unitholder loans from ADF2 to the sub-trusts); (ii) a first ranking mortgage over all units in the Stonington Trust; and (iii) a guarantee by Ashington Capital, as trustee for the Stonington Trust.
3. Ashington Capital, as trustee for ADF2 covenanted to maintain uncalled capital in the fund of $10 million and to make calls in amounts up to $10 million when directed to do so by Investec, with the funds to be paid immediately to Investec (the Stonington Uncalled Capital Undertaking). Ashington Capital also signed a power of attorney allowing Investec to make calls over the uncalled capital.
4. The Investec Stonington Facility incorporated by reference an Investec document entitled "General Terms and Conditions December 2008 Version", cl 6.1(b) of which made it an "Event of Default" if there were a breach of any undertaking in the Investec Stonington Facility, including the Stonington Uncalled Capital Undertaking (see Ex M at 4960ff).
5. Pausing here, PPB says that, on and from 25 February 2009 (when Ashington Capital entered into the Investec Stonington Facility), Ashington Capital was subject to conflicting obligations with respect to its uncalled capital: namely, the Project X Uncalled Capital Undertaking and the Stonington Uncalled Capital Undertaking. PPB says that Ashington Capital was thus in breach of each of those undertakings, and in default of its obligations under the Investec Stonington Facility, the Project X Security Deed and the various Project X facilities. PPB points out that Ashington Capital had also obtained borrowings at the head trust level, as distinct from SPV (special purpose vehicle) level, contrary to the commitments made in the Information Memorandum for ADF2. These matters in due course assumed much significance in terms of the relationship between Mr Anderson and superannuation fund investors and their asset consultants (see below).
6. Acorn says that it is significant that, although the settlement of Stonington in February 2009 with finance provided by Westpac and Investec was disclosed to the superannuation fund investors in the ADF2 Quarterly Investor Report No 6 for the period ended 31 March 2009, neither the terms of the Investec Facility nor the existence of the Hamton Vendor Finance (and that it was secured by Mr Anderson's personal guarantee) were mentioned to the superannuation fund investors in any way until many months later. It is said by Acorn that it was obvious in February 2009 that he should have disclosed this information to the unitholders at that time.
7. The plaintiff says that, shortly before settlement of the Stonington Property purchase was due to take place, Investec altered the terms upon which it was prepared to enter into the Investec Facility; and that this included a change in the capacity in which Ashington Capital was borrowing (from Ashington Capital as trustee for the Stonington Trust to Ashington Capital as trustee for ADF2). The plaintiff says that Ashington Capital negotiated to exclude, from the fixed and floating charge it provided as security to Investec, the rights, title and interest of Ashington Capital in the units held by ADF2 in the Project X Hotel Trust and the Noosa Trust, effectively limiting Investec's security over units in the ADF2 sub-trusts to those in the Stonington Trust. The plaintiff says that Investec also required Ashington Capital to covenant to ensure that there was minimum uncalled capital of $10 million in ADF2, and to provide it with a power of attorney enabling Investec to make calls on unitholders on uncalled capital to discharge the debt owed to it; and that there were other changes in the commercial terms which it is accepted were also unfavourable to Ashington.
8. Ashington's position is that it considered that it was appropriate to accept Investec's altered terms in order to avoid the likelihood of failing to complete the purchase (which would have put at risk a $12 million deposit paid to the vendor and would have exposed unitholders to legal action by the vendor).
9. PPB cavils with the proposition that the terms of the Investec Stonington Facility were the result of a late alteration of proposed terms by Investec, pointing out that the Investec indicative term sheet provided by Investec on 11 December 2008 foreshadowed security at the head trust level and the uncalled capital undertaking (see above).

Preparation of Stonington site for construction - February to June 2009

1. Ashington Capital advanced the Stonington Project through the design and approval process, launched a sales and marketing campaign and prepared the site for construction. By June 2009, bulk earthworks had been completed and the Stonington Property was ready for construction.

Ms Garrett and Mr Renauf's employment with Ashington - 25 February 2009

1. Meanwhile, on 25 February 2009 (at 6.19pm), Mr Carolan sent an email to Mr Anderson and Mr Minahan attaching a "proposal from Nicki and Sam" that Ms Garrett and Mr Renauf receive a base salary of $350,000, a 5% equity stake, bonuses and one voting seat on the Ashington board (Ex M at 2403-2406). Patersons says that, on its face, this appeared to be a proposal from Ms Garrett and Mr Renauf to bring a significant part of the Valad business to Ashington. (Patersons says that, while this proposal was sent from Mr Carolan's Patersons' email address, this was not a Patersons' proposal; rather, it was a proposal from Ms Garrett and Mr Renauf being conveyed by Mr Carolan qua husband.)
2. Mr Anderson has deposed (at [133] of his 19 December 2017 affidavit) that, in late February 2009, he had a conversation with Ms Garrett during which she told Mr Anderson that she was going to resign from Valad, take 3 months' "gardening leave" and start with Ashington at the end of June 2009. (Ultimately, it appears that Ms Garrett was required to take 6 months' gardening leave but that she may have commenced work for Ashington prior to the expiry of that period - see below.)
3. Around the same time, in early 2009, Ms Garrett (who was not only then an employee at Valad but also a former employee of Patersons) introduced Mr Shorrocks (the Head of Corporate Finance - Sydney at Patersons, to whom Mr Carolan reported) to Mr Minahan and Mr Anderson; the purpose of this introduction being to discuss, at a "high level", a series of different transactions with which Patersons might be able to assist Ashington.

Ashington Capital board meeting - 26 February 2009

1. The minutes of the Ashington Capital board meeting on 26 February 2009 noted that two technical compliance breaches had been reported to the Corporate Governance Committee. The Board Paper stated that "Australian Industry Superannuation Funds, are unlikely to be significant investors during the remainder of the 2009 calendar year"; and that the close date for the fund had been revised to 31 March 2009 (Ex M at 2430-2453).

Cashflow - March 2009

1. To set the context as to the position of Ashington in March 2009, it is relevant to note that, on 12 January 2009, Mr Steel sent an email to Mr Marsden indicating cashflow issues arising from the settlement of the Stonington Property and stating that "[h]opefully, you are able to defer most payment requests to the end of Jan" (Ex 17 at 50).
2. On 3 March 2009, Mr Steel sent an email within Ashington, copied to Mr Anderson, in which he stated that "[i]n simple terms, we need $21M up to the end of July. We have available $14M. Therefore, we need to shuffle/defer/reduce our expenditure by $7M!!!!" (Ex M at 205).
3. On 17 March 2009, Mr Steel sent an email to Mr Anderson about the funds' cashflow and noted that, even after a revision of expenditure, there would be a $5.5 million deficit across ADF and ADF2 for the period up to 30 July 2009. (Ex M at 2507).
4. On 1 April 2009, Mr Marsden (the Ashington group accountant) emailed Mr Anderson, copying Mr Steel, asking for approval for payments and said that "Mallesons & Maddocks - approx. $60k each. These are the invoices that are 120+ days old (and Maddocks in particular are ready to stop work if this isn't paid. Martyn is being pushed to collect more than this)" and that "post creditor M&W Zander - $33k. These invoices are around 6 months old and have only recently been approved, they have been chasing for months".

12th drawdown of ADF2 - 24 March 2009

1. On 24 March 2009, Ashington Capital made the 12th drawdown for ADF2 on the unitholders.

Ms Garrett's involvement with Ashington - April 2009

1. As adverted to above, there is some doubt as to when Ms Garrett actually commenced work within Ashington (possibly because Ms Garrett was meant to be on six months' "gardening leave" from Valad).
2. There is an email sent from Ms Briggs to Ms Garrett's Gmail account on 6 April 2009 at 9.16am in which Ms Briggs forwards Ms Garrett a draft term sheet for AOF3 (see [149] of Mr Anderson's 19 December 2017 affidavit; Ex M at 2604ff), which suggests that Ms Garrett may have been involved at least to some extent from around April 2009. Ms Garrett responded by email from her Gmail account at 4.31pm on 9 April 2009 with comments and suggestions in relation to the term sheet (see [150] Mr Anderson's 19 December 2017 affidavit; Ex M at 2603-2604).
3. However, it appears Ms Garrett was not formally acting in the role of Head of Funds Management until September 2009. Mr Renauf, on the other hand, had a shorter period of gardening leave and seems to have commenced as Head of Development from April 2009 (a role he performed until December 2009 when both he and Ms Garrett left the Ashington group).
4. On 17 April 2009, at 11.40am, Ms Garrett sent an email to Mr Anderson, proposing an insertion for the board paper for the next Ashington directors' meeting relating to Ms Garrett and Mr Renauf and what they could offer; and including reference to them being on gardening leave for six and three months, respectively (see [152] of Mr Anderson's 19 December 2017 affidavit; Ex M at 227). The email included information in respect of potential capital raisings (referred to as "Project Mac" and "Project Spring") and the transfer of management rights in relation to two Valad funds.
5. On the same day (17 April 2009) at 3.26pm, Mr Anderson sent an email to Ms Garrett requesting a copy of Ms Garrett and Mr Renauf's resumes for inclusion in the Ashington Board paper (see [153] Mr Anderson's 19 December 2017 affidavit; Ex M at 229).
6. In response to the above email, Ms Garrett sent an email to Mr Anderson on 20 April 2009 at 10.55am, attaching her resume and offered to add all of her investor discussion notes into a customer relationship management system if Ashington had one (see Ex M at 2621).
7. As noted above, Mr Anderson was first introduced to Patersons in early 2009 by Ms Garrett and Mr Minahan. On 24 April 2009, Mr Shorrocks (of Patersons) sent an email to Mr Minahan, copied to Ms Garrett's Gmail account, attaching a letter confirming a mandate "exclusively to approach the Stamford Group with a view to agreeing the terms of a due diligence period" during which a private client of Patersons of substantial net worth would seek to reach terms to acquire the Sir Stamford at Circular Quay (see Ex M at 2629); and on 29 April 2009, Mr Carolan sent an email to Mr Minahan, copied to Ms Garrett, referring to the attached letter. At around the same time (16 April 2009), Ashington was in receipt of a further mandate from Patersons in respect of a high-net-worth individual who was interested in investing in the Four Seasons Hotel, George Street, Sydney (a transaction of which Mr Shorrocks had no specific recollection - T 738).
8. On 28 April 2009, Mr Seaton (of Ashington) sent an email to Mr Anderson attaching links to employment agreements for each of Ms Garrett and Mr Renauf (see [155] of Mr Anderson's 19 December 2017 affidavit; Ex M at 2626, 2762ff). (There is no suggestion that any employment agreements were ever executed by Ms Garrett and Mr Renauf.)
9. On 1 May 2009, Ms Julie Watts, on behalf of Mr Minahan, sent an email to Ms Garrett (also addressed to Mr Renauf) attaching an employment agreement including a salary and sign-on fee (see [156] of Mr Anderson's 19 December 2017 affidavit; Ex M at 236), which email Ms Garrett sent to Mr Renauf.

Ashington Capital and Ashington Group board meetings - 4 May 2009

1. On 4 May 2009, Ashington Capital and Ashington Group held board meetings. The development of 10 Wylde Street was put "on hold" in May 2009. The board meeting paper stated that "a decision has been made to put the demolition of the building [10 Wylde Street] on hold due to financiers increasing their requirements for pre-sales from the previously agreed $20 million sale, and Investec (the land lender) becoming uncomfortable that the demolition was adding value to the property" (Ex M at 2959).

Trip to Hong Kong - May 2009

1. In late May 2009, Mr Shorrocks, Mr Minahan, Ms Garrett and Mr Renauf travelled to Hong Kong for what was referred to as the Asian road show to meet with potential investors interested in investing in Australian property. The trip to Asia was for the purpose of introducing Patersons' clients to Ashington, as potential investors in future Ashington projects, including AOF3. Mr Shorrocks recalled that there were four or five meetings, each with a different potential investor, one of which was Och-Ziff Capital Management Group (Och-Ziff) (T 744-755).
2. On 12 May 2009, Mr Anderson sent an email to Ms Garrett's Gmail account seeking some clarity about "plans for next week" (i.e., the Asian read show) (see [144] Mr Anderson's 19 December 2017 affidavit; Ex M at 3010). Ms Garrett's response on the same day was that she had locked in four meetings for Hong Kong on Tuesday and was trying to fill in Wednesday; and that she and Mr Renauf had been working on a presentation and the feasibilities.
3. On 14 May 2009, Mr Seaton sent an urgent print request for business cards for Ms Garrett and Mr Renauf as they were needed for the "Asian road show" (Ex M at 3050).
4. On 22 May 2009, Ms Garrett sent an email from her Gmail account to Mr Anderson (with a copy to Mr Minahan and Ms Briggs) reporting on the progress in relation to interested investors in Projects Spring and Mac and the trip to Asia (see Ex M at 3053-3054).
5. Ultimately, while there was some initial follow up from Och-Ziff, nothing came of those meetings in Hong Kong or the opportunities with respect to the Sir Stamford Hotel Circular Quay and the Four Seasons Hotel, at least insofar as Patersons was concerned.

Legal Advice re Investec Stonington Facility - 31 May 2009

1. By letter dated 31 May 2009, Ashington Capital's solicitors, Mallesons, gave Ashington Capital advice about the "fund issues with the finalised Investec Facility documents" (see Ex M at 5381).
2. Mallesons identified a number of inconsistencies between the terms of the Investec Stonington Facility and securities; and the obligations of Ashington Capital identified in the ADF2 Information Memorandum and the ADF2 constitution, including that: entry by Ashington Capital as trustee of ADF2 into a direct loan with Investec was inconsistent with the ADF2 Information Memorandum (which stated that liabilities be quarantined to the assets of each project); that provision of the fixed and floating charge to Investec was also inconsistent with the ADF2 Information Memorandum obligation that liabilities be quarantined to the assets of each project; and that the undertaking to maintain uncalled capital of $10 million during the life of the Investec Facility "appears to be inconsistent" with the ADF2 Information Memorandum statement that ADF2 uncalled capital will be called/used to invest in new development opportunities rather than used as a reserve to secure the provision of finance. Mallesons noted that granting a power of attorney to Investec allowing it to make a call on the unitholders at any time for the debt outstanding on the Investec Facility raised questions whether Ashington Capital had exercised its trustee powers in the best interests of the unitholders; and that the Investec Facility documents containing restrictions on the right of the unitholders to transfer their ADF2 units was at odds with the ADF2 constitution. The letter also noted that the Investec Facility documents contained restrictions on the right of the unitholders to replace Ashington Capital as trustee of the Stonington Trust or ADF2.
3. The letter expressed the view that investors could become concerned that ADF2 was abandoning the structure in that Information Memorandum. The letter advised Ashington Capital to disclose to the investors in ADF2 "that ADF2 entered into a direct loan with Investec and that the liability for the loan is not quarantined to the assets of Stonington project"; the key terms of the fixed and floating charge taken by Investec; and the fact of the Stonington Uncalled Capital Undertaking. (Ashington Capital made no such disclosure until after it had requested additional equity from the superannuation fund investors for the purpose of repaying Investec - see below.)
4. It is noted that in cross-examination Mr Anderson resisted any suggestion that he understood, following this advice, that the undertakings with respect to uncalled capital in the Investec Stonington Facility, as well as the grant of a power of attorney in favour of Investec, involved a breach of obligation or a breach of trust (T 471.45-472.46). Mr Anderson stated that the phrasing "appears to be inconsistent" in the advice, is "wishy washy" and that "I probably didn't find it, and I don't find it now necessarily [to] be inconsistent with the IM".

The position of Ashington - mid-2009

1. The plaintiff accepts that, by mid-2009, Ashington was facing a number of difficulties that posed a risk to its business. The plaintiff says that, central to these difficulties, was the need to refinance the Investec Stonington Facility and Hamton Vendor Finance (which were due for repayment on 25 and 23 August 2009, respectively). The various defendants emphasise the financial difficulties that Ashington was experiencing at this time.
2. The 31 March 2009 quarterly report to unitholders acknowledged that "[t]he facility component provided by Investec was on unreasonable terms which were amended within 24 hours of settlement" (Ex M at 2557).

Request for a further $15 million in equity - 1 June 2009

1. As noted, the Investec Stonington Facility was due to expire on 25 August 2009.
2. On 1 June 2009, Mr Anderson sent emails to Ms Megan Chan (of Sunsuper) and Mr Hamish Flett (of Arcadia, advising LUCRF) seeking a commitment to pay a proposed extra $15 million equity injection for Stonington by 18 June 2009 (the Second Additional Equity Request). The purpose of this (second) additional equity request was to pay out the mezzanine facilities (i.e., the Investec Stonington Facility and the Hamton Vendor Finance) amounting to $12.5 million and "a $2.5m 'buffer' for additional interest and costs in the Stonington Project, facilitating construction funding and build commencement on a proposed start date of 1 July 2009" (Ex M at 3063). Investec had indicated that it was not prepared to extend the Investec Facility.
3. Similar requests were made of the other superannuation fund investors, resulting in communications between representatives of the superannuation fund investors in early June 2009 in relation to the Second Additional Equity Request.
4. There is no doubt that this request led to disquiet and discussion amongst superannuation fund investors (and that it caused superannuation fund investors to question not only the Stonington Trust issues but also the overall performance of ADF2).
5. On 2 June 2009 at 10.52am, following receipt of the Second Additional Equity Request, Mr Dedes (of Strategic Capital Management, adviser to Military Super) emailed Mr Anderson and stated (Ex M at 3070): I will require the financial model for each project in ADF2. I want to better understand the sensitivities regarding each project. I can't just accept a conservative IRR of 15% as the base case. The Military Board will not accept this given this is the second equity injection into the fund. When we made the initial capital injection, one of the most important issues we had to ensure was that you raised enough capital to cover off any other potential risks. We informed the Board that you had covered off on these risks. At this stage, I don't have enough information to recommend Military inject more capital. Also, the performance of ADF1 is not assisting in building a case for additional equity. Can you please forward the financial models for each project and highlight the sensitivities....
6. On 4 June 2009 at 10.55am, Mr Anderson responded to this email, stating that the project models would be sent by Mr Steel. Mr Anderson stated (with emphasis added per Acorn) (Ex M at 3072): I understand the sentiment in your email but preface with this one comment. When we came to investors last November we had no issues with Noosa and it continues to be the case. Double bay we articulated clearly and circumstances have not changed. (We raised $20m specifically for this project). At the time Stonington was months away from being resolved and the risks including debt were not clear. It has taken until April/May to clearly define these risks.
7. Mr Anderson agreed in cross-examination that "these risks" included a reference to the risks with the funding for Stonington but Mr Anderson rejected the assertion that this response was untruthful because "all risks" were not known until April/May (T 358). Acorn says that no weight should be placed on that answer. Acorn says that there is no evidence of any risks relating to Stonington which were "not clear" to Anderson as soon as the Investec Stonington Facility was executed. Ms Garrett and Mr Renauf similarly say that this statement was at the very least misleading. It is said that the issues with the Stonington debt were clear months earlier between November 2008 and February 2009 when the First Additional Equity Request was made (with respect to Double Bay) and the Stonington facilities finalised. It is also said that, as far back as November 2008, Mr Anderson knew that Stonington would require further equity (Ex 17 at 53), in part because Investec required it (Ex 17 at 56). It is thus submitted that Mr Anderson intentionally misled investors about these issues to improve his chances of raising the $15 million of funds he needed to keep Ashington afloat.

Communications between superannuation fund investors - early June 2009

1. By early June 2009, the superannuation fund investors and advisers had begun coordinating their response to Ashington in relation to the Second Additional Equity Request and ADF2.
2. On 4 June 2009 at 1.35pm, Mr Flett (LUCRF's consultant from Arcadia) emailed Ms Chan (portfolio manager at Sunsuper) requesting a discussion about ADF2. Ms Chan agreed to having such a discussion with the involvement of Mr King (Sunsuper's consultant from Sovereign).
3. Mr King then sent a reply by email on 4 June 2009 at 2.35pm to Ms Chan, Mr Flett, Mr Dedes and Mr Gavin (representatives of all of the superannuation fund investors) in which he stated that "[i]t is highly unlikely that any of us will be satisfied with the information provided by Ashington in support of the additional equity raising" and proposed that the unitholders adopt a coordinated approach on the matter. Mr King suggested that the superannuation fund investors "should seek further information asap" from Ashington and attached a draft response for comment from the others.
4. Mr Gavin forwarded Mr King's email to HESTA representatives (Mr Hastings and others) on 5 June 2009 at 2.10am, stating that Mr King was "rounding up" the superannuation fund investors, commending a coordinated response, and commenting that "everyone is extremely frustrated with the poor investor communication…when they have known for months that this problem was looming". Mr Gavin gave his suggested comments on Mr King's document.
5. Mr Flett replied to the group email on 5 June 2009 at 9.06am, agreeing to a coordinated response, and stating that a key concern is "whether there is some major issue here that we are not really being told about ie breach of a financing covenant, cross‑collateralization of loan obligation etc".
6. On 5 June 2009 at 10.27am, Mr Hastings responded with comments on Mr King's document and stated (Ex M at 3094): When Ashington came to investors for equity last Christmas they handled the process very badly. The other investors were signed up prior to HESTA being able to have documents reviewed legally. It then became protracted when trying to negotiate changes to the documents. If we were to agree to contribute additional equity, then they must consult with the investors and take into account all investors legal issues and comments before issuing final documents for execution. They tried to pressure us last time as we were the last investor to agree to contribute the equity.
7. At 10.38am, Mr Gavin emailed unitholder representatives regarding concerns the ADF2 investors were experiencing in relation to Ashington and the request for additional equity. Mr Gavin's email included that "I completely agree with all your sentiments. As Ray [King] and I discussed yesterday, the investor communication at Ashington continues to be poor, and we're all getting a bit of [sic] sick of the little surprises that seem to appear in the quarterly reports, plus the last-minute requests for additional equity". Mr Gavin also stated (Ex M at 3096): …In this case, they have known about the looming mezz debt issues for some time, so it seems very poor that they have waited until 1 June to issue a formal request (which in itself was sadly lacking in detail). …. I know a few of us made Ashington insert a clause in the December 2008 equity injection that the equity was to be used for Double Bay only. I think it's very important that we ensure Ashington sticks to that undertaking, as there's a looming $6m drawdown on the $10m in undrawn commitments, if Ashington can't get the DA approved by September 2009. Given the very public (and very political) nature of that development, I think that is quite probable…. I agree we need to hold a unitholders meeting asap. …
8. At 4.07pm, Mr King (of Sovereign) sent an email to Mr Anderson (copied to various asset consultants) responding to the request for additional equity in Stonington and requesting information identified in an attached note. The email included the statement that "[g]enerally unitholders are very concerned about the lack of information in the equity request, the tight time frame for a decision and the misinformation already provided to unitholders", and that "[w]e are in agreement that we would like to progress discussions as a group". Mr King's attached note alluded to other emerging investment opportunities and stated that a far better case needed to be prepared to justify the additional equity injection into the Stonington Project. Mr King's note questioned, among other things, whether Ashington had a reasonable basis to believe that investors could withdraw the additional equity once replaced by debt in 6 months; why Westpac did not want mezzanine lending in the structure; and when the debt facilities had to be repaid (Ex M at 3120-3123). The note also sought detailed financial projections for the financial impacts of various options.
9. Pausing here, Acorn points out that Mr King's 5 June 2009 email plainly indicated that the superannuation fund investors were not happy with their relationship with Ashington as trustee and manager of their funds; and, further, they had already concluded that Ashington had misinformed them.
10. In cross-examination, Mr Anderson stated that he did not regard this email as indicating that the superannuation fund investors were unhappy with him and understood simply that the superannuation fund investors "were just having a difficult time, like everybody was" (T 638-639). Acorn submits that Mr Anderson's evidence in this regard should be rejected.

Winding up application - 7 June 2009

1. Meanwhile, on 7 June 2009, Maddocks applied to wind up Ashington for its unpaid invoices.

Ms Garrett comments on business plan - 8 June 2009

1. On 8 June 2009, Ms Garrett sent an email to Mr Anderson commenting on a business plan for the next two years, there referring to the proposed AOF3.

Mr Anderson's response - 10 June 2009

1. On 10 June 2009 at 6.46pm, Mr Anderson sent an email to Mr King (copied to other superannuation fund investors' consultants) answering the questions in Mr King's note of 5 June 2009 and attaching the Stonington monthly project control group report for May 2009. As to the settlement of the Stonington purchase on 25 February 2009, Mr Anderson explained that Investec had made clear that the Investec Stonington Facility must be repaid by no later than 25 August 2009 and said that Investec was "charging a prohibitive rate of an 18% margin above cost of funds to motivate an alternative funding solution" (Ex M at 3396). In relation to the financial structuring of the Investec Stonington Facility, Mr Anderson stated that: Neither the Westpac nor the Investec facilities have recourse to other ADF2 projects. The Investec Facility is however secured by uncalled capital.
2. In cross-examination, Mr Anderson's evidence was that he did not realise at the time that the first of the sentences extracted above was wrong (T 371-372). Acorn in its submissions says that this evidence, from a sophisticated funds manager, beggars belief and that it should be rejected as self-serving and dishonest. Acorn says that such an understanding would likely be due to exclusions in the security for the Investec Stonington Facility of units held by ADF2 in the Noosa and Project X Hotel Trust. However, Acorn points out that, by 10 June 2009, Mr Anderson had already read the Mallesons advice (which had advised Ashington Capital to disclose "that ADF2 entered into a direct loan with Investec and that the liability for the loan is not quarantined to the assets of the Stonington project").
3. In the 10 June 2009 letter, Mr Anderson expressed the view that it was "commercially acceptable at the point of settlement" to proceed with providing security over uncalled capital. Mr Anderson referred to the Hamton Vendor Finance of $2.5 million being repayable on 1 July 2009 (but the defendants note that he made no mention that he had personally guaranteed that amount).
4. Relevantly, on 11 June 2009 at 9.29am, Mr Steel sent an email to Mr Anderson, copied among others to Mr Minahan, pointing out that the 10 June 2009 response was inaccurate insofar as it said that the Investec Stonington Facility would not affect other projects (Ex M at 3692): We state that there would be no impact on other projects if Investors did not participate. We go on to say that Investec loan is secured by uncalled capital. What isn't clear is that it will, in fact, indirectly effect [sic] other projects. Investec will demand payment (from uncalled capital)… which, in turn, will put us in breach of our covenants on other projects. The concern I have is that stating that it (not contributing) will not effect other projects provided an "out" for investors. However if we explain that it does indirectly effect other projects, there may be more incentives for investors to participate. However, do this opens the door on covenants and the possibility of further discussions and scrutiny. [Original emphasis]
5. It is noted that Mr Anderson did not communicate with the superannuation fund investors to tell them that what he had said in his letter on 10 June 2009 was wrong.
6. Mr Fowler (HESTA's Executive Manager)'s evidence is that he was extremely concerned to learn (from the 10 June 2009 email) that the Investec Stonington Facility was secured by uncalled capital, which he regarded as contrary to the HESTA Side Letter (Ex 14 at 5).
7. On 11 June 2009 at 2.30pm, Mr Gavin emailed Mr Hastings about Mr Anderson's 10 June 2009 email to the superannuation fund investors, stating: I have had a quick read of Craig's response… He says the $10m Investec mezz debt is secured by "uncalled capital". I didn't think there was any uncalled capital in the fund, apart from the $10m remaining for Double Bay ($6m of which could be required in Sep 09). Craig assured us many times that they weren't double-promising this Double Bay commitment to 2 projects, but I fear they have. I'm worried.
8. (Acorn says that Mr Gavin's worries were very well founded; that he had now learnt for the first time that his concerted efforts on behalf of HESTA to ensure that the First Additional Equity Request was quarantined to Double Bay had been unsuccessful; and it is said that Ashington's behaviour was "the antithesis of a trustee acting with utmost candour".)

Meeting between investors/Mr Anderson - 12 June 2009

1. Mr Anderson has deposed that, on 12 June 2009, he and Mr King had a telephone discussion during which Mr King requested an update in relation to the Double Bay and Noosa projects (see [198] of Mr Anderson's 19 December 2017 affidavit).
2. On 12 June 2009, a meeting was held in Sydney between representatives of the superannuation fund investors (with representatives in Melbourne participating by telephone) and Mr Anderson (and other senior Ashington staff) to discuss the Second Additional Equity Request. In attendance at that meeting were at least Ms Chan of Sunsuper, Mr Cohen and Mr King, advising Sunsuper, Mr Dedes, of LUCRF and Mr Flett advising LUCRF.
3. Each of Ms Chan (Ex M at 3717), Mr Cohen and Mr King jointly (Ex M at 3714) and Mr Flett (Ex M at 3719) prepared contemporaneous file notes of the 12 June 2009 meeting. Mr Dedes also recorded his recollection of the meeting on 12 June 2009 in a subsequent report he prepared on 29 July 2009.
4. Those notes indicate that the discussion included: that Investec had security over uncalled capital; that it was a "surprise" to many investors that the $10 million mezzanine facility was secured against uncalled capital as investors believed that was for the Double Bay Project; that Ashington may have over pledged the uncalled equity commitments (which was the "main concern" for investors); that the Stonington Project was "now in a critical funding position as the original vendor finance ($2.5 million) is repayable on the 1 July 09 and the Mezzanine Finance ($10 million from Investec) must be repaid by 25/8/09" and that management did not think additional finance could be procured from Westpac or that a replacement mezzanine financier was available; that the options for unitholders included committing no further equity, committing their pro rata share of the requested equity, or attempting to refinance the mezzanine loan; and that some unitholders wanted their lawyers to review the documents because of their concerns about the use of the additional equity provided for the Double Bay Project. Superannuation fund investors indicated that "it is highly unlikely that Investors would commit further equity in the time fames required based upon the information made available from Ashington"; and that Ashington should prepare alternative strategies for funding the project and that investors required more information. It is also recorded that the investors now sought further information on the status of other projects and funding commitments.
5. The joint note made by Mr King and Mr Cohen (advising Sunsuper) of this meeting (it records their perception that "the manager is very bullish (perhaps overly so) on the residential market in Melbourne and has suggested that price is no issue in this market. Most unitholders at the meeting were not convinced however the prices secured so far have been above the manager's valuation" (Ex M at 3714).
6. Under the heading "Current Capital Structure for the Stonington Project", in this note, there is reference to Mr Anderson having given a personal guarantee for the whole of the "$2.5m vendor finance arrangement which is due for repayment on the 1st of July". Under the heading "Conclusion and issues to follow up" it is said: Unitholders signalled to Craig Anderson that there will be no further equity available to the fund, and that they must reschedule a meeting for late June to discuss alternative options given unitholders decision. Craig was also told that the vendor finance which he personally guaranteed (due for repayment on 1st July) is due too soon for unitholders to make an informed decision.
7. Pausing here, Acorn says that this note recorded that the unitholders had collectively and directly communicated to Mr Anderson that they would not provide any further equity to ADF2. It is said that it was clear that by this decision Mr Anderson would then come under considerable pressure personally to repay Hamton on his personal guarantee of the vendor finance. The joint file note also records that the superannuation fund investors were aware that providing no further equity meant that the value of the entire fund could be lost, as the note stated: Unfortunately due to poor financing arrangements, this project has put the whole fund in jeopardy. Unitholders can either inject further equity or run the risk (which is probable) that the entire fund will go underwater. The manager was clearly over confident about securing additional equity and had not even considered alternate solutions. It is also apparent that there is currently a lack of transparency as well as the reluctance of the manager to fully disclose the details of the project. Based on this, there needs to be a much more detailed review of all the assets in the fund.
8. Mr Hartley (Chief Investment Officer of Sunsuper)'s evidence is that when he was told by Ms Chan about this meeting he developed concerns about the problems that Ashington had caused and he began to lose trust and confidence in Anderson and Ashington as trustee and manager of the Ashington Funds (Ex 13).

Steps taken after 12 June 2009 meeting with superannuation fund investors - mid June 2019

1. On 16 June 2009 at 7.28pm, Mr Anderson sent an email to asset consultants attaching overview papers for each of the Noosa and Double Bay Projects ("as requested in last Friday's meeting", dealing with asset strategy, project status, financials and risks) (Ex M at 3730ff). The paper in relation to the Noosa Project also dealt with alternate exit strategies and equity divestment. Acorn points out that there was no mention in the Noosa report of any $20 million fee payable to Valad (nor any prior communication with the superannuation fund investors of that fact). It is also noted that Mr Anderson promised a report on the Stonington Project "on Friday". Acorn says that Mr Anderson knew that he was under considerable time pressure to respond to the unitholders.
2. On 17 June 2009, Mr Anderson and Mr Steel met with Mr King in his Melbourne office to discuss how to structure Ashington Capital's responses to information requests from the superannuation fund investors (see [202] of Mr Anderson's 19 December 2017 affidavit).
3. On 18 June 2009 at 10.11am, Mr Anderson emailed Mr Marsden, Ms Briggs and Mr Steel, stating that (Ex 17 at 75): Our investors need to be treated like "gold" . Their support is critical to confronting the challenges of the next 12 months . We need to ensure we always respond promptly, never missing a "deadline" , preferably providing in advance. Their sense of our professionalism is the major determinant of decisions about providing additional equity and whether to invest with us in future.
4. Acorn says that this is inconsistent with Mr Anderson's repeated evidence in cross-examination that he was "not focused on maintaining [the superannuation fund investors'] favour", and he "never thought about keeping the investors happy" (T 630-631).

Ms Garrett's planning for funds management decision - 18 June 2009

1. On 18 June 2009, Ms Garrett sent an email from her Gmail account to Mr Anderson, with a copy to Mr Minahan and Mr Renauf, attaching presentation slides to describe the direction she was planning for the funds management division of Ashington (see [164] of Mr Anderson's 19 December 2017 affidavit; Ex M at 3750).

13th drawdown of ADF 2 - 19 June 2009

1. On 19 June 2009, Ashington Capital drew down the 13th capital call (of $4 million) from unitholders in the ADF2 fund. Patersons points out that this drawdown would be in breach of the Investec Facility as ADF2 would no longer have $10 million of uncalled capital.

Information about Stonington - 19 June 2009

1. On 19 June 2009 at 2.54pm, Mr Anderson sent an email to Mr King and other asset consultants, attaching a Stonington residential report, Stonington financial report and "Investec Facility Documents" (referring to the Investec indicative term sheet and "a copy of the final documentation"). However, the email did not in fact attach the Investec Stonington Facility Agreement. Patersons says that the fact that the borrowing had occurred at the head trust level was "hidden" in an annexure to one of the guarantee documents.
2. Mr Anderson accepted that the Investec Stonington Facility Agreement was missing from the package of documents sent to investors (T 645.35-44) and that, if the facility agreement had been provided, it would have shown that Ashington Capital had entered into an agreement at the head trust level (T 646.22). Mr Anderson maintained in cross-examination that it was "not a secret at this point in time" (T 646.26) and "not a secret that there was a head trust loan" (T 648.11-17). (Ms Garrett and Mr Renauf say that there is no evidence to support this claim.)
3. The email stated that significant changes occurred during the negotiation period from December to February because Westpac did not consent to a Deed of Priority/Intercreditor Deed that would have satisfied Investec's original requirement for property security.

Further communications between asset consultants - 19 to 23 June 2009

1. On 19 June 2009, at 3.20pm, Mr Gavin sent an email to HESTA representatives (Mr Hastings and Mr Fowler) relating to the Investec Stonington Facility documents, saying that he would consider whether HESTA had a legal case against Ashington and that "I don't know if this is fraudulent, but at the very least, it's grossly negligent". (Pausing here, whether Mr Gavin's concern was justified or not, its articulation bespeaks a high level of concern by at least one of the superannuation fund investors at this stage.)
2. Mr Gavin then emailed the other superannuation fund investors on 19 June 2009 at 4.10pm and provided them with a copy of the HESTA Side Letter. Mr Gavin stated that he asked Mr Anderson to prepare this side letter for all superannuation fund investors "as it didn't make sense for only one investor to have it in place. Craig said he would do that. Did your respective clients receive the same side letter?". Mr Gavin stated (Ex M at 4004): The company guarantee that accompanies the Investec mezzanine facility was signed on 25 February 2009, after this side letter was signed (21 January 2009), hence the significance. I am reviewing the Investec documentation over the weekend, but it seems to me that Ashington was in no position to enter into anything with Investec….
3. On 19 June 2009 at 10.30pm, Mr Flett responded by email to Mr Gavin and the other unitholders to say that LUCRF did not receive the benefit of any side letter, stating that "I am afraid the more that I hear the more I wonder what we don't know about this matter and the other projects" (Ex M at 4100).
4. On 23 June 2009 at 9.04am, Ms Chan also emailed Mr Anderson (copying Ms Briggs) asking for information around what the call was for; and Ms Briggs responded by email that day at 10.43am again repeating that the draw was "specifically for Double Bay expenditure for the months of June, July and August a major component being quarterly interest due to NAB and St George" (Ex 13 at 18240).

Response to ADF2 investor information request - 25 June 2009

1. On 25 June 2009 at 3:58pm, Mr Anderson sent an email to the asset consultants entitled "ADF2 investor information request" (prompted by a request from Mr Gavin on 23 June 2009 that he quantify the fund's position in respect of its liabilities and that the superannuation fund investors wanted to meet "without the manager"). The email attached a Noosa Venture Trust special purpose financial report dated 30 April 2009, a letter from the consultant architects on the Double Bay Project, and a cash flow projection for ADF2 from May 2009 until December 2010. Mr Anderson's email stated that the additional equity requirement request in relation to Stonington of $15 million remained, stating that it was not unreasonable in the current lending environment and that Ashington believed that no further equity requests will be required (see Ex M at 4177). (Ms Garrett and Mr Renauf say that this was at least misleading, and more likely untrue, as around this time Mr Anderson and Mr Steel were debating making a funding request in the order of $25-$40 million.)
2. Acorn says that it should be found that Mr Anderson had no reasonable basis to state that no further equity would be required. It is noted that, a few days later, on 2 July 2009 at 10.43am, Mr Steel emailed Mr Anderson stating that "$15m will not be enough to fund the Stonington Project" (Ex 33 at 517), and that on 3 July 2009 at 11.35pm, Mr Steel emailed Mr Anderson stating that "[o]ne major problem we have is that the $15M we've requested will not be enough. We may need to strategically work this into the Key Item List" (see below in chronology; Ex M at 4612). Further, it is noted that in an internal Ashington email on 9 July 2009 at 5.50pm, Mr Anderson estimated that "the amount of investor support required to operate ADF2 on the least amount of capital possible" equated to "an additional $5-6M above the $15M Stonington request and the $6M undrawn for Double Bay" (Ex M at 4732).
3. Acorn here emphasises that, on the same day as sending the email on 25 June 2009, to the superannuation fund investors, Mr Anderson was debating with Mr Steel the adequacy of disclosure to the superannuation fund investors. Mr Steel stated in an email to Mr Anderson on 25 June 2009 at 1.11pm that "Investors simply want clarity of the risks and the quantification thereof. Fund managers should provide this. We continually skirt the issue, which continually gets us in trouble…We are continually knocked for selective disclosure … and we continually ignore this criticism by being selective in our disclosure" (Ex 17 at 87). (Acorn says that Mr Anderson should have accepted the truth of Mr Steel's observations rather than to have brushed them aside in the manner that his email in response did.)

Meeting of asset consultants to discuss additional equity request

1. Later, on 25 June 2009, the asset consultants for the superannuation fund investors met to discuss the 1 June 2009 additional equity funding request (see [205] of Mr Anderson's 19 December 2017 affidavit; Ex M at 4173).

Asian road show report - 26 June 2009

1. Meanwhile, Ms Garrett (from her Gmail account) sent an email to Mr Minahan and others reporting on ongoing discussion with potential investors that arose out of the May trip to Hong Kong (see Ex M at 4198ff).

Response to Mr Anderson's 25 June 2009 email - 26 June 2009

1. After obtaining the approval of other investors, on 26 June 2009 at 10.47am, Mr Gavin (of Frontier, advising HESTA) sent an email to Mr Anderson, copied to the asset consultants, responding to Mr Anderson's 25 June 2009 email, stating that: With regards to the $15m additional equity for Stonnington, we still don't think you are taking the investors seriously when we say there is very little chance of us contributing additional equity. We have asked you on at least two occasions to propose some alternatives, which you have not as yet done….. …. As you can probably tell from the options outlined, it seems, to some of us at least, that ADF2 is not sufficiently capitalised to complete three projects and will need substantial additional equity (more than the $15m for Stonnington), over the life of the fund, in order to complete all three projects. We simply cannot keep going back to our Trustee Boards every few months with another request for additional equity. We note that you believe this $15m additional equity should be the last additional equity requirement. However, given the Stonnington request came soon after the Double Bay request (despite assurances to the contrary in December/January), we find it hard to rely on your optimism. … ….. … As we now understand it Investec's $10 million mezzanine facility over Stonington provides them with $10 million security over the uncalled ADF2 commitments. Post Monday's call for Double Bay ($4.0 million) the remaining outstanding commitments will reduce from $10 million to only $6 million. Would you kindly provide investors with a letter by the close of business today confirming that reducing the outstanding commitments to $6.0 million will not cause a breach of the Investec security.
2. The email also noted that "the investors have requested that Ashington's chairman [Mr Mark Bouris] make himself available on Friday 3 July so investors can explain the gravity of the situation as we perceive it". The proposed alternative options involved the sale of different assets (including Stonington) or bringing in new investors.
3. On 26 June 2009 at 5.50pm, Mr Anderson replied to Mr Gavin's 26 June 2009 email, stating that "[w]e agree that ADF No. 2 is not sufficiently capitalised to undertake all three projects. We have acknowledged this for some time, supported by our plan to sell a 50% interest in Double Bay releasing circa $30M. We have also been exploring the majority of the options outlined in points i-vi in your email. This will be detailed in a thorough response mid next week as requested".

Cancellation of 13th capital drawdown - 26 June 2009

1. Mr Anderson's 26 June 2009 email to superannuation fund investors stated that Ashington had cancelled the proposed 13th (29 June) drawdown to "ensure that we avoid the risk of breaching the Stonington lending covenant", and indicating that Ashington had been negotiating a waiver of the covenant with Investec. In that email, Mr Anderson noted that cancelling the drawdown would have other implications which he wanted to discuss with the superannuation fund investors in a teleconference planned for Monday 29 June 2009. (Acorn says that the primary implication was clear - that it would place Ashington in default with the financiers for Double Bay.)

28 June 2009

1. On 28 June 2009 at 3.32pm, Mr Anderson sent an email to Mr Steel and Mr Minahan saying that at the teleconference with the superannuation fund investors he proposed "to respond fairly strongly that all the alternatives may work over time but there is no choice but to put $15m in now unless they want to "blow up" the fund" (see also T 381).

Conference call between Ashington and superannuation fund investors - 29 June 2009

1. On 29 June 2009, Ashington's property managers held a conference call with the superannuation fund investors to discuss the current and immediate lack of liquidity in the fund; the upcoming funding challenges; and selling assets in the current market. Mr Anderson was in attendance (see [142] of Mr Anderson's 9 December 2019 affidavit). In an email to Mr McCusker containing notes of the conference call, Mr Tieu recorded: that "[m]anagers wanted to make it clear to investors that they are taking the fund's liquidity issues 'deadly seriously'"; that the Investec Facility must be repaid by 25 August 2009 and is secured against uncalled capital commitments; and concluded that "[i]nvestors are hesitant about tipping in additional equity, and would like the managers to present a broader range of solutions for full consideration, including the option of sourcing new mezz debt". Mr Hastings recorded that Mr Anderson said that they were going to get the Double Bay approval.
2. Mr Dedes also recorded his recollection of the meeting on 29 June 2009 in a subsequent report he prepared on 29 July 2009 (Ex M at 5080).
3. Acorn says that it should be inferred that Mr Anderson told the superannuation fund investors at this teleconference that if they did not put in any additional equity that it would "blow up the fund" but that the superannuation fund investors indicated that they would not do so until they had further options to consider.
4. Mr Hastings' file note of a phone conference on 30 June 2009 with Ashington recorded that "Investec won't give a waiver of breach but said breach and try to remedy between now and August but this means Investec has reserved its rights to walk in at any time"

Military Super portfolio snapshot - 30 June 2009

1. An internal Military Super document notes on 30 June 2009 that superannuation fund investors had instructed Ashington to explore other options for refinancing Stonington, that investors had informed Ashington that no further equity would be provided by the unitholders and that investors were considering placing an independent person within Ashington to be part of the process (Ex M at 2402).

Amended 13th capital call - 30 June 2009

1. Ms Briggs emailed unitholder representatives on 30 June 2009 advising that Ashington was remaking the 13th capital call.
2. At 11.30am on 30 June 2009, Mr Anderson advised that they had communicated with Investec, were able to proceed with the 13th draw, and had "examined resolutions to the temporary breach with [Investec] and have until the facility expiry date of 25 August to resolve". Patersons and Acorn submit that this reassurance was not accepted at face value by the superannuation fund investors. Acorn notes that Mr Jonathan Stagg (HESTA's consultant from Frontier) emailed Mr Anderson at 12.16pm on 30 June 2009, stating that: Can you provide more details on the agreement with Investec. I'm a little sceptical that they would give away their security rights quite so readily.
3. On 30 June 2009 at 1.08pm, Mr Flett responded to Mr Stagg's email to Mr Anderson asking, "[i]s there a letter from Investec confirming the waiver and any conditions?". (Acorn says that the superannuation fund investors were right to be concerned, as there was no formal agreement with Investec.)
4. On 30 June 2009 at 4.17pm, Mr Stagg (of Frontier, advising HESTA) sent an email to Mr Anderson and various asset consultants, stating that the superannuation fund investors had agreed to pay the $4 million capital call in respect of interest due to NAB and St George on the Double Bay facility and stating that "[i]nvestors recognise that this action leaves the Investec mezzanine facility in a breach position … and further understand that Investec have not provided a waiver in relation to this breach, with Investec effectively reserving its rights". The email stated: In comments to investors, you have stated that Investec has a group exposure to Ashington related entities of $23 million, but would like to reduce this exposure below $20 million. To better understand the implications and commercial relationship in this regard, investors request that you detail the full extent of all these facilities, what exposure Investec might have to the Double Bay project, the security arrangements of each facility and any guarantees, personal or via Ashington corporate entities, that are in place. … … Investors are uncomfortable with the actions of Ashington in regards to managing these facilities and request this information as soon as possible.
5. Acorn says that it was necessary to request the "full extent of all these facilities" because, as at 30 June 2009, the superannuation fund investors still had not been provided with a copy of the Investec Stonington Facility. Acorn says that Mr Anderson's evidence in cross-examination (that he just read this email as asking for "additional facilities" with Investec, i.e., in addition to the Investec Stonington Facility) should be rejected as self-serving (T 648).
6. Moreover, it is noted that at this time there was an awareness within Ashington of the concerns which Mr Stagg had raised. Following advice from Mallesons, Ms Briggs had emailed Mr Steel on 30 June 2009 at 8.49am stating: I take your point that the POA [Power of Attorney] is useless to Investec should we draw all uncommitted capital however such a draw would amount to a clear breach of our obligations under 19.1(c), 19.2(b) of the Facility Agreement (which amounts to an event of default) whereby we covenant to keep a minimum uncalled capital of $10M and not make any draws without Investec's consent. Furthermore, we will have rendered part of the Facility Agreement unenforceable which also amounts to an event of default. Under this situation all Investec would need to do is ask for the $10M, which we wouldn't be able to pay and then appoint an advisor/account to review all our financial affairs - following this an administrator can be appointed if it is determined that we cannot meet our obligations. (as it is possible that from the review they would conclude that we are insolvent). Furthermore, Investec would be within their rights to cancel the facility. I don't understand how drawing all the money would put us in a better situation - all it may do is defer an opportunity by Investec to declare that we are insolvent. …
7. Thus, Acorn says that Ms Briggs was aware of the very solvency issue arising from the Investec Stonington Facility which had imperilled the Ashington Funds and about which Mr Steel had warned in December 2008. It is noted that at this time, Mr Anderson was aware that it was important he obtained investor support before Westpac and Investec expired, as they would otherwise default (T 654).

Response to Mr Stagg's email of 30 June 2009 - 1 to 4 July

1. On 1 July 2009 at 10.57am, Mr Anderson forwarded Mr Stagg's email of 30 June 2009 to Mr Steel and Mr Minahan, stating, amongst other things, that "I don't want to write (other than to tell him [Mr Stagg] to stop criticising us in communal emails when they don't understand what they are talking about) or teleconference anymore" (Ex 17 at 128).
2. Mr Steel replied to Mr Anderson's email on 2 July 2009 at 12.50am, stating that "this is a very discerning letter from Frontier which indicates that, contrary to your comment below, they clearly understand what they are talking about". Mr Steel said that his view was that they should consider liquidating the fund, showing that liquidation would require $10 to $15 million which would be more than would be recovered from increased values received in disposal of assets, show clear milestones in the strategy and, take out Investec which would put assets back in control of investors. Mr Steel thought the benefits of this strategy were that it was diverting Ashington Capital and its directors from exposure to the breach; eliminated the possibility "that investors see other strategies as smoke and mirrors, over optimistic and/or evasive"; allowed them another chance of convincing investors of preferred strategy; avoided the appointment of an administrator/receiver; and minimised the loss to investors under any other plan. Mr Steel commented on a number of Mr Anderson's opinions by responses in red text (italicised below): 1. that double bay & Noosa are not problems-How can you say that without having a solution for taking out Investec and/or selling an asset. Also there is a chance of DOP approval not received.(although you stated you are confident it will get approved- they stated earlier they do not share your optimism) 2. Stonington has insufficient equity , which is no ones fault Bold statement- it is a result of us putting ourselves in this position but has to be dealt with. Stonington continues to perform sales wise , despite this being questioned by investors. We have clearly , in a very detailed fashion demonstrated why the project will continue to sell ( we just don't know if they bothered to read the report written by Emily)Judging from Investors comments, they are not questioning the viability of the project, rather they are questioning whether or not it can be done with no more equity injected - and if so, is it worthwhile 3. We can "cap" their exposure going forward for ADF 2 to circa $20m, including Stonington- How can you say that without a sell down of an asset and or mezz on DB in December 4. we will continue to actively make disposals of part or whole shares of Noosa & Double Bay- when do you think the earliest this can happen? And can you meet equity requirements until then 5. demonstrate some progress with lenders ie NAB/ St George discussions underway to extend , Investec to leave $5m mezz in Stonington Craig I'm not comfortable looking Investors in the eye and making this statement unless we get confirmation from Stanley, which is doubtful given that he continually says that they do not want to stay in. 6. remind them that we could have "let Stonington go" losing $12m equity , if personal guarantee had not been provided They may question your judgment on this decision and ask Why you didn't use uncalled capital at the time? You told us in December that you needed $20M for DB and everything else was rosy.
3. Mr Anderson sent a reply email to Mr Steel on 2 July 2009 at 8.34am, stating that, although he respected Mr Steel's perspective and saw value in Mr Steel's comments, Mr Steel was "not aware of the content of many of the other meetings and conversations that [had] taken place".
4. On 2 July 2009 at 10.43am, Mr Steel emailed Mr Anderson stating that "$15m will not be enough to fund the Stonington Project".
5. On 3 July 2009 at 4.25pm, Mr Anderson replied to Mr Stagg's email of 30 June 2009, copied to the other superannuation fund investors, attaching a schedule of debt in place for ADF2. (Acorn says that a key piece of information missing from this table was the identity of the borrower for the various loan facilities.) The schedule said that Double Bay had an uncalled capital undertaking as "ADF2 has undertaken to maintain uncalled capital or free cash to cover interest and fees for term of the facility" (Ex M at 4606).
6. On 3 July 2009 at 11.35pm, Mr Steel emailed Mr Anderson stating that "[o]ne major problem we have is that the $15M we've requested will not be enough. We may need to strategically work [sic] this into the Key Item List" as preparations were made for a "Final presentation to ADF2 Investors".

Further cashflow difficulties - 1 July 2009

1. From as early as 1 July 2009, Ashington Management had ceased paying workers' compensation premiums and proceedings were ultimately commenced on 15 June 2010 by the Workers Compensation Nominal Insurer against Ashington Management to recover the unpaid amount.

Concern re potential breach of obligations to investors - July 2009

1. Meanwhile, on 1 July 2009, Arcadia (the adviser to LUCRF) noted in the LUCRF Investment Committee property portfolio report that Ashington had over pledged the uncalled equity commitments made for the Double Bay Project and the Stonington Project (Ex 16 at 53-54).
2. Also on 1 July 2009 at 10.07am, Mr Peter Hodgson (adviser to Military Super) emailed Mr Dedes and said "we should be putting in some form of IA [investigating accountant] to look at these investments for unitholders", which email he forwarded to Mr Paul Watson (the Chief Executive Officer of Military Super), stating "I am a bit grumpy about this". Mr Watson responded to Mr Hodgson, concurring with this, and requesting that Strategic Capital Management liaise with the advisers to the other superannuation fund investors. Mr Hodgson responded in an email at 4.23pm saying that "they should get no more funding until we are clear about all this" and suggesting that the best option might be a forced sale of some of the properties.
3. Mr Dedes responded to Mr Hodgson's email at 10.53am advising him that the two recent meetings with Ashington had highlighted issues to the superannuation fund investors "that were never disclosed", which had prompted them to seek additional information on all projects.
4. By this stage, therefore, Military Super was advocating appointing an investigating accountant and was considering that there should be a very careful consideration as to whether Ashington was in breach of its obligations to investors; and the view had been formed that Military Super should not pay any further capital calls to Ashington until the position was clarified.

Ms Garrett and Mr Renauf carpark facilities - 3 July 2009

1. On 3 July 2009, Mr Seaton sent an email internally within Ashington to arrange car parking facilities for each of Ms Garrett and Mr Renauf (see [162] of Mr Anderson's 19 December 2017 affidavit; Ex M at 4608).

Financial issues re Hamton Vendor Finance - 3 July 2009

1. On 3 July 2009, solicitors acting for Hamton (Middletons) wrote to Mallesons (acting for Ashington Capital) noting that Ashington Capital had not paid any of the principal and interest due on the vendor finance loan from Hamton, and agreed not to pursue enforcement action until 25 August 2009 in exchange for being paid penalty interest at the rate of 20% (Ex M at 4614).

Superannuation fund investors meeting - 7 July 2009

1. On 7 July 2009, there was a meeting between Mr Flett, Mr King, Mr Jonathan Stagg (HESTA) and Mr Dedes to discuss Ashington's request for an additional $15 million to pay out the mezzanine debt facility. A file note of that meeting prepared by Mr Dedes recorded in the "Background" section that the two meetings with Ashington had "yielded very little" and "created an element of distrust"; and that Strategic Capital Management had called the meeting to inform the other unitholders of Military Super's decision not to participate in any more capital calls and to employ and investigating accountant (Ex M at 4633).
2. The file note recorded that the superannuation fund investors agreed that, due to their "inability to feel confident with the quality of information", they should move to appoint an investigating accountant as soon as possible (with two recommendations being PPB and KordaMentha); and that the other superannuation fund investors "would probably require a legal review of the implications" of Military Super's decision not to provide further capital "before making a decision".
3. Under the heading "Legal Review", it is recorded that "[w]e should get advice on the process required to terminate the manager". (Acorn says that it should be inferred that this "we" was a reference to all of the superannuation fund investors). The notes record that the decision was sensitive as any move to terminate the manager could result in the Development Application for Double Bay not being approved which would erode all equity in the deal.
4. It is relevant here to note that, as early as 7 July 2009, there was therefore reference in contemporaneous documents to consideration being given as to the possible termination of the manager (the proposal coming from within the group of superannuation fund investors, not through any of Patersons, PPB, Ms Garrett or Mr Renauf) and, further, that the suggestion for removal of the manager was not here linked to the issue of concern as to the trust/sub-trust structure - rather, it was expressed by reference to lack of confidence in the information received from the manager.
5. Mr Dedes also recorded his recollection of the meeting on 7 July 2009 (which he calls the "third meeting") in a subsequent report he prepared on 29 July 2009 (which Acorns notes is consistent with the other records of the meeting on 7 July 2009). Acorn says that this seems to be the same meeting that Mr Hastings recorded in a note taken around this time, stating (Ex M at 4582): -Military unlikely to put any more equity in or meet any capital calls -If Military and HESTA don't put anything in then Ray said unlikely Sunsuper would either 1. Get an independent review of assets to attempt to work out what they are worth and also determine what asset/assets would be best to sell… 2. Base level legal review of trust deed, e.g consequences of not meeting capital calls and also looking at Ashington's actions in terms of legal action/recovery.
6. Acorn says that the above indicates how "parlous and tenuous" the relationship between the superannuation fund investors and Ashington had become. It is said (and I agree) that these were very serious steps for the superannuation fund investors to be taking.

Proposed meeting with asset consultants - 7 July 2009

1. On 7 July 2009, Mr Tony Marsden (of Ashington) sent an internal email to Mr Nick Wyeth, copied to Mr Matthew Bailey, attaching a schedule of creditors of Ashington Capital, Ashington Management, ADF and ADF2 and the sub-trusts; recording $2.49 million owed to creditors as at 6 July 2009.
2. At 6.20pm on 7 July 2009, Mr Anderson sent an email to the asset consultants (headed "Closure of ADF2 investor request"), advising them that it was essential to bring the Second Additional Equity Request "to a close", seeking a face to face meeting with investors on 16 July 2009 and foreshadowing a final presentation putting forward Ashington's case to deal with various topics including an analysis of the consequences of deciding to support (or not to support) the manager's recommendation (see Ex M at 4632). Mr Anderson promised to provide a "review of the Manager's decisions and actions over the past 12 months and proposed improvements to investor communications".

Ms Garrett and Mr Renauf - 8 July 2009

1. On 8 July 2009, Ms Garrett sent an email to Deutsche Bank referring to Mr Renauf as previous Head of Acquisitions at Valad "who left with me to join Ashington" and that Ms Garrett was on extended gardening leave (Ex M at 4635).
2. The following day (9 July 2009), Mr Anderson sent an email to Ms Garrett and Mr Renauf referring to corporate credit cards that were being arranged for them (see Ex M at 4740).

LUCRF concerns - 8 July 2009

1. The evidence of Mr Thow (then Chair of LUCRF's Investment Committee) is that by 8 July 2009 had developed such serious concerns in relation to the management of the Ashington Funds (having read the report dated 1 July 2009 from Arcadia on the Second Additional Equity Request and the LUCRF Investment Oversight Committee report dated 3 July 2009 which highlighted the double pledging of uncalled capital, the lack of quarantining of liabilities and serious liquidity issues) that he started to lose trust and confidence in that management (Ex 16).

Board meeting of Ashington Capital - 9 July 2009

1. On 9 July 2009, there was a board meeting of Ashington Capital, the minutes of which record that the chairman (Mr Mark Bouris) said (Ex M at 4725ff): MB noted that investors/advisors may question why they were not informed of the IM breach prior to the settlement for Stonington and that their decision to invest or not invest may become focused on this issue. MB suggested considering acknowledging a technical breach of the IM and to provide an undertaking that no other breach will occur. He also noted that it is likely we will need to offer something further to investors, such as offering for an investor/asset consultant to sit on Ashington's Compliance Committee. He stated that we need to give investors/advisors a reason to help us and to do this we may need to give control to them in relation to compliance.
2. In an internal Ashington email on 9 July 2009 at 5.50pm (which followed the Board meeting), Mr Anderson set out the matters which had been resolved at that meeting and set out his estimate that "the amount of investor support required to operate ADF2 on the least amount of capital possible" equated to an additional $5-6 million above the uncalled capital of $6 million and the $15 million for Stonington.
3. Ms Garrett and Mr Renauf say that the 9 July board meeting papers (Ex M at 4637ff) put Mr Anderson's "spin" on events, pointing to the reference in the papers to Frontier, the adviser to HESTA, not wanting to provide additional equity because of technical issues and that "[i]nvestors / asset consultants believe that we did not inform them early enough of the challenges we are confronting on Stonington".
4. At the board meeting on 9 July 2009, Mr Anderson is reported as having noted that "all investors are working together - therefore we need to get support from a majority"; that a "question mark has been raised over the way we have conducted ourselves in the settlement for Stonington"; that "it is irrational for investors not to commit the additional equity"; and that "investors do not always act rationally because…they don't always understand the problem" or "they may write off their investment in ADF2 because there are other much larger funds also requiring additional capital". (Ms Garrett and Mr Renauf say Mr Anderson here displayed an arrogant and contemptuous attitude to investors.)

Military Super's position - 10 July 2009

1. Mr Dedes (of Strategic Capital Management, adviser to Military Super) sent an email on 10 July 2009 to Mr Watson of Military Super in which confirmed that he had relayed to the other unitholders Military Super's decision not to provide further funding; and that the other unitholders were prepared to pay their portion of costs relating to legal advice and an investigating accountant.

Ashington's recognition of breach of covenants - 10 July 2009

1. On 10 July 2009, in an email at 6.54am to Ashington personnel including Mr Anderson and copied to Mr Bouris, Mr Steel summarised the two key breaches of trustee obligations as followed: … we are guilty of obtaining debt at the head trust level when the IM stated we would use only non recourse debt to fund projects. And we are in breach of our covenants by not having enough Uncalled Capital to support both the DB and Investec covenants.
2. On 10 July 2009 at 2:50pm, Mr Bouris sent a reply email to Mr Steel advising that he "would like to see a far more robust compliance and disclosure environment" (Ex 33 at 524).

Compliance and Communication Paper - 10 July 2009

1. Later on 10 July 2009, Mr Anderson sent an email to the superannuation fund investors and asset consultants, with a paper on Ashington decision making, "to address some issues that have been raised by investors relating to Ashington's decision making process and actions in the financing and settlement of the Stonington Project, the context in which these decisions were made, and the compliance of these actions with Fund covenants" (Ex M at 4749). The paper recognised that the Investec Stonington Facility was non-compliant with the ADF2 Information Memorandum; and that the fund did not have enough capital to meet both the Double Bay and Investec Stonington Facility funds covenants (and thus was in breach of those facilities) (see [136] of Mr Anderson's 9 December 2019 affidavit).
2. That paper relevantly stated: Notwithstanding this in-principle approval, in late January 2009 Westpac credit suddenly advised that they would no longer accept a second mortgage on the Stonington facility. With less than four weeks until settlement was due and no other lenders progressed enough, or willing to provide a facility, Ashington was forced to re-structure the Investec debt so it moved from the SPV level, to the fund level. The remaining $2 million was funded via a four-month vendor finance facility, granted on the basis of a personal guarantee provided by Craig Anderson. The timing restrictions imposed on Ashington by the prolonged process of decision making by the banks, and moving goal posts for approval, ultimately resulted in key decisions relating to the facility being made in the 24-48 hours immediately preceding settlement. Formal approval from Investec was in fact not received until the date of settlement. Throughout this process accessing uncalled capital was not an option, as it was entirely allocated to Double Bay.
3. PPB points out that, as the entirety of the uncalled capital in ADF2 as at 25 February 2009 was required in order to comply with the Project X Uncalled Capital Undertaking, it is apparent that, upon signing the Investec Stonington Facility, Ashington Capital as trustee of ADF2 was immediately in breach of both the Project X Uncalled Capital Undertaking and the Stonington Uncalled Capital Undertaking.
4. The paper recognised this, stating that: The result of obtaining debt at the head trust level, when the Fund Information Memorandum states only non recourse debt must be utilised to fund projects, means we are non-compliant in this regard. We acknowledge also that by not having enough uncalled capital to support both the Double Bay and Investec Facility[,] Fund covenants were not met. It is important to reiterate that at all times during the process Ashington's focus remained on preserving investor equity. A commercial decision was made to settle, and whilst we appreciate that investors may query what may be a technical breach in compliance, at all times, once the balance of risks had been assessed, commercial decisions were made that were ultimately in the best interest of investors.
5. PPB says that the characterisation of the insufficiency of uncalled capital in ADF2 to meet the undertakings given in the Project X Security Deed and in the Investec Stonington Facility as a "technical breach in compliance", combined with the insistence that the decision to settle on the purchase of the Stonington Property was "in the best interest of investors", bespeaks a denial by Mr Anderson of any impropriety in relation to Ashington Capital's entry into the Investec Stonington Facility.
6. Patersons says that, while this paper attempted to address the superannuation fund investors' concerns, including by introducing a "new fund compliance and communication regime" which (significantly on the plaintiff's case) involved the recruitment of Ms Garrett, the reality was that the superannuation fund investors had entirely lost trust and confidence in Ashington and that Mr Anderson's marketing of a new plan to them was never going to restore their confidence. It is noted that, three days before receiving this paper, the unitholders had resolved, as a block, to appoint an investigating accountant and to obtain legal advice as to Ashington's termination.
7. Acorn notes that this paper disclosed breaches directly for the first time. It notes that in his email, Mr Anderson advised that "the timing and extent of communications to investors surrounding these issues could have been better", outlined a range of enhancements to communications and compliance processes and promised to "ensure Ashington's future performance in this area is enhanced". (Acorn says that that promise was not kept.) It is noted that, at this time, Mr Anderson was aware that it was important he obtained investor support before the Westpac and Investec facilities expired, as they would otherwise default (T 654).
8. Mr Hartley's evidence (of Sunsuper) is that he was particularly concerned by what he learnt from Mr Anderson's email of 10 July 2009, considering that it raised questions about the competence and honesty of Ashington and that an independent review of Ashington's actions was required (Ex 13).
9. Mr Anderson forwarded his email of 10 July 2009 and its attachment to Mr Bouris by email on 12 July 2009 at 3.26pm, stating that it "deals thoroughly with Ashingtons decision-making processes around the Stonington settlement and the new proposed communications and compliance measures" (see Mr Bouris' response on 13 July 2009 below to this suggestion).

Internal Ashington communications re investors - July 2009

1. On 13 July 2009, at 3.32am, Mr Steel sent an email to Mr Anderson (which he copied, inter alios, to Mr Bouris) in which he stated that he had prepared cashflow projections under different scenarios which indicated a need for a further $24 million (up from $15 million) to take them to 30 June 2010 and that if they presented that to the superannuation fund investors they would "need to make a very strong case to 'entice' the investors not to walk".
2. On the same day, at 3.38am, Mr Steel sent an email to Mr Anderson, Mr Minahan, Ms Briggs and others at Ashington with further thoughts in relation to the investor strategy saying that "our strategy may be weak in terms of 'enticing' investors to commit" and that "[i]nvestors currently have many competing investment options, therefore we need (or must be prepared) to demonstrate that our investment is compelling enough to attract the dollars required. We need to convince them not to walk!"
3. On 13 July 2009, Mr Anderson sent an email to persons within Ashington (Mr Steel, Mr Minahan, Ms Lee, Mr Bailey and Ms Briggs) stating "[o]f course we have to be prepared for anything investors raise but we are trying to get to a position where the asset consultants are comfortable that the "Manager" is the best person to work through the current environment". (Pausing here, this suggests that Mr Anderson was cognisant of the possibility that the manager might be replaced, insofar as he appeared to consider it necessary to assure asset consultants that the current manager - Ashington Management - was the best option to work through the current situation. This does not appear to be linked to the issue as to the structure of the head trust and sub-trusts.)
4. On 13 July 2009 at 4.16pm, Mr Bouris replied to Mr Anderson's email containing the 10 June 2009 paper sent to the investors. Mr Bouris stated that the paper missed the point that the superannuation fund investors would be seeking to know "from Ashington, and [sic] verified from an independent party, what their exposure will be over the next 12 months so that they do not need to go back to their funds and ask for more money during that period". Mr Bouris stated that his opinion that Ashington needed to rebuild credibility "to avert any possible action to terminate the management agreement".
5. Pausing here, the recognition in this email of the possibility of action to termination of the management agreement again is not expressly linked to a structuring issue but on one view it may be that the structing issue cannot wholly be separated from the need to rebuild credibility which likely arises from a number of factors, one being the structure of the facilities and the exposure at the head trust level that was in breach of IM and without disclosure to investors. Certainly by 10 July 2009 Mr Bouris was aware both that there was an issue as to breach of the Information Memorandum and of Mr Steel's view that "… we are guilty of obtaining debt at the head trust level when the IM stated we would use only non recourse debt to fund projects".
6. In any event, Mr Bouris said that he regarded himself as compromised as a director because decisions would be attributed to him and he was "not comfortable with that proposition".

PPB Mandate - July 2009

1. On 10 July 2009, Mr Dedes sent an email to Mr Ian Carson of PPB attaching a letter in relation to the retainer of PPB to conduct a review. The letter set out the scope of work as follows (see Ex M at 4753ff; [145] of Mr Anderson's 9 December 2019 affidavit): As a guide the scope of the review could be as follows: ● Summarise the corporate and organisational structure of the Fund and any implications for the unitholders; ● Review at a high level the proposed forward strategy of the Fund including any proposed recapitalization or asset realization plans; ● Review and comment on the financial and cash position of the Fund. This analysis is to specifically include comment on the Fund's solvency at this time; ● Review and comment on cash flow assumptions and projections including funding interest expense and other proposed capital expenditure plans for each project. An indication of projected return expectations on asset realizations via fire sale and directed managed approach; ● A high level view after discussions with potential banks of obtaining construction financing for the Double Bay project. Strategy to optimise result for unit holders if no financing obtained; ● A high level analysis of the current financing structures for each project; ● Identify any other material contingent liabilities; ● The timing of the work is critical given the Fund has a refinancing commitment on 25th August 2009; ● Establish strategy to optimize unit holder equity by staged asset realization and no further equity requirements by unit holders; ● Could a minimal equity contribution provide a better outcome on a project by project basis. This limited scope is based on our initial thoughts as unit holders but will vary by agreement between us as the Engagement evolves.
2. The following day Mr Carson forwarded that email to Mr Brett Lord of PPB.
3. Following amendments after discussions between Mr Carson, Mr Lord and Mr Dede, on 15 July 2009, Mr Martin Quinlan from PPB sent an email to Mr Dedes, attaching a finalised proposal for PPB's review of ADF2 (the PPB Proposal).
4. The PPB Proposal set out the "key issues" included: reviewing the carrying value of the projects the subject of ADF2; reviewing the financing arrangements with respect to those projects; as well as considering the "management" of the fund. As to the key issue of "Management", it was said that "[b]ased on the request that an independent review be undertaken on the Fund by the unitholders, issues relating to the position of the Manager/Trustee will be paramount. We will consider all options in dealing with such, potentially including a compulsory retirement and replacement if necessary". (Acorn thus says that, from this time, "all options" were open in relation to the advice from PPB.)
5. On 15 July 2009, Mr Dedes forwarded the PPB Proposal and a proposal from KordaMentha to the superannuation fund investors for their approval, with a recommendation for PPB.

Signing of PPB Mandate - 16 July 2009

1. On 16 July 2009, asset consultants emailed each other in support of PPB's proposal and that PPB be appointed to advise the superannuation fund investors.
2. The PPB Mandate letter was signed that day. By the PPB Mandate, the superannuation fund investors appointed PPB to undertake an independent review of Ashington's financial modelling of the Stonington Project and to provide a strategic and financial review of ADF2 more generally. Patersons emphasises that PPB was engaged (independently of Ashington) to assess and verify the information presented to investors by Ashington Capital and Ashington Management; and to prepare a report in relation to the Stonington Trust to assist the investors in deciding whether to provide additional equity to Ashington Capital to finance the project.
3. Acorn accepts that the PPB Proposal (above) was more extensive than the PPB Mandate Letter. In particular, it is noted that the PPB Mandate Letter did not explicitly refer to PPB considering the compulsory retirement and replacement of Ashington as trustee and manager of ADF2. However, Acorn says that it is not clear that the superannuation fund investors turned their mind to the differences between the PPB Proposal and the PPB Mandate Letter, and specifically, whether they had intended for the PPB Mandate Letter not expressly to refer to PPB exploring the removal of the trustee and manager of ADF2. Acorn says that none of the superannuation fund investor witnesses who gave evidence (Mr Hartley, Mr Fowler, Mr McCusker, Mr Dedes and Mr Thow) was cross-examined on his understanding of the PPB Proposal. In any event, Acorn points to Mr Dedes' evidence in cross-examination that he expected that PPB was involved in all the conversations about the objective of removing Ashington as trustee and manager (T 1089). Acorn says that, implicit in that statement, was that PPB was aware that this was an objective (which Acorn says is consistent with the terms of the PPB Proposal).
4. Mr Thow's evidence, which Acorn points out was unchallenged in cross-examination, was that he expected PPB's mandate to have included doing what they could to save the equity already committed to the Ashington Funds, and, in his opinion, "that would not have involved continuing to work with those at Ashington who had been managing the Ashington Funds as trustee and manager unless that was the only option available" (Ex 16). In cross-examination, Mr Hartley accepted that that he was not aware of any instruction given by Sunsuper to advise on the removal of Ashington as trustee or manager but he maintained his evidence that he expected this was an option PPB would consider (T 982-983).
5. Acorn says that this evidence favours the conclusion that part of PPB's role was to consider the removal of Ashington as trustee of the Ashington Funds.

Meeting with asset consultant representatives - 16 July 2009

1. On 16 July 2009, a meeting took place in Melbourne between Mr Anderson and the asset consultant representatives (some participating by telephone). Mr Minahan and Ms Lee (from Ashington Capital) attended as did Mr Stagg, Mr Dedes, Mr Flett, Mr King, Mr Hastings, Mr Fowler, Mr McCusker, Ms Chan and Mr Cohen (see [210]-[212] of Mr Anderson's 19 December 2017 affidavit).
2. In evidence is a copy of the presentation with handwritten notes on it, Mr Cohen's note of it and Mr Hastings' note of it (which Acorn says are all broadly confirmatory of what took place) (Ex M at 4803ff, 4826).
3. In this meeting, Ashington requested $25 million from the superannuation fund investors until 30 June 2010 to allow the Investec Stonington Facility to be paid and the remaining capital to cover interest guarantees (T 395); and Mr Anderson said that this would provide 12 months to dispose of part or all of an ADF2 asset. The position of the Investec Stonington Facility was discussed in terms that, if it was not paid out by 25 August 2009, Investec would seek to take control of the "Fund assets at a Fund level" and it was said that default under the Investec Stonington Facility would "also escalate bank and finance-related risk and issues for other fund assets". This was recorded by Mr Cohen in terms that "going into default with the mezzanine piece could effectively contaminate the entire fund". (Acorn says that this was a stark reminder of the extent of the consequences of Mr Anderson's actions in entering into the Investec Stonington Facility in February 2009.) In the presentation Mr Anderson is recorded as describing the planning approval for Double Bay as delayed but expected in September and "a certainty". Acorn says it appears that the Ashington personnel were told at this meeting that Military was looking at a legal review and that PPB had been hired with a result expected in the following three to four weeks.
4. Mr Anderson has deposed that, late in the afternoon on 16 July 2009, Mr Dedes informed Mr Anderson that PPB had been selected to undertake a review (see [213] of Mr Anderson's 19 December 2017 affidavit).

Initial meeting PPB/Ashington - 17 July 2009

1. On 17 July 2009, there was a meeting between Mr Anderson and Mr Lord (a partner of PPB). Prior to the meeting, Mr Lord had requested, in email correspondence, information required to commence the review.
2. Acorn says that there is no reason to doubt that the information PPB had requested was subsequently provided (noting that Mr Steel's email of 20 July 2009 at 9.57am to Mr Peter Block (a partner of PPB) and Mr Lord stated that the information was being collected would be ready within 24 hours).

PPB Confidentiality Agreement - 20 July 2009

1. The PPB Confidentiality Agreement dated 20 July 2009 (PPB Confidentiality Agreement) was signed by PPB (Mr Lord) and Ashington Capital on or about 21 July 2009, governing confidential information provided by Ashington Capital and related entities to PPB for the "Approved Purpose", defined as being "for the purpose of assisting [PPB] to conduct a review and prepare a report of [ADF2] as instructed by investors in [ADF2]" (Ex M at 4837).
2. Clause 4 required PPB to maintain the confidential nature of the Confidential Information (defined to mean "all information … disclosed or otherwise made available by us or our Representatives to you or your Representatives … for or in connection with the Approved Purpose"); clause 5 (subject to inapplicable exceptions) prohibited PPB from disclosing the Confidential Information to any person; and clause 6 (also subject to exceptions) prohibited PPB from using, disclosing or reproducing any of the Confidential Information for any purpose other than the Approved Purpose.
3. Mr Lord sent an email to other PPB personnel on 21 July 2009 attaching a slide from the 16 July 2009 presentation by Ashington Capital to superannuation fund investors that dealt with disposal scenarios.

Amended 13th drawdown notice - 21 July 2009

1. On 21 July 2009, Ms Briggs emailed Mr Dedes the 13th drawdown notice for ADF 2 directed to Military Super and he forwarded it to Mr Lord.

Advice sought from Mallesons - 21 July 2009

1. On 21 July 2009, Ms Briggs sought advice from Mallesons about ADF2 making a loan to ADF in order to enable ADF to continue to fund 25% of the Double Bay Project. The advice received from Mallesons stated that, if any such loan is made, it will "need to be disclosed to ADF2 and ADF investors because it involves a conflict of interest" (Ex 17 at 142). Reference was there made to an email on 9 July 2009 that David Eliakim (a partner of Mallesons) had sent to Mr Anderson, Mr Steel and Ms Briggs where the potential conflict of interest was addressed in detail. (Complaint is here made that such disclosure was not promptly made to the superannuation fund investors.)

LUCRF report to HESTA's board re appointment of PPB - 22 July 2009

1. On 22 July 2009, Mr Fowler reported to HESTA's board that the unitholders "are now sufficiently concerned with the viability and solvency of [ADF2] to have appointed an independent advisor to assess the current and future viability of the Fund in the current market environment" (Ex M at 5099).

Communications within Ashington re liquidity issues - 22 July 2009

1. On 22 July 2009, Mr Steel sent an email to Mr Anderson, copied to Mr Minahan, entitled "ADF Liquidity" which recorded that they needed to address "ADF's liquidity/solvency issue". Mr Steel and Mr Anderson discussed the possibility that it might not be sufficient to resolve the liquidity issue to sell Double Bay because Investec would also need to be repaid in relation to the Wylde Street Facility.

Valuation Report for Stonington - 22 July 2009

1. On 22 July 2009, a valuation report for the Stonington Site was produced for Westpac.

Investec Security documents sent to PPB - 23 July 2009

1. On 23 July 2009, Mr Steel sent an email to Mr Block and Mr Lord of PPB, attaching copies of the Investec Security documents.

Meeting of superannuation fund investors representatives/PPB - 29 July 2009

1. On 29 July 2009, there was a meeting between superannuation fund investors' representatives and PPB (on which meeting no little weight was placed by various of the defendants in their submissions).
2. The file note prepared by Ms Chan of Sunsuper of the meeting on 29 July 2009 between the superannuation fund investors and Mr Lord, stated (Ex M at 5077): ● 9 instruments and securities held at head trust company level which if enforced could flow onto all assets and Fund No. 1 ● Major problem! … ● Very messy, need to change trustee.
3. On the same day (29 July 2009), Mr Dedes (Military Super) prepared a report in which he stated that the superannuation fund investors had "started a legal review of the Fund documents" that would initially focus on: (i) the unitholders position if they no longer provided the balance of committed capital; and (ii) the process for termination of the manager and responsible entity.
4. Various of the defendants point to these documents as making clear that, at that time, the termination of Ashington Capital as trustee of ADF2 was very much in the forefront of the superannuation fund investors' minds. PPB argues that, read together, these documents dispel the notion that PPB and the ADF2 investors were at this time concerned only with structural weaknesses associated with the fact that Ashington Capital was also the trustee of the sub-trusts within ADF and ADF2. Acorn says that (and I agree) whether these statements are interpreted as a reference to a structural issue with the form of securities within ADF2 giving rise to a need to change the trustee or the need to change the trustee due to a loss of trust and confidence in Ashington by the superannuation fund investors, they reflect a very significant problem in relation to ADF2 with which the superannuation fund investors were dealing at that time.
5. The plaintiff, however, interprets the reference in Ms Chan's note to a need to change the trustee as arising from the difficulty with having the same trustee at both the head and sub-trust level and says that this reference could be read as meaning that there be a change to the trustee in that regard but not an overall change of trustee at the head trust level.
6. In any event, PPB submits that, having regard to these documents, the proposition put by the plaintiff (in submissions at [20]) to the effect that "[p]rovided that Ashington could resolve its immediate funding difficulties, it had strong prospects of restoring investor confidence and maintaining and developing its business" is not sustainable. (There is much force to that submission.)
7. Reference is made to Mr Hartley's evidence, for example, is that (at about this time) he commenced forming the view that the superannuation fund investors should consider whether Ashington should be removed as trustee because he no longer trusted Mr Anderson and had lost confidence in Ashington.

Concerns expressed by Mr Bouris (then chairman of Ashington) - 4 August 2009

1. On 4 August 2009, Mr Bouris sent an email to Mr Anderson stating that (Ex M at 5591): I am still very concerned with being chairman of ashington for the reasons I put to you sometime ago. Cleary there are some major issues you need to resolve with the investors and now investec. I have spoken to Stanley at investec as you know. … I think you and the team have done a very good job under the circumstances although without more information I am concerned about what I was advised happened with stonington settlement and equally with the perception of what happened at least by some of the investors.
2. On 4 August 2009 at 1.38pm, Mr Anderson sent an email to Mr Bouris about his understanding of PPB's investigations, stating that PPB had advised that they would be recommending that the unitholders contribute the Second Additional Equity Request and had not been critical of the way Ashington dealt with the Stonington settlement.
3. On 6 August 2009 at 8.49pm, Mr Bouris emailed Mr Anderson that "I think that whatever happens it would appear that what has happened will adversely effect [sic] the nature of the mandate going forward with the investors".

Investors considering change of trustee - 5 August 2009

1. Meanwhile, the possible change of trustee was also clearly discussed in a meeting of superannuation fund investors and PPB on 5 August 2009, as the following day (6 August 2009) at 1.52pm, Mr Flett (of Arcadia, adviser to LUCRF) emailed Mr Lord (of PPB), copied to Mr Dedes, stating that he had had "a couple of additional thoughts about ADF No1" and that the "[k]ey issue is will change of Trustee require the approval of the financiers to each of the underlying SPV - we need to get our hands on the financing documents (first) before considering if and how we might change the trustee from [Ashington Capital]".

Variation of St George facility re Potts Point Trust - 6 August 2009

1. On 6 August 2009, St George wrote to Ashington Capital providing a Letter of Variation for the Potts Point Trust, reducing the facility limit to $13,005,000 and extending the term to 31 August 2009 (see Ex M at 5105).

Ms Garrett - 8 to 9 August 2009

1. Meanwhile over the weekend of 8 and 9 August 2009, Ms Garrett sent emails from her Gmail account: on 8 August 2009 to Mr Anderson (copied to Mr Renauf, herself at Ashington and Mr Minahan) in relation to the proposed handover of projects on which she was working while she was away on holidays with her husband and attaching a proposed organisation and bonus structure, noting that she would "be contactable on my Ashington blackberry"; and to Mr Minahan and Mr Anderson, respectively, attaching a handover sheet in respect of current and future projects of Ashington.

PPB communications - early August 2009

1. On 7 August 2009, Mr Block (of PPB) sent an email to asset consultants, attaching a structure document showing Investec having security for the Investec mezzanine funding over Ashington Capital and ADF2, rather than only Stonington Trust.
2. On 10 August 2009, Mr Block sent an email to Mr Lord and asset consultants attaching an agenda for a proposed conference call between representatives of PPB and the superannuation fund investors on 11 August 2009, on which agenda the following items were included: c. Implementation of revised structure to eliminate ACL [Ashington Capital] as Trustee; d. Review of management.
3. On 10 August 2009, Mr Anderson met with PPB and then sent an email at 3.19pm to Mr King to brief him as he was not able to attend PPB's teleconferences. Mr Anderson noted two issues: (i) that PPB recommended that Investec be paid out but the superannuation fund investors did not agree; and (ii) that on the basis that "asset consultants will not recommend further equity under any circumstances", Ashington proposed an alternate solution, supported by PPB, that the $6 million remaining uncalled capital be used for both Double Bay and Stonington to provide until 31 December 2009 to dispose of assets, which solution was also not supported by the asset consultants. Mr Anderson said that the asset consultants' approach "is uncommercial and will in our opinion lead to decimation of ADF2 equity" (Ex M at 5126).
4. On 11 August 2009, there was a conference call between Mr Block, Mr Lord and asset consultants.
5. On 11 August 2009, Mr Anderson emailed Mr Minahan, Mr Steel, Mr Bailey, Mr Lee and Mr Seaton about PPB's review of ADF2 and said "[PPB] have reservations about the profit margin in Stonington being sufficient to justify the risk of development and recommended investors contribute capital in the short term" (Ex M at 5129).
6. On 12 August 2009 at 11.53pm, Mr Gavin sent an email to Mr Block, Mr Lord and asset consultants commenting on the HESTA Side Letter (and attaching the emails of 22 June and 12 January 2009 from Ashington Capital to Mr Gavin), concerning the use of funds for the Double Bay Project (commenting that the email of 12 January 2009 from Ashington stated that "that they would not promise equity two or three times (which is painfully ironic now)", and saying "we put these in place (in writing) to try and ensure that Ashington would not use additional capital for anything other than Double Bay, and to try and ensure that additional commitments would not be promised two or three times. Unfortunately this does not seem to have worked".

Mallesons advice on structuring of funds - 14 August 2009

1. On 14 August 2009, Mallesons wrote to Mr Anderson regarding the structuring of Ashington Capital's development funds, stating that "[w]e understand that in the course of PPB reviewing the structure of [ADF] and [ADF2] and the associated sub-trusts on behalf of investors, queries have been raised regarding the multiple roles which [Ashington Capital] assumes in the structure" (Ex M at 5342). By 20 August 2009, Mr Anderson had asked Ms Briggs to advise on how the removal of Ashington Capital as trustee would impact Ashington Management's entitled to Development Management fees (Ex 23). Prior to providing that advice, Ms Briggs discussed the issue with Mr Edwards (of Mallesons) (Ex 25). It is submitted that the decision to request this advice was driven by a real concern held by Mr Anderson, reflective of the statements made to him by superannuation fund investors at the time. At the very least, it indicates that Mr Anderson had in mind the possibility that Ashington Capital might be removed as trustee.

PPB Strategy Report No 1 - 14 August 2009

1. PPB produced the first "Strategy Update" report to the ADF2 investors (excluding Ashington) on 14 August 2009 (First PPB Report). The report stated that it was produced in accordance with PPB's engagement letter dated 16 July 2009 and solely for the information of the investors of ADF2 (also referred to as "the Fund" in the First PPB Report).
2. The 14 August 2009 report noted that PPB was mandated by the Fund investors to perform "a commercial review of three projects within the Fund, assess the feasibility of each project and understand the potential for further financial support to be required from the investors" and that PPB's review "has highlighted the need for a definitive short-term strategy to minimise the risk of the Fund collapsing whilst exploring the options available to the investors and the costs associated with those options". The report also made certain recommendations about how such a strategy might be pursued.
3. In the report, PPB noted that superannuation fund investors were reluctant to advance further moneys and recommended that a stand-still arrangement with Investec and other lenders be sought pending a short-term sale of the Stonington Property.
4. PPB considered it "appropriate that management be directed by the investor group to work co-operatively with PPB to achieve short term goals and refine a medium-term strategy to determine what ongoing viability the Funds may have"; and said that with regard to the future direction of the Fund, in PPB's view it was "too early to determine conclusively the best course of action".
5. The report stated that, in order to implement that strategy, PPB would require a mandate with "4 arms". The second of those arms was "to assist the company in achieving a legally effective restructure of the current trustee and security arrangements". PPB stated that the current funding structure did not "quarantine the group from enforcement action by lenders to the trusts should one of the sub-trust assets default on its debt or other creditor obligations". The report noted that "a lender enforcing its securities is likely to do so at both the asset and the trust company level, resulting in potential cross defaults against other debt facilities in ADF No. 2 and also ADF No. 1" and that "a major short term goal is to take steps to avoid any further events of default that could lead to the appointment of an insolvency practitioner to ACL [Ashington Capital]".
6. Pausing here, Patersons says that the debate as to the scope of such a mandate is largely a matter between PPB and the plaintiff; but it says that even if the plaintiff is correct (and that second "arm" was restricted to PPB assisting in the restructure of the sub-trusts so that the head trustee (Ashington Capital) was not the trustee of all of them), that does not really matter for the purposes of the causation question in the present case. Patersons points out that the fourth "arm" of PPB's ongoing mandate included developing "a medium term strategy for the Fund, in the best interests of the Fund investors". It is said that that would include exploring the removal of Ashington Capital as trustee and Ashington Management as development manager (and Patersons says that Mr Anderson was cognisant of that fact at the time in August 2009).
7. Pausing here, the plaintiff's interpretation of the second "arm" is consistent with the content of the First PPB report. Beyond the executve summary, under section 2.3 "Risk of Current Structure - Ashington Capital (ACL) As outlined above, ACL acts as the trustee for ADF No2's sub trusts. As opposed to establishing separate borrowing entities for each of he Funds sub trusts, the structure established ACL as the trustee for the sub trusts of both ADF No. 1 and ADF No. 2. ACL currently has 9 charges registered against it, according to a recent ASIC search. … There is a strong risk that should any of the 9 charges be acted upon with the most immediate being the Investec facility due for repayment on 25 August 2009, ACL may be placed into some form of formal insolvency administration. The current structure does not quarantine the group from enforcement action by lenders to the trusts, should one of the sub trust assets default on its debt or other creditor obligations. This structure will need to be rectified in the medium term, should the shorter term issues be solved.
8. Further, the First PPB Report advised that "PPB be additionally retained by [Ashington Capital] to provide advice to [Ashington Capital] in respect of investor supported strategies".
9. Mr King's response to the email from Mr Block on 14 August 2009 suggested that Ashington might be entitled to see the report. Mr Block responded that, because the report was prepared for investors, there was no legal requirement for Ashington to have it (which I interpose to note is a clear contemporaneous indication of PPB's view as to by whom PPB had been retained). However, Mr Block noted that he had discussed the material issues with Mr Anderson on several occasions.
10. Mr Anderson's evidence is that he was not provided with the First PPB Report at the time it was issued and that he "pursued PPB for copies of the PPB strategy updates for some time in late 2009" and was "eventually" provided with PPB Report in late 2009 (his 19 December 2017 affidavit at [224]). Acorn says that this evidence is false as Mr Block emailed Mr Anderson the First PPB Report on 21 August 2009, a week after the report was provided to the superannuation fund investors. At the very least, it would appear that Mr Anderson's affidavit evidence to the contrary was incorrect.
11. Mr Anderson's evidence is that he considered that an immediate sale of Stonington, as recommended by PPB, would be unnecessarily destructive of unitholder value.

The URGENT ATTENTION email - 16 August 2009

1. On 16 August 2009 at 6.25pm, Mr Anderson sent an email to the superannuation fund investors, marked for their urgent attention, in which he warned that the superannuation fund investors "must be cognizant that actions taken in the next 24 hours will determine the future of both funds" for the reasons he there set out, which included the assertions that "the effluxion of time has placed the Manager and the Fund in a more acute and tenuous position" and that "[t]he Manager's ability to effectively deal on assets has been undermined by the wholesale level of inaction of the past 60 days". Mr Anderson noted that PPB's ultimate advice "does not represent PPB's initial advice (which was to pay out the Investec facility by its expiry date of 25 August) but is the only recommendation which investors will support". Mr Anderson set out why he regarded the PPB Recommendation to investors (to request Investec to extend the facility without offering any inducement to do so) to be fundamentally flawed and also set out the Manager's Recommendation in relation to the Investec Stonington Facility (that an inducement must be offered to Investec to extend the facility). Mr Anderson warned about Investec taking control of the asset and the possibility of heavy losses in such an event.
2. Mr Anderson described PPB's recommendation as "fundamentally flawed" and the superannuation fund investors as "misguided". Acorn says that the tone and content of this email was insulting because of Mr Anderson's lack of responsibility for the position in which he had placed the Ashington Funds and the superannuation fund investors by proceeding with the Stonington settlement in February 2009 in the manner he did; and says that the email betrays the desperation of Mr Anderson for the position in which he and Ashington were now placed (namely, that if demand were made by Investec on 25 August 2009 it was likely that it would not be met, Investec would take control of the Stonington asset which would trigger cross defaults across both Ashington Funds; in circumstances where Mr Anderson had personally guaranteed the Hamton Vendor Finance which was due).
3. In the email Mr Anderson also stated that "[a]ny concern surrounding the Double Bay government approval has no foundation for the reasons set out in the attached document", which asserted that "[c]ontinuing to raise a concern around the approval simply reflects a failure in understanding the approval process" and that "[a]pproval will be granted in late September or early October" (Ex M at 5344ff).

Meeting of Mr Gavin and Ashington - 17 August 2009

1. On 17 August 2009, Mr Gavin (on behalf of HESTA) met with Mr Anderson and Mr Minahan to discuss the situation.
2. On 17 August 2009 at 6.58pm, Mr Gavin wrote to the superannuation fund investors and PPB, reporting that he had met with Mr Anderson and Mr Minahan. Mr Gavin said that he conveyed to them that it "is highly unlikely that HESTA will be committing any additional equity to ADF 2, at least not in the time frame required for Investec and the vendor finance, and probably never", which he said had surprised them. Mr Gavin expressed the opinion that it was imperative that, at the meeting of superannuation fund investors to be held the following day (18 August 2009) at 3pm, they come up with a proposal which PPB (perhaps with Ashington) could deliver to Investec late in the afternoon "even if that outcome is to encourage them to proceed with the wind up of the Stonington trust and (and try and ensure the losses are quarantined to Stonington)". Mr Gavin stated that Ashington had asked to address the superannuation fund investors at the commencement of the next day's meeting and Mr Gavin asked whether everyone was in favour of that.

Investec calls on $6 million outstanding equity - 18 August 2009

1. On 18 August 2009 at 11.37am, Mr Stanley Hurwitz of Investec sent an email to Mr Steel asking him to prepare the documentation to drawdown the remaining $6 million of uncalled capital and transfer the funds to Investec, which email Mr Steel then forwarded to Mr Anderson and Ms Briggs.

14th drawdown on ADF 2 - 18 August 2009

1. On 18 August 2009 at 12.10pm, Ashington Capital made the 14th drawdown for ADF2, which Ms Briggs described in an email that day as having been formally requested by Investec.

Mr Anderson's email to superannuation fund investors - 18 August 2009

1. On 18 August 2009 at 12.10pm, Mr Anderson sent an email to the superannuation fund investors in advance of their meeting at 3pm that day to consider the First PPB Report. Mr Anderson noted the "significant disappointment in an element of the structuring of the project finance in the settlement of the Stonington project" but said that "the manager was compelled to take extraordinary measures in extraordinary times under great duress" in relation to the financing of the settlement of Stonington. Mr Anderson said that Ashington's primary objective was at all times to act in the best interests of investors, a key element of which was to preserve and protect the significant equity already invested in the project. The email assured the superannuation fund investors that "we are committed to working closely with investors to ensure that they are fully informed at all times". The email said that the assets in the fund would require "skill and expertise to either realize [sic] and or develop". The email noted that a meeting was taking place later that day between PPB and the superannuation fund investors to discuss the First PPB Report, and asked to be able to review issues arising out of the meeting and respond.

Update to LUCRF Investment Committee - 18 August 2009

1. On 18 August 2009 at 2.56pm, Mr McCusker sent an email to members of the LUCRF Investment Committee providing an update on the Ashington funds and attaching the First PPB Report. The email summarised PPB's suggested short-term goals and recommendations; summarised three communications from Ashington; and provided the Investment Oversight Group (IOG) response. The email suggested that LUCRF should support the engagement of PPB to assist Ashington in the execution of the strategy detailed in the First PPB Report.

Meeting of PPB, Ashington and superannuation fund investors - 18 August 2009

1. On 18 August 2009, at 3pm, PPB and Ashington met with the superannuation fund investors, which Ms Chan recorded in a note. In Ms Chan's note, she recorded that Ashington had "met with Frontier and now see exactly how disenchanted unitholders are" (Ex 13 at 18322). The outcome of the meeting was for the superannuation fund investors to review PPB's strategy and agree on a course of action.

HESTA board report - 19 August 2009

1. On 19 August 2009 a report to the HESTA board for its August 2009 meeting noted that unitholders remained concerned with the viability and solvency of ADF2 following an interim report from PPB.

Email from Mr Steel to Mr Bouris - 19 August 2009

1. On 19 August 2009, Mr Steel forwarded to Mr Bouris the 31 May 2009 Mallesons' advice dated 31 May 2009 (see above) that he sent to Mr Bouris "originally on 10 July" as to the matters in relation to ADF2 which Mallesons considered should be disclosed to superannuation fund investors.

Investec notice of default, demand for payment and cancellation of facility - 19 August 2009

1. On 19 August 2009, Investec wrote to Ashington Capital, as trustee of ADF2, declaring ongoing breaches of the Investec Stonington Facility, demanding immediate payment of some $10.139 million and cancelling the Investec Stonington Facility.
2. In particular, the Investec notice of default indicated that Ashington Capital had breached the ongoing covenants contained in cll 19.1(c), 19.1(d) and 19.2(b) of the Investec Stonington Facility. By those clauses, Ashington Capital had undertaken: to ensure that the aggregate of uncalled capital of ADF2 was not less than $10 million; to notify Investec of any proposal which would have the effect of reducing the uncalled capital of ADF2 below those levels existing at the time of the first drawing; and not to make any calls on unitholders including calls under uncalled additional equity without Investec's written consent. The Investec notice of default noted that $10,139,331.51 remained owing as at 18 August 2009 and made a demand for that money. Investec continued to reserve its rights. Investec utilised its power of attorney to call for the $6 million in uncalled capital.
3. At the same time, Investec's lawyer also wrote to Ashington Capital and its directors putting them on notice of the claims which Investec had against both Ashington Capital, in its personal capacity (as opposed to its capacity as trustee), and against the directors.

Bouris resigns as chairman and director - 19 August 2009

1. On 19 August 2009 at 12.40pm, Mr Bouris sent an email to Mr Anderson resigning as chairman of Ashington, and director of the Ashington companies, citing "grave concerns" about what he had been told at the June 2009 Ashington board meeting (Acorn says this is clearly a mistaken reference to the July 2009 board meeting) and what he had been told by one of the superannuation fund investors and by Mr Hurwitz of Investec. Mr Bouris, in an email later that day at 1.22pm, said that new information had come to his attention (including the Mallesons advice dated "4th August 2009" - it is likely this is a reference to the 14 August 2009 advice), which if he had known about at the time would have caused him to have "brought my decision forward".

Westpac response to request for extension of Westpac Stonington Facility - 19 August 2009

1. On 19 August 2009, in response to Mr Steel's request for the Westpac Stonington Facility to be extended to 11 January 2010, Westpac indicated that approval would depend on Ashington Capital meeting certain pre-conditions, including: paying down the facility by $5.4 million and paying interest in advance.

PPB draft mandate letter - 20 August 2009

1. On 20 August 2009 at 11.40am, Mr Block (of PPB) sent a mandate letter by email to Mr Anderson "outlining [PPB's] role going forward" which was stated to be agreed by the superannuation fund investors. The letter asked Ashington Capital to sign and return a copy of the letter as an acknowledgement of agreement to its terms. The mandate letter stated that PPB had been engaged by the unitholders of ADF and ADF2 to assist Ashington Capital as trustee to do a number of things including "achieving a legally effective restructure of the current trustee and security arrangements", "achieving a divestment of certain assets of the funds" and "recommending a medium term strategy for the funds". It sought Ashington Capital's authorisation and agreement to PPB approaching and holding meetings with, communicating with and requesting information from, all financiers to ADF and ADF2 "and all other third parties that are relevant to the ongoing operation and viability of the Funds" and to provide PPB with correspondence between Ashington Capital and those third parties. Further, PPB emphasised that PPB would not be acting for the Ashington Capital in any capacity and that, by signing and returning the letter, Ashington Capital agreed with those terms and represented and warranted to PPB that "PPB is not acting as a fiduciary for or as an adviser to [Ashington Capital] in any capacity whatsoever". Each of HESTA, Sunsuper and LUCRF subsequently sent an email on 24 August 2009 to Mr Anderson confirming its agreement with that letter.

Steel seeks advice as to his position - 20 August 2009

1. On about 20 August 2009, Mr Steel sought advice from Ms Briggs about whether he owed directors' duties and whether they might have been breached. Ms Briggs advised, by email on 20 August 2009 at 9.02am, that she thought that Mr Steel would be classified as an officer of Ashington and that therefore he owed directors' duties to the company. Ms Briggs said that, in her opinion, both the duty to act in good faith in the interests of the company and duty to use powers and exercise duties in good faith and for a proper purpose may have been breached. In relation to the duty to exercise care, skill and diligence, Ms Briggs advised that "[a]rguably deciding to enter into an agreement to purchase Stonington (when we knew there was never going to be enough equity) and Double Bay (when we knew the equity required exceeded the max. that could be spent on any one project) was not acting in the interests of the company". (Ultimately, on 13 November 2009 at 9.46am, Mr Steel emailed Mr Eliakim of Mallesons asking if he could recommend someone at Mallesons to provide him with personal advice on whether he owed directors duties to Ashington under the Corporations Act - Ex 17 at 215.) This is of relevance insofar as it indicates a genuine concern on Mr Steel's part as to the position at that time (which goes beyond him merely being a "worrier", as Mr Anderson has suggested).

Mr Anderson's request for better communication of PPB's role - 20 August 2009

1. On 20 August 2009 at 7.10pm, Mr Anderson sent an email to the asset consultants requesting that Ashington be advised of the outcome of the unitholders' meeting held on 18 August 2009 and requesting clarification of PPB's role and access, if appropriate, to the PPB report.

Advice from Ms Briggs re entitlement to fees if new trustee appointed - 21 August 2009

1. On 21 August 2009 at 4.16pm (the day after the 20 August 2009 draft version of the PPB Mandate Letter was sent by PPB to Ashington Capital), Ms Briggs sent Mr Anderson and Mr Steel an email stating, among other things (Ex 23): Scott and Craig, As requested I have looked into the following questions raised yesterday regarding the development management fees for ADF 2 Projects; 1. If ACL [Ashington Capital] is removed as the trustee and a new trustee is appointed would we still be entitled to DM [development management] fees? 2. If a project is sold rather than developed are we still entitled to DM fees?
2. In cross-examination, Mr Anderson denied being concerned, at the time of receiving the 20 August 2009 PPB draft mandate letter, about the risk that Ashington Capital might be terminated as trustee of ADF2; and denied being concerned about the potential consequences to Ashington if Ashington Capital were removed as trustee of ADF2 (T 932-933). Mr Anderson said, as to Ms Briggs' email above, that he "wasn't the driver of that email" (T 933). Acorn says that this evidence is unbelievable and dishonest, deliberately so. Acorn contends that Mr Anderson knew at this time that there was a very real potential for the unitholders to seek the removal of Ashington Capital as trustee. Acorn says that the fact that Ms Briggs was asked to provide advice on these questions at that time is only explicable because Mr Anderson had those concerns.
3. Further, it is said that the evidence indicates that Ms Briggs had consulted Mallesons in providing this advice (noting that in an email of 11 November 2009 at 11.37am to Mallesons, Ms Briggs refers to these same questions, stating that she had spoken to Mallesons "about these issues a few months ago"), which Acorn says indicates the seriousness of the view within Ashington that there was a very real prospect that Ashington might be removed.
4. PPB similarly submits that it should be inferred that, having read the draft 20 August 2009 PPB mandate letter, Mr Anderson and Mr Steel were prompted (by the reference to the restructure of current trustee arrangements) to ask what consequences would ensue if Ashington Capital were removed as trustee of ADF2. PPB argues that this destroys any suggestion that reasonable persons in the position of PPB and Ashington Capital respectively would have been ad idem in understanding, as at 25 August 2009, that the words "legally effective restructure of current trustee and security arrangements" were intended only to refer to the remedying of some structural weakness associated with Ashington Capital being the trustee of the head trusts and the sub-trusts in the Ashington business.

PPB Strategy Report No 2 - 21 August 2009

1. On 21 August 2009 at 5.01pm, Mr Block sent an email to the asset consultants attaching the PPB Strategy Report No 2 dated 21 August 2009 (Second PPB Report). Shortly thereafter, at 5.40pm on 21 August 2009, Mr Block sent an email to Mr Anderson and Mr Steel, copied to Mr Lord, attaching the PPB Strategy Report No 1 dated 14 August 2009 (Ex M at 5412ff).
2. The Second PPB Report: stated, among other things that the report was produced in accordance with PPB's engagement letter dated 16 July 2009, and was solely for the information of the investors of ADF2; and that Investec had "issued immediate notices of demand to Ashington, following their advisement of the breach of the uncalled equity undertaking in their facility agreement" (noting that the total amount demanded was $10 million plus interest). The report referred to the potential for any enforcement action by Investec (such as the appointment of a receiver) to push Westpac to enforce its securities at Stonington, disturb or defer the planning approval for Double Bay and cause enforcement actions across the sub-trusts of both funds.
3. The report referred to conversations PPB had had with Ashington and specifically with Mr Anderson and noted that superannuation fund investors adopted PPB's "recommendations last week" and, accordingly, PPB had "forwarded a letter to Ashington clarifying our ongoing role" (which was attached as annexure B to the report).
4. PPB advised the superannuation fund investors that "Investec has greater leverage as a result of the contagion which they can spread to the other assets in the Fund, most notably Double Bay, which is sensitive given the final stages of the planning approval process. We believe that enforcement of Investec's securities may jeopardise the ability to secure the Part 3A planning approval for Double Bay". (Patersons notes that the development application for the Double Bay Property was refused for unrelated reasons.)
5. PPB advised the superannuation fund investors that it was of the view that "Investec will require a financial inducement to extend their facility, pending a sale of Stonington" and that the option PPB considered most palatable was a "shortfall guarantee that would be granted to Investec". PPB recommended that the Stonington Property be put on the market immediately. The report said that the only other option was for the unitholders to "do nothing" and risk the likely appointment of a receiver to Ashington Capital by Investec.
6. Also, relevantly, the Second PPB Report advised on the cashflow of ADF2, concluding that "[i]n order to survive until 30 September 2009, the Fund will require approximately $3.8 [million] (August and September expenses not including the September payment of interest for Double Bay of $1.4 min) in addition to the accommodation necessary to be provided to Investec".

Superannuation fund investors' position - late August 2009

1. Acorn says that, at around the time of the Second PPB Report, all of the superannuation fund investors had reached the view that they were ready for the removal of Ashington.
2. It is noted that Mr Dedes (Military Super) gave evidence that he had formed the opinion that Ashington Capital and Ashington Management needed to be removed as trustee and manager of ADF, ADF2, and the sub-trusts, believing that it was necessary to remove Ashington if the unitholders hoped to extract any value from the trust assets (Ex 15 at 576); that Mr Thow (LUCRF) no longer had any trust and confidence in the ability of Ashington as trustee and manager of the Ashington Funds and considered that PPB was working to save the equity already committed to ADF and ADF2, which would not have involved continuing to work with Ashington unless that was the only option available; and that, after considering the two PPB Reports, Mr Fowler (HESTA) says he also lost confidence and trust in Ashington Capital around this time (Ex 14 at 560-561).
3. Mr Hartley (Sunsuper) gave evidence that he no longer trusted Ashington and formed the view that Ashington needed to be replaced. Acorn says that (contrary to the plaintiff's closing submissions) it is not material whether Mr Hartley communicated this view to the Board of Sunsuper prior to there being any viable alternative to Ashington for the Board to consider. It is noted that Mr Hartley's evidence is that he was the primary decision-maker at Sunsuper in relation to investments and the only person with relevant authority in this regard, and that at all times the Board usually followed the recommendations he made to them about investments (Ex 13 at 17825-17826). (Moreover, Acorn says that it is significant that Mr Hartley was not examined about his views as expressed in both his outline and in his affidavit in the later Mapeline proceedings - see below - about the conduct of Ashington during 2009.)

24 to 25 August 2009

1. As adverted to above, on 24 August 2009, Mr McCusker of LUCRF sent an email to Mr Anderson, copied to Mr Lord and Mr Flett, confirming that PPB had been engaged by the superannuation fund investors.
2. On 24 August 2009, Arcadia Funds Management provided a quarterly property portfolio report for the LUCRF Investment Committee (in advance of its 2 September 2009 meeting) relating to its property portfolio, addressing the performance of ADF and ADF2 and stating that "there remains a high probability that any one of a series of these issues could result in a total loss of equity in ADF2. In addition, there is now also a heightened risk that these issues will also contribute to a significant loss of remaining equity in ADF1" (Ex M at 5690).
3. On 24 August 2009, Mr Dedes (advising Military Super) sent an email to Mr Hodgson as to the Second PPB Report, stating that "it is difficulty to build an investment case for any further funds to be committed".
4. On 24 August 2009, there was a meeting between the superannuation fund investors and PPB. A note prepared by Mr Cohen and Mr King (Sovereign, advising Sunsuper) recorded that, at the meeting, a majority of the superannuation fund investors decided that they would not offer a shortfall guarantee to Investec and that there would be no further equity injection to service the Investec Stonington Facility and that PPB would meet with Investec to inform it (Ex M at 5806).
5. Acorn says that matters in relation to the funds only deteriorated further from this point, noting that Mr Thow (of LUCRF) in his oral evidence said of the LURCF Investment Committee that "we'd never had such a distressed asset in our …property portfolio….lose such value, so everyone was quite concerned about the state of the Ashington funds…it had heightened awareness amongst the committee, because we'd never lost this amount of money in our property portfolio, before" (T 1117-1118).

PPB Mandate - 25 August 2009

1. On 25 August 2009, Ms Briggs sent an email to Mr Block, copied to Mr Lord, Mr Anderson and Mr Steel, attaching a version of the 20 August 2009 draft PPB mandate letter with handwritten amendments made by Ms Briggs. The mandate was amended in accordance with those requests and the PPB Mandate Letter, as revised, was signed by PPB and Ashington Capital on 25 August 2009.
2. According to the 25 August 2009 PPB Mandate Letter, PPB was engaged by the "investors in the Funds" to assist Ashington Capital in: holding discussions with financers and valuers, obtaining valuations of the funds' assets to assist in determining their ongoing viability and assisting the fund's management in relation to approval applications; achieving a legally effective restructure of the current trustee and security arrangements; achieving a divestment of certain assets of the funds; and recommending a medium-term strategy for the funds.
3. It recorded that, by signing the letter, Ashington Capital authorised and agreed to: 1. PPB approaching and holding meetings with … communicating with and requesting information from, all financiers to the Funds and all other third parties that are relevant to the ongoing operation and viability of the Funds ("Third Parties"); and 2. Provide PPB with all correspondence between the Trustee (or its advisers) and Third Parties that is reasonably required [for PPB] to undertake their mandate and the details and reasonable notice of, and right to attend and participate in, all meetings and discussions that are held between the Trustee (or its advisers) and Third Parties that is [sic] relevant to the ongoing operation and viability of the Fund.
4. The 25 August 2009 PPB Mandate Letter made clear that PPB would "not be acting for the Trustee in any capacity". The PPB Mandate Letter also included a representation and warranty by Ashington Capital that: it is not relying on any communication (written or oral) from PPB, it being understood that any communications from PPB (written or oral) shall be for the benefit of and to the investors, regardless of whether the Trustee is privy to such communication.

Ashington liquidity issues - 26 August 2009

1. On 26 August 2009, Mr Marsden emailed Mr Steel and Mr Anderson and said "overnight [I]nvestec charged $180k interest to ADF2 account for the Stonington facility. I hadn't taken this into account … with the current default position & negotiations CA had mentioned we wouldn't be paying them until something is finalised. This has put a pretty big hole in our current cash. Can we please discuss this morning". Mr Steel replied to Mr Anderson and Mr Marsden "shit!!". Mr Anderson replied to Mr Steel and Mr Marsden stating, "I didn't plan to pay them and didn't realize that's how they get paid each month … that would have been useful info to share".

Request by Ashington for copy of Second PPB Report - 26 August 2009

1. On 26 August 2009, Mr Steel sent an email to Mr Block, copied to Mr Lord, requesting a copy of the Second PPB Report, on the basis that Ashington was not only the manager but also a unitholder. Mr Block replied that he would send the document provided all unitholders agreed at the 5.30pm meeting.
2. On 26 August 2009, Mr Anderson sent an email to Mr King, copied to Mr Steel, saying that Mr Steel was in the process of completing a paper for investors dealing with the issues discussed that day and asking for Mr King to review it prior to distribution.

Superannuation Fund Investors' meeting - 26 August 2009

1. There was a teleconference on 26 August 2009 between Mr Block and the superannuation fund investors' representatives at which Ashington's request for release of the Second PPB Report was discussed.
2. On 27 August 2009 at 11.09am, Mr Flett sent an email to PPB and the superannuation fund investors referring to the teleconference on 26 August 2009. Mr Flett's email indicates that it was reported at the meeting that Investec asserted to PPB that it might appoint a receiver at any time and had reserved their rights to pursue the unitholders for the uncalled $6 million. Mr Flett noted that this caused the superannuation fund investors to assume that there might be legal proceedings from the superannuation fund investors or financiers (including against Ashington Capital). The email also recorded that the superannuation fund investors decided that they would "not provide any further information to Ashington Capital Limited (without approval of our lawyers) and that all documents going forward from PPB should be privileged and also not provided to [Ashington Capital]" (Ex M at 5833). (Acorn says that this again reflects that the relationship between Ashington and the unitholders was irreparably damaged by this time.)
3. Mr King responded to this email on 27 August 2009, stating that some communication with Ashington was necessary, but that he agreed that they should be "very careful" and recommended that they have a discussion just amongst the superannuation fund investors, the consultants and the superannuation fund investors' lawyer (David Burridge of Norton Gledhill).

Ashington's recommended short-term strategy - 27 August 2009

1. On 27 August 2009 at 5.10pm, Mr Steel sent an email to the superannuation fund investors proposing "an alternative short-term solution for serious consideration by" them as set out in an attached presentation entitled "ADF2 Investor Presentation, Ashington Recommended Short-Term Strategy, 27 August 2009".
2. The presentation questioned the decision by the superannuation fund investors to sell the "Stonington asset to fund the payout the Stonington debt providers", stating that "[t]his decision crystallises a loss of circa $22M of Investors equity never to be recovered!".
3. Ashington's recommendation was to defer all decisions on all assets until 31 October 2009, to continue to procure construction funding for Stonington and for superannuation fund investors to contribute $15 million additional capital to take out the Investec and vendor finance, supported by a principal guarantee from Ashington.
4. At 7.24pm on 27 August 2009, Mr Gavin sent an email to the asset consultants relating to Mr Steel's request for a principal guarantee, saying that: I'm happy to hear more about Ashington's recommendation (sent by Scott Steel this afternoon), but to be frank, the proposed $15m principal guarantee from Ashington to the investors would need to be backed by a personal guarantee from Mark Bouris, with $15m of hard cash put up, which PPB can verify. As we know ACL [Ashington Capital] is not a well capitalised company and I'm afraid that we would just join the very lonq queue of unsecured creditors if we went down this route and things did not go to plan (which seems likely).

Response to Ashington's recommendation - 28 August 2009

1. On 28 August 2009, there was correspondence between the superannuation fund investors and PPB as to the substance of Ashington's proposal to provide a $15 million principal guarantee.
2. At 12.23pm on 28 August 2009, Ms Chan (Sunsuper) emailed the asset consultants as to whether any superannuation fund investors were paying the call due the following week.
3. On 28 August 2009 at 4.15pm, Mr Steel sent an email to the asset consultants with further details of the proposed guarantee; namely, that if Stonington was sold and there was an insufficient net proceeds of sale in order to repay the superfunds the additional $15 million of equity contributed by them, then Ashington would guarantee the shortfall.
4. Mr Flett sent an email to the asset consultants at 4.59pm attaching that email and saying that Mr Steel had called him "off the bat" and wanted their feedback on Ashington's proposals. Mr Flett said that he told Mr Steel that any feedback would be provided through PPB. (Acorn says that this email indicated that it had been made very clear to Ashington that it was to communicate with PPB, not the superannuation fund investors.)
5. In an email on 28 August 2009 at 6.54pm to the superannuation fund investors, Mr Block (of PPB) sent an email to the asset consultants noting that he had just had a lengthy call with Mr Anderson to discuss the proposed guarantee. Mr Block stated that PPB had reviewed the proposal and spoken to Mr Anderson about it and that, while in principle PPB agreed with a form of the proposal, PPB considered that "$15mln will not de-risk the vehicle for any real length of time". Mr Block said that there might be some sense in Ashington's proposal but that he thought $19 million would be needed rather than $15 million; and that the only way the money could be repaid would be by a sale of Stonington and that a shortfall on the sale was likely. Mr Block said that he had asked Mr Anderson to consider how the shortfall on the sale would be funded and that delaying making a decision for three months would push out funding commitments to the following year which may increase funding needs.

Westpac's position - 28 August 2009

1. On 28 August 2009 at 10.43am, Mr Marcus Faulkner of Westpac sent an email to Mr Steel, attaching a letter from Westpac to Ashington Capital as trustee for the Stonington Trust which recorded that Westpac's senior debt of $26 million expired on 26 August 2009. The letter stated that Westpac would retire the commercial bills to an "unpaid bills account" on 31 August 2009, where a rate of interest of 17.1% would apply. Westpac reserved its rights under its Business Finance Agreement dated 7 November 2008. The letter stated that the bank would seek a reduction of the facility to $17.6 million in order to restore a 50% loan-to-value position. The plaintiff points out that Westpac did not there seek to exercise its security held against the Stonington Property. Mr Steel forwarded the Westpac letter to both Mr Anderson and PPB.

Draft letter to Investec - 28 August 2009

1. Meanwhile, on 28 August 2009, Mr Burridge (Norton Gledhill) emailed to Mr Dedes a draft letter to Investec that had the intention of communicating the superannuation fund investors' position before they received a letter of demand. Mr Dedes circulated that draft for review by the asset consultants.

Expanded scope of PPB engagement - 31 August 2009

1. At 1.21pm on 31 August 2009, Mr Lord (of PPB) sent an email to the superannuation fund investors, noting that the scope of PPB's original review had expanded considerably "as a result of several urgent and significant issues uncovered" and now encompassed ADF and ADF2. Mr Lord proposed that PPB's mandate now be split between transaction management for Ashington Capital as trustee for the Stonington Trust to manage the sale process for the Stonington Property and investor advisory services to the superannuation fund investors. (Acorn says that there was a significant sense of urgency for everyone involved in dealing with these issues and the urgency never went away.)

Ashington's strategy - 31 August 2009

1. At 2.39pm on 31 August 2009, Mr Anderson sent an email to Mr Block, copied to Mr Lord and Mr Steel, explaining the drivers behind Ashington's ADF2 investor presentation (presented on 28 August 2009), namely, to maximise the fund's internal rate of return and minimise future equity requirements of the fund. Mr Anderson maintained that the only solution to eliminate short term fund impediments was for superannuation fund investors to contribute $15 million. (Acorn says that the proposal ultimately went nowhere.)

Liquidity issues - 31 August 2009

1. On 31 August 2009, Mr Wyeth (of Ashington) sent an email to Mr Anderson, copied to others at Ashington, attaching a schedule of creditors for Double Bay and Stonington.

St George offer to vary Cross+ Trust facility - 31 August 2009

1. Also, on 31 August 2009, St George wrote to Ashington offering to vary the facility for the Cross+ Trust by reducing the limit and extending the term to 30 September 2009 (see Ex M at 5945).

Letter from PPB to Investec - 31 August 2009

1. On 31 August 2009, PPB (on behalf of the superannuation fund investors) sent a letter to Mr de Rooy of Investec, with respect to the Investec notice of default. The letter stated that PPB had been engaged by investors to review ADF2 (Ex M at 6005ff). PPB said that investors declined to provide further funding to ADF2 and that "their reluctance is born largely by a lack of detailed information regarding the current market value of the assets and the equity attributable to members both at the asset level and also at the fund level".
2. That letter stated that PPB, on behalf of the superannuation fund investors, was working with Ashington Management to ready the Stonington Property for sale. The letter also noted that PPB had discussed with the superannuation fund investors what "additional measures" could be taken to strengthen Investec's position. It was noted that the superannuation fund investors might be in a position to recommend to their respective trustee board that Investec be granted further security over the Project X Hotel Trust. It was further noted that Ashington had approached the superannuation fund investors directly with an alternative proposal (i.e., the proposal that included the input of an additional $15 million in equity backed by a principal guarantee from Ashington).

Ms Garrett commences with Ashington - September 2009

1. From September 2009 to mid-November 2009, Ms Garrett held the role of Head of Funds Management at Ashington Management (on a salary of $350,000) (albeit that she was clearly performing some activities referable to Ashington before that time). From at least July 2009 (see Ex C at Tab 1) (but in some submissions put as being from around April 2009) up to December 2009, Mr Renauf held the role of Head of Acquisitions at Ashington Management (also on a salary of $350,000).
2. Ms Garrett and Mr Renauf here assert that they were independent contractors. The plaintiff contends that they were employees occupying senior positions but says that, in any event, their fiduciary and contractual duties owed to Ashington do not depend upon the classification of their relationship as one of employment (see the discussion of this issue in due course below).

Investec's position - early September 2009

1. On 1 September 2009 at 8.27pm, Mr Block sent an email to the superannuation fund investors reporting on a meeting with Investec in which Investec threatened imminent legal action against Ashington Capital and the superannuation fund investors over non-payment of the capital call; indicating that Investec had received advice that it could sue investors directly for any called but unpaid capital contributions.

HESTA consent to provision of PPB's report to Ashington - 1 September 2009

1. On 1 September 2009, Mr Gavin sent an email to Mr Block, copied to Mr Fowler and Mr Hastings, advising that HESTA consented to PPB's letter to Investec being provided to Ashington, saying that "I think the letter conveys that the situation is more positive than it really is - i.e., it doesn't really convey the loss of confidence from the investors towards the Manager. I understand this is probably important in relation to Investec and trying to buy time" (Ex M at 6060).

Conference call superannuation fund investors - 2 September 2009

1. On 2 September 2009, there was a telephone conference between Sunsuper, HESTA and LUCRF (a file note was prepared by Mr Hartley of Sunsuper of this meeting - Ex M at 6064). The minutes record that the attendees discussed Investec's uncalled capital rights and that "Ashington appears to have made a commitment to Investec that is contrary to a prior agreement with unitholders regarding application of money from calls". On the same day, LUCRF's Investment committee agreed with the IOG and Arcadia's recommendation not to pay capital calls to ADF2.

Letter to Investec from lawyers for superannuation fund investors - 3 September 2009

1. On 3 September 2009, Norton Gledhill (solicitors acting for the superannuation fund investors) sent a without prejudice letter to Mr de Rooy (of Investec) (as this was later treated as an open letter, a copy of the letter was in evidence in the proceeding). In that letter, which addressed the position in relation to the uncalled capital, Mr Burridge advised that the superannuation fund investors considered their equity had been pledged in breach of various agreements (Ex M at 6067). Mr Burridge requested that Investec continue discussions with PPB to achieve a mutually beneficial outcome.
2. On 3 September 2009 at 6.58pm, Mr Block (of PPB) sent an email to the superannuation fund investors, outlining his discussion with Mr de Rooy, following Investec's receipt of the Norton Gledhill letter. It stated that Investec was unsatisfied with the offer and that Mr Block expected Investec would: exercise its power of attorney and make a capital call on behalf of Ashington Capital, as trustee for ADF2; commence legal action by Investec after the 14 day satisfaction period; reserve its rights to appoint a receiver to ADF and ADF2. Further, Mr Block stated that Investec would look to "collapse the trusts" in order to access any equity value in the trusts (Ex M at 6065).
3. On 4 September 2009, Mr Steel emailed Mr Lord saying, "to follow on from Craig's email last Wednesday regarding the terms of your engagement for the disposal of Ashington, I have now had a chance to discuss internally with Craig Minahan and Elizabeth" (Ex M at 6072). (Ms Garrett and Mr Renauf say that it would be inferred that Mr Anderson's knowledge of PPB's engagement was the same as Mr Steel's.)

14th drawdown letter from Investec to unitholders - 7 September 2009

1. On 7 September 2009, Investec made the 14th drawdown for ADF2 on the superannuation fund investors (in the name of Ashington Capital, as trustee of ADF2), exercising the power of attorney granted under the Investec Stonington Facility, giving notice under cl 7.3 of the ADF2 constitution that the 14th drawdown was required to be paid to the Trust Company by 4pm on 22 September 2009. The letters to superannuation fund investors attached a copy of the Investec Power of Attorney granted by Ashington Capital as trustee for ADF2; and specified the particular unitholder's contribution to the drawdown (see, for example, Ex M at 6083ff).

Investec breach notices - 7 September 2009

1. On 7 September 2009, Allens Arthur Robinson (the solicitors acting for Investec) sent a letter to Ashington Capital, as trustee for ADF2, recording alleged breaches by it of the Investec Stonington Facility Agreement dated 25 February 2009. Claims were asserted against each of Ashington Capital, Mr Minahan, Mr Anderson and Mr Bouris.

Investec reference to proposed appointment of receivers - 9 September 2009

1. At 1.25pm on 9 September 2009, an Investec email recorded that it would appoint receivers to Ashington Capital "this afternoon".

HESTA "impaired" investments - 9 September 2009

1. An email from Mr Andrew Major (of HESTA) to Mr Gavin, Mr Fowler, Mr Hastings, and HESTA staff recorded Mr Major's opinion that it was premature to write-down HESTA's investments in ADF2 to zero but that the investments could be recorded as impaired as they were unlikely to recover their capital and not at the manager's valuation.

Request for extension of time by Ashington - 9 September 2009

1. At 5.46pm on 9 September 2009, Mr Anderson sent an email to others at Ashington recording that he had spoken to creditors holding approximately $600,000 of debt and requested more time.

Ashington response to request by PPB for update - 10 September 2009

1. Following a request by Mr Block on 9 September 2009 for an update on Wylde Street, Double Bay and Stonington, Mr Steel emailed Mr Block and Mr Lord, copied to Mr Anderson, on 10 September 2009 at 12.32pm. In relation to Wylde Street, Mr Steel said: that the sale process was running "on the quiet" but that if no formal offers were received by 15 October 2009 they would consider appointing an external agent; that the Investec facility would expire on 31 October 2009 and that he would start discussions with Investec within 7 days advising it of the intention to sell; and that a quote for the valuation of Wylde Street was being finalised.
2. In relation to Stonington, Mr Steel reported that: PPB had been appointed on a non-exclusive basis; that the sale process for Stonington was occurring while they were "currently" also informally pursuing two alternative options for Stonington - either mezzanine debt/preferred equity to take out Investec or temporary mezzanine debt/preferred equity converting to equity to continue with the development; that Ashington had met with Westpac on 8 September 2009 to "lay all cards on the table" and ask Westpac to defer the LVR [Loan Value Ratio] pay down and extend the current facility, and "hopefully" capitalise interest until sale proceeds are received; and that this meeting went well and there was no indication that Westpac would take further action.
3. In relation to Double Bay, Mr Steel said that agents had been appointed to seek out interested parties and there were three options for a sell down strategy. It was said that there was a short list of approximately 15 candidates with 6 signed confidentiality agreements and a due diligence site established "with relevant collateral"; and the deal completion target date was 31 December 2009.
4. Mr Steel stated that there were discussions with Westpac in relation to the "looming 30 September review date and potential LVR pay down", noting Westpac's view that if Ashington to made the LVR pay down it would assist in the potential renewal of the facility at 31 December 2009, but that due to liquidity issues Ashington would formally request to defer the review to 31 October 2009.
5. On 10 September 2009 at 3.05pm, Mr Steel copied the above information in an email to Mr Anderson and others at Ashington (including Mr Renauf) and copied to Ms Garrett.

Meeting of superannuation investors/consultants - 10 September 2009

1. Mr Block sent an email at 5.13pm on 10 September 2009 to asset consultants in relation to Investec, confirming matters said to have been decided at a meeting with the superannuation fund investors that day, namely that: PPB would advise Investec that superannuation fund investors would grant it an exit fee of $1 million in exchange for a standstill agreement to allow an orderly sale of Stonington; that Ashington Capital would be instructed to proceed with the sale of Wylde Street; and that superannuation fund investors were to instruct Mr Burridge of Norton Gledhill to respond to Investec's formal notice of default. (Those action items were set out in an internal HESTA communication of the same date.)

Proposed mandate for Patersons to raise $15 million for Stonington - 11 September 2009

1. By early September 2009, therefore, the position was that the Investec Stonington Facility had expired, and the superannuation fund investors had not agreed to contribute additional equity to repay the Stonington facilities. Ashington decided to engage Patersons to raise mezzanine capital from alternative sources (the Stonington Capital Raising). Ms Garrett, who had previously worked at Patersons (before her employment at Valad) where she had reported directly to Mr Shorrocks, led discussions with Patersons about the Stonington Capital Raising.
2. On 11 September 2009 at 11.27am, Ms Garrett (signing the email as "Wifey" from her Gmail address) emailed to Mr Carolan a draft letter from Patersons to Mr Minahan confirming that Ashington Group would exclusively mandate Patersons to raise $15 million in relation to the Stonington Project. Ms Garrett asked Mr Carolan to "chuck this on letterhead and send it to Craig [Minahan] and Sam [Renauf]".
3. Shortly thereafter, at 11.52am, Mr Carolan sent an email to Mr Renauf and Mr Minahan (copied to Mr Shorrocks and Mr Mark Hinsley, a junior employee of Patersons in the corporate department) attaching a letter in relation to Patersons undertaking a capital raising for the Stonington Project. The attached letter bore Mr Shorrocks' electronic signature and largely replicated the text that had appeared in Ms Garrett's email to Mr Carolan of 11.27am. It is clear, therefore, that Mr Carolan was not the author of the initial draft of what became the Patersons Mandate. In particular, the letter confirmed that Ashington would mandate Patersons exclusively to approach its clients with a view to a transaction involving the "Stonington development". The transaction contemplated in the letter was to raise up to $15 million on terms which included a 20% capitalising coupon and a term of 12 months.
4. Pausing here, Patersons says that this is the first document in evidence which shows Mr Shorrocks becoming aware of the proposed transaction. It is noted that, while Mr Shorrocks had attended a lunch with Ms Garrett and Mr Hinsley on 9 September 2009, he did not recall any deal or "new convertible offering" being discussed at that lunch (T 751).
5. Mr Shorrocks received a further email from Mr Carolan shortly after 11.54am on 11 September 2009 stating that Ashington needed quickly to refinance another mezzanine debt facility with Investec "due to Investec pulling the plug on the sector" and that Mr Carolan would talk to Campbell Smith about it the following week. (Mr Campbell Smith was a "high-net-worth" client of Patersons who resided in Queensland, to whom Mr Carolan later sent a term sheet in respect of the proposed transaction - T 752.)
6. As to Mr Carolan's comment that Investec was "pulling the plug on the sector", Mr Shorrocks' evidence is that he was not familiar with this issue at the time (T 752). Patersons says that the evidence overwhelmingly suggests that it was Ashington's defaults under the Investec Stonington Facility which led to Patersons being retained.

Establishment by Mallesons of Stonington Data Room - 11 September 2009

1. On 11 September 2009 at 11.47am, Ms Briggs sent an email to an information analyst at Mallesons (Mr Iwata), giving instructions to set up a due diligence data room for Stonington on "MatterWeb" (Stonington Data Room), an electronic secure cloud facility. This was done on the instructions of Mr Anderson and after Ms Briggs had spoken to Mr Eliakim of Mallesons about it. Users of Stonington Data Room were required to enter a username and password to enter the database, both of which were supplied (upon request by Ms Briggs) directly by Mallesons. As part of maintaining a secure database, Mallesons kept a record of every user who accessed the Stonington Data Room as well as a record of every user who accessed a document within the Stonington Data Room (Access Logs). Ms Briggs instructed that the contacts provided on the site should be Mr Wyeth and Mr Renauf.

Position in relation to Investec - 11 September 2009

1. At 12.05pm on 11 September 2009, an email communication between Frontier and HESTA records that "Investec has become more vocal about appointing a receiver to [Ashington Capital]".
2. On 11 September 2009 at 12.38pm, Ms Garrett sent an email to Mr Anderson and Mr Minahan, copied to Mr Renauf and Mr Steel, saying that, to take out Investec quickly, they needed to make their offer compelling. Ms Garrett stated that, after discussion with members of Patersons (and Wilsons) and comparison with other convertible and hybrid structures, it was clear that Ashington needed to have a cash component in the coupon. Ms Garrett recommended the following: I recommend that Ashington covers a 10% coupon payable quarterly for the 12 month term of the structure (noting that the likely term will be 3 or so months). There will be a further 10% capitalising coupon. This will be an excellent way to re-engage with investors and demonstrate Ashington's commitment to delivering the best possible return and belief in the project
3. Mr Steel's response (by email to Ms Garrett, Mr Anderson, Mr Minahan and copied to Mr Renauf) included that quarterly interest of 10% "is very good - we won't get any better than that". At 1.31pm on 11 September 2009, Ms Garrett responded, asking whether it was possible for the "head entity to provide a parent guarantee over the coupon" and saying that "we did this as a sign of support at Valad".
4. Mr Steel's response at 2.06pm on 11 September 2009 was that to do so they would need to ask superannuatin fund investors and that superannuation fund investors would be required to commit more equity which was unlikely to occur. Ms Garrett responded at 2.20pm that she agreed and suggested that Ashington itself (not the investors) fund the cash component of the coupon if required (perhaps out of fees), noting that investors would not have a problem with that and that Valad had done that for "troubled projects".
5. On 11 September 2009 at 4.55pm, Mr Anderson sent an email to Mr de Rooy, attaching a letter referring to a conversation between them earlier that afternoon and setting out the steps which were currently being taken by Ashington to resolve the matter with the Investec Stonington Facility promptly. Those included the following. First, that Ashington had entered into a Sales Agency Agreement with PPB, which had in turn appointed Stonebridge Capital to sell Stonington, with the online due diligence site to be available the following Thursday. Second, that Ashington had been undertaking a capital raising for its third opportunity fund which had introduced a number of investors interested in making direct investments into Australian property and Ashington was introducing Stonington to those investors. Third, that Hamton (i.e., a former owner of Stonington), had commenced a due diligence process to re-enter into "some form of ownership" of the Stonington Property. The letter noted Ashington's recruitment of Ms Garrett, and that she was working on a payout of the Investec Stonington Facility via an alternative mezzanine facility and "[u]ndoubtedly she will also introduce a number of other alternative options".
6. On 11 September 2009, Mr Block sent an email to Mr de Rooy of Investec, copied to Mr Lord, referring to a discussion the previous day. The email attached the executed agency agreement appointing PPB in relation to the Stonington sale; set out PPB's current understanding of Westpac's position, noting that Westpac's facility had expired on 25 August 2009 and that Westpac was moving to credit; set out a proposal for a standstill agreement to be executed to allow an orderly sale of Stonington in exchange for a fee of up to $1 million; and proposed strategies to collateralise Investec's position with the equity from Double Bay.

Sunsuper write-down of investment - 11 September 2009

1. On 11 September 2009, Sunsuper, wrote down its $20 million investment in ADF from $13 million to $6.4 million; and its $23.5 million investment (of which a further $1.5 million had not been paid) in ADF2 to $3.125 million (Ex M at 7079ff).

Proposed structure of mezzanine refinance deal - 13 September 2009

1. On Sunday, 13 September 2009, Ms Garrett emailed various people at Ashington, noting that they had "limited time to take out the Stonington mezzanine", that she had already arranged a breakfast meeting with Campbell Smith and that she had lined up a number of other potential investors. Ms Garrett planned a meeting the following day (at noon on 14 September 2009) with Mr Renauf, Mr Steel, Mr Minahan and Mr Anderson to finalise the deal structure so that summary material could be provided to investors.

Stonington Data Room - 15 September 2009

1. On 15 September 2009 at 5.18pm, Mr Iwata sent an email to Ms Briggs providing her with access to the Stonington Data Room.

Investec's response to PPB's proposal - 16 September 2009

1. On 16 September 2009, Mr Block sent an email to the asset consultants noting that, while Investec was yet to respond to PPB's proposal formally, it was under consideration and Investec had advised that the proposal demonstrated a good amount of goodwill.

Request for extension re Double Bay facility - 16 September 2009

1. On 16 September 2009, Ashington Capital as trustee of the Project X Hotel Trust sent a letter to St George and NAB requesting an extension or the removal of the review of the Double Bay facility set to occur on 30 September 2009.

Stonington Data Room - 16 September 2009

1. On 16 September 2009, Mallesons confirmed that documents contained on a CD had been uploaded into MatterWeb.

HESTA update - 16 September 2009

1. On 16 September 2009, Mr Fowler prepared an update to the HESTA Board advising that that it would not be paying the recent Ashington capital call because the "purpose of use [was] not consistent with the side letter" (Ex M at 7909).

Westpac Stonington Facility in default - 17 September 2009

1. On 17 September 2009, Mr Faulkner of Westpac sent an email to Mr Steel, copied to Mr Anderson and Ms Briggs, recording (further to the letter of 28 August 2009) that the Westpac Stonington facility had expired on 28 August 2009; and that "[t]he facility has not been extended and is in default with the rights of the Bank reserved".

Letter from Norton Gledhill - 18 September 2009

1. On 18 September 2009, Norton Gledhill (on behalf of Military Super, HESTA and LUCRF), wrote to Investec disputing its power to make a call for an additional $6 million of capital from investors and reiterating the superannuation fund investors' concern at funds being used in a manner inconsistent with the proposed uses of the funds as agreed between Ashington Capital as trustee for ADF2 and the superannuation fund investors in early 2009. The letter conveyed the reasons why the superannuation fund investors would not pay the call made by Investec under its power of attorney.

14th drawdown notice issued by Ashington Capital - 21 September 2009

1. On 21 September 2009, Ashington Capital as trustee for ADF2 issued a 14th drawdown notice for unitholders' capital at the rate of 3c per unit, requesting the funds by 28 September 2009. The call on unitholders for $3 million was to meet a quarterly interest payment on the Project X Facilities (in relation to Double Bay) due on 1 October 2009, and pay development management fees, current trade creditors at the asset level and provided for future trade creditors. This was the third time the "14th drawdown" had been made, having been made already by Ashington Capital on 18 August 2009 and by Investec on 7 September 2009.
2. On 21 September 2009, at 10.57am, Mr Gavin emailed Mr Block and Mr Lord, requesting a breakdown from Ashington as to how it intended to use the funds for the 14th drawdown.
3. On 21 September 2009, Ms Briggs sent various emails to Mr Block (copying most of them to Mr Anderson and Mr Lord) confirming that the funds from the drawdown notice issued that day would exclusively be used for Double Bay and providing a breakdown.

Legal advice on 14th drawdown - 21 September 2009

1. On 21 September 2009 at 11.03am, Mr Dedes emailed Mr Burridge from Norton Gledhill about the proposed drawdown. By return email that day at 11.48am on 21 September 2009, (copied to Mr Watson of Military Super) Mr Burridge advised that the proposed use of the drawdown was "clearly" not "consistent with Investec's security position and what PPB have been told by Investec" (Ex M at 7218).

PPB proposed superannuation fund investors' meeting - 21 September 2009

1. On 21 September 2009 at 12.07pm, Mr Block sent an email to the asset consultants in relation to a telephone meeting proposed for 23 September to address: media strategy; the 21 September drawdown notice; Investec's response to the PPB offer; and the proposed sale of Wylde Street.

Ashington account overdrawn - 21 September 2009

1. On 21 September 2009, Mr Aaron So (of St George) sent an email to Mr Marsden (of Ashington) noting that Ashington Management's and the Cross Restaurant Pty Ltd's accounts were overdrawn.

Development of the Patersons Mandate - 21 September 2009

1. On 21 September 2009 at 3.57pm, Ms Garrett forwarded to Mr Carolan a draft term sheet for the Stonington Capital Raising. The draft term sheet proposed a six-month term and a cash coupon of 20% per annum. Ms Garrett noted in her email to Mr Carolan that "[w]e need a mandate to cover this (4%, ideally not exclusive as I would like to chase Wessex and others as well) plus a formulated termsheet by noon tomorrow". Ms Garrett stated that the "key message is that this is in effect a "money for jam" investment we have been put into a tight spot by Investec but the project itself is performing well". Ms Garrett said that if it was not performing well then Westpac would not have offered to provide construction finance; and that the best comfort that the short term mezzanine provider gets that their money is safe is that not only is Westpac staying in but that it is "prepared to pony up a shitload of construction finance and they would not be continuing negotiations if they did not think we could complete on getting Asian investor to take on half the project". The email said that Ashington had undertaken to repay the mezzanine facility before the construction finance arrangement was concluded with Westpac; and that "it is a great deal".
2. On 21 September 2009, at 4.09pm, Ms Garrett emailed Mr Carolan a project overview document for the Stonington Project.
3. On the evening of 21 September 2009, there was a "three-way conference call" between Garrett and the "Patersons' team" relating to the proposed mandate.
4. Ms Garrett summarised the nature of this call, and some questions that arose out of that call, in an email to Mr Renauf sent at 9.25pm from her Gmail account (subject: "Stonington queries") (copied to her Ashington email account). Ms Garrett there said that she had just been chatting to the Patersons group, who had made various information requests and had noted that they "think a four-week timeframe is required" for the capital raising. The email: queried why the Investec mezzanine facility had run out if the project was on schedule and doing so well; stated that they needed to set out the use of funds in a term sheet, noting that they did not want to say that the money is required to pay creditors or the existing vendor as this looked terrible; stated that this needed to be discussed with Mr Minahan, Mr Anderson and Mr Steel, and that they "cannot misdeploy funds again"; and stated that the term sheet should probably note repayment of Investec and working capital for the third stage of the project. Ms Garrett stated "let me know if you think we should send this to [Craig Minahan] and [Craig Anderson] (we probably should?)".
5. Mr Renauf's response to the above was that these were fair questions, but some seemed to be "overkill" from a delivery issue and the process moving forward; and that he would commence working through some of the answers.

PPB email in relation to 21 September capital call - 22 September 2009

1. On 22 September 2009, Mr Block emailed the superannuation fund investors and asset consultants with further details regarding the 21 September 2009 capital call. PPB advised that, while there was a commercial case to meet the call, there was also a concern that any funds contributed would be directed to Investec given their its security position.

Proposed mandate re mezzanine finance - 22 September 2009

1. On 22 September 2009 at 11.35am, Mr Shorrocks sent an email to Mr Minahan and Mr Renauf, copied to Ms Watts (of Ashington) and Mr Carolan, attaching a draft mandate. The email stated (Ex M at 7274): I look forward to a final review and execution later today or tomorrow so we can commence with marketing the offer. I will have my team commence drafting a marketing term sheet and provide you with a list of our due diligence requirements. Please contact Martin Carolan and/or Mark Hinsley with any immediate questions on the mandate and/or process to follow. Given the terms discussed we believe we will have sufficient interest to complete the capital raising in the prescribed timetable and look forward to working together on a successful transaction.
2. The draft of the mandate attached to that email identified "Ashington Property Group" as the client (or "Company") and stated that Patersons was "keen to assist the Company to meeting its objectives through a successful capital raising" of $10-15 million "in project funding via a Short-term Mezzanine Finance Facility" where the funds would be "applied to restructure existing debt facilities currently in place for the Stonington development project". The indicative structure of the transaction involved a borrowing of $10-$15 million for a six-month period with a 30% per annum coupon payable at the end of the term.
3. In this version of the draft there were three stated "conditions to the Mandate", namely that: the findings and outcomes of Patersons' own due diligence investigations are satisfactory to Patersons; the "Company" finalises the offer pricing and timing parameters of the Mezzanine Facility to Patersons' satisfaction; and final approval by Patersons' "New Issues Committee".
4. The indicative timetable contained in the draft mandate provided for a week of marketing, a week for due diligence and a further week for financial close. (The plaintiff points out that Mr Shorrocks accepted in cross-examination that this statement reflected his honest opinion at the time that the type of timetable anticipated was achievable - T 753.)
5. On 22 September 2009, at 11.47am (in the context of an email communication between Ms Garrett and Mr Carolan seemingly about difficulties with her joining Ashington), Mr Carolan confirmed that the "[m]andate has been sent to Craig, Sam & Julie" to which Ms Garrett replied at 12.15pm, "[t]hanks very much for the mandate. Hopefully we can at least get that done with me working in the background". (Pausing here, this appears to indicate that Ms Garrett was well aware that such involvement was or could be a breach of her gardening leave obligations to Valad.)
6. At 2.25pm on 22 September 2009, Mr Minahan sent an email to Mr Anderson and Ms Briggs, copied to Mr Renauf, attaching a copy of the 11.35am email and asking Ms Briggs to review it, suggesting that comments from Mr Minahan, Mr Renauf and Mr Anderson be combined and consolidated on the proposed mandate.
7. Meanwhile at 2.05pm, Mr Carolan had sent an email to Ms Watts attaching a draft term sheet and asking her to print and provide a copy to Ms Garrett, saying that it needed some further work. At 4.59pm that day, Mr Carolan sent Ms Garrett a copy of that email.
8. At 6.04pm on 22 September 2009, Ms Briggs sent an email to Mr Anderson with her comments in relation to the draft Patersons Mandate, including that the contracting entity ought to be Ashington Capital as trustee for ADF2: The contracting Ashington entity is wrong. I think that its probably ACL as trustee for ADF2 (as ADF2 currently holds the Investec debt) … I also have concerns about the access to information provision (given how broadly it is stated) and the information provision as it states that Patersons can rely on information provided by Ashington (when in many cases Ashington can't give such reliance to third parties). We would also want a right to terminate this agreement - in the event that some other option presents itself or this property is sold pursuant to the PPB process.
9. In response, Ms Garrett, from her Gmail account emailed Ms Briggs (copied to Mr Minahan, Mr Anderson, herself at Ashington and Mr Renauf) at 6.21pm on 22 September, stating that she would be making a large number of changes to the mandate that night to align it to the Investec proposal and would need Ms Briggs to look at those the following morning. Commenting on the matters raised by Ms Briggs, Ms Garrett said: 1. My fault, they just used a placeholder name as I was not sure of the contracting entity. 2. … 3. Access to information will be tricky - it is generally a big issue for Patersons' clients … 4. Patersons won't agree to a termination clause without cause unless we agree to pay them their fee regardless (which is not a great option for us). However, we won't exercise this mandate unless PPB are removed (i.e. will be a condition subsequent as will Investec approval).
10. The plaintiff says that, in context, this was a reference to PPB pausing the sale process for Stonington to allow the capital raising to proceed, and Investec also allowing time for this to occur, as the plaintiff says is clear from a draft proposal put to Investec the following day.

Investec advise no extensions to Investec facility for Wylde Street - 22 September 2009

1. On 22 September 2009, Investec wrote to Ashington Capital as trustee for the Wylde Street Trust, advising that Investec had no intention to grant any further extensions to the Investec facility dated 25 February 2009 and that the indicative payout as at 31 October 2009 would be $10.844 million (Ex M at 7301).

Advice sought re use of funds from 21 September capital call - 23 September 2009

1. On 23 September 2009, Mr Burridge of Norton Gledhill wrote to Mr Anderson asking how Ashington Capital could ensure that any payments made pursuant to the 21 September 2009 capital call would be used exclusively for the Double Bay Project. Mr Burridge emailed a copy of that letter to the superannuation fund investors and PPB.

Draft proposal to Investec - 23 September 2009

1. On the morning of 23 September 2009, Ms Garrett and Mr Carolan worked together on a draft "Proposal - Stonington Mezzanine Finance Facility", intended to be sent on Ashington letterhead, setting out the terms on which Ashington would seek time from Investec to find a replacement mezzanine funder (Investec Proposal).
2. In particular, at 7.22am on 23 September 2009, Ms Garrett emailed Mr Carolan a draft of the term sheet proposed to be put on "Ashington Letterhead". At 9.21am that day, Ms Garrett sent an email to Mr Renauf, Mr Minahan, Mr Anderson and Ms Briggs, copied to Ms Watts, attaching the updated Investec proposal, and requesting that everyone review it and let her know any comments. Ms Garrett also sent a copy of the proposal to Mr Carolan.
3. The draft proposal was described as: Ashington is seeking investors to provide a short-term mezzanine finance facility to replace the Investec mezzanine facility and provide a small amount of additional capital to the Stonington project ("Replacement Facility): - Ashington has appointed Patersons Securities Limited ("Patersons") as Lead Manager with respect to the Replacement Facility. - Patersons' mandate takes effect on the written approval of Investec with respect to this Proposal.
4. The draft proposal included, under the heading "timetable": Paterson has already undertaken preliminary discussions with a number of its clients and has a positive response to the proposal. Patersons has agreed to a six week completion timetable, with an option to extend by a further four weeks in the event that identified investors require further time to complete due diligence and transaction documentation.
5. Patersons points out that the proposed six-week timetable was at a time when neither Patersons nor Ms Garrett had any real appreciation of the magnitude of the financial and investor problems confronting ADF and ADF2.
6. The document stated that: … Ashington is in discussions with a number of offshore institutional investors with respect to selling down a portion of the Stonington project. Ashington believes that the sell-down process provides it with the best means of preserving the value of equity contributed to the project and that it will deliver a superior price to that which will be achieved should the asset be quickly sold in its entirety by PPB to domestic investors. This sell-down strategy is being managed by individuals recently recruited to the Ashington group who have a strong track record of delivering on similar transactions and who have demonstrated this ability to Patersons and Patersons' clients in the past. A key component of the pitch being made to incoming investors is that Ashington will manage the sell-down process over the coming six months. It should be noted that the sell-down strategy is a condition of the aforementioned mandate with Patersons. Accordingly, it is vital to this proposal that PPB is no longer engaged to sell the asset. Accordingly, Ashington seeks as a condition of this proposal that Investec support Ashington in its efforts to conclude PPB's engagement with respect to selling the Stonington asset. Specifically, Ashington asked that Michael de Rooy participate in discussions in this regard with the equity investors in the Stonington project.
7. Relevantly, the draft proposal stated that the six-week timetable commenced once two conditions precedent had been satisfied, namely "[r]eceipt of Investec's written approval of the Proposal" and "PPB's mandate with respect to the Stonington asset is terminated".

Updates to Patersons Mandate - 23 September 2009

1. From 12.18pm to 1.11pm on 23 September 2009, Mr Carolan sent a succession of emails to Mr Shorrocks, Mr Minahan and Mr Anderson with revised versions of the Patersons Mandate for review and approval.
2. The revisions included the following.
3. First, the client or "Company" was changed from "Ashington Property Group" to "Ashington Capital Limited as trustee for Ashington Development Fund No. 2". This reflects Ms Briggs' feedback on the draft. As noted in correspondence above, Ms Garrett stated that the earlier draft referred to the "Ashington Property Group" as a placeholder because she did not know at that time who the contracting entity was.
4. Second, two additional "conditions to the mandate" were added, namely that Ashington receive written approval from Investec for the Mezzanine Facility to replace their existing debt facility (cl 4(a)) and Ashington "resume full control of the sell-down process underway for the Stonington project", including that the PPB mandate is concluded (cl 4(b)). Mr Shorrocks did not recall having any input into these conditions precedent but said that it was quite possible that Mr Carolan added these two conditions to the mandate at that time (T 754). Mr Shorrocks considered the two conditions were to be satisfied once Patersons had successfully raised capital under the mandate (see T 754-760). Patersons says that these additions make sense in the context of the "Investec Proposal" which Ms Garrett had circulated that morning (see above).
5. A further iteration of the mandate was emailed to Mr Minahan and Mr Anderson (copied to Mr Shorrocks, Ms Watts and Mr Renauf) at 12.54pm on 23 September 2009 and then the "absolute final version" was emailed to those persons at 1.11pm. Mr Minahan replied to that email at 1.15pm, stating "will execute and send back".
6. Mr Anderson's evidence is that on 23 September 2009 he signed a version of the Patersons Mandate received at 1.17pm (seemingly, the last of the three versions sent that day) but cannot locate a signed copy of it. While there is no final copy of the signed Patersons Mandate in evidence, there is no dispute between the plaintiff and Patersons that the version of the Patersons Mandate attached to Mr Carolan's email of 1.11pm was the version that Mr Anderson gave evidence he signed on or about 23 September 2009. Ms Briggs sent Mr Anderson a text message at 2.29pm that day stating "[j]ust delivered the pattersons [sic] mandate" and Mr Carolan sent an email to Mr Minahan at 3.03pm, which stated "signed acceptance received".
7. After entry into the Patersons Mandate, Mr Anderson says he had only infrequent communications with Mr Shorrocks in relation to the fundraising activities being undertaken by Patersons, otherwise leaving it to Ms Garrett to engage with Patersons and to keep him updated (see his 19 December 2017 affidavit at [252]-[253]).

Signed Patersons Mandate - 23 September 2009

1. Under the mandate entered into on 23 September 2009 by Ashington Capital and Patersons (the Patersons Mandate), Patersons was engaged as "Lead Manager" to raise $11-15 million in mezzanine finance to restructure the existing debt facilities for the Stonington Property.
2. In addition to Mr Shorrocks, the Patersons personnel involved in the Stonington Capital Raising were Mr Carolan (Associate Director - Corporate Finance) and Mr Doherty (Director - Institutional Dealing). Mr Carolan was the member of Patersons' corporate finance team with conduct of the transaction. Mr Carolan reported directly to Mr Shorrocks. He was then married to Ms Garrett. Mr Doherty was based in Melbourne and had relationships with Patersons' institutional clients, who were potential investors for capital raisings undertaken by the corporate finance team.
3. Clause 1 of the Patersons Mandate provided that: We [Patersons] refer to our recent discussions regarding [Ashington Capital as trustee for ADF2's] plans to raise ~$11-15 million in project funding via a Short-term Mezzanine Finance Facility ("Mezzanine Facility"). The funds raised will be applied to restructure existing debt facilities currently in place for the Stonington development project ("Project").
4. Clauses 2.1 and 2.2 set out an indicative structure and timetable proposed for the Mezzanine Facility.
5. Clause 3 (Good Faith Term) provided that: Patersons will act as Lead Manager on a best endeavours basis to the Mezzanine Facility subject to the satisfaction of the conditions in section 4 and on the terms detailed in this letter. Patersons has the relevant experience and expertise to enable it to perform the services and carry out the functions contemplated by this Mandate and will at all times act in good faith and in a professional and timely manner. The performance of our services to the best of our abilities will depend on the Company's [i.e., Ashington Capital's] timely co-operation and instructions.
6. Clause 3.1 provided that in its role as Lead Manager, "Patersons' tasks and responsibilities will be to provide the [Ashington Capital] with all necessary assistance in arranging the Mezzanine Facility as is customary and appropriate in capital raisings of this nature". The clause then went on to set out what Patersons would do, as required or as necessary.
7. Clause 3.1(b) provided for Patersons to familiarise itself to the extent deemed appropriate and necessary with the Ashington Capital's business, operations, properties, financial condition and prospects, it being understood that Patersons should, during the course of such familiarisation, "rely entirely on publicly available information and any other information supplied by [Ashington Capital] and its advisers without independent investigation or verification".
8. Clause 3.1(e) provided that Patersons had the exclusive and unfettered right (but not with any obligation) to offer any and all of the Mezzanine Facility to any investor at its sole and absolute discretion/direction, save that Patersons would only seek commitments from and make offers to investors whom it reasonably believed were institutional or sophisticated investors. (The plaintiff says that this provision for absolute discretion made Ashington Capital vulnerable to and dependent upon Patersons in respect of the Stonington Capital Raising).
9. Clause 3.1(f) provided for Patersons generally to manage the Mezzanine Facility, allocations and facilitate settlement.
10. Clause 4 set out the "conditions to the mandate" and provided that Patersons' participation and assistance as Lead Manager for the Mezzanine Facility was subject to certain conditions and that all of those conditions had to be satisfied, in Patersons' sole and absolute opinion (or subsequent waiver by Patersons), before Patersons proceeded on the terms outlined in the Patersons Mandate (Conditions Precedent). Those conditions included those which were canvassed in the "Investec Proposal" document referred to above, namely: Ashington Capital as trustee of ADF2 receiving written approval from Investec for the Mezzanine Facility to replace the Investec facility; and Ashington Capital as trustee of ADF2 resuming full control of the sell-down process underway in respect of the assets the subject of the Stonington Trust including by concluding the PPB Mandate.
11. Clause 5 provided for Patersons' fees and was to the effect that, other than reimbursement for out-of-pocket expenses directly related to the Patersons Mandate, Patersons' fees were to be calculated as a percentage of the gross amount raised from all sources for the Mezzanine Facility.
12. Clause 6.4 dealt with confidentiality and provided (Patersons Confidentiality Term): Neither Patersons, the Company or any of their Related Bodies Corporate will make any public announcement or disclosure to any person in relation to the Offer or this Mandate or information of which they have become aware in connection with this Mandate unless it first consults with and obtains the agreement in writing of the other party, which agreement will not be unreasonably withheld, save that each party may disclose to the extent: (a) that the same is required by law…; (b) required to make disclosures to the directors, secretary, professional advisers and bankers of that party and its Related Bodies Corporate so long as the party uses all reasonable endeavours to ensure that the matters disclosed are kept confidential; and (c) required to make discloses to potential investors. This obligation shall cease after all announcements in relation to the Offers have been made.
13. Clause 6.5 (which the plaintiff says made Ashington Capital vulnerable to the misuse of its information by Patersons) concerned access to information (Patersons Access to Information Term): The Company shall allow Patersons and its employees and advisers, full and free access to the premises, books and records of the Company, at all reasonable times, to enable them to obtain any information as to the business, assets and liabilities, financial position, profits and losses and prospects of the Company and other matters which Patersons reasonably requires from time to time in relation to the proposed Offer, due diligence and/or any incidental matter. The Company must also provide any information, assistance and facilities which Patersons reasonably requires for these purposes. Patersons will also be granted similar access to any of the Company's due diligence records and have the benefit of, and can rely upon, that process and findings, as necessary, for its role in the Offers and otherwise as outlined in this Mandate. Access to such due diligence information and records are to be made available to Patersons for a period of seven years after the date of signing this mandate unless terminated by either party.
14. Clause 7.2 dealt with Conflicts of Interest and provided (the plaintiff says consistently with the fiduciary nature of Patersons' obligations): As at the date of this Mandate, we are not aware of any conflicts of interest which would impact our ability to fulfil the role outlined in this Mandate. Patersons as principal, its directors and staff may hold securities in the Company from time to time - such positions would not be considered material.
15. Clause 7.3 (which dealt with termination) provided, inter alia: Patersons may terminate this Mandate at any time prior to the financial close of the Mezzanine Facility, if all of the conditions to the Mandate set out in section 4 above have not been, or will not in Patersons' sole and absolute opinion be, satisfied, or waived by Patersons, prior to the date of the issue being executed (i.e. at the commencement of the trading half or upon the commencement of formal offers being made to potential investors) or such later date agreed by Paterson in writing…
16. Clause 9 relevantly provided that the appointment of Patersons as Lead Manager would take effect upon receipt of the signed "Acceptance of Mandate" which was attached to the Patersons Mandate.
17. Shortly after entry into the Patersons Mandate, Patersons began approaching potential investors and distributing a marketing term sheet setting out the key terms of the proposed Stonington Capital Raising (see below). Mr Anderson's evidence is that he was provided with feedback that investor response to the proposal was strong.

Valuation of Wylde Street - 23 September 2009

1. On 23 September 2009, Colliers issued a valuation of Wylde Street with an "as is" market value of the land of $19 million exclusive of GST and an "as if complete" market value of $61.27 million exclusive of GST (Ex M at 7378ff).

Communications with Investec - 23 September 2009

1. During the course of the afternoon of 23 September 2009, there were communications between Mr Anderson and Mr de Rooy as to the proposal to pay out the Investec Stonington Facility. Mr de Rooy's response was that, until Mr Anderson was able to satisfy him that Westpac was agreeable to the Stonington Property being taken off the market, Mr de Rooy would not be able to discuss the proposal with "Credit". Those email communications were forwarded to Ms Garrett later that afternoon. (The plaintiff says that at around this time it appears that Investec was developing its own forbearance proposal but that there is no evidence that this was ever provided to Ashington.)

Modifications to Patersons Mandate and Investec Proposal - 24 September 2009

1. On 24 September 2009, at 6.11am, Ms Garrett sent an email to Mr Renauf saying that Mr de Rooy wanted a meeting that day "to make modifications to PSL mandate and proposal". (The plaintiff refers to email exchanges on 24 September 2009 between Ms Garrett and Mr Renauf and between Ms Garrett, Mr Renauf and Mr Steel, suggesting that Investec had expressed a potential difficulty with putting a pause on the sale process due to concerns about Westpac's position as senior lender but that by 27 September 2009 Ms Garrett had allayed those concerns and Mr de Rooy had expressed a willingness to be involved in meetings with superannuation fund investors.)

Stonington Capital Raising - 24 September 2009

1. On 24 September 2009 at 9.47 am, Mr Carolan sent an email to Ms Garrett at her Gmail address attaching a term sheet to be sent to Patersons clients for the Stonington Capital Raising (Patersons Stonington Term Sheet).
2. The key terms identified on that term sheet were as follows: Amount: Minimum of $11 million (and reserves the right to accept up to $15 million). Minimum investment of $2 million. Coupon: 30% per coupon payable at the end of the term. Term: 6 months from the date of first issue 6 months (Note: Repayment is targeted for early January, however, in the event of early repayment Ashington will pay the full six month coupon amount). Security: Second ranking security behind A$23 million senior debt facility provided by Westpac. (Terms will be made availability in the data room). Repayment Waterfall: Senior Land: Westpac $23 million Proposed Mezzanine: Incoming investors $11 million Equity Holders: 4 Australian Super Funds $22 million Undertakings: 1. Ashington undertakes not to secure any further finance, including but not limited to the construction finance, until such time as the mezzanine finance facility has been repaid in full. 2. Should there be a cash component payable to the coupon terms Ashington undertakes to provide a parent guarantee over the coupon being provided under the Mezzanine Facility. … Use of funds: Min Max Repay Investec Facility: $11.0M $11.0M Stage 3 Working Capital: - $4.0M Total: $11.0M $15.0M Indicative Timetable 2009 Investec Approval for Replacement Mezzanine Facility Friday 25 September Marketing 28 September - 2 October Investor Due Diligence 5-16 October Loan Documentation & Financial 23 October Key items made available in the data room ● Independent Valuation Report - September 2009 ● 2nd Ranking Security terms and conditions ● Stonington Project Overview ● Melbourne Property Review ● Ashington Property Group - company overview … Contact Details Martin Carolan - Patersons Securities Limited … Ray Shorrocks - Patersons Securities Limited
3. The key features were thus: a minimum amount of $11 million with the right to accept up to $15 million, with a minimum $2 million investment; a six-month term; a 30% per annum coupon payable at the end of the term; a repayment waterfall involving $23 million to Westpac as senior lender, $11 million to the proposed incoming mezzanine investors, and $22 million in equity; and an expected sale price of $55 million if the sell-down process was unsuccessful, but with a conservative independent valuation of $43 million having been obtained (at which price, the plaintiff says that the senior and mezzanine debt providers would not suffer any loss).
4. On 24 September 2009 at 12.46am, Mr Carolan emailed the Patersons Stonington Term Sheet to Mr Doherty and Mr Trevor Pike (both Directors of Institutional Dealing at Patersons) with a view to them providing it to potential investors within there networks, noting there location in Melbourne where the Stonington Project was based. After summarising the terms, Mr Carolan stated, "in worst case situation you get your cash and coupon protected with only the existing equity holders losing their cash". Mr Carolan requested that they not commence until "we give the ok". The email included: BTW - fee to PSL is 4%... so your cut is the normal third which could be a nice ticket. Call me if you have any thoughts/interest. We have two parties taking a look and there is another party being introduced by Ashington. Ideally one group is best, but happy to take 3 lots of $5m to get the max.
5. In furtherance of the Patersons Mandate, the Patersons Stonington Term Sheet was thereafter distributed by each of Mr Carolan, Mr Doherty and Mr Shorrocks to several potential high-net-worth investors over the period 24 September 2009 to around 2 October 2009 to gauge their interest in making an investment in the proposed mezzanine facility. So, for example, Mr Carolan sent an email to a potential investor (Mr Campbell Smith) attaching a copy of the Patersons Stonington Term Sheet, saying that the offer was very attractive and that, with a fire sale value of $43 million, the cash and coupon of the investor was protected in a wind up situation.

Process re Wylde Street sale - 24 September 2009

1. On 24 September 2009 at 2.40pm Mr Block sent an email to Mr Anderson with a copy to Mr Lord seeking information in relation to Wylde Street and Double Bay, and proposing "measurable milestones" for the sale of Wylde Street.

Issues re 21 September 2009 capital call - 25 September 2009

1. On 25 September 2009 at 10.37am, Mr Anderson sent an email to Mr Lord and Mr Block (with a copy to various asset consultants) addressing issues raised by PPB in relation to the current $3 million draw for the Double Bay Project. Mr Anderson stated that the funds could be directed to the Double Bay SPV (special purpose vehicle) bank account to ensure the proceeds are not delivered to Investec and that while Investec could be entitled to the funds if they were paint into the ADF2 bank account, without Investec having taken further steps to control the bank account, the money would only be the subject of a floating charge. As to the "true equity position" of Double Bay, Mr Anderson said that could only be confirmed in the coming two to eight-week period, as Ashington awaited the development planning approval and the completion of the Colliers valuation.

PPB request advice as to Investec fixed charge and Garrett made point of contact - 25 September 2009

1. At 10.45 am on 25 September 2009, Mr Block sent an email to Mr Anderson, copied to Mr Lord and asset consultants, requesting a copy of any legal advice received by Ashington Capital regarding the Investec fixed charge.
2. On 25 September 2009 at 2.20pm, Ms Briggs sent an email to Mr Block copied to Mr Lord, Mr Anderson and Mr Minahan (subject "various matters/milestones") in relation to milestones, the sale of Wylde Street and the appointment of Colliers to value both Double Bay and Wylde Street. Mr Minahan forwarded Ms Briggs' email at 2.42pm to Mr Anderson, Ms Briggs, Ms Garrett, Mr Renauf and Mr Steel, saying that "this should have been covered off this morning with Sam and Nicki" and that Ms Garrett was the "point of contact going forward" and that "ALL investor/PPB communication is to be vetted by her and approved by her. Sam Renauf must be copied in on all correspondence". (The plaintiff says that putting Ms Garrett and Mr Renauf in charge of communications with PPB and the superannuation fund investors was consistent with the strategy whereby superannuation fund investors had been advised in July 2009 of their appointment as part of a new compliance and communication regime.)
3. Ms Briggs acknowledged this instruction in an email sent to Ms Garrett (at her Gmail address) on 25 September 2009 at 3.23pm in which she stated "CA [Mr Anderson] has told me that you are the point of contact for all PPB/investor correspondence" and that, therefore, she would not respond to PPB's request for a copy of Mallesons' advice as to the Investec fixed charge until they had discussed it.
4. In cross-examination, Mr Anderson confirmed that he had given this instruction as (T 524): … we saw PPB and investors as one [and] the same thing, and because we were particularly pushing the point to investors that Garrett was now head of funds management, we needed to be methodical in dealing through her to investors.

Review of refusal of development application re Double Bay - 25 September 2009

1. The NSW Planning Assessment Commission completed a review dated 25 September 2009, undertaken at the request of the Minister for Planning, which concluded that the Department of Planning's recommendation to refuse development approval for Double Bay was reasonable. It is unclear who was given access to this review on that date.

Draw request re Double Bay - 26 September 2009

1. On Saturday, 26 September 2009, at 11.44am, Mr Steel sent an email to Mr Anderson copied to Mr Minahan and to Ms Garrett and Mr Renauf, referring to a discussion about the draw request and the difficulties arising from the crystallisation of Investec's fixed and floating charge.
2. Meanwhile, at 1.44pm, Mr Steel sent an email to Ms Garrett, stating: As you and Sam are quickly beginning to see, there are many skeletons that currently exist within Ashington. I've been waiting for an appropriate time to have a discussion with you and Sam with respect to an alternative strategy going forward.

Emails Ms Garrett/ Mr de Rooy - 27 September 2009

1. On Sunday 27 September 2009 at 5.09pm, Ms Garrett, from her Gmail account, sent an email to Mr de Rooy, copied to Mr Renauf, referring to a brief discussion on the Friday and seeking to confirm with him that: Patersons had agreed to amend their mandate so that existing equity investors (not Investec) must agree to a 14 day stand-still of the PPB Mandate; and that the Investec Proposal had been amended so that existing equity investors (not Investec) must agree to conclude the PPB Mandate as to the sale of the Stonington Project when the replacement facility was in place. Ms Garrett said that she was meeting with potential investors next week and that there had been a positive preliminary response. Mr de Rooy responded to that email and said he awaited Ms Garrett's advice on whether she required his involvement in any investor meetings. Ms Garrett later responded to this on 29 September 2009, asking Mr de Rooy to be available, if possible, for a phone call during the investor meetings that had been arranged.

Draft proposal for investors re Stonington Capital Raising - 28 September 2009

1. On 28 September 2009, Ms Garrett prepared a draft proposal document to be sent to the superannuation fund investors. The plaintiff says that this document emphasised the importance placed on Ms Garrett and Mr Renauf in seeking to secure a successful outcome for the Stonington Capital Raising.
2. The draft proposal document (Ex M at 7631ff; see a further version of this proposal in Ex M at 7511ff) included statements that: (i) the proposal "has been prepared by and will be managed by individuals recently recruited to Ashington, Nicki Garrett and Sam Renauf"; (ii) "Nicki/Sam have discussed the Stonington Proposal with Investec (meetings with Michael de Rooy) and Michael has advised that he is supportive of the Proposal as it provides Investec with a 'quick and clean' means of repayment"; and (iii) "Patersons has already undertaken preliminary discussions with a number of its clients and has a positive response to the Replacement Facility. Importantly, Patersons is primarily targeting individuals with whom Nicki/Sam have a prior relationship".
3. The draft proposal noted that Patersons had agreed a six-week completion timetable but expected to implement a replacement facility ahead of schedule given "the positive discussions already undertaken with prospective investors and the fact that the majority of those being targeted have a prior relationship with Nicki/Sam".
4. The proposal stated (and the plaintiff emphasises this), that "[a] component of the pitch being made to the New Mezzanine Investors is that Nicki/Sam will manage the Stonington sell-down process over the coming six months and that this underpins the expected repayment of the Replacement Facility".

Formal refusal of Double Bay development application - 28 September 2009

1. On 28 September 2009, the Minister for Planning formally refused the development application in respect of the Double Bay Property (Project X) (Ex M at 7656; Ex M at 7847ff). Ashington began considering its options in response, including an appeal of the decision, a "fall back option" of seeking development consent to convert the existing building into strata apartments, and re-opening the hotel in the existing building. Acorn points out that this was obviously seen as bad news by the unitholders. Mr Tieu sent an email on 30 September 2009 at 5.32pm to Mr McCusker and others at LUCRF saying, "[m]ore bad news for ADF2". Mr Anderson described the aftermath of it as "last week was the most disappointing in our nine-year history" in an email on 8 October 2009 at 6.33pm to all Ashington staff.
2. Mr Steel's reaction to the rejection of the Double Bay proposal (recorded in an email he sent to his wife on 29 September 2009 at 3.37pm) was that this had a serious impact on Ashington.

Direction that Ms Garrett generate Investor correspondence - 28 September 2009

1. On 28 September 2009 at 8.44am, Mr Anderson sent an email to Mr Minahan, Ms Briggs, Ms Garrett and Mr Renauf confirming that "all correspondence to investors and related parties will be generated by [Garrett] only".

Communications with superannuation fund investors - 28 September 2009

1. Meanwhile, on 28 September 2009, Ms Garrett sent an email to Ms Chan (Sunsuper) and Mr Flett (Arcadia, adviser to LUCRF), copied to Mr Renauf, confirming a meeting on 29 September 2009 at 4.30pm at Ashington's office and noting that "we are briefing PPB in advance of this meeting. I have also had several discussions with Michael de Rooy with regard to our proposal and he is supportive as it provides Investec with the quickest and cleanest means of repayment".

Ms Garrett organises meetings with investors - 29 September 2009

1. On 29 September 2009, Ms Garrett from her Gmail account sent an email to Mr Renauf, copied to her office account, with the subject "Melbourne meetings - to discuss with Sam". The email contained a "to do" list that noted that she had arranged meetings with HESTA and Frontier (advisors to HESTA) for 2pm, and needed to arrange times with LUCRF and Mr Ray King (Sovereign Investment Research, advisors to Sunsuper), who would ideally join or dial in to the 2pm meeting.
2. On 29 September 2009, at around 12.30pm, Ms Garrett emailed Mr David McCusker of LUCRF stating "[a]s per my voicemail, I have recently joined Ashington to head up their funds management division", and sought to arrange a meeting with him in Melbourne.

Emails Ms Garrett/Mr de Rooy - 29 September 2009

1. On 29 September 2009, at 6.55am, Ms Garrett emailed Mr de Rooy (copying Mr Renauf) noting that Ms Garrett and Mr Renauf would meet with the bulk of the Sydney-based investors or asset consultants that day at 4.30pm, and with the Melbourne-based investors the following day at 2pm. Ms Garrett noted that she had been unable to contact Mr Peter Dedes, but that she was confident that he would support the proposal. Ms Garrett also noted that she and Mr Renauf had had two positive meetings with Patersons' clients the previous day and remained hopeful that they would have both parties signed up shortly. (This is the first of the emails to which the plaintiff points as evidencing the meetings that the plaintiff says were the genesis of the Garrett plan.)

Updated Patersons Mandate - 29 September 2009

1. Ms Garrett sent Mr Carolan an updated version of the Patersons Mandate at 12.45pm on 29 September 2009 with changes in mark-up, saying "I am trying to be sensitive to Equity Investors who are a pain in the ass and I need to get them over the line".
2. At 3.47pm, Mr Carolan responded attaching an updated Patersons Mandate (Updated Patersons Mandate). The Updated Patersons Mandate included, as a condition to the mandate, further condition (c) to section four which stated that "[i]f required by incoming investors, Nicola Garrett and Sam Renauf are named as key persons with respect to the Stonington project". (The plaintiff says that this communication to Mr Carolan is a reflection of Ms Garrett's understanding that it might be critical to attracting new investors at this point in time, and obtaining existing investors' support for the capital raising, that Patersons be able to present Ms Garrett and Mr Renauf as the people at Ashington responsible for running the Stonington Project.)
3. Patersons notes that Mr Shorrocks was not shown the Updated Patersons Mandate and did not provide his authority for any change to the Patersons Mandate. (Patersons also points out that the plaintiff has now abandoned all allegations specifically in respect of the Updated Patersons Mandate.)

Meetings with superannuation fund investors - 29 to 30 September 2009

1. It appears that in the afternoon of 29 September 2009, Ms Garrett and Mr Renauf met with superannuation fund investors in Sydney and put forward the proposal of securing new mezzanine finance for Stonington.
2. The following morning (30 September 2009), Ms Garrett met with PPB and one or more of the superannuation fund investors. Patersons notes that there is no evidence of what was discussed at this meeting but says that it may be inferred (from the transcript of Ms Garrett's liquidator's examination (Ex A), as well as the notes of one of the existing investors (Ex M at 7932-7933)), that the superannuation fund investors communicated to Ms Garrett and PPB that they were open to exploring all options with PPB, including removing Ashington Capital and Ashington Management as trustee and development manager respectively from ADF and ADF2 at this meeting.
3. A document titled "Ashington insolvency update and write-down strategy" annexed to the LUCRF property portfolio review for the quarter ended 30 June 2009 annexed a note by Mr McCusker and/or Mr Tieu of LUCRF (the accuracy of which Mr McCusker said he had no reason to doubt - T 1063) that made reference to the 29 September 2009 meeting. That note records, after noting the rejection of planning approval for Double Bay, that: Investec have still not taken any action (aside from exercising their power of attorney to issue a call directly to the investors) with regards to the non-repayment of their $10m debt facility on the Stonington project (matured on 25/08/2009). The investors' offer to Investec of $1m of realised equity in Double Bay in return for Investec holding off action to allow Double Bay to receiving [sic] planning approval was viewed positively by Investec (but not formally accepted), however given the recent rejection of the Double Bay plans, the risk of Investec action is again a major threat. Two new Ashington recruits, Nikki Garrett & Sam Renauf both formerly of Valad and both with experience in managing distressed properties, met with investors in Sydney on Tues 29/09/2009 and in Melbourne on Wed 30/09/2009 to present a proposal to raise $15m of mezzanine finance for the Stonington project that would allow repayment of the $10m Investec loan (plus penalty interest), the $2.6m vendor finance (plus penalty interest), circa $1m to unsecured creditors, and other costs. Nikki & Sam alluded to their successful track record and their strong relationship with high net-worth investors. They are confident that they will be able to deliver and execute their strategy within a four month timeframe and that their strategy will achieve recovery of all capital contributed by the original equity investors (which the original equity investors highly doubt). They also advise that their strategy has the support of Investec. Nikki & Sam have proposed a 14-day standstill on PPB's mandate of selling Stonington on behalf of investors, to allow Nikki & Sam to effectively promote their mezzanine finance facility to their high net-worth investors and then report back to the equity investors. The equity investors (including LUCRF) have given their approval to this 14-day standstill as it does not harm investor interests and can only lead to a more favourable outcome.
4. The other contemporaneous evidence of what occurred at the meetings with superannuation investors on or around 29 and 30 September 2009 is a handwritten note by Mr Hastings of HESTA that was produced in answer to a subpoena. While undated, it appears from its contents (including its reference to a meeting with Ms Garrett and Mr Renauf, the rejection of Double Bay, and its consistency with the typed report above) that it relates to the meeting held on 30 September 2009. It relevantly states (Ex M at 7621-7622): Ashington Nicki Garrett and Sam Renauf Nicki knows Michael de Rooy from Investec New facility of $15m enables the sell down of the asset as well as trade creditors, payment of interest on Westpac facility Expect a valuation of $43m on Stonington. Have discussed this with PPB. New mez investors - [likely] two for $7.5 or 3 for $5m each Second ranking security confined to Stonington project. Sell down of Stonington wouldn't result in a profit outcome but rather preserve equity. Six month window Mez debt 30% capitalising coupon, six-month facility with a cleaned up security arrangement Moving away from a forced sale into a managed selldown … Double Bay DA not approved… Stonington $23m land facility plus $13m mezz vs a mid $30's valuation. Ashington valuation is on a DCF basis Rather than a standstill agreement with Investec, more likely to get a letter of comfort out of them Investec are aggressively targeting Hamton as a customer and may be willing to stay in for short/medium term should Hamton become the manager of the project To remove the trustee, the unsecured creditors would need to be removed Facilities have expired/coming due so this makes a change of management cleaner PPB believe they are about $1m short on the mez proposal in terms of being able to extinguish liabilities Agree to proposal on basis Investec enter into a letter of comfort arrangement
5. The plaintiff says that the reference to Hamton becoming the manager of the Stonington Project and the associated comment about the change of manager have not been explained by the superannuation fund witnesses, nor by any of the other parties to those meetings. The plaintiff says that it is impossible, from the limited documentary evidence, to understand to what it refers save that it appears that at some stage Hamton may have been willing to resume the property and the project on terms that are not disclosed, but which would have involved the superannuation funds retaining 50% of the project. It is noted that that course does not seem to have been advanced.

Patersons Stonington Term Sheet - 30 September 2009

1. Meanwhile, on 30 September 2009 at 7.48am, Mr Carolan sent an email to Mr Pike and Mr Doherty, attaching the 24 September 2009 Patersons Stonington Term Sheet and stating (Ex M at 7699): See attached for the term sheet on the Mezz note facility for Ashington Property Group. While this appears to be 'too good to be true' this is a solid project with an opportunity representing a low risk, high return financing arrangement for the prospective investor. Please review and give me a call to discuss. I can have someone available for you to meet with from Ashington in Melbourne tomorrow. BTW - I have not gone wide with this… I have two interested HNW [high-net-worth] parties and I have only sent it to you both given the project should be known to the Melbourne establishment. My understanding is that Thorney has plenty of cash in their property fund and Tim Hannan has expressed an interest. If there is no interest from your insto guys I will chat with the retail boys down there. Fee payable will be 1.33% - and the whole thing is up for grabs if you have someone for it.
2. "Thorney" was a reference to one of Mr Doherty's institutional clients. Mr Tim Hannon was a fund manager at Goldman Sachs, who had recently established a boutique funds management firm called Derwent Capital. He was a client of Mr Doherty and had previously invested through Mr Carolan and Ms Garrett (when she was employed by Patersons).
3. Mr Carolan sent a private email to Ms Garrett at 9.27am, reporting feedback from Mr Pike that the rate looked "too good to be true" and that "there must be some risk in it", requesting that Ms Garret meet with them in Melbourne the next day.

Email to Mr Routley - 30 September 2009

1. On 30 September 2009 at 10.44am, Mr Doherty sent an email to Mr Routley (then Head of Private Markets at Acorn, a boutique investment manager) copied to Paul Palumbo, with the heading "Investment Opportunity - Mezzanine Finance Facility", attaching the 24 September 2009 Patersons Stonington Term Sheet and stating, "[w]hile this appears to be 'too good to be true', this is a solid project with an opportunity representing a low risk, high return financing arrangement for the prospective investor".
2. Mr Routley replied to that email on the same day at 11.01am advising that he had "had a brief look. Unfortunately we can't do pure debt, needs to have some equity convertibility".
3. On 30 September 2009 at 11.22am, Mr Doherty then forwarded this exchange with Mr Routley by email to Mr Carolan, saying: Marty - Thorney having a look & coming back to me. Acorn can't (see below) …
4. In respect of Mr Doherty's reference to "Thorney having a look", Mr Doherty's affidavit affirmed 10 September 2018 at [24] records that he cannot recall how he first made contact with Thorney in relation to this transaction, yet based on his general practice, he expected he made contact by telephone.
5. Mr Carolan replied to Mr Doherty's email at 11.24am on 30 September 2009, asking whether Mr Routley would "look at converting equity into an unlisted property fund? If so we can look at recutting the deal as a fall back option". (Mr Doherty understood Mr Carolan's email to be a reference to whether Acorn might be able to invest if there was a form of conversion of debt into equity - Mr Doherty's 10 September 2018 affidavit at [28].)
6. At 11.34am, Mr Doherty sent an email to Mr Routley asking him, "[i]f this converted into equity into an unlisted property fund would that be of interest?", to which Mr Routley replied, "[i]t would certainly allow us to do the deal but we would still be a low probability to complete" noting a preference to invest in the manager. Mr Doherty forwarded this email to Mr Carolan at 11.48am on 30 September 2009 who in turn forwarded it to Ms Garrett at 11.51am on 30 September 2009. In his email to Ms Garrett, Mr Carolan stated: Have a look at the email below… Acorn would be a low probability to invest into the deal:… however they might look at a direct investment into the manager. Let me know your thoughts… also waiting on Thorney.
7. Later that day, Mr Doherty and Mr Carolan exchanged emails confirming a meeting with Thorney at 10.30am on Friday, 2 October 2009.
8. Mr Anderson, Mr Steel, Mr Renauf and Ms Briggs were updated of this proposed meeting by Ms Garrett at 5.03pm on Wednesday 30 September 2009. In that email Ms Garrett said: We have locked three excellent mezz meetings: Thorney, 10.30 Friday [being a reference to Friday, 2 October 2009] Acorn, 2.00 Friday Lieberman, 3.30 Friday We were shooting for tomorrow, but we need to meet with banks and we need to improve our story on feaso… We owe Paul Doherty and Marty a beer or five as they are calling in favours.
9. Mr Steel replied to this email later than evening stating "Good Work Nicki!!" and asking if she got investor sentiment on the call to pay interest on Double Bay, to which Ms Garrett replied (to Mr Steel only) "I can get that from existing investors BUT they have asked me to sign 12 month commitment. Sorry, racing to Patersons as need to see Paul but will debrief tomorrow (we have lots to do). Please keep to yourself as I am not sure about committing just yet". (Pausing here, this suggests: first, that Ms Garrett was not yet committed, or did not regard herself as committed, to Ashington; second, that Ms Garrett was not hiding from at least Mr Steel that she might not be "committed"; third, Ms Garrett was presenting the request for a 12-month commitment as coming from the existing superannuation fund investors.)
10. Patersons says that the evidence is sparse and inconclusive as to whether Ms Garrett in fact met with Mr Doherty on the afternoon of 30 September 2009 (as the line "need to see Paul" in the above email suggests). When examined in 2013 by the liquidator's representative, Mr Doherty did not recall whether he met with Ms Garrett before his receipt of the 2 October 2009 email (see below) from her.
11. Shortly before the above response to Mr Steel, Ms Garrett had sent an email to Mr Renauf with the text "Doherty and Marts are on fire … Paul thinks he will get more meetings as well".
12. On 30 September 2009 at 5.31pm, Mr Block sent an email to Mr Renauf (copied to Mr Lord) which referred to a meeting between them held that morning, said that there were a number of issues they wanted to discuss with Mr Renauf and Ms Garrett as soon as possible (including the unitholders' reaction to Stonington and the strategy surrounding Double Bay). Mr Block suggested that they meet the following day and asked for a number of items, including the Patersons Stonington Term Sheet and Patersons Mandate. (This is the second of the emails to which the plaintiff points as evidence of the meetings the plaintiff said led to the genesis of the Garrett plan.)
13. As to the meetings referred to in Garrett's 30 September 2009 email, the meeting with Thorney was rescheduled to Monday 5 October 2009. The meeting with Acorn also appears to have been changed to 3.30pm on 5 October 2009.

Investec's position on Stonington Capital Raising - 30 September 2009

1. On 30 September 2009 at 11.15am, Mr Anderson sent an email to Mr de Rooy saying that interest on Stonington would be paid that morning.
2. That evening, Mr de Rooy emailed Ms Garrett asking if there was any update from her end as to the Stonington Capital Raising, noting that he received a call from Mr Block of PPB to discuss the concept of Investec providing comfort to investors that they were comfortable for the asset sale process to be varied to allow Ashington to raise funds via the proposal as discussed. The plaintiff thus says that, while Mr de Rooy had indicated to Mr Block that Investec's formal position was to reserve its rights, he also expressed a willingness to take to his credit department a proposal from investors to allow a timeframe for Ashington to raise funds with a fallback sale process if the capital raising was unsuccessful.

HESTA's position on Stonington Capital Raising - 30 September 2009

1. On 30 September 2009 at 5.52pm Mr Hastings (HESTA) sent an email to Mr Block (PPB) copied to Mr Lord and assets consultants saying that HESTA agreed to the "next steps" proposed by Ms Garrett and Mr Renauf to investors, on the basis that Investec entered into a letter of comfort arrangement.

Initial advice on appeal of Double Bay development refusal - 30 September 2009

1. On 30 September 2009, Mr Anderson sent an email to Ms Garrett (both at her office and Gmail address) and Mr Renauf (copied to others at Ashington), advising that he had initial appeal process comments from Blakes in writing for potential use in the St George/NAB meeting and with investors. This was to show that it was still possible to get Department of Planning approval in "a reasonably short timeframe ie in the early months of the new year". On the same day, Blake Dawson wrote to Ashington confirming instructions given in a meeting that afternoon that Ashington Management wished to lodge an appeal against the Minister for Planning's rejection of the Double Bay development application.

Creditors - 30 September 2009

1. As at 30 September 2009, the MYOB records recorded payables due of: $939,690.27 for Project X Hotel Trust; $1.273 million for Stonington Trust; and $522,295.10 for Wylde Street Trust.
2. On 30 September 2009, Savi Communications Pty Ltd (Savi Communications) filed a statement of claim against Ashington Capital claiming a debt of $54,199.01, which had been outstanding, in part, since March 2009 (Ex M at 7794ff).

Failure to meet $3 million uncalled capital call - 1 October 2009

1. The superannuation fund investors did not meet the call for $3 million uncalled capital by 1 October 2009, leading Ashington Capital to default on the Project X Facilities.
2. On 1 October 2009, Mr Steel sent an email to Mr Anderson, Mr Renauf and Ms Garrett (at both her Gmail and office accounts), copied to Ms Briggs, Mr Minahan and Mr Bailey, setting out matters that he thought the banks would raise at "tomorrow's bankers meeting".

LUCRF write-down of investment - 1 October 2009

1. On 1 October 2009, LUCRF's investment meeting was held; Mr McCusker presented a report recommending the write-down of LUCRF's investments in ADF and ADF2.

Apex Capital Partners Pty Ltd - 1 October 2009

1. On 1 October 2009 at 8.32pm, Mr Alex Vynokur of Apex Capital Partners Pty Ltd (Apex Capital) sent an email to Ms Garrett and Mr Renauf with an indicative proposal in respect of Stonington, namely that Apex Capital with a co-investor, would provide fresh equity capital into Stonington and seek to renegotiate or repay the existing Investec Stonington Facility; indicating that Apex Capital wanted to take over the management of the Stonington development and that, upon recapitalision, own a substantial majority equity stake in Stonington. It sought a 14-day exclusivity period to complete initial due diligence. Mr Renauf forwarded Apex Capital's email to Ms Garrett's Gmail account that night.
2. At 12.58pm on 2 October 2009, a person apparently associated with Alex Vynokur (simon@ewessex) emailed Mr Renauf as to the investment opportunity, noting a concern that the Stonington Project had an insufficient margin. At 2.59pm, Mr Vynokur sent an email to Ms Garrett and Mr Renauf, copied to "Simon" and Mr Jason Gellert, attaching a further letter dated 2 October 2009 titled "Indicative Non-Binding Proposal in relation to the Stonington Malvern Development" by Apex Capital and its co-investor. The key elements of the proposal were that the "Investor" would seek to refinance the existing mezzanine debt facilities with a new funding activity, potentially converting into equity; would provide fresh equity capital into the Stonington development; and would take over the management of the Stonington development, "bringing a strong capability in delivering residential property projects". The letter sought a meeting at the first available opportunity and to obtain access to the necessary information to complete a transaction within the shortest possible timeframe.

Emails refer to "plan" discussed with PPB - 2 October 2009

1. On 2 October 2009 at 7.25 am, in an email to Mr Renauf commenting on an indicative non-binding proposal in relation to Stonington that had been received the previous day from Mr Alex Vynokur of Apex Capital, Ms Garrett noted that while it was good to get a letter "if we want to execute on the plan we discussed with PPB then this offer does not work for us as it involves APEX taking over the management of the Stonington development" (Ex C).
2. The plaintiff says that this 2 October 2009 email is a clear indication that Ms Garrett was willing to suppress offers to participate in the refinance of the Investec facility if it was inconsistent with the plan Ms Garrett and Mr Renauf had discussed with PPB. The email also noted that it was unlikely to be appealing to existing investors as would involve them having to undertake due diligence on a new delivery team (which the plaintiff says is hardly likely to have been a comment Ms Garrett would have made had the superannuation fund investors already indicated that they were open to new management).
3. On 2 October 2009, at 7.32 am, in a "to-do" list copied to Mr Renauf, Ms Garrett included an entry for "NG [Ms Garrett] to take SR [Mr Renauf] through her thoughts on PPB suggested plan".
4. On 2 October 2009 at 12.15pm, Ms Garrett sent an email to Mr Carolan, as to how the transaction might be presented to potential investors. The email from Ms Garrett from her Ashington email address had the subject, "[w]hy is it so good". It stated: The Investec security arrangements Ashington entered into have the potential to impact on other assets in the Fund. Accordingly, it is critical to Ashington that it quickly replaces the Mezzanine Facility to ensure its other projects are quarantined from Investec action. The current Investec terms provide a 26 percent coupon and the Replacement Mezzanine terms have been made slightly more attractive to ensure a speedy response. Is that enough? Basically Investec can come after the other assets coz Ash fukt up and now they need to move quickly...
5. Mr Carolan replied to this email at 12:15pm, stating "Perfect!" Ms Garrett then forwarded this email chain to her Gmail address at 3.33pm that day.
6. Meanwhile, at 12.21pm on 2 October 2009, shortly after the above email, Mr Carolan send an email to Mr Stuart Foster (of Fostock), a potential investor, copied to Mr Shorrocks essentially repeating the text of Ms Garrett's message and attaching the Patersons Stonington Term Sheet.
7. On 2 October 2009, Mr Carolan sent to Mr Shorrocks a pro forma email to be sent to potential investors attaching a copy of the Patersons Stonington Term Sheet, and on the same day sent a copy of the term sheet with the email to Mr Chris Ryan copied to Mr Shorrocks.

"Opportunity to invest into manager" - 2 October 2009

1. On 2 October 2009, at 12.48 pm, Ms Garrett sent an email to Mr Carolan: Mart Can you please confirm with Jug [Mr Doherty] whether we can get an Acorn meeting. There is a significant opportunity to invest in to the Manager. Also, I probably need 30 minutes with him to explain the situation. Ideally, keen to get another meeting in place and some time with Paul.
2. Mr Carolan subsequently emailed Ms Garrett advising that Mr Doherty's contact with Acorn was Mr Routley, who managed the unlisted fund, and asking Ms Garrett to call Mr Doherty.
3. The plaintiff says that it can be inferred that Ms Garrett then spoke with Mr Doherty, following which Ms Garrett sent Mr Doherty an email on 2 October 2009 at 3.45pm, copied to Mr Carolan, in which the plaintiff says that Ms Garrett set out in detail the "PPB suggested plan": Hi Paul Further to our discussion: The Investec security arrangements Ashington entered into with respect the Stonington project have the potential to impact on other assets in the Fund. Accordingly, it is critical to the Existing Equity Investors in the Fund that Ashington quickly replaces the existing Mezzanine Facility. This was what prompted the original terms of the Replacement Facility. The Existing Equity Investors in the Ashington Funds have had concerns about the security arrangements adopted by Ashington and this now combined with the Double Bay decision has prompted them to investigate options to transfer key assets to a new Manager. As a result, there is an opportunity for an incoming investor to: - invest in the Stonington Project which in and of itself delivers an attractive return (2X equity multiple, 25% equity IRR and 24 month timeframe); and in so doing - receive a significant equity interest in Newco (Newco will be established by the Existing Equity Investors in the Ashington Funds, it will replace Ashington as the Manager of these Funds and receive the fund management fees). This process is in its early stages and is being managed by PPB and myself and Sam Renauf. It is highly confidential, so please ensure that this information is managed carefully. Thanks - Look forward to seeing you on Monday. Regards Nicki will be the new Fund Manager
4. Mr Doherty gave evidence in his affidavit, and during the liquidator's examination of him, that he did not recall having a discussion with Ms Garrett prior to receiving the 3.45pm 2 October 2009 email. However, when asked about this email and who Ms Garrett said would be the new manager, Mr Doherty responded "she said it might be her". Mr Doherty also gave evidence during the liquidator's examination that, following his receipt of the 3.45pm 2 October 2009 email, he booked "a meeting with Acorn explaining that - or just asking if I could get them in front of - asking if they would take a meeting to hear what Nicky had to say". Mr Doherty did not recall if he was any more expansive when he booked this meeting.
5. The plaintiff complains that, despite Patersons being mandated by Ashington, and Ms Garrett making plain to Mr Doherty that she was pursing an opportunity to replace Ashington (for whom she worked), Mr Doherty assisted her by arranging a crucial introductory meeting with Mr Routley for Monday 5 October 2009 "to advance the PPB and Garrett plan".
6. Pausing here, the above 3.45pm email is significant for a number of reasons; not least because there is nothing in the contemporaneous documents in evidence to suggest that the existing superannuation fund investors had formulated any such process at that stage (albeit that there had been some reference to the possible termination of the manager - and as to seeking advice on that issue). I return to this in due course. However, it is relevant here to note that there is a strong inference from the chronology of events that Ms Garrett was telling one thing to potential investors and another to the existing superannuation fund investors (and nothing about this to Mr Anderson). Weight is placed by the plaintiff on the reference here to the process being managed by PPB and [Ms Garrett] and Mr Renauf.
7. Mr Doherty responded to Ms Garrett's email copying Mr Carolan, to the effect that he had "locked in" Mr Routley from Acorn for 3.30pm Monday (i.e., 5 October 2009.
8. On 2 October 2009, at 3.53 pm, Mr Carolan emailed Ms Garrett with the subject header "all looks good to me… you can trust Paul" (and no text in the body of that email).

Investec update - 2 October 2009

1. In the afternoon of 2 October 2009, Ms Garrett again met with PPB, as evidenced by an email discovered by Investec where Ms Garrett's executive assistant passed a message on to Mr de Rooy that Ms Garrett's meeting with PPB was running longer than expected. That evening, Ms Garrett forwarded to Mr Anderson and Mr Minahan an update that she had provided to Mr de Rooy, noting the proposal that had been received from Apex Capital but stating that Ms Garrett had deferred a response until after she had met with interested parties in Melbourne on Monday (5 October 2009). The plaintiff points out that, unbeknownst to Mr Minahan and Mr Anderson, those "interested parties" were not interested in the Stonington mezzanine proposal.

Other potential investors - 2 October 2009

1. Meanwhile, it seems that Mr Anderson was continuing to seek to identify potential investors and sent an email to Mr Renauf, copied to Ms Garrett in relation to persons at Sensata and Icon Constructions.

APEX Capital - 2 October 2009

1. On 2 October 2009 at 6.33pm, Mr Renauf sent an email to Mr Vynokur at Apex Capital and Ms Garrett at Ashington, copied to simon@wessex and Mr Gellert, in response to Apex Capital's indicative proposal. Mr Renauf stated that there had been some difficulty getting a formal response but that their initial thoughts were to provide a non-exclusive period until a formal term sheet was signed.

NAB/St George default notices - 2 October 2009

1. On 2 October 2009, NAB issued default notices to Ashington Capital as trustee of the Project X Hotel Trust, ADF and ADF2; and to Trust Company as custodian of the Project X Hotel Trust and Ashington Stamford; one default notice in respect of NAB's position as senior note facility subscriber and the other as a mezzanine facility provider, relying on failure to pay amounts due on 30 September 2009. On 6 October 2009, St George also issued a default notice as senior note facility subscriber.

Communications between Mr Steel and Ms Garrett - 3 October 2009

1. On Saturday, 3 October 2009, there was a series of communications between Mr Steel and Ms Garrett (on their respective Gmail, not office, accounts), commencing with an email from Mr Steel at 10.21am. In that email, Mr Steel (seemingly writing communications and to be seen more widely within Ashington) writes: Before I forget, Julie [Wyatt?] sees all of Sam's emails- that needs to be changed!!!!! She has been getting a play by play view of what is going on….must be careful. Can't forward this email to Sam's blackberry or Sam's Ashington mailbox.
2. It also said that, having regard to what had happened in the past week, it was time to think about the "fee streams" for all of her efforts; that she was acting as a "representative of Ashington" and that Ashington's ability to pay was a risk that was of concern to everyone and that "you are better to act in your own capacity (or as a representative of a New entity) whereby you are paid a fee from the fund stakeholders for the various workout strategies" (similar to a liquidator or receiver) and that "it is better (for you and your team) to have a direct mandate (for your recovery efforts) with Investors/financiers/PPB than with Ashington".
3. In the course of those email communications, Ms Garrett referred to "madly putting together the Stonington presentation for Monday's meetings" and said she had been instructed by PPB in writing (a copy of which instruction does not appear to be in the evidence) that Mr Anderson was not to attend, which she said was "bloody awkward" as he was flying down. Mr Steel told Ms Garrett not to worry because Mr Anderson had three meetings set up independent of her meetings.

Debt schedule for ADF and ADF2 - 3 October 2009

1. At 5.03pm on 3 October 2009, Mr Steel sent an email to Ms Garrett's Gmail address reattaching a debt schedule for ADF and ADF2, stating that: Just so you don't get caught off guard, I don't think CA [Mr Anderson] has ever properly disclosed the $20M Valad Noosa fee to Investors … to my knowledge, Noosa has always been lightly discussed or put on the backburner in any discussions with PPB and/or Investors … focus has been on Stony and DB … I don't think anyone is aware of the implications the $20M can/will cause. … (For the record, the terms and structure of this fee were kept from me until it was too late … I had an internal hissy when I saw the executed final copy of the deal … couldn't believe we agreed to this.) (Worse yet, the terms of this were sugar coated when disclosed to Bouris … in fact, I'm not so sure Bouris was updated on the fee at all. I remember seeing minutes of directors meetings (which I attended) that were altered (by CA) to make it looked [sic] like the issue was fully discussed.
2. Pausing here, PPB says that it is immaterial whether Mr Steel's allegations were true; what PPB says is significant is that they were made by the chief financial officer of the Ashington group and that they concerned possible dishonesty on the part of Mr Anderson, not merely in failing to disclose matters to investors, but also in altering the minutes of a meeting of the Board of Ashington Capital.

Stonington model - 3 October 2009

1. At 5.32pm on 3 October 2009, Ms Garrett sent an email from her Gmail address to Mr Renauf, Mr Steel, Mr Anderson, (and others at Ashington), with the subject "Stonington Model - Weekend Review Required". Ms Garrett commented that the model supported figures in the presentation she was providing to prospective investors on Monday and assumed replacement mezzanine finance of $15 million was received at the end of October, that would be replaced with $21 million of preferred equity in January 2010. Ms Garrett said that the incoming equity investors would get a priority return of capital and 100% of profit generating an equity IRR of greater than 35%, and the existing equity investors would receive 100% of their capital back. Mr Steel responded, noting that he had compared the Stonington Model, that assumed a stage 1 construction loan of $32 million, and a hypothetical indicative stage 1 loan calculated using Westpac's formula that resulted in a loan of approximately $28 million.
2. Mr Steel also emailed to Ms Garrett at her Ashington email address (at 1.25pm that day) information as to the amount of cash invested in each of Project X, Noosa and Stonington extracted from the 30 September 2009 ADF2 balance sheet.

Stonington PowerPoint - 3 October 2009

1. From 3 October 2009, Ms Garrett commenced preparing a Stonington PowerPoint presentation (Stonington PowerPoint). There are several versions of the presentation in evidence, mostly sent between Ms Garrett and Mr Carolan.
2. The structure of the PowerPoint consisted of: Background/Introduction; Ashington Corporate Structure; Staged Investment Opportunity - Stonington Project: (i) Replacement Mezzanine Finance Facility; (ii) Preferred Equity (sell-down); Appendices: (i) Stonington Project Overview; (ii) Stonington Project Key Assumptions.
3. Some versions of the PowerPoint included a section titled: 'Go Forward' Corporate Structure. That slide stated "NG [Ms Garrett] to insert". No content was included on that slide in any of the versions in evidence.
4. All versions of the presentation also included an introductory paragraph stating that: The Existing Equity Investors in ADF1 and ADF2 have appointed a real estate advisory group, PPB, to help them unlock the value in key projects in ADF1 and ADF2. PPB are working with new recruits, Nicki Garrett and Sam Renauf, on work-out options with respect to key projects in both funds.
5. Acorn says that whilst the final version of this presentation is not precisely clear from the evidence, the plaintiff appears to have accepted in opening submissions that the presentation included the above content.
6. Although it was not included in the structure, the versions of the PowerPoint included various iterations of a slide titled either "Project Management" or "Key Personnel Appointments".
7. In what appears to be the first version of the draft attached to an email Ms Garrett to herself at her Ashington address and to Mr Carolan at 5.45pm on 3 October 2009, that slide was headed "Project Management". It stated that "Project Stonington will be managed by key personnel" and identified Mr Renauf (described as Head of Acquisitions and Development) as one such person in respect of "Real Estate Planning and Development" and Ms Garrett (described as Head of Funds Management) as another person under the banner of "Funds Management". The footnote to Mr Renauf's name stated that he had "signed an employment contract with Ashington Group but is currently on 'gardening leave' as per the terms of his employment arrangement with Valad. Commences post 1 July". Similarly, with respect to Ms Garrett it was stated "Nicki has signed an employment contract with Ashington Group but is currently on 'gardening leave' as per the terms of her employment arrangement with Valad. Commences post 1 July".
8. By contrast, later versions of this slide no longer referred to an employment contract. The footnote for Mr Renauf recorded, "Sam was recruited 7 months ago but has been on extended "gardening leave" as per the terms of his employment arrangement with Valad". The footnote for Ms Garrett was identical.
9. Pausing here, the plaintiff points out that although there might be thought to be some inconsistency in the timing of emails in relation to the power point presentations over the weekend of 3 to 4 October 2009 (in that the email attaching the "Background slide" content appears to have been sent before Ms Garrett's 4 October 2009 1.19pm email), it is common ground as between the plaintiff and Patersons (which produced the emails) that emails printed by Ms Joan Warren are timestamped either two or three hours earlier than the AEST time (Ms Warren being located in Western Australia) (with emails on or before 3 October 2009 being two hours behind, and emails on or after 4 October 2009 being three hours behind as daylight saving time commenced in NSW and Victoria on 4 October 2009).
10. On 4 October 2009 at 2:19pm, Ms Garrett emailed Mr Carolan, the subject of which was "'Go Forward' Corporate Structure Slide". The text of the email stated: The Existing Equity Investors in the Ashington Funds have appointed a real stated advisory group, PPB, to advise them as to the best means of unlocking value in key projects in ADF1 and ADF2. PPB have recommended that the sub-trusts containing key projects should be transferred out of the existing Ashington structure to a new Corporate Trustee to quarantine them from any possible future issues within the Ashington Group. - PPB have recommended that the Nicki Garrett and Sam Renauf are the replacement key personnel in the new Corporate Trustee with back office support from PPB - The new Corporate Trustee will replace Ashington as the Manager of these key projects and receive the fund management fees - Existing Equity Investors have unanimously supported this recommendation - Arnold Bloch Leibler has prepared advice in this regard and will transfer Stonington on receipt of the Replacement Mezzanine Facility or Preferred Equity Investment. As a result, there is an opportunity for incoming investors to: - invest in the Stonington Project, - which in and of itself delivers an attractive return, and in so doing - receive an equity interest in Newco.
11. The plaintiff seeks an inference to be drawn that that the presentation included the above content (based on a process undertaken with another slide whereby Ms Garrett emailed Mr Carolan the content for the slide in an email and it was included in a subsequent version of the PowerPoint). Further, the plaintiff says that the suggestion in the above slide that existing equity investors had unanimously supported the recommendation was untrue; and that in fact the plan was being driven by PPB (and was revealed to the superannuation fund investors on 9 October 2009). Reference is made to Ms Garrett's evidence in her liquidator's examination to the effect that at this time she had not canvassed the views of superannuation fund investors as to whether or not Ashington should be removed as trustee or manager.
12. On 4 October 2009 at 2.19pm, Ms Garrett sent an email to Mr Renauf attaching the version of the presentation that Mr Carolan had emailed her as at 1.29pm, stating in the email: The latest version is attached and yes I know it is incomplete, there are number of slides I am still working on. The key information we need from you is on slide 8 - we need as many conservative assumptions as possible and we need to provide the detail on the first appendix. Ideally we would have discussed and agreed go-forward corporate structure section as well but is redundant now anyway. I guess that is what I advise Kevin tonight - not sure if you read his text but I am meant to be calling to confirm arrangements. You should also check the second appendix but I have not done that slide yet. I guess it would have been good to have a final walk-through of the whole document before it is printed but not sure if that is possible now.
13. On 4 October 2009 at 2.34pm, Mr Carolan emailed a further iteration of the presentation to Ms Garrett. In this version the "Go Forward Corporate Structure" had been removed.
14. That version of the presentation was emailed by Ms Garrett to Mr Renauf on 4 October 2009 at 2.41pm (Ex C). Among other things, the email stated: You will note I have removed the go-forward corporate structure section from the presentation. I will take it as a separate set of slides as this is probably more appropriate. I don't know how to send it to you for review and as per yesterday/today it is all a bit redundant now anyway but given I promised Robert Routley it would be forthcoming I need to take something on Monday. Please let me know if you still want to discuss that aspect of the presentation…
15. The plaintiff says that it should be inferred from the above that Ms Garrett had spoken with Mr Routley at some time on 2 October 2009 or over the weekend about the plan that had been developed with PPB and confirming their meeting on 5 October. Acorn accepts that it can be inferred from this email that Mr Routley and Ms Garrett had spoken prior to this point but says that there can be no comfortable inference (contrary to the plaintiff's closing submissions) about what was said between them (other than that Ms Garrett promised Mr Routley that she would address the contents of the "Go Forward" at their meeting). (I interpose to note that Ms Garrett's statement that she did not know how to send it to Mr Renauf for review is likely to be in light of Mr Steel's email to Ms Garrett earlier that day that stated that "Julie" could see all of Mr Renauf's emails, and, if so, indicates that Ms Garrett did not want others at Ashington to view the content in the "Go Forward" slide.) I also note that it is not clear what had occurred to make this slide, or the presentation as a whole, "a bit redundant now".
16. On 4 October 2009 at 5.10pm, Mr Carolan emailed Ms Garrett a further iteration of the presentation. The attachment had the document name "Stonington_051009_vfinal.ppt". This version did not include the "Go Forward Corporate Structure" slide.
17. On 4 October 2009 at 8.54pm, Ms Garrett sent an email to Mr Renauf telling him to "just chill tomorrow", stating that she proposed to "bluff Acorn and Thorney" at the meeting the following day "so as not to piss off Paul and then advise later in week that Investors had a change of heart on revised structure".

Stonington Data Room - 4 October 2009

1. On 4 October 2009 at 11:36am, Ms Garrett sent an email to Mr Renauf, Mr Steel and Ms Briggs asking that certain documents be included in the data room including Knight Frank's $43 million valuation, Mallesons' advice that "our mechanism" provides second ranking security plus term sheet for the replacement finance, the Investec mezzanine finance documentation, Stonington feasibility and builder quote.

Email Mr Steel to Ms Garrett and Mr Renauf - 4 October 2009

1. In an email of 4 October 2009 at 12:49pm, Mr Steel stated, in relation to equity in Double Bay, that Mr Anderson's view was that he "didn't want to show a large amount owing from ADF1 in the books of ADF2 (violates constitution big time and investors would flip)… also if the amount is recorded as a loan from ADF1, then Investec has potential charge under their ADF2 fixed and floating … this then stretches their security to ADF1. NAB's concern was the ability for ADF1 to pay their interest (if it had cash) without Investec intercepting".

Meetings in Melbourne - 5 October 2009

1. A series of meetings was planned for 5 October 2009 in Melbourne. At 2.56pm on 4 October 2009, Mr Anderson sent an email to Ms Garrett (at her Ashington and Gmail address) and Mr Renauf with details of his time in Melbourne trip, including a meeting with Icon at 4pm at which he assumed Mr Renauf would attend unless he confirmed otherwise. Ms Garrett responded later that day, noting she had a meeting schedule with Acorn at 3.30pm for at least an hour which conflicted with Icon.
2. Mr Anderson was planning to meet with what he described as a "long shot financing alternative, ex CEO Investec who is very keen on Stonington" (this is a reference to Wingate), Mr Paul Hameister (the Managing Director of Hamton, the previous owner of the Stonington Property) and (as noted above) Icon Constructions. Patersons says that it is unclear whether there was a meeting with Thorney scheduled for that day as well. Mr Doherty deposed that he has no recollection of that meeting. Further, there is email correspondence between Mr Doherty, Mr Alan Miller and Mr Avee Waislitz (Mr Doherty's contact at Thorney) which suggests that the Thorney meeting might have been further deferred to Monday 12 October 2009.
3. On 5 October 2009, Mr Minahan sent an email to Mr Anderson, Mr Renauf and Ms Garrett as to a number of meetings with potential investors in Hong Kong and Singapore; and Ms Garrett forwarded Mr Minahan's email to Mr Carolan as to whether they could "target a few of these for the mezz or pref equity deal". Patersons says that this was a reference to the two alternatives described in the Stonington PowerPoint dated 5 October 2009 (i.e., a replacement mezzanine finance facility or a preferred equity sell-down).
4. Relevantly, it was on 5 October 2009 that the first meetings took place with Acorn and then Albany. The first (short) meeting with Acorn took place on 5 October 2009 at 3.30pm, at Acorn's offices in Melbourne (in attendance were Ms Garrett and Mr Renauf, Mr Doherty, Mr Carolan and Mr Routley (of Acorn)). At the beginning of that meeting, Mr Routley said that Acorn would not be able to invest without the involvement of the Alter family and suggested that Ms Garrett, Mr Carolan and Mr Doherty meet with Mr Ko (of Albany), which subsequently occurred at Albany's offices. That meeting with Mr Ko was for approximately 30 minutes, and occurred without Mr Routley.
5. Patersons says that, save for Mr Doherty's examination transcript and affidavit, the evidence of what was discussed at these meetings is sparse. Mr Doherty's recollection of the Acorn/Albany 5 October 2009 Meetings is set out in [35]-[38] of his 10 September 2018 affidavit as follows: 35. The meeting with Acorn on Monday, 5 October 2009 was with Routley. It was intended that I meet with Carolan and Garrett prior to the meeting. However, that did not occur as Carolan and Garrett were running late. The meeting took place at Acorn's offices in Melbourne. It was attended by Routley, Garrett, Carolan and me. I recall that the meeting was very short - no longer than 5 to 10 minutes. 36. At the commencement of the meeting, Routley said words to the effect "Acorn will not be able to invest without the involvement of the Alter family". Routley then suggested that we go to meet with Byron Ko (Ko). 37. I did not know of the Alter family or Ko at this time. I 'Googled' the Alter family in the taxi on the way from Acorn's offices to meet with Ko. The meeting was attended by Ko, Garrett, Carolan and me and lasted for about 30 minutes. I recall that Ko began the meeting by explaining that the Alter family were property developers and property investors. 38. Garrett then went through what they wanted to do. I do not recall specifically what Garrett said, but I do recall that it concerned both the deal to raise money for the mezzanine facility and that the existing investors were potentially looking to put a new manager in place for some of the assets, with there being a potential opportunity to invest in that new manager. I recall Garrett saying that it was 'early days' (or words to that effect). As these meetings were largely introductory, discussions were at a high level and not a lot of detail about the Proposed Ashington Transaction was discussed. I do not recall the specifics of Ko's response to what was said by Garrett in the meeting, other than that he indicated that there may be interest in investing but that due diligence would have to be done. Ko said that he would be in touch.
6. Patersons says that this affidavit evidence is consistent with Mr Doherty's evidence as to the 5 October 2009 Meetings under examination by the liquidator's representative: Q. Can you explain to me what you mean by the meetings? A. I'd organised a meeting - sorry, I'd organised one meeting with Acorn Funds Management - Privilege. And we went and saw Acorn who then asked us to go and talk to the Alta [sic] family office who they often co-invest in property deals with. Q. Right, keep going? A. Privilege. We went and saw Acorn, spoke about the deal - or Nicky spoke about the deal - I was purely there to introduce all the parties, and organise the meetings. Acorn said look we might be interested but we need you to go and see the Alta family office, which we then went and saw, and Nicky ran through the deal with them. Q. And what was the deal? A. The deal was to raise money for the Stonington property, but she also spoke about potentially some of the assets being transferred to a new manager. Q. And by "some of the assets", some of the assets of what? A. Privilege. Some of the assets within Ashington. Q. Did you understand that to be within the terms of the mandate? A. Privilege. No, I didn't. …. Q. At the meeting can you recall what was discussed about Nicky Garrett becoming the funds manager? A. Privilege. The Acorn meeting from what I recall only went for about five minutes. Robert said, "Look, you need to go and speak to the Alta [sic] family as we co-invest with them and they'll make the decision." Q. And then there was a meeting with the Alta family, and what was said at that meeting about any restructuring of the funds manager? A. Privilege. The meeting there was - as I've said before, Nicky was saying there was a change that the deal was changing in that the existing or some existing investors were potentially looking to put a new manager in place and that it was very early days, but this was ongoing at the time. Q. What I'm specifically interested in, and I'm going to be ask you to be candid to the Court about, is at what point Nicky Garrett communicated to either of those potential investors that the changing deal, new funds manager, call it what we may, involved her ousting her employer as the funds manager of these assets? A. Privilege. In the meeting she said that it was early days and she may be - I think it was she and another guy, Sam Renouf [sic], were potentially to become the new fund managers. Q. What did either or both of Acorn or Alta [sic] Group say about this proposal? A. Privilege. They just - they said there was potential that they would look to invest but they obviously needed to do their due diligence, and they explained who the Alta [sic] family were, because we had never - I hadn't met them previously, and that they would be in touch.
7. It is noted that Ms Garrett also admitted in her examination that her "understanding of when the discussions first commenced with Acorn and with Pacific [Acorn] was that there were two streams being investigated, one was a direct investment into the Stonington sub-trust either as a two part investment, so replacement mez with a preferred equity piece, or you could invest into Stonington and also into Newco, and that the form of Newco would involve the replacement of Ashington as trustee and manager" (Ex A).
8. Acorn says that the shortness of the meeting with Mr Routley (together with what he said at it about the limitations of any involvement by Acorn without the Alter family) indicates that Ms Garrett could not have said very much during it and that she certainly could not have made the full presentation of 30 minutes with him "to explain situation" (as she said to Mr Carolan in her email on 2 October 2009 at 12.48pm), or what she had thought would be at least an hour (as she had said to Mr Anderson in her email of 4 October 2009 at 9.27pm).
9. Further, it is said that Ms Garrett could not have left the Stonington PowerPoint with Mr Routley at the meeting either, because in an email on 8 October 2009 at 7.25pm Mr Routley asked Ms Garrett to send "a soft copy" to him, to which she responded by email that day at 9.39pm to Mr Renauf that she was "[n]ot too sure about doing this" (although I interpose to note that it might equally be that all he had was a hard copy). Acorn says that there is no evidence that Ms Garrett acceded to Mr Routley's request or that he had the Stonington PowerPoint in his possession from any other source, attaching significance to this because Acorn draws the inference that Mr Routley did not have the Stonington PowerPoint displayed or given to him at the meeting on 5 October 2009 and therefore says that he could not have seen that it was stamped with the word "Ashington" on each slide.
10. Instead, Acorn says that the only proper inference of what was said by Ms Garrett to Mr Routley at the meeting on 5 October 2009 or in any telephone call prior to it were the matters that found their way into the email sent to Mr Swan on 8 October 2009 (see below).
11. The plaintiff, however, says that at the 5 October 2009 meetings, Ms Garrett told Mr Routley and Mr Ko that Ms Garrett and Mr Renauf were going to be the new fund manager. In this regard, the plaintiff says that it can be inferred that the presentation was given at those meetings, noting that: it was clearly prepared for that purpose; Ms Garrett recorded in her email that she had promised something (the "Go Forward" slide) to Mr Routley; a version of the PowerPoint was produced by Mr Ko, and (as noted above) that on 8 October 2009 (see below) Mr Routley requested a soft copy of the Stonington PowerPoint. The plaintiff says that Ms Garrett expressed some reluctance to provide the soft copy, surmising that Ms Garrett no doubt recognised the risk to her if Mr Anderson "got wind of her plan".)
12. Later on 5 October 2009 there was a meeting between Ms Garrett, Mr Doherty and representatives of Thorney.
13. The plaintiff complains that, over the ensuing weeks, "in flagrant disregard of their contractual and fiduciary obligations owed to Ashington" Ms Garrett and Mr Renauf pursued an opportunity that involved the replacement of Ashington Capital and Ashington Management as trustee and manager respectively of ADF and ADF2 by new entities established by Acorn and Albany, in which Ms Garrett and Mr Renauf would have a financial interest. The plaintiff says that Ms Garrett and Mr Renauf did so with the knowledge and assistance of Patersons, PPB, Albany and Acorn. Indeed, the plaintiff in closing submissions says that PPB gave very careful thought as to how to "pitch" the plan to replace Ashington to superannuation fund investors over the period from 6-9 October 2009, once it knew that Acorn and Albany were interested in the scheme.

Garrett provides update on Melbourne meetings - 6 October 2009

1. At 7.12am on 6 October 2009, Ms Garrett sent an email to various persons at Ashington copied to Mr Renauf, Mr Steel and Mr Anderson, saying that there had been "good meetings with prospective investors in Melbourne yesterday on the replacement mezz for Stonington" and confidentiality agreements were going to be executed that day "and they will grill us on the feaso amongst other things".

Investec update - 6 October 2009

1. On 6 October 2009, Mr de Rooy sent an email to Ms Garrett, copied to Mr Renauf, stating that he needed "something a little more concrete backed up with a revised Patersons Term Sheet" and some revised hard timelines as soon as possible as he needed to give "Credit and Group Legal" some tangible evidence that repayment without accelerating legal action was a realistic option. In response to that email, Ms Garrett advised that the meetings in Melbourne had gone well, and that a more formal progress report would be forthcoming.

Information provided by Albany - 6 October 2009

1. On 6 October 2009 at 10.47am, Mr Ko emailed Mr Carolan his own "member profile". Separately, on the same day at 12.48pm, Mr Ko emailed Mr Carolan a profile of the Pacific Group of Companies. Mr Carolan sent an email at 2.59pm asking if Mr Ko could also "provide a couple of financial metrics i.e. NTA and or total assets", noting that this was "to provide PPB and the banks with a sense of size/scale of potential investment partner". Later that day, Mr Carolan forwarded a draft confidentiality undertaking to Mr Ko, copied to Mr Doherty.

Mr Anderson's position re Wingate and Icon Constructions - 6 October 2009

1. Meanwhile, at 12.01pm on 6 October, Mr Anderson sent an email to Ms Garrett (at both her Ashington and Gmail addresses) copied to others including Mr Renauf, Mr Steel and Mr Minahan. Mr Anderson advised that from the meetings in Melbourne he had two genuine parties interested in taking the "mezz/equity position", both of which appeared to be backed by family investment houses and both had been advised that there was a need for another "circa $22m equity". Mr Anderson said the reason their interest was genuine was because the families live locally and know the property well and requested their advisers contact us. One of those seems to have been Wingate (because at 1.36pm Mr Anderson sent an email to persons at Wingate, copied to Ms Briggs, referring to a meeting on 5 October 2009 and saying that Ms Briggs would provide a copy of a confidentiality agreement in regards to the Stonington opportunity). On 6 October 2009 at 5.08pm, Mr Anderson sent an email to Mr Renauf, Ms Garrett and Mr Steel advising of his telephone discussion with the Head of Property Finance Vic at Westpac (Mr Tim Keating) and indicating that Ashington had received three offers of additional equity for the project that would enable Ashington to pay interest on the land but also put in the equity to "lubricate the construction".
2. At 7:34pm, Mr Anderson advised Ms Garrett that the interested parties he had met with were Wingate and Icon Constructions (in concert with Sensata and who he advised were high-net-worth families in Melbourne).
3. Mr Anderson sent an email to representatives of both Sensata and Icon Construction on 6 October 2009, copied to Ms Briggs, referring to the meeting on 5 October 2009 and advising that Ms Briggs would provide copies of a confidentiality agreement.

Confidentiality agreements sent to Acorn/Albany - 6 October 2009

1. As noted above, at 5:07pm on 6 October 2009, Mr Carolan emailed Mr Ko (copied to Mr Doherty) attaching a copy of a confidentiality agreement. Mr Carolan asked Mr Ko if he could arrange for it to be executed and returned to Mr Carolan in the morning. Mr Carolan also said, "[i]t might also be an idea to have it passed on to the guys at Acorn if they are also to receive detailed documentation as we move through the process".
2. Patersons says that it appears that on the same day (6 October 2009) Mr Carolan spoke to Mr Ko and arranged a call scheduled for 10.00am on 7 October 2009. Mr Carolan informed Mr Doherty of this arrangement in an email to him at 2.15pm on 6 October 2009 asking Mr Doherty if he could "let Rob at Acorn know that we will contact him after this call? Please advise that Nicki has been back-to-back with PPB, Westpac & St George working through issues today and an update will be provided tomorrow". Mr Carolan also asked Mr Doherty to provide him contact details for Mr Routley as there was a "need to get him a CA [confidentiality agreement] for execution". Mr Doherty provided those details to Mr Carolan on the morning of 7 October 2009 indicating that he had "spoken to Rob & told him you will send the CA [confidentiality agreement] through this morning. He has been talking to Byron and is going to be on the 10am call as well".

Notices of default re Double Bay sent to PPB and asset consultants - 6 and 7 October 2009

1. On 6 October 2009 at 1.50pm, Ms Briggs sent an email to Mr Block and Mr Lord, copied to Mr Renauf, Ms Garrett, Mr Anderson and Mr Steel, attaching the NAB notice of default in relation to the Double Bay facility dated 2 October 2009. Mr Block forwarded that notice to the asset consultants, copied to Mr Lord, noting that they were "working with [Arnold Bloch Leibler] and the new 'Ashington' employees on a go forward structure".
2. At 4.27pm on 6 October 2009, Ms Briggs sent an email to Mr Block and Mr Lord, copied to Mr Renauf, Ms Garrett, Mr Anderson and Mr Steel, attaching the St George notice of default in relation to the Double Bay facility.
3. On 7 October 2009 at 2:02pm, Mr Block forward the St George default notice to the consultants, stating "we continue to work co-operatively with Nikki & Sam re the re-cap proposal but what is clear is that any proposal would see the management and trustee arrangements changed so that Ashington are no longer involved. We have sought ABL's [Arnold Bloch Leibler] advice on this and we should have their thoughts pretty soon this afternoon. It looks as if this may be mechanically easier to affect [sic] than first thought".

PPB internal update re "Newco" opportunity - 6 October 2009

1. On 6 October 2009, Mr Block emailed Ian Carson of PPB noting that "Investec are reserving their rights against a default at the fund level", and going on to state: Nicki Garrett & Sam Renauf (both ex-Valad) have recently joined Ashington and are currently working on a proposal with our input to replace Investec and re-cap the Stonington subtrust. During the course of these discussions, we see the only sensible way forward is to remove the current asset structure and establish a new trustee and management vehicle with which to move forward. The potential incoming investors have also noted their concerns with the Ashington management team and would only consider a re-cap proposal with a new structure. We are working with ABL [Arnold Bloch Leibler] to get that happening asap. The opportunity is there for the new NEWCO - to have a range of equity investors include the new mgt team, PPB, the major investor and perhaps existing investors …
2. The Alter family and Acorn were listed in the email as "potential investors" who (amongst others) "[a]ll have expressed comfort in seeing ABL & PPB involved and all would like to secure equity in the new management company". The plaintiff points to this as evidence that PPB was aware that Ms Garrett and Mr Renauf had "recently joined Ashington", at the same time that PPB was working with them on a plan to replace Ashington as trustee and manager (and PPB was contemplating having a financial interest in the "Newco" that was to take over Ashington's business).

PPB email re CV's - 6 October 2009

1. On 6 October 2009 at 4.16pm, Mr Block sent an email to Mr Renauf copied to Ms Garrett (at her Ashington address) and Mr Lord, saying: Also probably need to start thinking about something in writing re the team - CVs for you guys and the other 1-2 in the team. Mgt fees etc. Also thinking about the scope of the mgt agreement - what can/cant be done etc.
2. Ms Garrett forwarded this email to Mr Carolan stating, "[s]ome good news at last…".

Garrett sends progress report to Investec - 6 October 2009

1. On 6 October 2009 at 11.26pm, Ms Garrett from her Gmail account sent an email to Mr de Rooy, copied to Mr Renauf attaching a progress report on performance of the Patersons Mandate for the Stonington Capital Raising. Ms Garrett forwarded that email and the progress report to Mr Anderson and Mr Steel, referring to a positive teleconference that she and Mr Renauf had had with "Kevin" (McCabe) late that evening.

Meeting with St George - 6 October 2009

1. Meanwhile, also on 6 October 2009, a meeting took place between Mr Anderson, Mr Renauf and Ms Garrett with three representatives of St George, at the Ashington offices to provide St George with an update on matters including Ashington Capital's proposed strategy in relation to the Double Bay development approval and discussions with investors. At that meeting the St George representatives expressed disappointment at Ashington Capital's failure to provide previous disclosure of the status of the Stonington issue (i.e., the situation in relation to the Stonington Uncalled Capital Undertaking); and serious concern about the solvency of ADF2. Reference was made to the possible intention of appointing an investigating accountant (Ex M at 8457ff).

Conference call with Mr Ko and Mr Routley - 7 October 2009

1. On 7 October 2009, there were communications between Mr Doherty and Mr Carolan relating to the proposed conference call arranged for 10am with Mr Ko.
2. On 7 October 2009 at 9.07am, Mr Ko sent an email to Mr Routley and Mr Sheehan with Mr Ko's edits to the proposed confidentiality undertaking with Ashington Capital.
3. On 7 October 2009 at 9.12am, Mr Ko sent an email to Mr Carolan and Ms Garrett stating that he thought Mr Routley (of Acorn) should join the call as they were working together. Mr Carolan replied at 9:42am to that email stating "catch you in 20 min for the call at 10am". There are no contemporaneous emails about what was said during that call.
4. Just prior to the meeting, at 9.50am and 9.56am, Mr Ko and Mr Sheehan (copying in Mr Routley) exchanged emails in relation to proposed amendments to the draft confidentiality undertaking. Mr Sheehan provided their marked-up amendments by email at 10.01am to Mr Carolan, copying Mr Routley and Mr Ko. Later that day by email at 12.52pm Mr Carolan said he would follow up the requested changes and come back to Mr Sheehan.

Investec responds to progress report - 7 October 2009

1. At 12.52pm on 7 October 2009, Mr de Rooy responded to Ms Garrett's email containing the Investec progress report. Mr de Rooy asked Ms Garrett to provide a timeframe for when Investec would be repaid and to reconfirm the offer. Mr de Rooy asked whether Mr McCabe would be willing to put up a bank guarantee or letter of credit to secure the Investec repayment and what quantum was being offered for a delayed settlement to 10 January 2010; and said that once those questions were answered and the amended Patersons term sheet provided, he would discuss further with Credit. In the meantime, Investec continued to reserve all its rights in relation to the notices of default.

Double Bay media release - 7 October 2009

1. On 7 October 2009 at 1.18pm, Mr Renauf sent an email to Ms Lee and Mr Bailey at Ashington, with a copy to Mr Anderson, recommending to "hold off" on the appeal and media release for Double Bay.

Apex Capital - 7 October 2009

1. On 7 October 2009 at 2.33pm, Mr Vynokur of Apex Capital sent an email to Mr Renauf, copied to simon@wessex, Ms Garrett and Mr Jason Gellert, responding to Mr Renauf's 2 October email and asking as to the status of Stonington and whether Mr Renauf was in a position to provide detailed project information in relation to Stonington and potentially other Ashington projects.

Rumours of insolvency - 7 October 2009

1. On 7 October 2009, Mr Block emailed the asset consultants and superannuation fund investors, saying that "their [sic] are rumours in property circles regarding the ongoing solvency of Ashington…we note that St George have also issued a default notice as of yesterday re the Double Bay facility".

Wingate sign confidentiality agreement - 7 October 2009

1. On 7 October 2009 at 3.05pm, a representative of Wingate sent a signed version of the confidentiality agreement to Ms Briggs (copied among others to Mr Anderson) in relation to the Stonington Project.

Arnold Bloch Leibler advice - 7 October 2009

1. On 7 October 2009 at 5.08 pm Arnold Bloch Leibler's memorandum of advice in relation to the ADF and ADF2 funds and "the procedure for removal of the Trustee, Ashington Capital" was sent by email to Mr Block and Mr Lord. The advice was forwarded to Ms Garrett (at Ashington) and Mr Renauf that same day (and on-forwarded by Ms Garrett to her Gmail account).

LUCRF write-down - 7 October 2009

1. On 7 October 2009, the LUCRF Investment Committee approved write-downs for the ADF and ADF2 funds from $7.9 million to $4.3 million and $15.4 million to $1.9 million, respectively.

PPB requests update of creditors - 8 October 2009

1. On 8 October 2009 at 9.39am, Mr Block sent an email to Mr Renauf, copied to Ms Garrett asking for an updated schedule of the unsecured creditors at the trust level for the Wylde Street, Stonington and Double Bay Trusts; and at 11.30am Mr Steel sent an email to Mr Block copied to various people including Mr Renauf, attaching schedules of the creditors.

Acorn/Albany confidentiality agreement - 8 October 2009

1. On 8 October 2009 at 12.27pm, Mr Sheehan sent an email to Mr Carolan in respect of the requested changes to the confidentiality agreement, saying that Acorn was keen to commence review. Mr Carolan's response was that he was "still waiting on the Ashington lawyers to respond … I will chase them again and come back to you ASAP". Mr Sheehan forwarded the email chain to Mr Routley. The final confidentiality agreement for Acorn was emailed to Ms Garrett by Ms Briggs at 2.11pm. Ms Garrett then forwarded the confidentiality agreement to Mr Ko and Mr Routley at 2:29pm and invited them to see the Stonington Property in Melbourne on Monday 12 October 2009. Ms Garrett advised Mr Routley that she could "arrange someone from Ashington to be there to let you in".
2. Patersons says that there is no evidence that Mr Carolan took this form of the confidentiality agreement to "the Ashington lawyers". Patersons says that it appears from the documentary record that what occurred was that the form of confidentiality agreement with Acorn's and Albany's mark-ups was provided by Mr Carolan to Ms Garrett who then asked Ms Briggs to type into a Word version of the confidentiality agreement the handwritten mark-ups requested by Acorn and Albany. This version of the confidentiality agreement was then forwarded by Ms Garrett to Mr Routley and Mr Ko on 8 October 2009 at 2.29pm. Ms Garrett then forwarded this email to Mr Carolan.
3. Both Acorn and Albany provided their executed confidentiality agreements to Ms Garrett on the afternoon of 8 October 2009. Mr Ko subsequently forwarded Acorn's confidentiality agreement to Mr Carolan separately. The Undertaking was in the same form for both Acorn and Albany, providing that each must use any "Confidential Information" provided to it solely for the "Purpose", and not use the "Confidential Information" for any other purpose. "Confidential Information" was defined to mean all information provided by Ashington Capital to Albany/Alcorn "including the Transaction Documents and any information relating to the Transaction Documents for the Purpose". "Transaction Documents" were defined to mean documents in the Stonington Data Room and any other documents which Ashington Capital advised Albany/Acorn were Transaction Documents prior to disclosing them. "Purpose" was defined in the recitals to the Undertaking as the provision of information to enable each of Acorn and Albany to "evaluate, consider and negotiate a transaction in relation to the [Stonington Property]". Mr Carolan subsequently replied to this email stating, "[w]e will raise the security issue on stonington with Ashington in advance of your discussions on Monday. We can also confirm any DA [development approval] issues".
4. On 8 October 2009 at 6.51pm, Ms Garrett sent an email to Mr Sheehan and Mr Routley (copied to Mr Ko and Ms Briggs) to say that Ms Briggs would send them the data room access details.
5. As to Acorn's and Albany's subsequent access to the Stonington Data Room, Patersons says that it was not involved in that process. Patersons says that what occurred was that, following the provision of the signed confidentiality agreements to Ms Garrett, Ms Garrett indicated that Ms Briggs "will send you the data room access details shortly". Ms Briggs (who was copied into that email) gave evidence in her first affidavit that she understood this to be an instruction from Ms Garrett to arrange for Acorn and Albany to access the Stonington Data Room. Ms Briggs confirmed in her oral evidence that her usual practice was that, upon receipt of this email and signed confidentiality agreements, she would have arranged with Mallesons that Acorn and Albany be given access to the Stonington Data Room. On 9 October 2009, Ms Briggs emailed Ms Clare Morgan (of Mallesons) asking that she provide Mr Ko and Mr Sheehan access to the Stonington Data Room. Ms Morgan confirmed that access details had been sent to those persons shortly thereafter on 9 October 2009.

Discussion between Mr Routley and Mr Ko - 8 October 2009

1. At some time on 8 October 2009 prior to sending the Swan Email referred to below, Mr Routley deposed that he had a telephone discussion with Mr Ko, in which Mr Ko informed him that: (a) Mr Ko had met with Ms Garrett and Mr Doherty; (b) Ashington had two unlisted property development funds; (c) the ADF funds were in distress and were looking to raise new capital; (d) Sunsuper, Military Super, LUCRF and HESTA were unitholders in the funds; (e) the superannuation fund investors were dissatisfied with Ashington Capital and Ashington Management, had decided not to provide any further funding, were going to terminate the mandates of Ashington Capital and Ashington Management, had appointed PPB to review the ADF funds; (f) he was interested in exploring a co-investment with Acorn (see Mr Routley's 10 August 2018 affidavit at [29]).

Swan Email - 8 October 2009

1. On 8 October 2009 at 11.26pm, Mr Routley sent an email (on which Acorn places much emphasis) to his Acorn colleagues Mr Anthony Swan and Mr Sheehan (Swan Email) providing a "basic overview of the opportunity" mentioning that the "situation is still very fluid", and further stating: 1. Background. a. The Ashington Group …has a funds management business that has two development funds ADF1 and ADF2… b. The landmark assets held collectively by the funds include Noosa Sheraton, Double Bay and Stonington Assets. c. Funds have been provided by 4 main investors Lucrf, Hesta, Sun Super and Millatary [sic] Super d. As a result of breach of mandate and loss of trust the investors hire[d] PPB to advise (as distinct from an administrator) the investors. e. The major breach that we are aware of relates to the Stonington Trust which is owned by ADF2 which raised $10.3m of Mezzanine finance from Investec (coupon 30% pa.) which effectively cross collateralises the other assets in ADF2 including the Noosa Sheraton and the Double Bay Trust. f. We also understand that there are a range of other issues in the property developments. There is a high probability that there are further issues to be discovered in the underlying property trusts. g. Investec have demanded repayment of the mezzanine finance from ADF2 which we understand would trigger cross defaults in underlying asset debt facilities. h. PPB have negotiated a standstill with Investec to raise $15m into the Stonington Trust to refinance the Investec Finance. i. We understand that Investec have only granted the standstill until Friday, 16 October 2009 at which time they require some assurance that refinance is imminent. We do not know the exact nature of the assurance that they are after. j. Investors have not provided the capital to refinance the mezzanine debt due to the requirement that all fund[s] must be pro-rata and Hesta (and Frontier as consultants) have declined to provide further funding on the basis that the manager has breached its mandate. We do not know whether they will provide new capital if a new manager is installed. k. We understand that the decision has been made to terminate the Ashington as manager and RE of ADF1 and ADF2. l. As a part of the decision to terminate Ashington, investors are open to the proposition of a credible syndicate financing the mezzanine and assuming the management rights of ADF1 and ADF2 m. The transfer of individual development assets in ADF1 and ADF2 is contingent upon i. Senior/mezz debt approval; and ii. Viability of projects for investors and new managers, ie can they be saved. n. The recapitalisation/rescue effort is being le[d] [sic] by Nicola Garrett who is ex Valad. She was due to start Wed/Thur last after 6 months of 'gardening' leave from Valad. PPB contacted her and let her know that Ashington was not going to retain [I assume] management rights for the funds and that she should work with them [PPB] to solve current funding issues and work out how to move forward. We believe that she is …known and endorsed by investors. 2. Investment Strategy. … We cannot verify the ability of Nicola Garrett but know she has the endorsement of PPB and investors … 3. Investment Proposition. The investment proposition for Albany …and Acorn (collectively the Consortium) has two components: b. Stonington Trust Mezzanine… c. Manager Equity. As a provider of mezzanine equity we will be entitled to a proportionate interest in newco manager. We will be investing on same terms as Albany (mezz and manager). … The focus of Nicola has been to resolve the senior debt issues and confirming the ability to transfer the management rights before firming up the new mezz investor and manager. I personally think the Acorn/Albany consortium has a good probability of getting over the line because of the appeal with the investors…
2. Acorn says that the Swan Email is a critical document to Acorn's defence, emphasising that much of it is consistent with the representations about PPB, and Ms Garrett and Mr Renauf's involvement with PPB and the unitholders, which were made in the Stonington PowerPoint. It is submitted that it should be inferred that, prior to sending the Swan Email, Mr Routley was aware of certain aspects of the content of the Stonington PowerPoint (without actually having received or been shown it), either by discussions with Mr Ko or aspects of it having been raised (briefly) at the meeting on 5 October 2009 with Ms Garrett, Mr Carolan and Mr Doherty. However, Acorn emphasises (as adverted to earlier) that there is no evidence that Mr Routley ever received a soft copy of the Stonington PowerPoint (and Acorn says that his email to Ms Garrett requesting a copy of it earlier in the evening on 8 October 2009 outlined above and her response to Mr Renauf plainly suggests Ms Garrett did not provide him with it) or ever had a hard copy of it in his possession.
3. Mr Routley then forwarded the Swan Email to Mr Ko on 9 October 2009, noting that "[t]his is more a status report than recommendation…". The Swan Email was not sent to either Ms Garrett or Mr Renauf for their review and consideration (Acorn notes that this is despite the plaintiff's assertion that by this stage Acorn was working with them as part of the Consortium).
4. The plaintiff says that the Swan Email is consistent with a finding that Ms Garrett, Mr Carolan and Mr Doherty had put the Patersons Mandate on hold. (Patersons does not appear to contest this.)

NAB/St George - 8 October 2009

1. Meanwhile, at 1.07 pm on 8 October 2009, Ms Garrett sent an email to Ms Briggs, copied to Mr Anderson and Mr Renauf, advising that she needed material for NAB and St George ASAP (being Blakes' advice on the Double Bay appeal process, PPB report and 30 September accounts) and adding the Patersons report and the Investec report. Mr Anderson responded to Ms Garrett and Ms Briggs, copied to Mr Renauf and Mr Steel, that he had agreed to provide St George with a package of material "which demonstrates right up to the point of draw that we expected to pay their intere[s]t" and that he had spoken to NAB and that NAB was expecting a proposal from Ashington (which he said Ms Briggs could assemble with a little guidance from Ms Garrett).
2. On 8 October 2009 at 2.16pm, Ms Garrett sent an email to NAB copied to Mr Renauf, attaching information that she said should assist their assessment of the Ashington situation (the Blakes' advice; the PPB report; the Patersons Mandate; and the status report sent to Investec). Ms Garrett said she would send the 30 September accounts when received and advised that investors had engaged Norton Gledhill to provide legal advice (and gave that firm's contact details).
3. On 8 October 2009 at 2.34pm, Ms Garrett sent the three St George representatives the material referred to above (other than the contact details).
4. At 4.18pm on 8 October 2009, Mr Anderson sent an email to NAB in relation to Double Bay. The stated purpose of the email was to substantiate that, in the months preceding Ashington Capital's failure to pay interest in advance for the 1 October quarter, the fund manager was acting in the best interests of the NAB/St George banking syndicate. A copy of that email was sent to Ms Garrett and Mr Renauf. At 4.33pm, Mr Anderson sent a similar explanation to St George as to how, in the months preceding the failure to pay interest due on 1 October 2009, Ashington had been acting in the best interests of St George/NAB.
5. Ms Garrett sent an email to Mr Block and Mr Lord, copied to Mr Renauf, at 6.47pm forwarding the email Mr Anderson's email to NAB that afternoon. Mr Block's blunt response was that Mr Anderson's assertions to NAB "are absolute and complete crap".

PPB seek update re Stonington/Wylde Street - 8 October 2009

1. On 8 October 2009, Mr Block sent an email to the asset consultants organising an update meeting to discuss the Stonington refinance, restructure discussions, Wylde Street and other matters at 2pm Friday 9 October 2009. Mr Block also sent an email to Mr Anderson, Ms Briggs and Mr Steel, copied to Mr Lord, seeking an update on the sale of Wylde Street.

Ashington staffing issues - 8 October 2009

1. On 8 October 2009, Mr Anderson sent an email to all Ashington staff, in the aftermath of the Double Bay development refusal recording, inter alia, that Ashington was making difficult decisions with regards to cost saving exercises and that Ashington's response and future plans would require investor and banking support.

Valuation of Stonington - 8 October 2009

1. On 8 October 2009, Knight Frank prepared a valuation of Stonington that contemplated a staged development approach, resulting in an "as if complete" gross realisable value of $142 million including GST (Ex M at 8754ff).

Investec update - 8 October 2009

1. On 8 October 2009, at 6.40pm Mr de Rooy sent an email to Ms Garrett and Mr Renauf, requesting an update and suggesting that in the event that McCabe or another party wanted to do the deal, they buy the Investec debt and step straight into Investec's security position/charge documentation (which Ms Garrett forwarded to Mr Carolan the following day). At 11.22pm, Ms Garrett responded to Mr de Rooy, advising that they were working around the clock and that she would send a more detailed report along with timeline and revised Patersons Mandate the following day.

Further developments with Albany - 8 and 9 October 2009

1. On 8 October 2009, at 7.48pm, Mr Block sent an email to Mr Carson (of PPB), asking how it had gone with Mr Ko. Mr Carson responded later that evening (10.35pm) that it was "[v]ery positive" and that he was "desperate to work with us".
2. On 9 October 2009 at 9.45am, Mr Carolan sent an email to Ms Garrett's Gmail account (subject line "Alter - Byron") stating: Gaz Byron has called me this morning requesting I attend Monday in Melbourne as they plan to "articulate the principles" in which they want to proceed with the deal etc. Then we can respond/address in our session on Wednesday. Byron is also happy for PPB to attend Wednesday's session. Let me know your thoughts - surely Ash can cover the flight?
3. Ms Garrett replied: Hon, I don't think you need to go. I don't think Westpac will pay ball and if he wants to articulate principles he can do so on Wednesday. We have to deal with another site and spend two hours with Westpac so you would be there for a small meeting and a ten minute site visit. That said maybe you come and we can just go shopping and drinking!
4. Mr Carolan's response was that he was happy not to go unless it was looking more solid.
5. On 9 October 2009, Mr Carolan sent an email to Mr Renauf, copied to Ms Garrett (subject line "Sydney Property Group") advising that Mr Ko was keen to take a tour of other Sydney based projects (in particular Double Bay) on Wednesday.

NAB formal notice of default - 9 October 2009

1. On 9 October 2009 at 10.28am, Ms Garrett and Mr Anderson received an email from NAB, attaching a letter of that date from NAB to Ashington Capital as trustee for the Project X Hotel Trust, ADF and ADF2 and to Ashington Stamford and Trust Company Ltd as custodian of the Project X Hotel Trust in relation to NAB's Double Bay Property Security Trust and Intercreditor Deed, recording that the beneficiaries had instructed NAB to provide formal notice of default for failure to pay amounts due on 30 September 2009; and that the beneficiaries, NAB, St George and the Security Trustee reserved their rights.

Offer re Wylde Street - 9 October 2009

1. On 9 October 2009, Daniel Gallen of Balmain Commercial sent an email to Mr Steel attaching a letter addressed to Ashington Croup and recording an offer to refinance Investec's facility in relation to the Wylde Street Trust. Mr Anderson's position on 9 October 2009 was that he did not see a benefit to the offer as it did not create a liquidity event; and Mr Steel commented that although the liquidity event is the sale, the offer takes out Investec.

Wylde Street progress report - 9 October 2009

1. At 12.06pm on 9 October 2009, Mr Anderson sent an email to Mr Block, copied to Mr Lord, Ms Garrett, Mr Renauf, Ms Briggs and Mr Steel, attaching a report on the sale process of Wylde Street.

Access to Stonington Data Room - 9 October 2009

1. On 9 and 10 October 2009, someone using Mr Sheehan's login details accessed the MatterWeb for the Stonington Data Room. The Access Logs record that only two documents were accessed by someone at Acorn. Of those two documents, only one substantive document was accessed, being a project model excel spreadsheet entitled "336 Glenferrie Road/19_Project_model.003916.xls" (the other document being merely an index to the MatterWeb) (the Project Model Document). Acorn says that it was incumbent upon the plaintiff to establish the identity of that excel spreadsheet (and that the plaintiff has not done so).

Investec - 9 October 2009

1. At 12.43pm on 9 October 2009, Ms Garrett sent an email to Mr de Rooy, copied to Mr Renauf, attaching an update on Stonington. Ms Garrett advised that her main concern as to completion was the risk that Westpac might not provide an extension on the land facility; saying that she had received a verbal assurance but not written confirmation from "Credit" and that she would keep Mr de Rooy informed. At 4.43pm, Mr de Rooy responded to Ms Garrett's email, copying Mr Renauf and Mr Sargeant (of Investec), referring to Ms Garrett's comments in the status report she provided on 6 October 2009 regarding Mr McCabe. Mr de Rooy asked whether Ashington would deal exclusively with Mr McCabe if he committed to the facility or whether Ashington was obliged to deal with all the other interested parties within the indicative Patersons timetable; and said that Investec was very interested to know about the outcome of Mr McCabe's review of his ability to post a bank guarantee/letter of credit to secure a deferred settlement to a date post 10 January 2009.

Discussion with superannuation fund investors - 9 October 2009

1. It appears that, on or about 9 October 2009, a discussion took place between Ms Garrett, Mr Renauf, PPB and the superannuation fund investors. The plaintiff says that the "Garrett plan" was revealed in this discussion.
2. A paper prepared by Mr Peter Dedes of SCM for the Military Super board, dated 12 October 2009, records that Ms Garrett and Mr Renauf had met with investors and indicated that they could raise capital for Stonington and Wylde Street, and Investec had allowed them time to explore the recapitalisation; and that Ms Garrett and Mr Renauf had indicated that, while they could raise equity to recapitalise Double Bay, if successful they would require the restructuring of the fund, the replacement of Ashington as manager and trustee, and they would take control of Double Bay, Stonington and Wylde Street. It was noted that interested parties included Alter (i.e., Albany) and Acorn.
3. A handwritten note of that meeting was produced by Mr Hamish Flett of HESTA which records the following: Ashington Brett + Peter (PPB) Nicki + Sam four groups have indicated interest in the project capital raising will be larger as more equity is needed and not just mezz significant work has been done on feasibility, finance arrangements Alter? family, Thorney, Kevin McCabe, HNW led by Campbell Smith Completion risk: 1. Senior facility - predicated on Westpac extending land facility and moving into a construction facility. Sydney credit committee (and not just Melbourne credit committee) are now involved and Westpac/St George CC has been morphed into one (St George are involved in Double Bay). 2. Longevity of Ashington group and how this will be managed in terms of running Stonington project. Ashington Directors - Craig Minahan in Asia with a view to sell down a share of the Double Bay asset - Craig Anderson-attended all meetings Nicki + Sam have had with NAB and St George. Unlikely to be involved going forward in these discussions. - Ashington have made a number of people redundant a week ago. - Existing directors are not adding value and lenders have indicated they don't want to deal with Craig or Scott any more. Process is to limit their interference. Craig & Scott are continuing to lie/answer questions incorrectly and then Sam / Nicki have to sort out the issue and provide correct information. - Craig has been telling NAB they have made interest payments to Investec. $179k has been apportioned from other trusts to pay Investec. Investors can remove trustee, there are some issues with the management agreements. Hard to terminate, misconduct has been at the Ashington Capital Ltd level rather than Ashington Management Ltd. There is a 20 day [?] period to remove them from management. Going to change the Trustee, more difficult to remove the mgr. All incoming investors want a position where Ashington is neither Trustee or Manager. Court Option - need to go to court and say breaches are so fundamental there is not an intention by the mgr to comply with mgt agreement - need affidavits, evidence etc to get to court process. Would be 6-10 week process before court could [hear] then [Court time] - common law breach Stonington - feasibility: 3-4 year timeframe $22m injected and will be able to be repaid Noosa - currently pays its way - VCS have a charge for a development fee of $20m in 4 years time Double Bay - potential as a lowrise development with [restructuring] of DA (6-9 mts process), potential recapitalisation. Way forward are 7-10 days [is] for Sam / Nicki to continue progressing and then determine what needs to be done to remove Ashington.

Albany/Acorn seek additional documents - 10 October 2009

1. On 10 October 2009 at 7.52am, Mr Ko emailed Ms Garrett, Mr Carolan, Ms Briggs (copying in Mr Routley and Ms Morgan of Mallesons) requesting further documents be included in the Stonington Data Room. Acorn says that the fact that this email was sent to Ms Briggs (a representative of Ashington) indicated that there was no particular secrecy about what Mr Ko and Mr Routley were doing. Mr Routley replied that day by email at 4.35pm to Mr Ko, commenting that the lack of data in the Stonington Data Room raised questions about "how serious they are about getting the deal done" and that they were going to need something from the investors because "[i]f all new investments in trust have to be done by way of pro-rata investment then just one of the investors can starve capital ad force the project into liquidation". Mr Routley said that they had to make it clear that they were not interested in buying time just to sell the asset (assuming this was not the value maximising decision). Mr Ko's response was that he agreed.
2. At 5.45pm on 10 October 2009, Ms Garrett forwarded to Mr Renauf the email received from Mr Ko requesting further documents in the Data Room and saying that Mr Ko had left a detailed message as to what would be covered on the Monday. Ms Garrett said that she and Mr Renauf should find time to prepare on Sunday if he still wanted to go (to Melbourne); and that, if not, that was fine by her as she was actually ready to provide her resignation. (This, to me, has the flavour of someone frustrated with the negotiations; not someone planning to take away the business of Ashington.)

Garrett re update sought by Anderson - 10 October 2009

1. At 5.42pm on 10 October 2009, Ms Garrett emailed Mr Anderson (copied to Mr Minahan and Mr Renauf) suggesting that the four have a group call or catch up on the Sunday 11 October 2009 (to ensure that nothing got lost in translation) and that this could replace the scheduled get together on the Monday morning as she and Mr Renauf were on the 6.30am flight to Melbourne on the Monday. Ms Garrett said that they could also update Mr Anderson on the Friday afternoon meetings.
2. At 5.47pm, Ms Garrett forwarded to Mr Renauf the email she sent to Mr Anderson at 5.42pm, and saying, "[t]his was sent to stop him calling me today as I have been ignoring his calls but he is leaving persistent messages. If you don't want to do it, no problem by me. I am happy to simply bail". (Again, this seems to me to be inconsistent with someone intent on progressing the diversion of Ashington's business for her own purposes.)

Response to Acorn/Albany's request for documents - 11 October 2009

1. On 11 October 2009 at 6.34pm, Ms Garrett replied to Mr Ko's email (including Mr Carolan, Ms Briggs, Mr Routley, Mr Renauf and Ms Morgan as recipients) confirming that she would pull together the requested information early the following week and that she was arranging a Sydney asset tour for Wednesday (14 October 2009) and would see him at 9.30am the next day (being Monday 12 October 2009) (which Acorn says was obviously for the Stonington tour). The Stonington Property was located in Melbourne, and as such, an asset tour in Sydney would necessarily include other assets of ADF and ADF2, such as the Double Bay Property, the Wylde Street Property or the Kings Cross Property. Again, it is said that the fact that Ms Briggs and Ms Morgan (as representatives of Ashington) were included on this email indicated no particular level of secrecy about these matters. (Acorn says that Ms Briggs' evidence that she did not know from this email that touring the Sydney assets would have nothing to do with a capital raising in relation to Stonington should not be accepted.)
2. After receiving Ms Garrett's email, on 11 October 2009 at 7.51pm, Mr Routley sent an email to Mr Sheehan, stating that "I now have a low expectation of this deal" and noting that the documents Mr Ko had asked for were "basic and should have been provided. No-one can invest without them", causing him to "[q]uestion how serious they are about getting a deal done". Mr Sheehan replied by email at 8.35pm that day commenting "[y]ou never know. Things had been pretty fluid and they may not have had time to put these documents together" and saying that they "must be serious about a deal" as "the alternative is insolvency and real value loss for the unitholders".

Stonington Tour - 12 October 2009

1. Acorn says that it should be inferred that on Monday 12 October 2009 Mr Routley and Mr Ko toured the Stonington Property as arranged and referred to in Ms Garrett's email of 8 October 2009 at 2.29pm (see above).

Investec update - 12 October 2009

1. On Monday 12 October 2009 at 3.58am (presumably this timestamp is wrong since it seemingly precedes the trip to Melbourne to which the email refers), Ms Garrett sent an email to Mr de Rooy, copied to Mr Renauf, apologising for the lack of contact and stating that she and Mr Renauf had just returned from Melbourne. Ms Garrett stated that they made good progress with the Alter family (who she said were well known to Investec and definitely had the financial capability to close the proposed transaction within the prescribed timeframe); that she had had some disturbing advice in relation to approaches to agents by Investec; and that she did not have access to the Patersons Mandate from her home computer but would send the following day.
2. On 12 October 2009, Mr de Rooy responded to Ms Garrett's email arranging a time to have a discussion and noting that her comments as to approaches to agents by Investec was "really disturbing". Ms Garrett responded, copying Mr Renauf, asking if Mr de Rooy had any time the following day to meet with Alter.

Legal proceedings - 12 October 2009

1. On 12 October 2009, Ashington was advised that was being commenced (by an entity Fulton Hogan) legal action against it in relation to outstanding moneys.

Writedown of HESTA Investment - 12 October 2009

1. On 12 October 2009, Ms Briggs sent an email to HESTA and others recording the value of HESTA's investment in ADF2 at cost of $28.6 million and at a firesale of $3.1 million. Mr Hastings at HESTA confirmed that HESTA should writedown its investment to $3.1 million. On the same day Mr Hastings emailed Mr Gavin regarding an article about Ashington in The Australian titled, "Advisers called in after twin towers take tumble".

Thorney - 12 October 2009

1. On 12 October 2009, Ms Garrett emailed Mr Anderson that the meeting with Thorney went well; and that Thorney was concerned to ensure that they had the Westpac extension prior to committing to site inspections (and suggesting that she and Mr Renauf might meet Thorney in Melbourne on Friday).

Draft Albany/Acorn offer - 12 to 14 October 2009

1. Between 12 and 14 October 2009, Mr Ko and Mr Routley prepared drafts of a letter, the final form of which appears to be dated 14 October 2009 and addressed to "The Unitholders, Ashington Development Fund 1, Ashington Development Fund 2, C/- Brett Lord, PPB" (14 October Letter). That final letter was hand delivered to PPB on 14 October 2009, when Mr Ko and Mr Routley were in Sydney for the Sydney asset tour.
2. On 12 October 2009 at 11.08pm, Mr Routley sent an email to Mr Ko attaching a marked up version of a proposed letter of offer from Albany and Acorn to the unitholders of ADF and ADF2 (dated 14 October 2009) with respect to a "proposed investment and transfer of management rights of the Funds to the Consortium", the "Consortium" being defined to mean Albany and Acorn; noting that it was to be hand-delivered to PPB in the Sydney meeting. The plaintiff points out that Mr Routley's changes included the addition of the following words, which the plaintiff says make plain his awareness that Ms Garrett and Mr Renauf were "Ashington personnel": Proposal …. c. Management Team. It is the intention of the Consortium to enter into negotiations with Nicola [ ] and Sam [ ] with a view to retaining their services going forward together with other selected Ashington personnel.
3. Mr Ko responded at 11.46pm attaching an alternative draft letter of offer, which referred to discussions between "Nicola Garrett and Sam Renauf with [Albany] and [Acorn]" and set out a proposed investment, the objective of which included "[t]o acquire the RE and management rights for [ADF and ADF2]". The plaintiff says that that document indicated that their preliminary review of the ADF and ADF2 properties led them to view the projects as having sound property fundamentals including specifically their location and underlying demand for the development product.

Investigating accountant KordaMentha engaged by NAB - 12 October 2009

1. On 12 October 2009, NAB informed Ashington that they were appointing David Winterbottom of KordaMentha as investigating accountant to review the Double Bay Project. NAB and St George did not take steps to enforce their security pending KordaMentha's review (which was undertaken whilst Ashington was seeking to progress the Stonington Capital Raising). (The plaintiff maintians that, had the Stonington Capital Raising been successful, the Investec and Hamton facilities would have been fully paid and the unitholders would have become legally liable to meet a call for capital of $6 million. It is said that the remaining funds from the new lender, the funds from this call, and funds from the sale of the Wylde Street Property would have meant that Ashington Capital would have been able to complete Stage 1 of the Stonington Development, as well as improving Ashington's negotiating position with Westpac and NAB/St George.)

Sale of Stonington put "on hold" - 12 October 2009

1. On 12 October 2009, Mr Block sent an email to Mr de Rooy, copied to Mr Lord, attaching a letter confirming that Ashington was pursuing a capital raising exercise with regard to a possible recapitalisation of the Stonington unit trust and that following the adoption of this strategy "the sale process which we were mandated to pursue has been put on hold". The letter set out a timetable for the sale process assuming recommencement of the sale process on 19 October 2009.

Military Super - 12 October 2009

1. Mr Dedes prepared a Board report for Military Super on the Ashington funds on 12 October 2009.

Ms Garrett updates Mr McCabe - 13 October 2009

1. On 13 October 2009, Ms Garrett sent an email to Mr McCabe at 12.36am, telling him that things had been moving quickly and that "in our discussions with various private investors with respect to the Stonington opportunity we realised that we were aiming too small and should be focussed on the current broader market opportunity". Ms Garrett stated: In brief, there are a number of domestic institutions keen to support myself, Sam Renauf (who you have met) and Tim Hannon (background attached) in a new venture that will effectively run as an Australian real estate investment and advisory organization that participates in all major asset classes…
2. Ms Garrett identified four opportunities and said that she was close to securing the capital to deliver on each. Ms Garrett asked whether Mr McCabe would be interested in being on the board and potentially taking on an equity stake; and asked to visit him in London and share with him her detailed business plan and the work completed to date on each of the opportunities. Mr McCabe expressed interest and suggested a conference call.

Investec - 13 October 2009

1. On 13 October 2009, Mr de Rooy sent an email to Ms Garrett copied to Mr Renauf confirming arrangements for a telephone call and a meeting with Alter on 14 October 2009.

Creditors - 13 October 2009

1. On 13 October 2009, apparently following a meeting the previous day at which it was agreed to keep a running schedule of all creditors who had issued final demands or commenced legal proceedings, Ms Briggs sent an email to Mr Steel and Mr Anderson attaching a schedule of outstanding creditors (containing four Stonington creditors, one Cross+ Trust creditor and one Project X Hotel Trust creditor).
2. By 19 October 2009, at least one creditor had ceased providing services to Ashington as a result of unpaid invoices, preventing real estate listings from being published (Ms Garrett and Mr Renauf note that this was despite payment of this account being "important", and the amount being relatively small). That particular creditor was seeking a payment of $10,529 to reactivate the account (with the rest to be paid pursuant to a payment arrangement). Mr Steel stated in an email that this needed Mr Anderson's approval as they had agreed not to make any payments until the next cashflow meeting. Ms Emily Lee (of Ashington), responded that Mr Anderson had earlier agreed to pay by installments ($4500, then $4000, then the remaining $4534.47) over a number of weeks.

Smorgon access to Stonington Data Room - 13 October 2009

1. On 13 October 2009 Ms Briggs requested that Mallesons grant Mr James Orloff (of Smorgon) access to the Stonington Data Room.
2. On 13 October 2009, Mr Anderson emailed Ms Garrett (at her Ashington and Gmail accounts) and Mr Renauf, saying that he had three groups inspecting the Stonington Property that day and hopefully this could create some competitive tension with Ms Garrett's prospects.

Ms Garrett's "salary" - 13 October 2009

1. On 13 October 2009, Mr Carolan sent an email to Ms Garrett with the subject "payment from ashington", stating: Mate - have just noticed a payment from Ashington last week for $4080 with the comment of 'salary'. Are you also now on the payroll on a fortnightly basis?

Acorn/Albany prepare joint letter to investors - 13 October 2009

1. On 13 October 2009 at 1.56pm, Mr Sheehan (who with Mr Ko and Mr Routley was working on a draft letter to the superannuation fund investors via PPB setting out their joint investment proposal) sent an email to Mr Ko copied to Mr Routley (subject line "Ashington letter") in advance of Mr Ko and Mr Routley's meeting later that afternoon. Mr Sheehan said, "here is where we got to on the Ashington letter" and advising that Mr Routley would bring a copy of the letter with him to Sydney for Mr Ko to sign for the meeting the following day. On 13 October 2009, at 2.18pm, Mr Ko responded to that email saying he had reviewed the letter and it was excellent and that he would revert if there was any feedback from the meetings that day.

Meeting of PPB, Investec and Albany - 13 October 2009

1. Mr Ko met with PPB and Investec on 13 October 2009. Following the meeting, Mr Ko provided Mr Routley with an update. Mr Routley emailed Mr Sheehan at 10.13pm to say that the "motivation from unitholders is pending legal action from Investec, as expected. Investors would prefer to see a deal to be done" and that they would know more the next day.

The Stonington Data Room - 14 October 2009

1. Mr Routley deposed that after the meeting on 14 October 2009, Mr Ko and Mr Routley prepared a list of additional documents and information to be provided to Albany/Acorn for due diligence purposes (Mr Routley's 10 August 2018 affidavit at [50]). On 14 October 2009, Mr Carolan arranged a due diligence review session for the Stonington Project.

Stonington Project - 14 October 2009

1. On 14 October 2009 at Ms Briggs' request for a "soft copy", Ms Garrett sent an email to Ms Briggs and Mr Anderson, copied to Mr Renauf, attaching the 5 October 2009 Stonington PowerPoint. Ms Briggs had asked: "Can you send me a soft copy of the Stonington Project Investment Opportunity presentation (as attached)." I read this as Ms Briggs having a hard copy and perhaps have even scanned it and attached it to the email but that what she was seeking is the powerpoint file.
2. On 14 October 2009 at 8.42am, Mr Carolan sent an email to Ms Garrett (at her Ashington email address), enclosing a copy of the Patersons Mandate to share with Investec.
3. On 14 October 2009 at 9.39am, Mr Burns of NAB sent an email to Mr Gadallah (at St George) copied to KordaMentha, saying that Ms Garrett had called to say that Ashington was meeting with potential investors that day and would not be able to join them; and that they had been talking with this particular investor "solidly" for some time.

Albany/Acorn letter of offer - 14 October 2009

1. The Albany and Acorn joint letter of offer to superannuation fund investors appears to have been provided to PPB at the 14 October 2009 meeting attended by Mr Routley, Mr Block, Mr Lord and Mr Nicholas Warden (of PPB), Mr Ko and Mr Tremaine (of Albany) at PPB's offices.
2. The 14 October 2009 letter was prepared on the joint letterheads of Albany and Acorn and is addressed to the unitholders care of PPB. The 14 October 2009 letter defined Acorn and Albany as "the consortium".
3. The 14 October 2009 letter included, amongst other things, the following: (a) the title "Refinancing of $10.3 Mezzanine Facility provided by Investec to Ashington Development Fund 2 and Transfer of Management Rights (Proposed Investment)"; (b) a reference to discussions between Garrett and Renauf with Albany and Acorn; (c) a statement that the letter was indicative only, not an offer and not capable of acceptance; (d) an expression of hope that the 14 October 2009 letter would assist "the ADF 1 & 2 unitholders… and PPB" to determine whether they wish to continue discussions with the Acorn and Albany; (e) an outline of Acorn and Albany's objectives, including assuming the management rights for ADF and ADF2; (g) a desire that "the Unitholders…view our proposal as a friendly solution to assist with short term financing problems, but provide a long term solution in the best interests of Unitholders"; (h) a statement that the Acorn and Albany were open to considering investments over and above the Proposed Investment; (i) a summary of the respective businesses of Albany and Acorn, including also describing them as "[t]he Partners"; and (j) a process and timetable of approximate dates of completion, which included agreeing terms of employment for the management team, which would be "principally" Ms Garrett and Mr Renauf, by 21 October 2009 as well as due diligence and a term sheet for the proposed transaction, both being completed by 6 November 2009.

Smorgon - 14 October 2009

1. On 14 October 2009 at 3.55pm, Mr Anderson sent Mr Orloff (of Smorgon) a version of the Stonington PowerPoint, referring to a meeting that morning.

Meeting of Albany/Investec/Ms Garrett - 14 October 2009

1. At 5pm on 14 October 2009, Mr Ko met with Mr de Rooy and Ms Garrett.

Application to extend - 14 October 2009

1. On 14 October 2009, there was a St George Internal Advance Application to extend the Cross+ and Potts Point residual debt expiry date to 30 November 2009 and to carry current excess for 19 days to 31 October 2009, represented by the quarterly interest in advance for the Project X Hotel Trust, subject to investigating accountant and Phillips Fox documentation review; and noting that Ashington Capital as trustee for the Stonington Trust is also currently in default.

McCabe organises meeting in London - 15 October 2009

1. On 15 October 2009, Ms Garrett sent email to Mr Carolan noting that Mr McCabe wanted Ms Garrett and Mr Renauf to meet in London the following week. Mr Carolan responded that Ms Garrett should go to London.

Media - 15 October 2009

1. On 15 October 2009 at 11.47am, Mr Routley sent an email to Mr Ko, Mr Sheehan and Mr Swan, attaching a copy of a news article concerning rumours about a sale of the Potts Point Property by Ashington and that stating that "PPB had been appointed by investors to work with Ashington".

Meeting with KordaMentha organised - 15 October 2009

1. On 15 October 2009 at 3.01pm, Ms Garrett sent an email to Mr Minahan, Mr Anderson and Mr Steel, copied to Mr Renauf, saying that Joe (presumably Joe Burns of NAB) had asked her to meet with KordaMentha the following day and that in light of "today's press" PPB had been asked by superannuation fund investors to review the assets again. Ms Garrett said that Mr Renauf would liaise with them on the information required by Mr Block. Ms Garrett said that she had a conference call with the Alter family at 4pm and Thorney at 5pm and that the meeting between Mr Ko and Investec went well. Ms Garrett said that neither the Alter family nor Thorney was "phased" by Westpac's decision.
2. At 5.20pm on 15 October 2009, Mr Anderson responded to Ms Garrett's 3.01pm email, saying that Mr Steel should attend the KordaMentha meeting and noting that Ms Briggs was preparing weekly reports for Investec, Wylde Street and PPB.
3. At 7.50pm, Ms Garrett sent an email to Mr Anderson saying that KordaMentha had asked her to attend the meeting alone.

Wingate sent Stonington PowerPoint - 15 October 2009

1. Mr Anderson says that, concerned by an apparent lack of tangible progress on the Stonington Capital Raising during October 2009, he held direct discussions with other parties who expressed interest in entering into a transaction with Ashington, including discussions with Wingate Group. On 15 October 2009 at 3.51pm, Mr Anderson sent an email to persons at Wingate, attaching a version of the Stonington PowerPoint.

PPB/Albany/Acorn - 15 October 2009

1. On 15 October 2009 at 4.24pm, Mr Block sent an email to the asset consultants providing an update on the meeting with Alter (i.e., Albany) and Acorn the previous day to "discuss their interest in pursuing the Ashington assets". The email stated that Mr Ko wanted to provide a conceptual deal by the middle of the following week and while they saw some value in the asset management strategy "their real interest is to use these assets as seeds for a broader fund management business". The email said that Alter and Acorn "see no value in retaining Ashington and any 'deal' would incorporate the effective and cost-efficient removal of existing management" and any "deal" would include the removal of Ashington as the manager. The email also said that Alter/Acorn undertook a site visit of the Wylde Street and Double Bay and a street visit of the Cross+ and Potts Point properties "which were conducted with Ashington's approval and with a member of staff present".
2. Mr Block requested the asset consultants' approval to provide the required information to Acorn/Alter on a "needs be" basis for them to gain a better understanding of the assets. While consent for the provision of this information to Albany and Acorn for this purpose was sought from superannuation fund investors, the plaintiff points out that it was not sought from Ashington.
3. In relation to this, Mr Gavin noted in an email to HESTA on 16 October 2009: Jonathan & I spoke to Peter Block late this morning. We don't have a problem with PPB supplying the information to the Alter family and Acorn Capital to allow them to make a decision, on the basis that HESTA aren't pre-agreeing to whatever Alters & Acorn have in mind. Peter said PPB already have the majority of the information, and we just need to get the rest of the info. off Ashington, which shouldn't be a problem, as Craig Anderson is still delusional and still thinks this is a plan to keep his fund (and his business) going. … The biggest issue will be extricating Ashington (voluntarily) from ADF 1 and ADF 2, so the Fund can continue with no involvement from Ashington. Removing Ashington forcefull [sic], or proceeding with court action, will be lengthy & costly. For what it's worth, while we agree with PPB that the Alters & Acorn proposal is likely to give the investors the best possible chance of some upside here, we also think you want to think very carefully before any "amicable" split from Ashington, which would release Craig and his friends (particularly Bouris, who is likely to be the only one with any capital) from their liabilities…
4. Acorn says that this email is completely consistent with the long held attitude of the superannuation fund investors at this time that being the desire to see the removal of Ashington and to try to find a proposal which would restore some value to their equity (or "save the equity" as Mr Thow termed it).
5. On 16 October 2009, there were emails from the asset consultants responding to Mr Block's email and giving approval to the disclosure of information to Acorn and Albany.

Investec querying standstill arrangement - 15 October 2009

1. On 15 October 2009 at 5.36pm, Ms Garrett sent an email to Mr Anderson, copied to Mr Minahan, Mr Renauf and Mr Steel, saying that "Paul" had contacted Mr de Rooy and advised he has an action against Ashington and you in respect of Stonington; and that as a consequence, Mr de Rooy was querying the standstill arrangement. Ms Garrett said that "we were due to have dial in with Alter and Investec to pass "'gate one' on standstill tomorrow morning". On 15 October 2009 at 5.41pm, Mr Anderson sent an email in reply saying, "[i]t would be nice to know who contacted who first. Hamton just like Investec have an action pending. The Hamton action is slow and Investec position will be resolved way earlier. Why don't I come to meeting with Michael he has nothing to worry about and it won't impact the standstill". Ms Garrett's response at 5.48pm was that Mr Anderson was welcome to come to the meeting but Mr de Rooy was not favourably disposed towards any of the Ashington directors.

Albany list of issues - 15 and 16 October 2009

1. On 15 October 2009 at 9.59pm, Mr Routley sent an email to Mr Ko with a "List of Issues" attached, which covered matters including the "Termination of Management Agreement", to which Mr Ko then responded by email with some additions. Acorn says that the list is a good "ready reckoner" of the issues that were bedevilling Ashington, ADF, ADF2 and the superannuation fund investors at that time, including: whether there was any equity in the developments; whether there was any value worth rescuing; breach of mandate; breach of licence conditions; solvency; Investec default and potential litigation against the investors; vendor finance litigation (and the personal guarantee) and the payment to Valad due in four years (in relation to the Noosa Property).
2. On 16 October 2009 at 10.46am, Mr Ko sent an email to Mr Routley with a draft email to PPB for discussion.

Albany/Acorn confirm interest in replacing Ashington - 16 October 2009

1. On 16 October 2009 at 11.46am, Mr Routley sent an email to Mr Block, Mr Warden and Mr Lord, copied to Mr Ko and Mr Sheehan, referring to the meeting held with them and Mr Tremaine on 14 October and saying that, while he understood that there were significant issues with respect to ADF and ADF2, its financing arrangements and the respective properties, he confirmed their interest in "replacing Ashington as a manager of ADF 1 & 2" and investing their capital to replace/refinance the Investec mezzanine facility. The email enclosed a list of information that Mr Routley wanted to receive as a matter of urgency. (The plaintiff says that Mr Routley's request identified a plethora of documents required at fund and sub-trust level, including constitution documents.) Mr Block responded that "[c]learly that is a lot of information!!", noting that "[w]e have access to a fair degree of what has been requested and will start sending what we can to you". Mr Block also noted that PPB had put together an "issues document" and would be happy to discuss it that afternoon. Mr Block then sent an email to Mr Renauf and Ms Garrett, forwarding that email at 11.52am, saying that, "[w]e have a fair bit of that info - lets discuss how to get it to them".

Wylde Street change of agent - 16 October 2009

1. On 16 October 2009 at 2.03pm, Mr Block sent an email to Ms Briggs and Mr Lord with a copy to Mr Anderson, querying why Ashington changed agents on the sale of Wylde Street. At 2.06pm Mr Anderson forwarded the email to Mr Minahan saying, "FYI - suggest you meet peter and explain".

Information to Albany - 16 October 2009

1. On 16 October 2009 from 2.10pm through to 4.37pm, Mr Block sent a number of emails to Mr Ko, Mr Sheehan and Mr Routley attaching several documents, including ADF and ADF2 structure summaries and the Ashington corporate diagram and fee structure summaries; ADF2 Information Memorandum with tax opinion part 1; tax opinion part 2; tax opinion part 3; the constitutions of ADF and ADF2; the Second PPB Report; the First PPB Report and annexures; the Development Management Deeds for the Stonington, Wylde Street, Cross+, Potts Point and Double Bay trusts; services agreement between Noosa Venture 1 Pty Ltd, Valad Funds Management Ltd and Ashington Management; Balance Sheets and Financials of ADF2 and its sub-trusts; documents relating to Investec's facility with ADF2; information in relation to the Noosa Venture Trust; information in relation to Westpac's senior debt for the Stonington Trust; Stonington sale documents and vendor finance documents; information in relation to called and uncalled capital in ADF; Double Bay debt legals; information as to various charges; facility documents for Wylde Street, Double Bay, Ashington Group and Cross+; Wylde Street valuations Parts 1 and 2; constitutions for the sub-trusts for Stonington, Kings Cross, Potts Point and Wylde Street and for Noosa; the Noosa Valuation; acquisition and feasibility documents for Double Bay Part 1 and Board submission Stamford Plaza Part 1; acquisition documents for Double Bay part 2; acquisition documents and final feasibility in Board report for April 2008 re Noosa; acquisition and feasibility documents part q for Stonington; acquisition and feasibility documents part 2 for Stonington; trade creditors as at 30 September 2009 for Stonington Trust, Wylde Street Trust and Project X Hotel Trust; Double Bay valuation; and Balance Sheets for Wylde Street Trust, Cross+ Trust, Noosa, Double Bay and Stonington as at 30 September 2009.
2. In the course of so doing, at 2.45pm, Mr Block emailed Ms Briggs asking her to send him the constitution for Ashington Capital; and at 2.56pm Mr Routley sent an email to Mr Block seeking further information about the called and uncalled capital for ADF. Mr Block suggested a phone conference at 3pm that day. On 19 October 2009 at 10am, Ms Briggs sent an email to Ms Garrett forwarding the email received from Mr Block at 2.45pm on 16 October 2009 and saying: Peter had asked for the below documentation … it may be outside the scope of their engagement. Please advise whether we should send this to him.
3. Ms Garrett responded to this at 10.07pm that day, stating "[t]he breadth of the PPB mandate seems to shift every day!" and that she had a meeting with them tomorrow in which she hoped to "get resolution on the reason for the information request". (Pausing here, Ms Garrett must have known the reasons for the information request as she was sent the emails requesting information from Albany/Acorn. Hence, the inference is that she was attempting to hide that knowledge from others at Ashington.)
4. Also on 19 October 2009, Ms Garrett sent an email to Mr Renauf, forwarding the email chain commencing with Mr Routley's email at 11.46am on 16 October 2009 (see above), followed by Mr Block's email to Mr Renauf and Ms Garrett sent at 11.52am) on 16 October 2009 (marked with high importance), saying that "This is the key thing for us today. If you have time it would be great if you could look at my letter in response".

PPB Key Issues Paper - 16 October 2009

1. On 16 October 2009 at 11.30am, Mr Block sent an email to Ms Garrett's Gmail address, stating "as discussed" and attaching a "Key Issues" paper. On 16 October 2009 at 5.51pm, Mr Block emailed Mr Sheehan, Mr Routley and Mr Ko (copying Ms Garrett and Mr Lord) the "Key Issues" document (PPB Key Issues Paper) which, amongst other things, gave an overview of the assets within the various sub-trusts that were comprised within ADF and ADF2, and: highlighted breaches of the trustee's obligations at the head trust and sub-trust levels; stated that the removal of the trustee had been investigated by their lawyers, Arnold Bloch Leibler, who have advised that the trustee could be summarily removed from its position upon a circular resolution of members holding at least a 75% majority, observing that "[w]e note that our clients have indicated their willingness to support such a move, in light of a revised proposal"; stated that it is not as easy to remove Ashington Management as development manager as PPB are "not as clear on the breaches of the Development Management Agreements"; referred to PPB seeking advice from Arnold Bloch Leibler and that there are two options: voluntary removal of the manager and a possible court application seeking orders removing the trustee and manager, subject to the support of the unitholders and lenders; and stated that, "[g]iven the fundamental and serious breaches of duty by the Trustee, together with the financial position of ACL, [PPB] are of the view that an application to the Court for the appointment of Provisional Liquidator to ACL is likely to be successful and further, that the Provisional Liquidator would be able to give effect to a restructure and removal of the Manager should this position not be achieved by negotiation".
2. (Relevantly, this seems in its terms to be PPB advising Ms Garrett and Mr Renauf of the superannuation fund investors' support for removal of trustee, i.e., that PPB was raising the issue with Ms Garrett rather than vice versa.)
3. On Sunday, 18 October 2009 at 4.22pm, Ms Garret forwarded the PPB Key Issues Paper to Mr Renauf's Gmail address.

Westpac extension - 16 October 2009

1. On 16 October 2009 at 4.01pm, Mr Thomas of Westpac sent an email to Mr Steel, copied to others at Westpac, stating that Westpac was prepared to extend the maturity for its Commercial Bill Line facility in relation to the Stonington Trust until 31 December 2009 subject to certain conditions, but that Mr Steel had advised that they could not make the $850,869 interest payment on 16 October 2009 and on that basis Westpac had withdrawn its offer to extend the matured Commercial Bill Line facility. The email reserved the right to appoint an investigating accountant and/or receiver and manager; and concluded, "[p]lease note that the Bank will not provide funding to complete your Stonington project".

Icon Constructions - creditor's statutory demand - 16 October 2009

1. On 16 October 2009, Mills Oakley on behalf of Icon Constructions sent a creditors' statutory demand to Ashington Capital as trustee for the Stonington Trust in the sum of $50,050.

Investec update re Stonington Capital Raising - 18 October 2009

1. On 18 October 2009 at 4.37pm, Ms Garrett sent an email to Mr de Rooy, copied to Mr Renauf, attaching a progress report on the Stonington Capital Raising dated 16 October 2009.

KordaMentha - 19 October 2009

1. On 19 October 2009, NAB and St George appointed KordaMentha as investigating accountant to undertake a review of the financial position of ADF2.
2. On Monday, 19 October 2009, Ms Garrett sent to Ms Cassandra Matthews (of KordaMentha), copied to Mr Renauf, an email Ms Garrett had sent to NAB personnel (on 8 October) attaching documents and said that she and Mr Renauf were in the process of collating further information on Double Bay.
3. On 19 October 2009 at 9.34am, Mr Winterbottom (of KordaMentha) sent an email to NAB and St George banking personnel (subject line "Ashington - 33 Cross Street, Double Bay"), setting out details of a meeting he had with Ms Garrett and Mr Renauf. Mr Winterbottom stated: You should note that it is apparent that despite carrying Ashington business cards, Nick and Sam are not formally employed with Ashington as yet, and based on our conversation, may not be any time soon. Preliminary indications are that any new equity injection would involve fundamental restructuring of ownership and management at the top level, and therefore, they are keeping their employment options open and fluid.
4. The reference to "keeping their employment options open and fluid" seems to be consistent with Ms Garrett's earlier email to Mr Steel as to her not being necessarily prepared to commit for 12 months as superannuation fund investors had wanted; and is contemporaneous evidence that Ms Garrett did not regard herself as contractually bound to employment with Ashington.

PPB/Acorn/Albany - 19 October 2009

1. On 19 October 2009 at 9.32am, Mr Block sent an email to Mr Sheehan, Mr Routley and Mr Ko, commenting on the Cross+ Project and saying that it was the seed asset acquired by Ashington prior to the development of ADF and included in the fund by way of a risk assumption agreement rather than a sale into the fund for stamp duty reasons. The email attached documents, including the Information Memorandum for ADF and documents relating to the Cross+ Project.
2. On 19 October 2009 at 10.05 am, Mr Ko sent an email to Mr Block, copied to Mr Routley and Mr Lord (with the subject header ASH - Project X Hotel) stating that PPB had previously indicated to "us" that "the issue of security for the proposed replacement mezzanine/preferred equity and the viability of ADF2 going forward for existing investors is predominantly contingent on the ability to provide a property solution to Project X" and that "they" agreed "with this thesis". Mr Ko requested that arrangements be made for Mr Tremaine and accompanying builders to visit the Double Bay Property and requested information regarding the Double Bay Project. The email noted that "[o]btaining this information would be very useful as we are having difficulty reconciling this particular project at the moment".
3. On 19 October 2009 at 11.16am, Mr Block sent an email to Mr Sheehan, Mr Routley and Mr Ko, attaching the Risk Assumption Agreement for the Kings Cross Property (part of the Cross + Trust).
4. On 19 October 2009 at 11.19am, Mr Block sent an email to Mr Renauf and Ms Garrett with the subject heading "FW Ash - Project X Hotel", forwarding the 10.05am email from Mr Ko and saying "Some info - Byron need; can you plse assist? Also they wish to lock in a time for a more detailed site visit".
5. At 11.20am, Mr Block responded to Mr Ko's 10.05am email, with a copy to Mr Routley and Mr Lord, saying that he would "liaise with Ashington and revert on both fronts as soon as practicable". (Acorn says that this was an important indicator to Mr Ko and Mr Routley that PPB was liaising directly with Ashington to get access to the Double Bay Property and to obtain additional documents to satisfy the information requests. Acorn says that, outwardly, it is not suggestive of any particular secrecy about what was occurring.)
6. At 12.32pm, Mr Block sent a couple of emails to Mr Ko, copied to Mr Routley and Mr Lord, attaching various documents in relation to the Double Bay Project; first, the floor plans and sale Information Memorandum for Double Bay; and then CBRE and retail estimates for Double Bay. This included documents labelled, "SUBJECT TO CONFIDENTIALITY UNDERTAKING. Do not distribute or copy".
7. At 12.38pm on 19 October 2009, Ms Garrett responded to Mr Block's email of 11.19am, saying that they could secure this data and arrange for more detailed site visits; and that she had some issues "from an Ash perspective" to discuss with him and would call at a convenient time. Mr Block's response was that he had been corresponding with Mr Ko, who wanted to talk to Ms Garrett that afternoon. At 12.53pm, Ms Garrett responded that she had spoken to Mr Ko and would update Mr Block when she called.

Investec/Albany/Acorn - 19 October 2009

1. On 19 October 2009 at 10.19am, Mr Ko sent an email to Mr de Rooy, with the subject "Ashington Development Fund 2 - replacement of Investec Mezzanine Facility", referring to their meeting the previous week and saying that he was working with Ms Garrett and PPB to create a new investment structure which would allow them to pay out in whole the mezzanine debt facility that Investec had provided to ADF2. The email raised the possibility of purchasing or refinancing the Investec senior debt position in the Wylde Street Property and asked for Mr de Rooy's thoughts on that possibility. Mr Ko sent to Ms Garrett at 10.20am a copy of that email. (Acorn points out that there is no evidence that Mr Routley was aware of this communication.)

Ms Garrett/Mr Renauf's proposed new salary arrangements - 19 October 2009

1. On 19 October 2009 at 2pm, Ms Garrett sent an email from her Gmail address to Mr Ko, copied to Mr Renauf with the subject "proposed package - Nicki/Sam", setting out suggestions concerning base salary ($350,000), equity in Newco, and bonus structure/carry arrangements. The email noted that each of Ms Garrett and Mr Renauf "currently have a base salary of $350k per annum" and were offered "5% each of equity in Ashington when they made the decision to join the company". Ms Garrett proposed the same salary under the Alter/Acorn structure, along with a bonus structure potentially involving a share in profits. Mr Ko forwarded a copy of Ms Garrett's email to Mr Routley at 3.12pm.
2. On 19 October 2009 at 2.02pm, Ms Garrett sent an email to Mr Carolan, copying this email, saying that "Byron [Ko] is pressuring me for this information, hopefully this looks reasonable. Thought I had better keep you in the loop". Mr Carolan replied, "We can discuss later tonight".
3. Meanwhile, as adverted to above, on 19 October 2009, Ms Garrett, in communications copied to Mr Renauf, made arrangements with Mr Block for a call that day and a meeting on 20 October 2009. The plaintiff says that, over the course of October and November 2009, Ms Garrett, Mr Renauf, PPB, Albany and Acorn worked collaboratively to develop and execute a secret plan to replace Ashington with a new trustee and manager.

NAB send Ashington the KordaMentha engagement letter - 19 October 2009

1. On 19 October 2009 at 2.57pm, Mr Peter Fossey of NAB sent an email to Ms Garrett and Mr Anderson, copied to NAB and St George personnel, attaching an engagement letter for KordaMentha to conduct a strategy and financial review of Ashington Capital.
2. At 4.30pm on 19 October 2009, Mr Ko and Ms Garrett had a conference call.

Investec update from Ms Garrett - 19 October 2009

1. On 19 October 2009 at 5.17pm, Mr de Rooy sent an email to Mr Sargeant (of Investec) and others, attaching the update received from Ms Garrett on 16 October 2009 and reporting on a telephone call with Ms Garrett that morning. Mr de Rooy noted that they had discussed three "serious parties" (Acorn/Pacific, Mr McCabe and the Smorgon Family). Noting that Credit wanted to decide in mid-October whether to pursue legal action, Mr de Rooy requested this be extended to the end of October and reviewed at that time. Mr de Rooy said that working with Ms Garrett and Mr Renauf on either a mezzanine facility or alternative "asset sale" would provide a better ultimate outcome to Investec than commencing legal recovery action.

PPB/Garrett/Albany/Acorn - 20 October 2009

1. On 20 October 2009 at 8.04am, Ms Garrett sent an email to Mr Block, copied to Mr Renauf, saying that she and Mr Renauf had been "summoned" to a meeting at 9am at Ashington (postponing a planned catch up to 10am) and that "[w]e had a good catch up with Byron [Ko] and Kevin [McCabe] yesterday and Sam [Renauf] made progress on offers". Ms Garrett and Mr Renauf apparently then met with Mr Block at 10am on 20 October 2009.
2. On 20 October 2009 at 12.31pm, Mr Routley sent an email to Mr Block asking for the unitholder structure regarding the called and uncalled capital for ADF. Mr Block responded at 1.43pm, providing that information.
3. On 20 October 2009 at 2.57pm, Ms Garrett sent an email to Mr Ko, Mr Routley and Mr Tremaine, copied to Mr Block, Mr Lord and Mr Renauf ("re Stonington queries") attaching a document said to address their three queries with respect to the Stonington sales contracts.
4. On 20 October 2009 at 3.55pm Mr Block sent an email to Mr Routley attaching balance sheets for ADF and ADF2 as at 30 September 2009, referring to communications he had with Mr Steel about the Double Bay Project. The email stated that the attachments should explain their questions and that Mr Steel had advised that the "split in Project X is because of tax and other reasons for why the debt has been recorded the way it was. It has not been split on a 75/25 basis".
5. On 20 October 2009 at 4.06pm, Mr Renauf sent an email to the development managers at Ashington (Mr Bailey and Mr Wyeth) requesting documents in relation to Double Bay (as requested in Mr Ko's 10.05am 19 October email). Mr Wyeth responded at 5.47pm attaching the requested documents. Mr Renauf then sent those documents at 7.15pm by email to Mr Tremaine (of Albany), copied to Ms Garrett.
6. Meanwhile, on 20 October 2009 at 4.40pm, Mr Block sent an email to Mr Routley, stating that Mr Block had requested explanations from Mr Steel in relation to a number of errors Mr Block had found in the documents provided by Ashington. (Acorn says that this and the 3.55pm communication from Mr Block indicate that PPB was telling Mr Routley that PPB was obtaining information from Ashington - in this instance, the Chief Financial Officer).

PPB and Ashington - 20 October 2009

1. On 20 October 2009, from 2.54pm, through to 12.55pm on 21 October 2009 there were emails between Mr Block and Mr Steel relating to debt and equity in Double Bay.

KordaMentha - 20 October 2009

1. Meanwhile, on 20 October 2009, Mr Ko sent an email to Mr Craig Shepard of KordaMentha arranging to meet with him to discuss the Double Bay development (copying Mr Shepard's response to Mr Routley). (As noted above, KordaMentha had been appointed to advise the senior lenders of the Double Bay Property (NAB and St George) in relation to their various loan facilities.)
2. On 20 October 2009 at 3.02pm, Ms Garrett sent an email to Ms Cassandra Matthews (333 Consulting - apparently linked to KordaMentha) copied to Mr Renauf, saying that they had been advised the Double Bay valuation was imminent and had been working on various workout possibilities and should be in a position to share those the following day.
3. On 20 October 2009 at 6.43pm, Ms Matthews sent an email to Ms Garrett, copied to Mr Renauf and various persons at KordaMentha (including Mr Winterbottom), suggesting a meeting the following day at 3.30pm and attaching a list of information she wanted in relation to Double Bay.
4. On 20 October 2009 at 10.31pm, Ms Garrett emailed Ms Matthews, copied to Mr Renauf, Mr Winterbottom and others at KordaMentha, saying that she and Mr Renauf would start to work through their request the following day; that they had been working on a broad equity solution for a number of assets in Ashington funds, including Double Bay and that prospective investors (the Alter family and Acorn) were travelling from Melbourne to Sydney for a "detailed full day workshop" the following day. The email noted that both Mr Anderson and Mr Steel were available at that time and that Ms Garrett and Mr Renauf were free most of Thursday (22 October 2009). At 10.38pm, Ms Garrett forwarded to Mr Anderson and Mr Steel, copied to Mr Renauf, the email from Ms Matthews sent at 6.43pm on 20 October 2009.
5. On 20 October 2009 at 9.21pm, Ms Garrett emailed the development managers at Ashington to reschedule a 10am meeting to 12pm on the basis that she had been "summoned" by PPB for a meeting a 10.30am.

Acorn/Albany indicative offer - 20 and 21 October 2009

1. On 20 October 2009 at 3.30pm, Mr Sam Alter, Mr Tremaine, Mr Ko and Mr Routley held a meeting to discuss the results of due diligence and security for investment.
2. Over the course of 20 October 2009 and 21 October 2009, Mr Routley and Mr Ko exchanged a number of versions of a draft letter to investors that originated with the 14 October 2009 letter from Albany and Acorn.
3. This culminated in an updated offer to the superannuation fund investors in a letter dated 21 October 2009 that Mr Ko handed to Mr Lord on 21 October 2009. The letter was on joint Albany/Acorn letterhead and proposed a preferred equity issue in which Albany and Acorn, as well as the ADF2 Investors, would participate (21 October Letter). The final version signed appears to have been signed by Mr Ko, for himself, and also by Mr Ko "for Rob Routley Acorn Capital".
4. The 21 October Letter included, amongst other things: (a) the title "Ashington Development Fund 1 and 2 and Transfer of Management Rights ("Proposed Investment")"; (b) a reference to the meeting with PPB on 14 October 2009 and subsequent discussions; (c) a reference to continuing discussions between Ms Garrett and Mr Renauf with Albany and Acorn (Acorn together with Albany defined as "the Consortium") (d) a statement that they are seeking to work cooperatively with the Unitholders and advisers; (e) a reference to the opportunity they have had to conduct very preliminary due diligence on ADF and ADF2; (f) a statement that the letter was indicative only, not an offer and not capable of acceptance as any potential offer will require completion of further due diligence and documentation; (g) an outline of the Consortium's objectives, including assuming the fund and property management rights for ADF2; (h) proposing an investment of capital in ADF2, with a willingness to underwrite up to $15 million in preferred equity with the Unitholders participating in their respective proportions; (i) an outline of a preliminary strategy and recommendations with an initial focus on ADF2 (which involved the Investec mezzanine debt being immediately resolved, equity provided for Stonington and an exit strategy within 6-12 months, refurbishment of the Double Bay Property for residential and retail and hold the Noosa Property until an appropriate strategy is determined) and that overall ADF should be managed by PPB with the Consortium sub-managing the Wylde Street Project and the 25% interest of ADF in Double Bay; (j) the comment that the original purchase price for Stonington of $46 million was excessive and the original feasibility had flawed assumptions about the ability of the development plan to deliver the underlying revenue forecasts; (k) a summary of the respective businesses of Albany and Acorn as the Consortium, including also describing them as "[t]he Partners"; and (l) a process and timetable of approximate dates of completion, which a detailed due diligence being finalised and provision of a term sheet for the proposed transaction, both by "[ ] November 2009". The document did not include reference to the employment of Ms Garrett and Mr Renauf.
5. The 21 October Letter concluded by proposing a meeting with all of the superannuation fund investors and their advisers/consultants in the following week.

Superannuation fund investor's response to Acorn/Albany indicative offer - 21 October 2009

1. On 21 October 2009 at 5pm, representatives of the superannuation fund investors attended a teleconference with PPB to discuss the proposal received from Acorn/Albany. The plaintiff says that it appears that the content of that letter was relayed to investors by PPB by phone. Ms Chan of Sunsuper produced a note of a teleconference with Mr Block of PPB on 21 October 2009, noting that Alter and Acorn were proposing a "$15m mezzanine piece" for Stonington and noting that Double Bay required $167 million to complete with a new development approval, assuming existing investors put in 67% pro-rata to receive a return of about 95%. The plaintiff notes that Mr Hartley's recollection is that this was the only recapitalisation proposal advanced by PPB for consideration by the superannuation funds; and that, according to Mr Hartley, the Alter and Acorn proposal was put to the superannuation fund investors on the basis that it required a transfer of management to Alter/Acorn as a condition of the finance that they were offering (T 1001).
2. On 21 October 2009, Mr Block sent two emails (6.23pm and 6.41pm) to Mr Ko and Mr Routley with a copy to Mr Lord, providing feedback on the 21 October Letter and the meeting held that day between PPB and asset consultants to the superannuation fund investors.
3. In the first, Mr Block referred to the proposal, stating that: they had discussed the proposal with "our clients" that afternoon (inferred to be the superannuation fund investors) and provided them with a broad overview of the proposal; there was limited support for such a conceptual plan; the superannuation fund investors were not minded to support significant equity raisings in the funds from their own resources; they were instructed to seek a revised proposal on the basis that funding for Double Bay, Stonington and Noosa be provided by third parties; it would be prudent for Mr Ko and Mr Routley to provide a more detailed outline regarding their proposed management capabilities; and in replacing Ashington, the superannuation fund investors would want to be convinced of the new manager's capabilities in respect of both funds management and high end residential development.
4. In the second, Mr Block said that he would appreciate Mr Ko and Mr Routley's thoughts regarding the Wylde Street Property and how they propose to move forward with it, which would involve outlining how existing investor equity would be dealt with and procurement of additional costs to finalise the project.
5. On 21 October 2009 at 7.02pm, Mr Ko forwarded Mr Block's emails to Ms Garrett, asking her to let him know if she received this email from Mr Block. (Acorn notes that there is no evidence that Mr Routley knew of this communication between Mr Ko and Ms Garrett.)
6. PPB forwarded the 21 October 2009 letter to superannuation fund investors the following day with a covering email which stated, inter alia, that "[t]he consortium want to secure the management rights to the assets".

Garrett and Anderson discuss PPB involvement - 21 October 2009

1. On 21 October 2009 at 6.30am, Mr de Rooy sent an email to Ms Garrett asking for her daily bullet point update after her telephone conversation with Mr McCabe. Ms Garrett sent that update at 7.47am to Mr de Rooy, copied to Mr Renauf. In that update, Ms Garrett advised that there was a detailed workshop in Sydney that day with PPB, Mr Renauf, Alter and Acorn on Stonington and Wylde Street; the Smorgon family had advised they were not progressing with the transaction; the call with Mr McCabe went well and she was flying with Mr Renauf to the UK the following week with a view to concluding the transaction; and that the "PSL syndicate" was on track with two high-net-worth individuals who had a Q&A session the previous day. Ms Garrett send a copy of that email to Mr Anderson and Ms Briggs at 7.57am with the comment "he now wants daily updates".
2. In response to this chain of emails, on 21 October 2009 at 10.52am, Mr Anderson sent an email to Ms Garrett, copied to Mr Renauf, Mr Minahan and Ms Steel asking why PPB was sitting in on this meeting "or any other meeting like it"; and saying that PPB was racking up enormous fees but not contributing to anything; was probably detrimental to the exercise; and would make it impossible for Ms Garrett to negotiate Ashington's position in the projects in their presence.
3. In response to the 10:52am email, Ms Garrett sent an email to Mr Anderson at 12.12pm, copied to Mr Renauf, Mr Minahan and Mr Steel, saying that: Alter are close to Hesta and Military. Both have advised Byron of the PPB appointment, further it was in the press. Byron requested that PPB attend. PPB have been cooperative to date with Alter/Acorn/McCabe and PSL syndicate. My view is that it is better to be cooperative, we have nothing to hide. We need investor support. And given Alter is one of our two key lifelines I am not inclined to argue re attendance with so little time left to run on the clock. The plaintiff says that this response was false and misleading noting that, on 21 October 2009, an outline proposal from Acorn/Albany was provided to PPB.

Mr Renauf organises Albany site visit - 21 October 2009

1. On 21 October 2009 at 7.57am Mr Renauf sent an email to Mr Tremaine (Albany) copied to Ms Garrett, asking him to confirm flights for Friday so that Mr Renauf could arrange meetings and access.

Sale of Wylde Street moves to open market - 21 October 2009

1. On 21 October 2009 at 11:42am, Mr Minahan sent an email to Mr Block with a copy to Mr Anderson attaching a spreadsheet in respect of Wylde Street, commenting on the sale process and saying that they proposed to list Wylde Street on the open market.

Ko seeks advice on response to PPB - 22 October 2009

1. On 22 October 2009 at 9.02am, Mr Ko sent an email to Ms Garrett and Mr Routley, seeking their thought on a draft email response to PPB. In the draft email, Mr Ko indicated that Albany would not pursue the investment if the superannuation fund investors were unwilling to provide any additional capital.
2. Ms Garrett responded to Mr Ko's email (copied to Mr Routley and Mr Renauf) at 10.41am, noting that she considered investors would provide capital but were concerned about the quantum required and highlighting that PPB had not provided the investors with a copy of the letter yet. Ms Garrett said that she and Mr Renauf could source a joint venture partner with a buy in price of $70million+ on Double Bay immediately. Ms Garrett said, amongst other things, that she was not sure if the deal would work for Acorn or Albany if the superannuation fund investors provided half the required capital and the "Consortium" providing the other half, and that "it may just feel all "too hard" … and with PPB and four separate asset consultants involved in this transaction it would be like herding cats from start to finish!". (Acorn says that this communication from Ms Garrett was not suggestive of a person seeking to drive the implementation of any form of their own plan to take over the management of ADF and ADF2 as part of an alleged "Consortium".)
3. On 22 October 2009 at 2.05pm and 2.09pm, Mr Ko sent two emails to Ms Garrett and Mr Renauf, in the first, attaching another draft letter to superannuation fund investors "for discussion" and then correcting that draft shortly thereafter in the second email. The letter provided two options - one being "no further capital"; the other being "alternate - a staged solution". (Acorn says that there is no evidence of any discussion with Ms Garrett of the contents of that letter.)

"Hit and Run" email - 22 October 2009

1. On 22 October 2009 at 9.12am, Mr Ko sent an email to Ms Garrett and Mr Renauf referring to the possibility of doing a "hit and run" on the Ashington assets. Mr Ko stated: …it strikes me that if you do execute the strategy in the form of a back to back arrangement, you actually do not need the Alter Family's balance sheet. While we would obviously welcome the opportunity of working with you on this, the circumstances should probably dictate that you receive 100% of the proceeds of this strategy because we would be redundant. I think it is important for you to know I would be fair in this…
2. Ms Garrett's response to this (by email, copied to Mr Renauf, at 10.27am) was that she would "very much like to work with [Mr Ko and Alter] on the 'hit and run' transaction" and that she had buyers lined up for Wylde Street, Double Bay and Stonington. Ms Garrett stated: Sam and I anticipate that we would be working under our newly formed company, Evergreen Pty Ltd, so we would obviously be very keen to discuss some form of transaction costs arrangement, particularly, if that assists you and the Alter Family in participating in the deal and profit arrangements with us.
3. (Again, Acorn emphasises that there is no evidence that Mr Routley knew of these communications between Mr Ko, Ms Garrett and Mr Renauf.)

PPB update asset consultants - 22 October 2009

1. Meanwhile, on 22 October 2009 at 9.52am, Mr Block sent an email to the asset consultants, reporting on his meeting the previous day with Mr Ko and Mr Routley and attaching the 21 October Letter which he summarised in his email; as well as summarising his email response to Mr Ko in relation to the letter.

Ko details plan to Investec - 22 October 2009

1. On 22 October 2009 at 9.57am, Mr Ko sent an email to Mr de Rooy (Pacific - Stonington) attaching his "internal solution for Stonington", which involved the further development of the Stonington Property pursuant to a strategy including: the sell down of the mansion apartments in one lot to the Smorgon Group on completion of the early construction works; and the construction of early works by Icon Construction to avoid the development permit expiring. Mr Ko said they would "void" all existing presales and, rather than develop the site, subdivide the site into 17 allotments for sale to the open market for which he envisaged a sale price of the remaining lots totalling about $38.5 million. Mr Ko said that Icon Constructions identified this opportunity. Mr Ko said that the net revenue of the proposal was about $39 million which involved a return of capital equivalent to 25.6%.
2. On 22 October 2009 at 4.47pm Mr Ko sent a letter to Mr de Rooy attaching a copy of the 22 October 2009 Letter to the superannuation fund investors (below), stating that it was his "final position to PPB". Mr de Rooy's response at 5.43pm was that Investec needed $11.3 million out of the deal, as the investors offered a $1 million fee for Investec to enable an orderly sale of Stonington, and the same fee arrangement was expected from any mezzanine deal. Mr Ko responded at 6.46pm that Alter would honour that arrangement (which Mr de Rooy noted at 6.48pm).

PPB/Acorn/Albany - 22 October 2009

1. On 22 October 2009 at 11.22am, Mr Block sent an email to Mr Ko and Mr Routley with a copy to Mr Lord, referring to a discussion with them and saying that he thought it would make sense for Mr Ko and Mr Routley to share the "detailed feasibility numbers" with PPB and superannuation fund investors, particularly with respect to Double Bay/Wylde Street and to a lesser extent Stonington. Mr Block suggested that they speak that afternoon, once Mr Ko and Mr Routley had had a chance to review and discuss with Mr Renauf.

Ko responds to PPB - 22 October 2009

1. On 22 October 2009 at 4.34pm, Mr Ko sent an email to Mr Lord and Mr Block, copied to Mr Sheehan and Mr Routley, attaching a "draft" letter dated 22 October 2009 under joint Albany/Acorn letterhead to the superannuation fund investors, stating that: PPB has asked us to consider a strategy for the ADF 1 & 2 Unitholders that does not involve further investment in order to effect a recovery of capital. We have also considered a strategy that involves a minimum amount of capital to be applied to effect a stabilisation strategy which would then give the basis to raise additional capital to complete the Double Bay and Noosa Projects.
2. The letter then stated that, if the superannuation fund investors were unwilling to contribute further capital, then the best course would be for a financier to provide short term mezzanine finance while negotiations took place with Ashington "to conduct an orderly wind up of the assets in consultation and co-operation with the financiers". The alternative solution was for Acorn/Albany to manage the Stonington Project and obtain development approval for Double Bay following an equity injection of $17.7 million (of which Acorn/Albany would contribute $4.43 million, with the balance of $13.27 million being raised by the superannuation fund investors); with no solution for ADF.
3. At 5.28pm, Mr Block sent the asset consultants the further offer that had been received from Acorn and Albany.

Ko/Garrett/Renauf - 22 October 2009

1. On 22 October 2009 at 4.56pm, Mr Ko sent an email to Mr Garrett and Mr Renauf (both on their Gmail accounts) copied to Mr Routley (re "draft response to PPB"). Mr Ko said that, with the letter being sent, they would have "clean hands" and that "we have both registered our interest and given them an alternative minimising the capital call. If they don't for this then I think we immediately commence discussions to acquire the properties". Ms Garrett responded to that "clean hands" email at 6.37pm, copied to Mr Renauf, saying that the superannuation funds, perhaps guided by PPB, probably would not accept the latest proposal (saying that "I suspect the existing investors (perhaps guided by PPB) are unlikely to accept the offer (which is very foolish and short-sighted)") and that she and Mr Renauf were on "stand-by to share with [him] the details of our buyers and how we would work together in that regard". Mr Ko responded at 8.03pm to Ms Garrett and Mr Renauf that he looked forward to speaking with them the following morning.

Sunsuper Investment Recommendation Form - 22 October 2021

1. On 22 October 2021, a Sunsuper Investment Recommendation Form was prepared by Ms Chan which referred to the fact that "[b]oth the Manager and the underlying projects have come under significant stress over the past 4 months in the main due to mismanagement of both the structures and investments". (Acorn says that this is further evidence of the superannuation fund investors' prevailing negative view of Ashington.)

Superannuation fund investors and PPB discussion - 23 October 2009

1. The revised Acorn/Albany proposal put to superannuation fund investors by PPB on 22 October 2009 was followed by a discussion on 23 October 2009. Mr Hastings of HESTA took a file note of the teleconference, which records that "Ashington behaviour is a concern. PPB have been made aware of some questionable activities (liabilities etc, another national campaign on Wylde St)".
2. A file note by Sovereign Investment Research noted that PPB was concerned about Ashington having changed sales agents for Wylde Street, as they felt that it might be detrimental to its value. (The plaintiff says that it is in that context that Norton Gledhill wrote to Ashington Capital on 23 October 2009 expressing concerns that unitholders were not being kept properly informed, and requested that Ashington provide such information as was sought by PPB to them, to which on 26 October 2009, Mr Anderson and Mr Minahan responded, expressing surprise given their discussions with PPB.)

Garrett and Renauf - 23 October 2009

1. Meanwhile, on Friday 23 October 2009, at 9.18am, Ms Garrett sent an email to Mr Renauf with a "to do" list: 1. Alter Plan B: Need to confirm arrangement with Byron (suggested 10k per week plys 50/50 profit share). Determine whether Alter or we approach banks. Line up Simon. NB: how many details of our back-ups do we provide. 2. CFAL: Determine whether Andrew will wait a week. 3. Thunder, complete business plan.
2. Ms Garrett said in that email that "I have thoughts on how to have our arrangements sorted but too hard over the phone. I can't reach lawyer".
3. Pausing here, "Thunder", as I understand it, is a reference to a project involving a boutique real estate advisory business project that Ms Garrett was pursuing at the time (and that she was exploring with a Mr Tim Hannon of Derwent Capital) (see communications later between Mr Carolan and Mr Hannon) and hence is not relevant to the issues in the present proceeding.
4. On 23 October 2009 at 9.22am, Ms Garrett sent an email to Mr Renauf saying that they were not going to London now.

KordaMentha - 23 October 2009

1. On 23 October 2009 at 11.45am, Ms Garrett sent an email to Mr Anderson, Mr Steel, Mr Bailey and copied to Mr Renauf, saying that Ms Matthews would no longer be working on the Ashington matter. Ms Garrett said that KordaMentha were expecting the Ashington material that afternoon and wanted Ms Garrett to bring it as KordaMentha wanted a briefing on the capital raising efforts. Ms Garrett said that KordaMentha would then meet with Mr Anderson, Mr Steel and Mr Bailey the following week to discuss Double Bay.
2. At 11.49am on 23 October 2009, Mr Anderson responded by email to Ms Garrett, Mr Steel and Mr Bailey, copied to Mr Renauf, saying that they had booked in Monday at 2pm in the office with KordaMentha and told them all the information would be available at that time. Ms Garrett responded that KordaMentha were under the distinct impression that the material would be ready that afternoon, stating that Ms Matthews said Mr Anderson had advised as such. Ms Garrett's view was that at least some of the material should be delivered that afternoon; otherwise the report back to the banks would be that Ashington had not delivered any of the requested information. Mr Anderson's response (at 12.13pm) was that he was very careful not to give Ms Matthews that impression.

DTZ sign confidentiality agreement - 23 October 2009

1. On 23 October 2009 at 11.55am, a representative of DTZ (Debenham Thouard Zadelhoff - a commercial real estate company) sent an email to Ms Briggs, copied to Mr Minahan and Mr Anderson which attached a signed confidentiality agreement in relation to the Stonington Project; and at 12.01pm, Ms Briggs replied, sending a copy of the Stonington PowerPoint (amended from the 14 and 15 October versions to remove all references to the replacement mezzanine finance facility). Ms Briggs instructed Mallesons to grant Ms Alison Meadows of DTZ access to the Stonington Data Room.

Update re Wylde Street - 23 October 2009

1. On 23 October 2009 at 12.48pm, Mr Steel sent an email to Mr de Rooy and others attaching an update report on Wylde Street. Investec responded at 1.31pm, noting that there was an offer of $17 million and asking why it was not being progressed. Mr Steel forwarded this email to Mr Anderson and Mr Minahan asking them to provide a response for him. On 23 October 2009 at 5.05pm, Ms Briggs sent the update report on Wylde Street to Mr Block, copied to Mr Lord.

Acorn/Albany/PPB - 23 October 2009

1. On 23 October 2009 at 3pm, Mr Ko sent an email to Mr Block and Mr Lord, copied to Mr Sheehan and Mr Routley, referring to a telephone conversation the previous day and the current view of the superannuation fund investors not to contribute any further capital; saying that: …we have tried to be responsive to investor objectives. To progress this, I think it would be useful for the Unit holders and yourself to indicate the basis upon which you would be prepared, if any, to go forward with us and all of the pre conditions [sic] attaching. This should bring the matter to a rapid conclusion. I am tending to the view that the legacy issues created by Ashington as a management team in the ADF 1 & 2 Structure may have resulted in hurdles which are too high for us to meet. If this is the case, we are grateful for the professionalism and candour that you have demonstrated in working with Acorn and ourselves and hope we can work together in the future in the same cooperative manner. Acorn says that this appears to be a statement of intention to pull out of any further negotiations and is not suggestive of the pursuit of a pre-arranged plan by an alleged "Consortium".
2. On 23 October 2009 at 4.57pm, Mr Block sent an email to Mr Ko and Mr Lord, copied to Mr Sheehan and Mr Routley, responding to Mr Ko's 3pm email. In the email, Mr Block said that: The existing investors have instructed us, that at this stage, they wish to pursue a strategy which delivers both a capital and management solution from a third party. The third party or parties will be required to provide both short, and longer term financing solutions, via a preferred or other equity instrument. At this stage, the investors have advised us that they do not wish to pursue a strategy which sees them providing further funding to these assets; although they are happy to work with a party (ies) to achieve a longer term work out of the key assets of the fund. … Byron, as you are aware there are a number of legacy issues, which whilst producing some hurdles, are not insurmountable … … your delivery of a proposal which returns some capital to existing investors over time, will be the working demonstration of your ability to add value to our clients - this will not doubt form the basis of a sound ongoing relationship
3. Acorn says that this communication is squarely at odds with any alleged "Consortium" agreement between Albany and Acorn on the one hand and Ms Garrett and Mr Renauf on the other hand). Mr Block said that "the property assets in question here still possess sound underlying fundamentals and will form the basis of a healthy ongoing portfolio for whomever wishes to move forward on this".
4. On 24 October 2009 at 9.31pm, Mr Ko forwarded this email to Mr de Rooy. Meanwhile, on 23 October 2009 at 4.22pm, Mr Burridge of Norton Gledhill sent an email to Mr Anderson and Mr Minahan, attaching a letter on behalf of the superannuation fund investors to the directors of Ashington Capital, expressing the concerns of the superannuation fund investors that they were not being kept properly informed about the activities of ADF, ADF2 and the sub-trusts; and asking that information about the current financial status, dealings with financiers and proposals and plans of ADF, ADF2 and the sub-trusts be promptly provided to PPB. (Mr Anderson accepted in cross-examination that this letter was a serious step for the superannuation fund investors - T 659.) Mr Burridge sent a copy of that letter by email to the asset consultants at 4.29pm.

Garrett/Renauf/PPB - 23 October 2009

1. On 23 October 2009 at 5.05pm, Ms Garrett sent an email to Mr Lord, copied to Mr Renauf, saying that, "[i]t has been manic today so they have been unable to find a timeslot to firm up approach with you on CFAL [seemingly a reference to item 2 on Ms Garrett's 23 October 2009 "TO DO LIST". We don't want to miss this opportunity and so are keen to understand whether you think it would be possible for us to discuss our thoughts on the asset by phone early next week. We could then arrange to meet with Andrew early the following week or do you think that will be leaving things too late?".
2. On 23 October 2009 at 11.05pm, Mr Ko sent an email to Mr Block and Mr Lord outlining some transaction ideas and seeking their guidance on those ideas. Mr Ko said he was sending the email to them on the basis that it or its contents could not be communicated to the superannuation fund investors without his consent. Mr Ko said that he was "not writing on behalf of the Consortium. If either transaction idea proceeds, we will invite Acorn to participate". Mr Ko said the email's sole purpose was for Mr Ko to gauge what PPB's advice would be on the following ideas. The first transaction idea was that Albany (with or without Acorn) purchase all the units in ADF2; the second was that Albany (again, with or without Acorn) assume all future capital commitments on certain terms. On 26 October 2009 at 9.35am, Mr Ko forwarded this email to Mr Routley for his information.
3. The plaintiff notes that, between 23 and 26 October 2009, Mr Routley and Mr Ko continued to have discussions about a possible revised investment proposal.

Garrett and Renauf meet with McCabe in London - 24 October 2009

1. On around 24 October 2009, Ms Garrett and Mr Renauf flew to London to meet with Mr McCabe (the plaintiff says that this was ostensibly to pursue the Stonington Capital Raising).

Wingate term sheet - 26 October 2009

1. On Monday, 26 October 2009 at 10.54am, Mr Harrison of Wingate sent an email to Mr Steel, copied to Mr Anderson, attaching Wingate's term sheet to Ashington Capital as trustee for the Wylde Street Trust in relation to a senior debt facility. This term sheet proposed indicative terms to refinance Wylde Street by way of senior debt in the sum of $13 million.

Internal PPB - 26 October 2009

1. On 26 October 2009 at 11.41pm, a manager in PPB Real Estate sent an email to Mr Lord copied to Mr Block, asking for clarity as to whether or not PPB Real Estate would be brought back into the process and saying that they were confused as to what role (if any) they were undertaking in the transaction.

Response to Norton Gledhill - 26 October 2009

1. As adverted to above, on 26 October 2009 at 6.21pm, Mr Anderson responded to the 23 October Norton Gledhill letter, by letter attached to an email to Mr Burridge copied to the asset consultants. Mr Anderson and Mr Minahan wrote that they were "surprised to receive [Mr Burridge's] letter", they stated: By way of background Craig Anderson and our CFO Scott Steel discussed with PPB the challenge of providing reporting for the 30 June quarter and with their apparent support we requested a waiver of reporting for that period. The request was emailed to the distribution list for this email. We did however provide monthly unit prices to each investor. Conscious of any potential concern that insufficient information may be provided to investors, Craig Anderson telephoned PPB partner Brett Lord on Tuesday 6 October to discuss the possibility of Ashington providing weekly reporting to PPB (which would be presumably passed onto investors). Mr Lord advised that since reporting to investors was provided by PPB on an 'ad hoc' basis it was not be necessary for Ashington to trouble themselves with a regular reporting regime. We were however sent an email by PPB Director Peter Block on 8 October reminding Ashington that its staff member Elizabeth Briggs had committed a weekly update to the 10 Wylde Street sale process. This report has been provided on a weekly basis to both PPB and Investec.
2. Mr Burridge replied to this on 27 October 2009 at 10.09am, disputing Ashington Capital's account of events.

Acorn/Albany communications - 27 October 2009

1. On 27 October 2009 at 3.58pm, Mr Ko sent an email to Mr Routley with an attached document headed "Stonington Development Sources and Uses of Funds" and asked Mr Routley what he thought of the enclosed numbers, saying that the "excess cash at the end will be used to fund the DA going forward and our costs".

Wylde Street - 27 October 2009

1. On 27 October 2009 at 5.12pm, Ms Lee sent an email to Mr Minahan, copied to Mr Anderson and another, with a draft media statement for the sale of the Wylde Street Property.
2. On 27 October 2009 at 7.33pm, Mr Anderson sent an email to Ms Garrett and Mr Renauf copied to Mr Minahan, seeking an update on discussions with Mr McCabe and noting that "we appear to have a good back up on both Wylde and Stonington with Wingate Group"; that the KordaMentha meeting went well; and that Mr de Rooy had been calling each day and wanted to know how they were going with Mr McCabe. On Wednesday 28 October 2009 at 12.45pm, Ms Garrett responded, saying that the talks with Mr McCabe were going well and that she was still pushing the Stonington/Wylde deal. (The plaintiff notes that in Ms Garrett's liquidator's examination she admitted that she had discussed with Mr McCabe the proposal to replace Ashington as trustee and manager (Ex A).)

"Boutique incubator" model - 27 October 2009

1. On 27 October 2009 at 10.24pm, Mr Carolan sent Ms Garrett an email setting out his thoughts for a boutique incubator model, being the terms on which an investor (a boutique incubator) will provide start-up capital for a funds management business.

Anderson seeks update on Alter family - 28 October 2009

1. On 28 October 2009 at 7.36pm, Mr Anderson sent an email to Ms Garrett (copied to Mr Renauf and Mr Minahan) asking if the Alter family was still interested in Stonington. It appears that Mr de Rooy was still pressing Mr Anderson for an update at this stage.

Wingate extend Wylde Street offer - 28 October 2009

1. On 28 October 2009 at 8.58pm, Mr Harrison from Wingate sent an email to Mr Anderson agreeing to extend the offer on Wylde Street to 6 November 2009.

Acorn/Albany "conceptual plan" - 29 October 2009

1. On Thursday 29 October 2009 at 7.21am, Mr Ko sent an email to Mr Block and Mr Lord, copied to Mr Sheehan, Mr Routley and Mr Tremaine, responding to Mr Block's 23 October email. Mr Ko said that Albany and Acorn were considering putting a "final proposal" to the superannuation fund investors: Further to our telephone discussion of earlier this week, Albany and Acorn are considering putting a final proposal to the investors which would request that they contribute $6 MM in preferred equity of a new $20 MM raising. The balance of the $14 MM would be $4 MM in preferred equity and $10 MM in mezzanine debt (at terms more favourable than the current Investec facility. I would be grateful if you could advise us to your view of the investors [sic] likely reaction to this proposal?
2. On 29 October 2009 at 1.43pm, Mr Gavin sent an email to the superannuation fund investors in which he referred to a conversation with Mr Block that morning during which he mentioned "that Albany & Acorn have come back with something that looks more interesting, which I believe he has spoken to most of you about…but I think this option is at least worth hearing more about". Mr Gavin suggested one more telephone conference between the superannuation fund investors with PPB before coming to a conclusion, and that they would "probably need to ask PPB to excuse themselves from that bit of the meeting". Mr Gavin stated, "[i]f the latest proposal doesn't have investor support, I imagine Nicky and Sam will walk away too". (Acorn says that this indicates that the superannuation fund investors were very much in control of the process of determining the removal of Ashington and the appointment of a replacement.)
3. Mr Block responded to Mr Ko's 7.21am email at 3.15pm on 29 October 2009, in an an email to Mr Ko and Mr Lord, copied to Mr Sheehan and Mr Routley, noting that he had discussed the matter with the superannuation fund investors and their consultants and that there was "some support" for Mr Ko's "conceptual plan". Mr Block then identified a number of issues (seven in all, including "Management changes etc as per out previous correspondence"), which he said the superannuation fund investors required Acorn and Albany to address, and concluded by suggesting that "if these issues can be worked through … we receive a proposal along with your feasibility numbers on Stonington, Double Bay and Wylde to move forward". (It is noted that it was the "conceptual plan" thus advanced by Mr Ko that ultimately formed the basis for Parissen's proposal to investors in November 2009.) Meetings were arranged for Albany and Acorn to present their proposal to superannuation fund investors in Sydney and Melbourne on 6 November 2009.
4. On 29 October 2009 at 12.18pm, Mr Ko sent an email to Mr Routley and Mr Tremaine, attaching a feasibility model prepared by Mr Tremaine in respect of the Stonington Project. Mr Ko noted that the feasibility did not include funds management fees.

Investec - 29 October 2009

1. On 29 October 2009, Mr Anderson met with Mr de Rooy to discuss the position in relation to Wylde Street and Stonington. At 6.25pm that day (29 October 2009), Mr Anderson sent an email to Mr Steel, Mr Minahan and others at Ashington, copied to Ms Garrett and Mr Renauf, reporting on the meeting with Mr de Rooy for Mr Anderson to gain a better understanding of the status of each of the Ashington facilities. Mr Anderson referred to the potential investors in two groups: (i) Ms Garrett's options, being Mr McCabe, Alter Family and Paterson's clients; (ii) Mr Anderson's options, being Wingate Group and Smorgon. Mr Anderson noted that Smorgon was not proceeding but that a written offer was expected from Wingate the following week. Mr Anderson noted that he had been unable to elaborate very significantly on Ms Garrett's options as he was not sure "where these were at". The email stated that the meeting was long but productive and that Mr Anderson believed that "Michael [de Rooy] will continue to support Ashington in the Investec credit process as long as we update him very regularly". Mr Anderson said that, "[i]t is also interesting to note that constantly throughout the meeting Michael was highly critical of PPB's conduct and he does not believe that they have acted Investors interest nor have they conducted themselves professionally". The email referred to a "joint report" being prepared by Ms Garrett (but none appears to have been produced in the proceeding). (The plaintiff says that it can be inferred that Smorgon's interest in the mezzanine finance was diverted to the Acorn/Albany proposal, based on an email from Mr Ko to Ms Garrett and Mr Renauf of 14 November 2009 - see below; noting that Smorgon had agreed to provide mezzanine funding to complete the Stonington Project.)

Ashington unable to pay rent - 29 October 2009

1. By 29 October 2009, Ashington Management was unable to meet its obligations to pay rent. Mr Anderson required finance staff to provide the four weekly cashflow to him twice a week.

HESTA - 29 October 2009

1. In a funds management update on 29 October 2009, Mr Fowler (of HESTA) stated that "[p]ositive developments have occurred at Ashington with two new senior employees have joined" and expressed his view that the "new personnel are acting in a far more appropriate manner than the existing management have to date".

Wylde Street update - 30 October 2009

1. On 30 October 2009 at 12.35pm, Ms Briggs sent an email to Mr Block and Mr Lord attaching the weekly update on Wylde Street.

Acorn/Albany proposal - 30 October 2009

1. On 30 October 2009 at 2.59pm, Mr Block sent an email to the asset consultants summarising the latest proposal from Albany and Acorn. The email attached the Wylde Street update from Ashington. Mr Block stated that Mr Ko would wish formally to present their plan to investors in Sydney/Melbourne the next Friday (6 November 2009). Mr Block set out the key terms of the proposal, which involved an initial $20 million injection of funds of which $10.3 million would cover the Investec mezzanine debt, $3 million would go towards Stonington's vendor finance, $2.5 million to unsecured creditors, $2.5 million to Stonington's site works and $1.5 million to "other". Mr Block said that $10 million would be injected as mezzanine debt and $10 million would be a debt instrument at the fund level of which $4 million would come from the consortium (defined as Acorn and Albany) and $6 million from the superannuation fund investors, being the remaining uncalled capital of their initial commitment. The email also referred to the return to Australia on 30 October 2009 of Ms Garrett and Mr Renauf after their meeting with Mr McCabe in London.

Anderson informs PPB of Wingate offer - 30 October 2009

1. On 30 October 2009 at 5pm, Mr Anderson sent an email to Mr Block with a copy to Mr Lord, passing on the Wingate letter of 26 October 2009 (which offered indicative terms on a refinance package of senior debt of $13 million for Wylde Street). Mr Anderson said that he only organised the refinance as a backup if Investec were not happy with the sale process but that Investec had now confirmed that it was happy with the sale process and therefore the offer was not being disclosed to Investec. Mr Anderson also advised that Wingate had extended taking up the offer for another week.

Investec update - 30 October 2009

1. On 30 October 2009 at 5.47pm, Mr Anderson sent an email to Mr de Rooy attaching an update on the Stonington Capital Raising deal with Wingate, Alter and Mr McCabe. In relation to Alter, the update recorded that "the Alter Family focus has incorporated increasing the equity commitment by also involving the Wylde Street property. This adds an additional level of complexity that we wish to avoid".

Quarterly investors' report - 30 October 2009

1. On 30 October 2009 at 7.37pm, Mr Anderson sent to the asset consultants and to PPB the quarterly investor reports for ADF and ADF2 as at 30 September 2009.

Ashington's auditor to contact ASIC - 30 October 2009

1. On 30 October 2009 at 10.06pm, Mr Cameron Hume of RSM Bird Cameron (as it then was), Ashington Capital's then auditor, sent an email to Mr Steel stating that "we are required under the Corporations Act, in relation to Ashington Capital's licence requirements to inform ASIC of any adverse conditions experienced by a licence holder" and that it proposed to send a draft letter to ASIC.

Garrett emails Investec - 1 November 2009

1. On Sunday 1 November 2009 at 8.18pm, Ms Garrett sent an email to Mr de Rooy, copied to Mr Renauf, apologizing for not getting in touch the previous week and referring to Mr de Rooy's meeting with Mr Anderson that last week. Ms Garrett said that there were some challenges with Mr McCabe's prospective investment; but that Alter was once again interested. Ms Garrett forwarded a copy of that email to Mr Anderson and Mr Minahan, copied to Mr Renauf at 8.20pm on 1 November 2009. The plaintiff says that that email was intended to mislead Mr Anderson who continued to believe Ms Garrett was pursuing mezzanine funding for Stonington.

2 November 2009

1. On 2 November 2009, Ms Garrett and Mr Renauf met with Mr Ko.
2. On 2 November 2009 at 9.43am, Ms Garrett sent an email to Mr Anderson and Mr Renauf saying she was not sure why she was not copied into the original note to Mr de Rooy and asking about the Wingate capital raising. Mr Anderson at 10.09am sent an email to Mr Renauf and Ms Garrett attaching the note to Mr de Rooy.
3. On 2 November 2009 at 10.19am, Ms Garrett sent an email to Mr Anderson and Mr Minahan, copied to Mr Renauf, referring to an article in the Financial Review and saying that as a consequence of the article there were concerns among existing investors and Patersons. Ms Garrett said that she would deal with Patersons separately and assumed from the report to Mr de Rooy that Mr Anderson's preference was to use Wingate over the PSL consortium, "so I guess the PSL concerns are not overly important to Ashington". Ms Garrett said investors were asking why they were not forewarned of the upcoming article and terms of the proposed equity investment.
4. Mr Anderson's response, by email sent at 10.59am to Ms Garrett and Mr Minahan, copied to Mr Renauf was that: Michaels report is tailored to meet views he expressed on Thursday as I didn't need him having a problem at credit this morning. As I have no update on your prospects I would expect you would appreciate managing Michael [de Roos] is challenging. I simply represent Ashington as being professionally in control of this process. In terms of [Patersons] I have seen nothing on this from you so I didn't want to suggest it was 'alive' when I am completely uninformed … But we all agreed Pref Equity over Mezz was a much better option … There was no time for advising investors… Investors were warned of these risks in all our earlier meetings.
5. On 2 November 2009 at 5.28pm, Mr Block sent an email to Mr Anderson (stated to be on behalf of the superannuation fund investors) requesting a detailed update on Wingate's potential offer to provide mezzanine/preferred equity.
6. Over the course of 2 and 3 November Mr Ko corresponded with PPB confirming two meetings with the superannuation fund investors on Friday 6 November 2009. On 4 November 2009, Mr Ko forwarded the meeting details to Mr Routley, Mr Tremaine, and to Ms Garrett and Mr Renauf (at their respective Gmail addresses).

3 November 2009

1. On 3 November 2009, Investec issued a demand for payment to Ashington Capital as trustee for the Wylde Street Trust, in respect of the default of the Wylde Street Facility, demanding payment of $10.78 million immediately.
2. On 3 November 2009 at 11.28am, Mr Ko sent an email to Ms Garrett, Mr Routley and Mr Tremaine, attaching a memorandum addressed to those persons setting out issues to be canvassed in a proposed conference call to be held on 4 November 2009 at 2pm. The first item on the agenda was "agreement on preconditions to all of us proceeding forward". The "us" on the agenda item was divided into 3 groups with initials denoting: Alter/Acorn, Tremaine and Garrett/Renauf. (It should be noted that the plaintiff places execution of the "Garrett plan" as commencing from around 1 November 2009.) The issues also included a "presentation to equity investors on Friday 6 November" that would cover "[e]xpectation Management".

Investec notice of default - 4 November 2009

1. On Wednesday, 4 November 2009, Investec sent a letter to the directors of Ashington Capital as trustee for ADF2 in respect of default of the Investec Stonington Facility, requiring a signed term sheet to be in place by 6 November and a binding unconditional agreement to be in place to refinance Investec by 13 November 2009, failing which Investec would consider all options available to it.

Preparation for meeting with superannuation fund investors - 4 November 2009

1. On 4 November 2009 at 8.36am, Mr Ko sent an email to Mr Routley attaching an outline of draft presentation slides to the superannuation fund investors, which included the introduction of Parissen and the management team; and the statements that, "[o]ur main limitation has been access to information …" and that Parissen is a "joint venture between the Alter Family and Acorn Capital" and will be "led by Byron Ko and Neil Tremaine".
2. At 8.54am, Mr Ko sent Mr Routley a draft email to Mr Block. On 4 November 2009 at 9.25am, Mr Ko sent the foreshadowed email to Mr Block and Mr Lord, copied to Mr Routley and Mr Tremaine, seeking "urgent clarification of two issues from PPB": first, that "[w]e need to understand how PPB intends to address the issue of access to information" to form a definitive view on the asset and business strategy; and second, to "understand both the process and timeframe for removal of the manager". Mr Block responded to this email at 10.53am, to Mr Ko and Mr Lord (copying in Mr Routley and Mr Tremaine), agreeing that these "remain key issues" and saying that PPB "have some strategies" to discuss with Mr Ko.
3. On 4 November 2009 at 11.54pm, Mr Ko sent Mr Routley and Mr Tremaine a marked-up further draft of the outline of the proposed presentation to the superannuation fund investors, for discussion.

Mr Anderson communication with Mallesons - 4 November 2009

1. On 4 November 2009 at 12.46pm, Mr Anderson sent an email to Mallesons (Andrew Norman and David Eliakim), copied to Ms Garrett, Mr Steel and Ms Briggs, saying that he wanted to bring all relevant parties together under the email; and that Ashington's aim was to introduce either the Alter family or Wingate as the provider of funds "(circa $22m-23m) during November to drive completion of this project including the payout of Investec and Hamton". The email said that Mr Eliakim (from Mallesons) and Ms Garrett would finalise terms and structure with preferred party and complete the transaction.

Wingate - 4 November 2009

1. On 4 November 2009 at 5.41pm, Mr Ryan Levin of Wingate sent an email to Mr Anderson, copied to Mr Harrison of Wingate, providing the detail of the potential transaction structure discussed that afternoon and asking Mr Anderson to call and discuss.

Information sent to PPB - 4 and 5 November 2009

1. On 4 November 2009 at 3.44pm, Mr Block sent an email to Mr Anderson, copied to Mr Lord, following up on his information request of 2 November 2009 in relation to Wingate and asking for information on the Hamton legal action. On Thursday, 5 November 2009 at 10.17am, Ms Briggs sent an email to Mr Block, copied to Mr Lord and Mr Anderson attaching: the Hamton statement of claim, Ashington defence, and Mallesons advice on the litigation.
2. On 5 November 2009 at 1.28pm, Mr Anderson sent an email to Mr Block with a copy to Mr Lord, attaching email communications between Mr Wyeth of Ashington and Mr Harrison of Wingate, about a refinancing proposal for the Stonington Project, although it is not clear what was provided.

Ashington meets with auditors - 5 November 2009

1. On 5 November 2009 at 3.30pm, Mr Anderson, Mr Steel and Mr Minahan met with Cameron Hume (Audit Partner at RSM Bird Cameron Partners) in relation to the proposed correspondence to ASIC about potential insolvency; and it was agreed by the auditor that the letter would not be submitted until 9 November 2009.

Wylde Street sale progress - 5 November 2009

1. On 5 November 2009 at 3.42pm, Mr Knight (of Ashington) sent an email to Mr Anderson and Mr Minahan, copied to Mr Steel, advising that Colliers had reported an extensive buyer enquiry for Wylde Street following an email to its database and an advertisement the day before.

Garrett informs PPB of Investec notice - 5 November 2009

1. On 5 November 2009 at 5.49pm Ms Garrett from her Gmail account sent an email to Mr Block and Mr Lord, copied to Mr Renauf, forwarding an email from Ms Briggs at 5.46pm, attaching a demand from Investec re Wylde Street, stating "no surprises, just for your information". Mr Block's response (by email on 6 November 2009 at 8.55am) was that Wingate's refinance proposal on Wylde Street should be immediately pursued and Investec advised; indicating that Investec should be kept "on side".

KordaMentha - 5 and 6 November 2009

1. On 5 November 2009 at 5.45pm, Mr Paul Mirams of KordaMentha reported in an email to his fellow partners that he had spoken to Wingate "off the record" and that he understood that its "pricing will effectively mean no return to current unitholders but some opportunity to recover part of the original investment in a few years time". Mr Mirams also noted that Wingate was "in the deal" but would not meet Investec's timeline; and that McCabe was also unlikely to meet the timeline.
2. On 5 November 2009 at 8.43pm, KordaMentha personnel sent an email suggesting a call with the banks due to a concern that Ashington would go into voluntary administration.
3. On 6 November 2009, there was a teleconference between Michael White of Westpac and Mr Winterbottom of KordaMentha in relation to Ashington Capital.

Presentations to superannuation fund investors - 6 November 2009

1. On 6 November 2009, presentations were made to the superannuation fund investors, with Ms Garrett, Mr Routley and Mr Ko in attendance.
2. On 5 November 2009 at 6.50pm, Mr Ko sent an email to Ms Garrett, Mr Routley and Mr Tremaine attaching the presentation to investors that he had omitted to include with his 7.49am email that day. It noted, inter alia, that Parissen Property Group (a joint venture between the Alter family and Acorn) "proposes to invite Nicky Garret and Sam Renauf to join the team" and proposed the "[r]emoval of Ashington from trustee and management roles across ADF 1 & 2".
3. On 5 November 2009 at 6.50pm, Mr Ko sent an email to Ms Garrett, Mr Routley and Mr Tremaine a more advanced presentation for the Unitholders dated 6 November 2009. The advanced form of presentation included the following statements: (at p13276) Parissen Property Group Parissen Property Group (PPG) is a newly created fund manager focused on opportunistic and distressed property investments. PPG is a joint venture between the Alter Family (51%) and Acorn Capital (49%). The joint venture will be led by [Ko and Tremaine]. PPB proposes to invite Nicky Garret and Sam Renauf to join the team. (at p13277-13278) Structure We are looking to provide a 'holistic solution' with the following elements: Removal of Ashington from trustee and management roles across ADF 1 & 2 Trusts Introduction of new PPG trustee and manager entities at sub trust levels Removal of problematic secondary financiers (e.g, Investec and Hamton) Raise $20+ MM in new capital…Existing Investors to contribute. $6 MM in preferred equity at ADF 2… Time critical (Investec, Hamton and planning permit lapsing Dec 09) … Limited implementation steps required for sale and settlement with target of June 30, 2010"On 6 November 2009 the presentation to the Unitholders about the Parissen proposal was made, appearing to be in the form which was emailed on 6 November 2009 at 2.27pm by Carolan to Routley. This presentation contained the same content as that outlined above (at p13318-13320).
4. On 6 November 2009, Ms Garrett sent a copy of that presentation to Mr Carolan to be printed. Mr Carolan forwarded it to Mr Routley noting that "Nicki & Co require the attached … to be printed for the afternoon meetings in Melbourne".
5. The plaintiff emphasises that this presentation was not made known to Mr Anderson.
6. That presentation was entitled "Parissen Property Group: Presentation to Ashington Development Funds Investors". It described Parissen as a "newly created fund manager focused on opportunistic and distressed property investments" and a "joint venture between the Alter Family (51%) and Acorn Capital (49%)" with the joint venture being "led by Byron Ko and Neil Tremaine". It stated that Parissen proposed to invite Ms Garrett and Mr Renauf "to join the team". As to the structure, the presentation identified as the first of its elements the "removal of Ashington from trustee and management roles across ADF1 & ADF 2 Trusts" and the "[i]ntroduction of new [Parissen] trustee and manager entities at sub-trust levels and the application of 'best of breed' corporate governance moving forward".
7. Between 6 and 10 November 2009, Mr Sheehan, Mr Ko and Mr Routley commenced preparation of an indicative term sheet to submit to the superannuation fund investors, subject to due diligence and further information and documents. The drafts setting out the basis of the Parissen proposal were provided by Mr Ko to PPB for comment and were also shared with Ms Garrett and Mr Renauf. The plaintiff says that PPB kept the existing investors informed of the developing proposal from Parissen, while expressing negative views about the Wingate Proposal.

Wingate developments - 6 November 2009

1. On 6 November 2009 at 12.04pm, Mr Anderson sent an internal email to Mr Minahan and Mr Wyeth, copied to Mr Steel, Ms Garrett and others, forwarded the email received from Mr Levin on 4 November 2009 as to the structure of Wingate's potential investment. Mr Anderson said that Wingate had come back that morning on the basis that they would prepare a term sheet not conditional on construction finance and that they wanted to get an understanding that Ashington would be able to obtain a facility and an agreed level of presales for Stage 2 construction. Mr Anderson said it was agreed that Ashington would prepare an application to CBA. Ms Garrett responded to this at 1.43pm saying, "[w]e are working with Alter. I have left messages with CBA and will follow up this afternoon".
2. At 4.01 pm on 6 November 2009, Mr Anderson sent an email to Mr de Rooy and Ms Garrett forwarding a copy of the email sent on 4 November 2009 by Wingate setting out a proposal for Stonington. At 4.43pm, Mr Anderson sent an email to Mr Farrel Meltzer (Wingate) saying that he "went out on a limb pushing the Wingate case over the Alter Family". At 6.10pm, Mr Harrison of Wingate sent an email to Mr Anderson saying "we will be providing a term sheet to you outlining the general structure of our proposal by Monday November 9". On 6 November 2009 at 6.27pm, Mr Anderson sent an email to Mr de Rooy copied to Ms Garrett, forwarding Mr Harrison's email as confirmation that Wingate would provide a term sheet by Monday. At 8.13pm on 6 November 2009, Ms Garrett sent Mr Anderson and Mr de Rooy an email, copied to Mr Renauf, saying that she had been "thrashing out" a term sheet with Alter that would be done by Monday. The plaintiff says that this was not true, as Ms Garrett had in fact been presenting the Parissen proposal to the super fund investors with Mr Ko in Melbourne.

Wylde Street has positive response rate - 6 November 2009

1. On 6 November 2009 at 1.45pm, Colliers sent an email to Mr Minahan, Ms Briggs and Ms Knight, copied to others, saying that there had been a very high and positive response rate in the first week promoting the sale of Wylde Street.

Mr Carolan

1. On 6 November 2009 at 12.11pm, Mr Carolan sent an email to Ms Kylie Dickson of Patersons, with the heading "MC WIP template" (presumably a reference to Mr Carolan's work in progress).
2. On 6 November 2009 at 2.15pm, Ms Garrett from her Gmail address, sent an email to Mr Carolan as to what he could say to Mr Tim Hannon (of Derwent Capital), saying "Maybe in the email say you were sad to hear that Thunder is no longer but hope to stay in touch. You could note how busy I have been this week given it is my last for Ash investors …". As noted above, Project Thunder is not relevant to the present proceeding. However, what is relevant is that Ms Garrett here appears to be suggesting that this was to be her last week at Ashington or for Ashtingon investors.
3. At 2.31pm, Mr Carolan emailed Mr Hannon saying "… strange to hear Thunder is no longer but hope to stay in touch… Nicki has been working around the clock with Ashington as I thought it was her last week or so before joining forces". Mr Hannon's response at 3.38pm included "I was disappointed with Thunder. I just got the feeling you guys didn't want me to be involved". Mr Carolan then responded at 4pm saying "Typical of Nicki .. she is working to death on something that is not her responsibility (Ashington farck-ups) … the plan last week was to secure McCabe's funding to seed Thunder and I thought that was successful". Mr Carolan forwarded these emails to Ms Garrett saying "see below for email banter with Tim … I think this captured your point to me. Seems like some miscommunication unless of course you don't want him to be involved".

Mr Anderson pressing for information - 6 November 2009

1. Meanwhile, on 6 November 2009 at 2.26pm, Mr Anderson sent an email to Ms Garrett saying he wanted to discuss a couple of things when she had a minute. Mr Anderson says that, at the time he was negotiating a term sheet with Wingate on 6 November 2009, Ms Garrett informed him that a term sheet from Albany was imminent and was expected on 9 November 2009; and the plaintiff says that this was not true.

PPB weekly update - 6 November 2009

1. On 6 November 2009 at 6.18pm, Mr Anderson sent an email to Mr Block copied to Mr Lord, summarising matters arising during the week in relation to Wylde Street, Stonington and Double Bay, and attaching documents including the Investec demand of 4 November 2009 and a draft strategy document dated 3 November 2009 for Double Bay.

8 November 2009

1. Ms Garrett, Mr Lord and Mr Renauf organised a meeting on Monday 9 November 2009 at 4.30pm in correspondence between them on Sunday 8 November and Monday 9 November 2009.
2. On 8 November 2009 at 9.34pm, Mr Ko sent an email to Ms Garrett, Mr Renauf and Mr Tremaine attaching a memorandum proposing that they receive a salary of $240,000 plus superannuation, along with an equity ratchet structure. After receiving these, Ms Garrett emailed Mr Carolan and told him to log into her Gmail and "check out Byron latest two emails.. [t]he ratchet and consultancy look good to me, esp the ratchet". (Mr Ko sent Ms Garrett and Mr Renauf a draft employment term sheet on 16 November 2009.)
3. On 8 November 2009 at 9.37pm, Mr Ko sent an email to Ms Garrett and Mr Renauf at their Gmail addresses attaching a memorandum in relation to a proposed consultancy arrangement "to allow you to resign from Ashington after the terms sheet is signed with investors this week". The memorandum noted that Mr Ko would be "grateful if you give consideration to resigning from Ashington as soon as practicable after we complete a terms sheet and take up a consultancy contract with us" and that Mr Ko "wanted to start planning to enable [Ms Garrett and Mr Renauf] to … [m]inimise the conflict issues" and "[w]ork aggressively to complete the assumption of ADF1 & ADF2". Mr Ko stated that the consultancy fees of $5,030.77 per week would be funded by Pacific and Acorn. (Acorn says that there is no evidence that this email was sent to Mr Routley.)

Hamton winding up application - 9 November 2009

1. On 9 November 2009 at 10.19am, Ms Garrett sent an email to Mr Anderson, copied to Mr Renauf, saying that Mr de Rooy had just advised her that Hamton had sought "special leave to have the Ashington business wound up tomorrow".
2. On 9 November 2009 at 5.59pm, Mr Block sent an email to the superannuation fund investors, stating that he had spoken to Mallesons about the Hamton legal action and that Mallesons advised that "Hamton had accelerated the legal process to seek a summary judgment" and "they consider that Hamton have a strong chance of securing the judgment on Weds". Mr Block also stated that the action was against both Ashington Capital and Mr Anderson personally.

Superannuation fund investors/Investec - 9 November 2009

1. On 9 November 2009 at 4.08pm, Mr Gavin sent an email to the superannuation fund investors about the important role of PPB "in the next few days", saying that "I think it's also important that [PPB] stay involved to hopefully avoid Craig doing something silly in the coming days (which we are increasingly concerned about)". (Acorn says that this was another example of the distrust that existed between the superannuation fund investors and Ashington.)

Ko sends draft term sheet to Investec -9 November 2009

1. On 9 November 2009 at 4.25pm, Mr Ko sent an email to Mr de Rooy attaching a term sheet intended to be advanced to PPB, showing how Investec would be repaid from new equity.

Wingate Proposal - 9 November 2009

1. On 9 November 2009 at 6.43pm, Mr Harrison of Wingate sent an indicative term sheet to Mr Anderson recording a proposal for the provision of finance to pay out Investec (the Wingate Proposal). The terms of that proposal included that: a principal sum of $9 million would be advanced to Ashington Capital as trustee of the Stonington Trust for a term of 24 months at an interest rate of 42% per annum capitalised and compounding monthly in arrears; by way of security, Ashington Capital as trustee of the Stonington Trust would grant a fixed and floating charge over its assets and undertaking, as well as a registered mortgage in respect of the Stonington Property, both of which would rank behind Westpac's securities; and any facility agreement would be subject to conditions precedent including there being "[c]urrent indicative terms for a construction facility for Stages 1 and 2 issued by a 'Big Four' Senior Lender which, in [Wingate's] opinion, are capable of being fully satisfied by the Borrower". Wingate was to receive a profit share on the project, a $300,000 establishment fee, and a $200,000 per annum management fee. As noted, there were various conditions precedent.

Auditor's draft letter to ASIC - 9 November 2009

1. On 9 November 2009 at 7.45pm, Mr Hume of RSM Bird Cameron sent an email to Mr Anderson, attaching s 990K of the Corporations Act. At 1.28am on 10 November 2009, Mr Hume sent an email to Mr Anderson attaching a copy of a letter to ASIC about Ashington's financial difficulties noting that it had come to the attention of RSM Bird Cameron during the audit for the year ended 30 June 2009 that ADF 1 and 2 were in financial difficulty and may not be in a position to meet their debts as and when they fell due.

Ms Garrett/Mr Renauf's trip to Melbourne - 10 November 2009

1. On Tuesday 10 November 2009 at 7.46am, Ms Garrett from her Gmail account forwarded to Mr Carolan an email which Mr Ko had sent to Ms Garrett and Mr Renauf attaching flight tickets for travel to Melbourne, and Ms Garrett asked Mr Carolan to print them off for her and Mr Renauf, saying "bit awkward to do it here".

Parissen developments - 10 November 2009

1. On 10 November 2009 at 9.31am, Mr Ko sent an email to Mr Routley, Mr Sheehan, Mr Tremaine, Ms Garrett and Mr Renauf, attaching a draft of a term sheet for a proposal from Parissen to recapitalise ADF2 with $20 million, with $6 million to come from the superannuation fund investors. An objective of the term sheet was stated to be "[r]emoval of the Ashington Group from ADF as trustee, manager and real estate services provider" and "assumption of ADF2 trustee and management responsibilities by [Parissen] controlled entities".
2. At 9.35am, Mr Ko sent an email to Mr Sheehan with a copy to Mr Routley, Mr Tremaine, Ms Garrett and Mr Renauf, requesting legal advice about a number of matters relating to the structure of ADF2 and investment structuring. Among other things, in the email Mr Ko asked "[w]ill any or all of the above options pose more or less risk to a) Alter/Acorn as manager or b) Acorn/Alter as investors in diluting/dealing with Ashington's interest?" and said: Can you organise to get from PPB a copy of their advice on removal of the Manager? Should they be thinking of engineering/setting up new breaches of the management agreement by Ashington to create pressure on Ashington to agree to step away?
3. Acorn points out that there is no evidence that Mr Sheehan responded to this email.
4. On 10 November 2009 at 10.04am, Mr Routley sent an email to Mr Ko, attaching an initial due diligence questionnaire "that ideally needs to be completed by [Ashington] and PPB". Mr Ko responded at 12.09pm attaching a proposed organisation chart for the new Parissen entity listing Ms Garrett under "Funds Management" and Mr Renauf and Mr Tremaine under "Development", all reporting to the Managing Director. Ms Garrett was also listed under "Finance Administration - Client Service/Reporting".
5. On 10 November 2009 at 12.28pm, Mr Routley sent an email to Mr Ko, copied to Mr Sheehan, suggesting that the investment into ADF2 should be by way of a participation loan at ADF2 level, unless it should be at sub-trust level for "litigation reasons". Mr Ko responded to that email at 12.44pm stating that he had not had much experience with participating loans and asked a number of questions, saying "let's try to discuss this afternoon".

Investec query re Wingate Proposal - 10 November 2009

1. On 10 November 2009 at 12.47pm, Mr de Rooy sent an email to Ms Garrett saying that: I have received the Wingate Term Sheet (albeit highly conditional and subject to agreement with PPB/Investors) … and had a telephone discussion with Craig A [Mr Anderson] this morning. As you are probably aware, Byron was good enough to forward me the latest draft of the "Parissen" term sheet yesterday afternoon, with an expectation that PPB/Investors would provide a YES/NO last night, as to whether they were the preferred partner. What is the timeframe governing a decision by Ashington in regard to the appropriate financier to run with and expected decision/settlement/Investec repayment timeframe?"

Hamton proceeding adjourned - 10 November 2009

1. On 10 November 2009 at 12.21pm, Mr Anderson sent an email to Ms Garrett with the subject "Hamton - CONFIDENTIAL good news" saying that "Hamton are adjourning".
2. On 10 November 2009 at 8.20pm, Mr Block sent an email to the asset consultants noting that the Hamton legal proceedings had been adjourned and that Hamton had agreed to allow Ashington until 30 November 2009 for payment. He said that "Craig [Anderson] is punting he will have the money by the end of the month".

Draft letter to ASIC re Investec's position - 10 November 2009

1. On 10 November 2009 at 1.28pm, Mr Hume of RSM Bird Cameron sent an email to Mr Anderson, copied to Mr Eliakim of Mallesons and Mr Paul Heiler of RSMI, attaching an amended version of the draft letter dated 29 October 2009 to ASIC. The draft letter recorded that, in accordance with its obligations under s 990(k) of the Corporations Act and Regulatory Guide 34, it had identified that Ashington Capital as trustee for ADF and ADF2 were in financial difficulty and may not be in a position to meet their debts as and when they fell due.

Anticipation of celebration - 10 November 2009

1. On 10 November 2009 at 2.54pm, Ms Garrett, from her Ashington email address sent an email to Mr Block, copied to Mr Renauf, saying "The big lunch is planned for Wed next week [i.e., 18 November]" and that she had told "the Arab" that he needs to take us for copious drinks soon.

Norton Gledhill request information re Wingate - 10 November 2009

1. On 10 November 2009 at 3.40pm (in what the plaintiff says was perhaps the first step in the design to create pressure on Ashington to cause its resignation), Norton Gledhill, acting for the superannuation fund investors sent an email to Mr Anderson and Mr Minahan, attaching a letter to Ashington Capital requesting information in relation to the Wingate Proposal. In that letter, Norton Gledhill stated that investors expected to be "properly consulted, in advance, of any decision being made in relation to the dealings with Wingate". (It is apparent that the subsequent decision of Mr Anderson to sign the Wingate term sheet without consultation with the superannuation fund investors caused considerable dissatisfaction with them, to say the least.)
2. Mr Anderson was cross-examined on whether he appreciated that this letter was a "a very serious request about a very important matter to the investors" and his response was that he thought the letter was "bizarre" (T 663). Acorn maintains that this reflected Mr Anderson's failure to understand and respect the request by superannuation fund investors for prompt and accurate disclosure of information on important matters. It is also said to be inconsistent with Mr Anderson's evidence that understood the superannuation fund investors wanted to be properly consulted and his self-serving assertion that he in fact "properly consulted them" (T 934).

Ashington cashflow problems - 10 November 2009

1. On 10 November 2009 at 4.13pm, Mr Steel sent an email to Mr Anderson and others at Ashington, copied to Mr Minahan, saying "until we take care of the bank covenants, the PXHT bank account is basically frozen". Mr Steel said that as "the banks are 'secured' creditors and trade creditors are 'unsecured', the payment of unsecured creditors prior to the payment of secured creditors places the directors at risk"; and that "if we wish to pay the creditors…Ashington Group must make the payment on behalf of the fund". At 5.15pm, Mr Bailey of Ashington sent an email to Mr Steel and Mr Anderson, copied to others at Ashington saying that "in short, if we can't pay anybody we will have to close the building. We need to pay cleaners, essential services maintenance, electricity etc and if we can't the building will be unsafe to occupy". Mr Steel responded at 5.34pm that the directors must make a decision as to whether they are willing to risk being reimbursed and whether they have the capacity as a group to make the commitment.
2. Mr Anderson responded at 7.15pm to Mr Steel and Mr Bailey only, that "there are times when a face to face conversation is more appropriate and considered than global emails. In tough times, more than ever leadership is needed".
3. By 10 November 2009, Mr Steel had advised Ms Briggs, who in turn advised Mr Anderson that (Ex 17): I cannot (or will not) certify that ACL is able to "pay all of its debts as and when they are due". All of ACL's cash on hand is committed to supporting the St George MOF facility for all Ashington Group entities. This prevents the cash to be readily available to fund the payment of creditors as and when they are due.

Further steps re Acorn/Albany proposal - 10 November 2009

1. Meanwhile on 10 November 2009 at 5.19pm, Mr Ko sent an email to Ms Garrett and Mr Renauf at their Gmail addresses and to Mr Tremaine, Mr Sheehan and Mr Routley, attaching "a first draft of a task list that I think needs to be done by the team", which assigned responsibility by initials to Mr Ko, Mr Routley, Mr Sheehan, Ms Garrett, Mr Renauf and Mr Tremaine across each of the project stages of financial modelling, due diligence, manager, investment approval, deal negotiation and implementation.
2. On 10 November 2009 at 5.30pm, Mr Block sent an email to Mr Ko, copied to Mr Lord, attaching trade creditors of Ashington Capital and following up on matters discussed in a phone call that day. Mr Block said that, in connection with the arrangements with ADF, he would like to discuss with Arnold Bloch Leibler but that subject to them being able to work through an investor consent that could work well. Mr Ko forwarded that email to Mr Routley at 5.46pm that day.
3. On 10 November 2009 at 5.34pm, Mr Block sent an email to the asset consultants advising that Mr Anderson had sought an interview with the Australian Financial Review (AFR). Mr Block said that Ashington had received a proposal from Wingate and that he had "the terms are pretty ugly", but that it had not yet been sent to PPB. Mr Block also said that he had had detailed discussions with Mr Ko and his team that day and expected something from him in the next day or so.
4. On 10 November 2009 at 5.37pm, Mr Routley sent an email to Mr Ko, Ms Garrett and Mr Renauf on their Gmail addresses, Mr Tremaine and Mr Sheehan, advising that he had just "organised a dataroom" and would "upload data and send invites".

Land and Environment Court Appeal re Double Bay - 10 November 2009

1. On 10 November 2009, Ashington filed an appeal in the Land and Environment Court in relation to the Double Bay decision.

St George records loan breaches by Ashington - 10 November 2009

1. A St George "Application Summary - Decision History" document dated 10 November 2009 recorded loan breaches by Ashington to date.

Internal Ashington communications re consequences of removal as trustee - 10 November 2009

1. On 10 November 2009, Mr Steel forwarded to Ms Briggs the email that she had sent him and Mr Anderson on 21 August 2009 about the removal of Ashington Capital as trustee, seeking to clarify the structure of the Development Management Deed.
2. There followed a chain of emails on 11 and 12 November 2009 between both Mr Steel and Ms Briggs, and also Mr Steel, Ms Briggs and Mr Anderson about the current structure and the financial consequences for Ashington Management if Ashington Capital was removed as trustee. Mr Anderson was cross-examined about those emails. Mr Anderson maintained his position that, even by mid-November 2009, he had "very little focus" on whether Ashington Capital would be removed as trustee as "there was no evidence available to me that anyone was contemplating on sacking the trustee at that time" (T 936-937). Mr Anderson denied that he knew there was a possibility that the superannuation fund investors might remove Ashington Capital as trustee (yet Acorn notes that Mr Anderson's own email on 12 November 2009 at 4.35pm within this email chain spoke in terms of "[i]f ACL atf SPV gets sacked"). Mr Anderson in cross-examination dismissed that the fact that Mr Steel as Ashington's Chief Financial Officer had written to Ms Briggs to reagitate earlier advice she had given about Ashington Capital's removal as trustee as no more than a reflection that Mr Steel "by nature was a worrier", and that Ms Briggs likely sought external advice from Mallesons because Mr Steel "harassed" Ms Briggs about it (T 940).
3. Acorn says that this evidence is absurd, especially in light of the fact that Ms Briggs had checked the advice with Mallesons in her email to Mr Edwards of Mallesons on 11 November 2009 at 11.37am (which was sent at 12.18pm by Mr Eliakim to Mr Anderson because Mr Eliakim was concerned that Mallesons might not recover their fees for giving it) (Ex 25). Acorn says that it is quite plain that for Ashington Capital to be removed at trustee of ADF and ADF2 at that time would have been very significant, if not catastrophic, for Ashington's business. Acorn maintains that Mr Anderson's evidence in the witness box in this regard was unsatisfactory and dishonest in that he failed to accept those obvious propositions.

Wingate Proposal - 11 November 2009

1. On 11 November 2009 at 11.23am, Mr Block sent an email to Mr Anderson seeking more details of the Wingate Proposal and repeating the superannuation fund investors' concerns in relation to the process.
2. On 11 November 2009 at 11.57am, Mr Anderson sent an email to Mr Block (copied to Mr Lord and Mr Burridge) in which he explained why he had not sent the Wingate Term Sheet to him, saying that he got it the previous morning (which Acorn says was not correct - technically it appears that Mr Anderson received it at 6:43pm on 9 November but whether he read it then is not clear) and indicated that it would be supplied. However, Mr Anderson said that he "did not forward it to you because there were numerous issues/inaccuracies which we would like to resolve before it gets your review". Mr Anderson said in that email that he did not recall PPB "raising a concern about the Stonington Pref Equity process" and stated that Ashington ran a professional process with due diligence undertaken via a due diligence site. On 11 November 2009 at 12.12pm, Mr Block responded to this by email to Mr Anderson pointing out that they had "been in constant dialogue with you concerning this matter, given its importance to investors and the future of the fund". (Acorn says that this was yet another indication of Mr Anderson's poor views of his serious obligations of disclosure to the superannuation fund investors.) On 11 November 2009 at 11.59am, Mr Anderson sent an email to Mr Block (copying Mr Lord and Mr Burridge) with the Wingate Term Sheet attached.
3. Meanwhile, on 11 November 2009 at 11.59am, Mr Anderson sent an email to Ms Garrett (who must have been in Melbourne at this time) and to Mr Minahan, passing on this email to PPB. Ms Garrett's response at 4.47pm was that she "got a shitty phone msg but have not yet responded as took a tumble today and decided I could respond to Peter [Block] tomorrow".
4. On 11 November 2009 at 4.13pm, Mr Wyeth (of Ashington) sent an email to Mr Renauf, Ms Garrett and Mr Bailey, summarising the current terms of the Wingate Proposal and forwarding an email sent to Mr Levin of Wingate as to why the Wingate Proposal did not work for Ashington.

Ashington cash flow problems - 11 November 2009

1. On 11 November 2009 at 1.38pm, Mr Steel sent an email to KordaMentha saying: I re-iterate that both funds are basically out of cash until the following liquidity events occur: 1) ADF2 - Re cap of Stonington - Currently reviewing an indicative term Sheet from Wingate and Alter family is still in the picture 2) ADF2 - Once #1 occurs, $6M Uncalled Capital is freed up - allows for Nab/StG interest and partial principal pay down - (if not otherwise renegotiated with Banks) 3) ADF - Sale of Wylde St - Releases circa $6m-$8m equity after retirement of Senior and trade creditors 4) ADF - Once #3 occurs - ADF has the ability to repay ADF2 intertrust loan ( circa $2.3M). Alternatively ADF could pay direct to PXHT but it will not eliminate intertrust loan 5) ADF2 - receives loan proceeds in #4 above and repays remaining principal pay down - (if not otherwise renegotiated with Banks). 6) Recapitalize Double Bay and agree a short term work out with Banks to allow time for the recap to occur (to be negotiated with Banks)

Acorn/Albany term sheet sent to PPB - 11 November 2009

1. On 11 November 2009 at 4.48pm, Mr Ko sent an email to Mr Block and Mr Lord, attaching a draft term sheet for discussion and noting an intention formally to submit it to superannuation fund investors the following day. The draft term sheet set out a proposal from Parissen to recapitalise ADF2 with $20 million, with $6 million to come from the superannuation fund investors. Mr Ko stated that, "Acorn is still reviewing and therefore this documents [sic] is also subject to their comments", which Mr Ko then forwarded by email at 4.52pm to Ms Garrett, Mr Tremaine and Mr Renauf.

LUCRF reference to proposal for Parissen to take over as trustee/manager - 11 November 2009

1. An Internal Oversight Group IOG report for the LUCRF Investment Committee dated 11 November 2009 outlines detail of a proposal by a new entity called Parissen to take over as trustee and manager of the Ashington funds.

HESTA's valuation of ADF2 investment - 11 November 2009

1. On 11 November 2009 at 5.49pm, Mr Hastings (of HESTA) sent an email to Ms Briggs stating that HESTA would value its investment in ADF2 on the basis of a firesale of all assets and requested an updated valuation based on that scenario.

Possible AFR story - 11 November 2009

1. On 11 November 2009 at 5.33pm, Ms Garrett sent an email to Mr Anderson confirming that she had spoken to PPB and two investors about a possible AFR story.

Wingate revise proposal re Wylde Street - 11 November 2009

1. On 11 November 2009, Wingate improved its refinance offer on Wylde Street, increasing the principal amount from $13 million to $15.3 million.

Judgment entered for Savi Communications - 11 November 2009

1. On 11 November 2009, Coopers Lawyers on behalf of Savi Communications sent a letter to Ashington Capital stating that judgment had been entered against it in the sum of $56,088.72 on 10 November 2009 and attaching the notice of order made by the Court.

St George to engage Grant Thornton - 11 November 2009

1. On 11 November 2009, St George sent a letter to Ashington about its facilities being in default and stating that St George wished to engage Grant Thornton to undertake a limited scope review of Ashington Group.

Internal Ashington concerns about liquidity - 12 November 2009

1. On Thursday, 12 November 2009 at 8.58am, Mr Steel sent an email to Mr Block, copied to Mr Lord. The email from Mr Steel noted issues including: the recording of "excess" contributions or "loans" made by ADF2 to the Double Bay Property; the recording of a future $20 million fee payable to Valad on completion of the Noosa Project; certain "going concern issues" which Mr Steel summarised as that "in general both funds are illiquid and dependent on future events to occur" which included not just the Stonington recapitalisation but also the sale of the Wylde Street Property, an agreed strategy with the financiers of the Double Bay Project and an unfavourable valuation of Stonington; as well as certain "compliance issues" which included an inter-trust loan of $2.3 million, the defaults on the banking covenants as well as the borrowing at the head trust level which had occurred with respect to the Investec Stonington Facility. Mr Steel there recorded his view that the auditors were reluctant to issue their report prior to the outcome of the Stonington Capital Raising. On 12 November 2009 at 9.05am, Mr Block forwarded that email to Mr Ko and Mr Lord. On 12 November 2009 at 7pm, Mr Ko forwarded the email to Ms Garrett and Mr Renauf on their Gmail addresses, and to Mr Routley, Mr Tremaine and Mr Sheehan.

Events of 12 and 13 November 2009

1. On 12 November 2009 at 4.58pm, Mr Ko sent an email to Mr Block and Mr Lord, attaching a term sheet of the Parissen proposal "for distribution", with some marking up.
2. On 12 November 2009 at 6.31pm, Mr Carolan sent an email to Ms Dickson attaching a document recording his 'Work in Progress', which noted the Ashington Property Group at the top of the list under the heading "Mandated", with the transaction description of "Mezzanine Finance Facility".
3. On 13 November 2009 at 8.37am, Ms Garrett informed Investec that Acorn and Albany had submitted a term sheet to PPB, which PPB was going to recommend to investors. At 9.22am, Mr de Rooy requested that Ms Garrett push for a timetable for completion of the deal by close of business that day. Ms Garrett responded at 2.40pm that she was "pushing as hard as I can".
4. Meanwhile, on 13 November 2009 at 9.59am, Mr Ko sent an email to Mr Block and Mr Lord, copied to Mr Routley, attaching a final term sheet for the proposal from Parissen to recapitalise ADF2 with a minimum of $24 million, with $6 million to come from the superannuation fund investors, to be applied across the Stonington Project and the Double Bay Project. At 5.33pm, that day, Mr Block forwarded that email to Mr Warden copied to Mr Lord.
5. On 13 November 2009 at 5.28pm, Mr Block sent an email to Mr Warden and Mr Lord at PPB, forwarding the email chain between Mr Wyeth and Mr Renauf attaching Stonington Project Summary Financials.
6. On 13 November 2009 at 5.33pm, Mr Anderson sent an email to Mr Block, copied to Mr Lord and Mr Burridge, outlining significant events that week. The email stated that the Hamton legal action had been adjourned to 7 December 2009; that a term sheet had been received from Wingate late on 9 November 2009 but that the Wingate Term Sheet "requires clarity in many areas to permit the development of a financial model that would allow Ashington to communicate to investors the terms of the offer"; and that "Ashington's development team is working with Wingate to develop a financial model which clearly articulates the terms of this arrangement". Mr Anderson concluded by saying "[u]pon agreement, a proposal will be forwarded to PPB for consideration with investors".
7. On 13 November 2009 at 5.37pm, Mr Block sent an email to asset consultants advising that an updated term sheet had been received from Mr Ko that would be circulated on the Monday; that Mr Ko was seeking exclusivity for two weeks (which Mr Block recommended); and that they had "very serious concerns" about the Wingate Proposal.
8. On 13 November 2009 at 6.11pm, Mr Burridge sent an email to Mr Anderson and Mr Minahan, copied to Mr Lord and Mr Block, attaching a letter in relation to the Wingate Proposal; requesting that Ashington keep them updated as to the detail of any discussions and correspondence Ashington was having with Wingate and noting the expectation of the superannuation fund investors "to be properly consulted, in advance, about any dealings with Wingate". Norton Gledhill stated that PPB had serious concerns about the Wingate Proposal. (Again, Acorn says that Mr Anderson's response in cross-examination (that upon receiving this letter he "question[ed] the genuineness of PPB. That's all" - T 665) should be understood as nothing more than a self-serving response for a trustee in Ashington Capital's position.)
9. Meanwhile on 13 November 2009, a progress report on the Wylde Street sale process was being prepared by Ashington.

Parissen funding developments - 14 November 2009

1. On 14 November 2009 at 2.21am, Mr Ko sent an email to Ms Garrett and Mr Renauf at their Gmail addresses, and to Mr Tremaine, noting that Victor Smorgon Group had agreed to provide Parissen with mezzanine funding to complete the Stonington Project and seeking comments on whether to make an offer to the Victor Smorgon Group to match the offer from Apex Capital.
2. Shortly after the above email, Mr Ko sent an email to Ms Garrett, Mr Renauf and Mr Tremaine, asking everyone to participate in a conference call at 8.30pm on Sunday 15 November 2009 to prepare for the upcoming week, and listing a series of points he wished to discuss, including: review and finalisation of the Parissen financial model; review of the Parissen shareholder presentation, Parissen shareholder terms sheet and team members employment terms sheet; briefing on plans for a meeting to discuss implementation with Mr Philip Chester of Arnold Block Leibler; review the status of the due diligence request; and Victor Smorgon Group's possible funding for Stonington.
3. On 14 November 2009 at 9.51am, Mr Ko sent an email to Mr Block, Mr Lord and Mr Carson at (PPB), which he then sent to Mr Routley, Mr Sheehan, Ms Garrett and Mr Renauf (at their Gmail addresses) and Mr Tremaine. In this email Mr Ko said: [i]n thinking about all the issues that need to be covered in due diligence, a significant "variable" is obviously whether Parissen takes responsibility as Trustee and Fund Manager for ADF1. As discussed, Parissen believes that this ADF1 role is best delivered by PPB as the developments are complete or the sale process for undeveloped sites is underway. We would like to land on what PPB would like to do early this week. Can we arrange a separate conference call on Monday or Tuesday afternoon to discuss?
4. On 14 November 2009 at 10.19am, Mr Ko sent an email to Mr Routley reporting on a long conversation Mr Ko had had with Mr Tremaine regarding Mr Renauf's value to the Parissen management team. Mr Ko said that Mr Tremaine's opinion was that Mr Renauf's value was significant and that Mr Tremaine would not join PPB and leave "the Pacific family" if Mr Renauf was not part of the team going forward. Mr Ko said that, without Mr Tremaine, Parissen could not go forward in his view and that this placed a different dimension on things for him.
5. Mr Routley's evidence (see at [82] of his 10 August 2018 affidavit) is that he stepped back and allowed Mr Ko to put together an investment proposal via the Parissen model in the period mid-to-late November 2009. His evidence (at [83]) is that Mr Ko informed him that the superannuation fund investors supported the appointment of the Parissen entity as the new trustee.

Mr Carolan's "we will be shot" email - 16 November 2009

1. On 16 November 2009 at 9.40am (in perhaps one of the more intriguing communications in evidence), Mr Carolan sent an email to Mr Doherty, saying "please keep anything re Alter investment 100% confidential! Very important this is not leaked in anyway or we will be shot". (The plaintiff says that from this it is plain that Patersons and Ms Garrett and Mr Renauf were well aware that their conduct could not be defended, if uncovered.)

Ashington overdrawn accounts - 16 November 2009

1. On 16 November 2009 at 9.42am, Mr Anderson sent an email to St George and NAB attaching a letter from Ashington Capital to the banks in regard to the bank account for the Double Bay Property being overdrawn and their defaults and seeking bank support to have a separate bank account to pay for creditors in relation to security, fire safety inspections and maintenance and electricity (so that the building could stay open).

Ms Garrett decides not to "formalise" her employment with Ashington - 16 November 2009

1. On 16 November 2009 at 12.16pm (the plaintiff says once it was clear that her proposal was going to be accepted by superannuation fund investors), Ms Garrett sent an email from her Gmail account to Mr Anderson and Mr Minahan, copied to Mr Renauf, advising that she had decided not to "formalise my employment arrangement with the group". Effectively, this was Ms Garrett's resignation from her position with Ashington.
2. On 16 November 2009 at 2.52pm, Mr Ko sent an email to Ms Garrett, Mr Renauf and Mr Tremaine attaching a draft employment terms sheet. Acorn says that there is no evidence that this was sent to Mr Routley.

Investec - 16 November 2009

1. On 16 November 2009 at 5.27pm, Mr de Rooy sent an email to Mr Anderson copied to Ms Garrett, referring to their telephone conversation that morning and requesting a timeframe for an update on the Wingate and Alter/Acorn Proposals. Mr Anderson replied at 5.50pm that: I have been trying to get hold of Nicki for a couple of days, via phone and email, without success so I can only assume that her health is a more important issue to her at the moment. It is embarrassing from my perspective as the MD [Managing Director] of Ashington that I cannot comment on the status of the Alter Family but unfortunately I cannot.
2. Mr Anderson provided an update on the progression of Wingate, noting that "Mallesons have begun the financial structuring work to cater to the terms of their offer"; and that a revised off would be finalised in the next 48 hours. Mr Anderson offered to meet on Wednesday (18 November 2009), which Mr de Rooy confirmed in his reply at 6.03pm.
3. On 16 November 2009 at 7.11pm, Mr Lord sent an email to Mr Ko, with a copy to Mr Warden, giving an extract of an email sent to Mr de Rooy on 11 September 2009 in relation to the proposed "exit fee" of $1 million.

Alter - 17 November 2009

1. On 17 November 2009 at 11.46am (the day after she had made known that she was ceasing her role with Ashington), Ms Garrett sent an email to Mr Anderson, saying that they needed to chat about Alter. Ms Garrett said that Alter (effectively Albany and Acorn) had "lost faith in Ashington as Manager" and that they were "looking at ways they can still provide investment but in a protected fashion"; and Ms Garrett said that Alter was speaking directly to PPB and that she was not across all of the detail. Mr Anderson responded at 5.36pm, requesting a 30-minute catch up the following morning; and Ms Garrett agreed.
2. On 17 November 2009 at 2.30pm, Mr Ko sent an email to Mr Warden (of PPB), copied to Mr Lord and Mr Block, attaching a list of "missing" documents that had been requesting and which he wanted to review as a matter of urgency (including documents relating to each of ADF2, the custodian, Double Bay, Stonington and Noosa). Acorn says that there is no evidence that this was sent to Mr Routley.

KordaMentha informed of Parissen Proposal - 17 November 2009

1. On Tuesday 17 November 2009 at 10.02am, Mr Winterbottom sent an email to the banks (NAB/St George) copied to KordaMentha personnel, noting that they were meeting with Ms Garrett and Mr Renauf that afternoon (who had just returned from London where they were meeting with potential investors). Mr Winterbottom said that Investec had been in regular contact with Mr Anderson; and that KordaMentha had gained some "high level financial information" in respect of Ashington Group, which they were incorporating in their report.
2. On 17 November 2009 at 6.28pm, Mr Ko sent an email to Mr Shepard, following their telephone conversation that day. Mr Ko confirmed that "[they] are working with equity investors in ADF1 & 2 to provide a solution to both funds". The email sets out elements of the proposed terms, including that there be a standstill agreement for 24 months from NAB/St George in return for certain things, including the new equity being dedicated to seeking a development application for mixed use within the existing building envelope. The email noted that the Alter family and Acorn's proposal had the support of Mr de Rooy from Investec. Mr Ko said that he understood that David Winterbottom was acting for NAB/St George and that Acorn/Albany would like to brief him but that "we have some sensitivity about approaching St George with this proposal as they are the bankers for Ashington Group Limited, "the manager"". Mr Shepard sent an email to Mr Winterbottom at 6.33pm, noting that Mr Ko was keen to have a chat and asking if Mr Winterbottom was available.
3. Mr Winterbottom sent an email internally within KordaMentha at 6.54pm that day, noting that he had just spoken to Mr Ko, that Mr Ko was worried about St George telling Ashington and that Mr Ko was reluctant to give the proposal to them in detail until there was "some assurance in place".
4. On 17 November 2009 at 8.43pm, Mr Winterbottom sent an email to various persons at NAB and St George, saying that KordaMentha met with Ms Garrett and Mr Renauf that afternoon, and that they would "not be accepting employment with Ashington as initially intended"; but would be working alongside the Alter family with a view to restructuring and recapitalising ADF2. Mr Winterbottom summarised the proposal in relation to this; and said that subsequent to the meeting he had received a call from Mr Ko who broadly confirmed the proposal outlined but was reluctant to provide the proposal to them at that point as he was aware that St George lended funds to other parts of Ashington and was concerned about disclosure. The email noted that "they are still planning out how to gain control of Ashington and need to get formal confirmation from Investors that they will go with the PSCG [Parissen] proposal".

KordaMentha/Parissen Proposal - 18 November 2009

1. On 18 November 2009 at 8.15am, Mr Winterbottom informed NAB and St George that he had spoken with Michael White of St George who was working on an internal solution to the confidentiality issue raised by Mr Ko.
2. On 18 November 2009 at 8.37am, Mr Winterbottom sent an email to Mr White reminding Mr White not to pass on any of the details of the Parissen Proposal to any people internally who may be "running with the Group exposure going forward, nor obviously to Ashington".
3. On 18 November 2009 at 6.21pm, Mr Winterbottom sent an email to Mr Ko, stating that it had been agreed by the relevant teams within St George not to disclose the Parissen Proposal to Ashington and provided Mr Ko with Mr White's contact details.
4. At 6.32pm, Mr Winterbottom sent an email to NAB/St George personnel, Mr Mouawad and another at KordaMentha (Paul Mirams) and Mark Clifton at Freehills, forwarding the above email and stating that, "St George now have separate teams dealing with the Double Bay and Other exposures. I will follow up Pacific Shopping Centres [Alter] shortly to determine when we can expect their proposal". In reply to the 6.21pm email, Mr Ko responded at 8.19pm that he would provide a copy of the term sheet the following day.

Concern re Ashington balance sheet - 18 November 2009

1. Meanwhile, at 8.17am, Mr Mouawad of KordaMentha sent an email to Mr Steel raising concerns about Ashington's balance sheets; to which Mr Steel responded at 11:22am. At 11.42am, sent an email asking if Mr Steel's previous response meant that Ashington was yet to contribute $4.5 million of its capital calls; to which Mr Steel responded, "yes".

PPB position re Alter/Acorn proposal - 18 November 2009

1. On Wednesday, 18 November 2009 at 12.17pm, Mr Lord sent an email to the asset consultants advising that a number of matters in relation to the Parissen (Alter/Acorn) Proposal had progressed during the last 24-48 hours and that they would send an update report to investors later that day or the next at the latest. The email recorded Parissen's suggestion that, in order for their due diligence to be completed, they should assume the role as trustee of both ADF and ADF2, the benefits of which would be to "remove Ashington from its capacity as trustee and prevent the incurring of any further liabilities at Fund or sub-trust level" and allow Parissen full access to records to complete their due diligence.
2. The email stated that PPB supported this proposal in circumstances where Mr Anderson was contemplating executing the Wingate Proposal. PPB believed that the replacement of the trustee should occur for both funds as Mr Anderson proposed to use surplus funds released from a purported refinance of Wylde Street against the interest costs in relation to Double Bay. The email stated that if Parissen did not wish to proceed after finishing its due diligence "other opportunities will need to be explored".

Amendments to Wingate Proposal - 18 November 2009

1. On 18 November 2009 at 3.53pm, Mr Anderson sent an email to Mr Levin requesting changes to the Wingate Proposal to "allow it to be a little more 'user friendly'".

PPB Strategy Update No 3 - 18 November 2009

1. On 18 November 2009 at 8.59pm, Mr Warden of PPB sent an email to Mr Lord, Mr Block and the asset consultants attaching PPB's Strategy Report No 3, with the following documents: Parissen Final Terms Sheet; Stonington Feasibility; Double Bay Feasibility; Curriculum Vitaes (Third PPB Report).
2. PPB recommended the Parissen deal and the removal of Ashington. In so doing, PPB noted that, according to advice it had received from Arnold Bloch Leibler, while the trustee could be removed by members holding 75% of votes, the management agreements between Ashington Management and each sub-trust had no applicable termination clauses, and material breaches of those agreements had not been committed by Ashington Management.
3. PPB canvassed several options to effect Ashington's removal as trustee and manager, which included seeking to provide an incentive for Ashington voluntarily to resign from those positions; replacing the trustee and seeking to terminate the management agreements forthwith, exposing the trusts to the risk of claims for unpaid and unearned management fees running to several million dollars; or seeking otherwise to terminate the management agreements through Court proceedings (the outcome of which would be uncertain).
4. Relevantly, the Third PPB Report amongst other things, stated that: (a) it was produced in accordance with PPB's engagement letter dated 16 July 2009 and solely for the information of the investors of ADF2; (b) there was a "clear and imminent risk of a further deterioration in the solvency position of both Funds as a consequence of potentially capricious behaviour of the manager (i.e. the signing of the Wingate proposal)"; (c) a recapitalisation of the funds and sub-trusts was unlikely to occur whilst Ashington was trustee and manager; (d) an outline of the Parissen plan to recapitalise ADF2; (e) the key benefits of the Parissen proposal include the removal of the immediate insolvency threats, address the issues on the Stonington and Double Bay Projects and remove management; (f) if the superannuation fund investors do nothing it is arguable that equity will completely disappear across both funds but if the Parissen Proposal proceeds they should be $12 million "in front"; (g) PPB recommends that the superannuation fund investors consider changing the trustee of both ADF and ADF2 from Ashington to Parissen, which would prevent Ashington incurring further liabilities and allow Parissen to complete due diligence; (h) a summary of the recent events on Stonington, Double Bay, Noosa and Wylde Street; (i) an outline of the parties approached in the refinance the Investec Stonington Facility, the vendor finance and unsecured creditors at Stonington (including Mr Ko of Pacific, Mr Routley of Acorn and Wingate); (j) an outline of the Wingate Proposal and the problems with it; (k) that Ashington may execute the term sheet with Wingate and incur the application fee without further consultation with the superannuation fund investors and PPB, noting that this is a major factor in PPB's recommendation to replace Ashington Capital as trustee.
5. (Acorn says that there is no evidence that Mr Routley received the Third PPB Report.)

Parissen Proposal accepted by superannuation fund investors - 19 November 2009

1. On Thursday 19 November 2009 at 7.54am, Mr Ko sent an email to Mr Winterbottom, copied to Mr Shepard and Ms Garrett (at her Gmail address) attaching a copy of the Parissen Proposal. Mr Ko said that if Parissen was not appointed a fiduciary for the ADF2 assets within the next 21 business days or if agreement cannot be reached with the existing financiers, then they will approach "your clients" with two propositions for Double Bay, one being outright purchase, and the other being a joint venture.
2. In response to the above email, on 19 November 2009 at 9.54am, Mr Winterbottom sent an email to Mr Ko, copied to Mr Mirams, asking if Mr Ko and Mr Tremaine would be available to have a call with Mr Mirams (head of 333 Real Estate - KordaMentha) and him the following day.
3. On 19 November 2009 at 10.52am, Mr Ko sent an email to Mr de Rooy to update him on the progress of the term sheet and sought his assistance.
4. On 19 November 2009, the superannuation fund investors had a meeting with PPB and (according to Ms Chan and Mr Weaver's note of the meeting) agreed to appoint Parissen as long as there was "a strong process regarding the retirement and appointment of trustee" with "PPB to arrange by advising Ashington". Mr Hastings' note is to a similar effect.

Parissen Group incorporated - 19 November 2009

1. Meanwhile, on 19 November 2009, Parissen Property Group Pty Ltd (later renamed Scarborough Pacific Group Pty Ltd and then FGHA Pty Ltd) (to which I refer as Parissen) was incorporated for the purpose of investing in ADF and ADF2, with Mr Ko as a director and secretary. Acorn had no management or shareholding interest in Parissen until April 2010 (see below).

20 November 2009

1. On 20 November 2009 at 10.25am, Mr Ko sent an email to Mr Lord, Mr Warden and Mr Chester (of Arnold Bloch Leibler) requesting a copy of the Unitholders Agreement between Valad and ADF2 regarding Noosa. Mr Ko said that he appreciated "all of the effort that you are making in this transaction [t]o work for all the parties".

Shortfall in capital raising for ADFIT - 20 November 2009

1. On 20 November 2009 at 10.40am, Mr Anderson sent an email to Mr Steel saying that he did not think that they "should acknowledge that the shortfall in capital raising for ADFIT becomes an Ashington liability".

Investec contemplate appointment of receiver - 20 November 2009

1. On 20 November 2009 at 2.53pm, Mr de Rooy sent an email saying that he and Mr Lord had discussed the concept of a "pre-pack receivership appointment" in the event that Ashington Management "attempted to obstruct the processes/outcomes you have requested of Investors/Ashington".

Mr Ko updates Investec of superannuation fund investors' acceptance of Parissen Proposal - 22 November 2009

1. Meanwhile, on Sunday, 22 November 2009 at 12.51pm, Mr Ko sent an email to Mr de Rooy in answer to the 2.53pm 20 November email, advising that the investors had accepted the Parissen terms sheet, although it needed to be signed. Mr Ko said it looked unlikely that the transaction would complete before Investec's 30 November deadline. Mr Ko committed to keep Mr de Rooy abreast at all times with the information required by Investec.

Acceptance of Wingate Proposal - 20 November 2009

1. Over the period from 18 to 20 November 2009, Mr Anderson negotiated amendments to the Wingate Proposal. (Complaint is made that Mr Anderson executed an amended Wingate Proposal (see below), without advising Norton Gledhill, PPB or the superannuation fund investors. Acorn says that Mr Anderson's evidence in cross-examination, at T 665, that he did not sign the amended Wingate Proposal without proper consultation with the superannuation fund investors or PPB must be rejected as dishonest.)
2. Returning to the chronology, on 20 November 2009, Wingate provided indicative terms for Stonington which the plaintiff says were materially improved and which were accepted by Mr Anderson and Mr Minahan (Amended Wingate Proposal). Mr Anderson's position is that at this stage he still remained in the dark about the Parissen Proposal and that the Wingate term sheet involved a debt transaction for which approval from superannuation fund investors was not necessary. The term sheet was signed in the absence (Mr Anderson thought) of any alternative. It was sent to PPB on Monday 23 November 2009. PPB emphasises that the Wingate indicative terms sheet was signed by Mr Anderson and Mr Minahan without consulting the superannuation fund investors and without seeking the consent of Westpac to Wingate taking a mortgage over the Stonington Property.

Wingate establishment fee - 23 November 2009

1. On Monday 23 November 2009 at 2.34pm, Mr Steel sent an email to Ms Tina Wang (of Ashington) instructing her to pay the Wingate establishment fee ($50,000) from the Stonington Trust. It is noted that this was a component of an establishment fee payable under the Amended Wingate Proposal on acceptance of its term sheet - and that it was paid even though cash was not available in the Stonington Trust.

Investec re 30 November deadline

1. On 23 November 2009 at 2.42pm, Mr de Rooy sent an email responding to Mr Ko's email of 22 November, saying that the 30 November deadline is a "desirable"; but noted that Investec appreciated that significant steps required to close the transaction. Mr de Rooy stated that he hoped to continue to work with "your Group" to achieve a resolution as soon as possible. At 2.53pm on 23 November 2009, Mr Ko forwarded that correspondence to Ms Garrett.

Ashington updates PPB - 23 November 2009

1. On 23 November 2009 at 7.30pm, Mr Anderson sent an email to Mr Lord, copied to Mr Block, attaching a report of significant events from the past week, including the sale process for Wylde Street and attaching an unexecuted copy of the revised term sheet from Wingate dated 20 November 2009. Mr Anderson advised that Ashington had given Wingate an exclusive dealing period of three weeks and asserted advantages to the superannuation fund investors of the deal, including the payout of Investec and removal of the threat of further legal action, the payout of the Hamton Vendor Finance and all other creditors, the de-risking of the project to remove stage 3 construction and a return to the superannuation fund investors of about $15 million.
2. Acorn says that it is significant that Mr Anderson did not advise PPB that Ashington had in fact already executed the term sheet (on 20 November 2009). Acorn says that it is clear that, despite Mr Anderson's attestations to the contrary in cross-examination, Ashington had a track record, from the time of the Investec Facility through to executing the Amended Wingate Proposal of seeking to conceal from the superannuation fund investors fundamentally important matters concerning ADF and ADF2.

Offer re Wylde Street - 23 November 2009

1. On 23 November 2009, Ashington received an offer from MV Developments to purchase the Wylde Street Property for $18 million.

KordaMentha report - 23 November 2009

1. On 23 November 2009, KordaMentha issued its Investigative Accountants Report. In that report, KordaMentha stated, amongst other things: It appears that the persistent financial strain experienced by the Ashington Group over the last 6-12 months has led to a series [of] inter fund dealings and the possible application of Investor funds for purposes inconsistent with the Investors' intentions and the legal requirements of the funds and sub trusts … … Additionally, our review of the balance sheet of ADF2 indicates that Ashington Group Pty Ltd and ADFIT have not funded approximately $4.6 million of their capital calls in ADF2. A review of the Ashington Group Pty Ltd and ADFIT balance sheets indicates [sic] that there is no capacity for the respective entities to fund their outstanding capital calls or their portion of the remaining portion of the remaining $6.0m in called capital ($0.4m).
2. On 24 November 2009, KordaMentha held a meeting with NAB in relation to that report.

Meeting to be arranged with Ashington re its removal as trustee/manager - 24 November 2009

1. On 24 November 2009 at 7.34pm, Mr Ko sent an email to Mr Lord, asking him to meet with Mr Anderson and Mr Minahan the next day (25 November 2009). Mr Lord responded to this at 6.53am on 25 November 2009 that he was just waiting for confirmation of any outstanding approvals from investors or their committees. Copies of these emails were sent by Mr Ko to Ms Garrett and Mr Renauf (at their Gmail addresses) and Mr Tremaine on 25 November 2009 at 7am.
2. On 24 November 2009 at 8.37pm, Mr Warden sent an email to the asset consultants confirming that the during the conference call between the superannuation fund investors and PPB on 19 November 2009 "there was a consensus amongst investors providing PPB with a mandate to commence negotiations with Ashington for their removal as trustee and manager of both ADF1 & ADF2".

PPB Amended Report No 3 - 25 November 2009

1. On 25 November 2009, PPB published its amended report No 3 (Amended Third PPB Report). PPB sent that report by email to the asset consultants at 3.57pm that day, seeking their approval for PPB to commence negotiations with Ashington for their removal as trustee and manager of both ADF and ADF2. The Amended Third PPB Report referred to greater returns for the superannuation fund investors under the Parissen Proposal, including that they would be $18 million "in front" of a "do nothing" scenario.
2. On 25 November 2009 at 8.51pm, Mr Warden sent an email to asset consultants advising that PPB had learnt (not from Ashington) that Ashington had executed the Wingate Proposal and therefore that discussions to commence the removal of Ashington should commence urgently. Mr Warden sought immediate instructions from the superannuation fund investors to expedite the process of removing Ashington as trustee and manager, including confirmation that PPB had the authority to convey a message to Ashington that investors had lost confidence in Ashington, will not support Ashington any further as trustee and manager and plan to remove Ashington as trustee/manager in the short term.
3. The plaintiff says that the Amended Third PPB Report misled superannuation fund investors as to the terms of the Wingate and Parissen proposals. The plaintiff says that presumably this was done in order to persuade the superannuation fund investors to accept PPB's preferred Parissen Proposal. It is said that the report contained an analysis of an "inferior" Wingate Proposal (dated 9 November 2009) that had never been accepted by Ashington and had been superseded by an improved offer (dated 20 November 2009). The changes between the 9 November 2009 and 20 November 2009 Wingate term sheets included an increase in funding from $9 million to $11 million, a 4% reduction in the rate of interest, a reduced profit share, a deferral of the majority of the establishment fee, and the inclusion of obligations on Wingate to assist with the terms of the sales of stage 3 and the Stables and with obtaining construction finance. The proposal also involved a projected return to investors of approximately $15 million.
4. The plaintiff says that, on the other hand, PPB's summary of the Parissen Proposal failed to make clear that it involved the abandonment of the superannuation fund investors' existing equity interest in ADF2, and involved the amendment of unitholdings according to the additional equity investment to be made (of $6 million for the super funds and $14 million for Parissen). It is said that that critical aspect of the proposal is only apparent from a close examination of the Parissen term sheet. Reference is made to the evidence of Mr Hartley in this regard (T 1004-1005): Q. Was it clear to you - and you may not be able to recall - but was it clear to you from that summary that one aspect of the Parissen proposal was that all of the equity contribution by the investors into ADF2 was written‑off to a nil value as a condition of Parissen making their contribution? A. We were expecting it to be diluted by this process, yeah. I mean, if that, if that answers your question. Q. You were expecting to be diluted? A. Yes. Q. That's an inevitable consequence of raising new capital? A. Yes, that's right. Q. Did you understand from this summary that it was a condition of the Parissen putting in the $14 million of equity and $10 million of mezzanine finance, that the value of the $94 million that the super funds had committed to ADF2 would be reduced to nil? A. I can't recall. Q. Certainly, looking at the summary now, it doesn't jump out at one, does it? A. No. Q. You can look over to the next page, 446, and there doesn't seem to be an express statement in the report that it was a condition of Parissen introducing capital that the existing equity would be valued at nil? A. No. Q. It's something that, on reflection, you think PPB ought to have clearly advised the existing investors of, if it was the fact? A. I think it's relevant, but it wouldn't necessarily stop the deal. Q. But it's relevant? A. Yeah.
5. PPB sought authority from the superannuation fund investors to convey to Ashington that the investors had no confidence in the trustee and manager, would not support its ongoing business and planned to remove Ashington as trustee and manager in the short term. It is said that the superannuation fund investors gave their approval having been faced with circumstances of urgency. It is noted that on 27 November 2009, Mr Lord met with Mr Anderson and Mr Minahan to communicate that message.

Communications re Parissen Proposal - 25 November 2009

1. On 25 November 2009 at 10.02am, Mr Ko sent an email to Mr Warden (copied to Mr Lord, Mr Chester of Arnold Bloch Leibler, and Mr Block) acknowledging receipt the previous day of a CD-Rom and attaching a document list of outstanding documents; and outlining areas to cover before making the new investment (property, financial and legal due diligence). The email requested further documents if they had them "otherwise we will wait until we take over" and noted that "we recognise that the above matters can only be covered with proper access to the information which will be gained after we are appointed a Trustee and Manager".
2. On 25 November 2009 at 11.14am, Mr Ko sent an email to Mr Routley and Mr Sheehan (copied to Ms Garrett at her Gmail address and Mr Tremaine) discussing interim operational funding. The email proposed funding arrangements for Parissen's operating costs (which did not include the capital required to be invested to recapitalise ADF2). In summary, Albany, through Pacific Shopping, was to provide unsecured loans to Parissen to meet transaction and employee costs until an agreed date and that when Parissen issued equity to Acorn and "Investor 3" (65%), the same ratio of the unsecured loans would be repaid using that equity; and at the same time Pacific would convert its remaining 35% to equity leaving it as a 35% partner in Parissen (with Acorn and Investor 3 going forward).
3. On 25 November 2009 at 11.22am, Mr Ko sent an email to Mr Lord with a copy to Mr Carson (with the subject line: PPB as manager of ADF). Mr Ko stated that "[w]e have received oral legal advice with respect to ADF1 that the manager will not require an AFS licence". Mr Ko enquired whether Arnold Bloch Leibler had provided similar advice and, if so, "will PPB act as the Fund Manager for ADF1 as we have previously discussed, if we are prepared to act as the Trustee?". Mr Ko asked, if that was the case, whether PPB would undertake its own due diligence of ADF and its assets simultaneously to Parissen completing due diligence on ADF2 and its assets.

Investec's understanding of the position as at 25 November 2009

1. On 25 November 2009 at 1.26pm, Mr de Rooy sent an email internally within Investec reporting on Mr de Rooy's meeting with Mr Anderson and his conversation with Mr Ko that morning. Mr de Rooy there noted that Mr Anderson had advised that: [Ashington] had signed an agreement with Wingate - they had given Wingate exclusivity to do a deal i.e. any negotiations Nicki Garrett was having with interested parties such as the Alter Family would be shut out of the Ashington process … Ashington was intending to 'go to PPB this week' to advise them or the transaction and to tell them that Ashington had no intention of relinquishing their management of the Trusts.
2. Mr de Rooy noted that Mr Anderson had said that it was a debt transaction so there was "no need to involve the investors". Mr de Rooy further noted that Mr Ko "had instructed Brett Lord of PPB (as advisor to the Investors) to 'kick' Ashington out" as trustee/manager and that the investors accepted that proposal. Mr de Rooy noted that Mr Ko was coming to Sydney to get the deal done next week and that Mr Lord had given an assurance that he could deliver the change in trustee and resolve the issue of Ashington Management claiming a right to ongoing management fees despite the change in trustee.

Consent provided by LUCRF, Sunsuper and HESTA - 26 November 2009

1. On 26 November 2009, each of LUCRF, Sunsuper and HESTA sent emails authorising PPB to convey the message to Ashington contained in Mr Warden's email of 25 November 2009 and stated that they should have formal approval by the following Wednesday (2 December 2009). Mr Thow's unchallenged evidence was that a "significant part of the attraction of the Parissen proposal was that it did not involve working with Ashington".

Parissen - 27 November 2009

1. On Friday 27 November 2009 at 9.40am, Mr Ko sent an email to Mr Lord and Mr Warden with a copy to Mr Block, Mr Tremaine and Mr Routley, noting that PPB had advised that the four major investors had accepted PPB's strategy, and thanking them for their efforts over the past 24 hours and looking forward to hearing from them that afternoon as to how the discussions went.
2. On 27 November 2009 at 10.15am, Mr Ko sent an email to Mr Routley with a first draft of the "Manager Financial Model" being a cash flow forecast over three years for Parissen.

Further communications re ADF/ADF2 and Wingate Proposal - 27 November 2009

1. On 27 November 2009 at 1.51pm, Mr Steel sent an email to Grant Thornton setting out a "high level overview of the strategy" of ADF and ADF2.
2. On 27 November 2009 at 2.59pm, Mr Wyeth sent an email to Mr Block, Mr Lord and copied to Mr Anderson, Mr Renauf and Mr Bailey, noting that the planned meeting that afternoon would not proceeding and attaching a summary of the Wingate Proposal for the Stonington Project.

PPB informs Mr Anderson of proposal to remove Ashington - 27 November 2009

1. On 27 November 2009, Mr Lord conveyed to Mr Anderson and Mr Minahan that superannuation fund investors wanted the removal of Ashington as trustee and manager. Mr Anderson says that this was the first time that he became aware that there was a proposal to remove Ashington as trustee and manager. (The plaintiff says that by that stage the plan had been afoot for almost two months, and that Ashington had missed its opportunity to refinance the Investec Stonington Facility and to repair its relationship with superannuation fund investors and financiers.)

Superannuation fund investors formalise approval - 27 November 2009

1. On 27 November 2009, an internal memorandum to the Board Executive of HESTA prepared by Mr Hastings, recommended that the Board Executive approve the removal of Ashington Capital as trustee of the ADF 2 and Ashington management as the manager of the ADF2. On 27 November 2009, HESTA made the decision to approve the removal of Ashington Capital as trustee of ADF2.
2. The internal HESTA memorandum of 27 November 2009 (where the Wingate Proposal was being considered), noted that Mr Anderson had provided a personal guarantee to secure around $2.5 million of vendor finance to the settle the purchase of Stonington in 2008 and stated that, "[i]t is almost certain the personal situation in which he has found himself has motivated him to accept any proposal which deals with this issue without due consideration as to whether it is in the bests interests of the fund and unitholders".
3. On 30 November 2009 at 11.25am, there was an email from Sovereign Investment to Sunsuper recommending removal of Ashington as trustee and manager. On or before 30 November 2009, a Sunsuper "Investment Recommendation Form" recorded a recommendation that Sunsuper approve the Parissen Proposal and Ashington's removal as manager and trustee of ADF and ADF2; which recommendation was approved on that date.

PPB update investors on removal of Ashington - 30 November 2009

1. On 30 November 2009, at 5.38pm, Mr Block sent an email to the superannuation fund investors advising, amongst other things, that Mr Lord had met with Mr Anderson and Mr Minahan on Friday (27 November 2009) to discuss their removal as trustee and manager and that there was a further meeting scheduled for the next day. The email stated that the "messages were understood" and that they would revert over the weekend with their responses. Mr Block said that Mr Anderson and Mr Minahan had "in the short term vowed to continue". Mr Block also said that if they did not achieve a concrete position at that time then the removal would need to be addressed more definitely with a circular resolution to remove them as trustee, which would "allow Parissen to undertake further due diligence and further pressure Ashington towards their ultimate removal".

PPB communications with Mr Ko - 30 November 2009

1. On 30 November 2009, Mr Ko and Mr Lord communicated about organising a catch up, deciding to meet at Mr Lord's office at 9:15am prior to their meeting with Valad the following day. Mr Ko also asked Mr Lord about his meeting with Mr Anderson that day. Mr Lord's response to this, at 6.29pm, was that further feedback from KordaMentha was that Mr Anderson was adopting the business as usual approach. Mr Lord said, "we are getting the trustee removal documents prepared for execution by investors once the final sign-offs are obtained". Mr Ko forwarded those emails to Ms Garrett and Mr Renauf at 6.42pm that day.

Termination of Mr Carolan's employment with Patersons - 30 November 2009

1. Meanwhile, at some time in the afternoon of 30 November 2009, Mr Carolan was called into a meeting with the Executive Head Director of Corporate Finance at Patersons. His employment with Patersons was terminated with immediate effect. (It is not suggested that the termination was linked in any way to Mr Carolan's dealings in relation to the matters the subject of this proceeding.)

Mr Ko sends Ashington's documents to Baker McKenzie - 1 December 2009

1. On 1 December 2009 at 7.43 and 7.55am, Mr Ko sent to David Holland of Baker McKenzie emails, copied to Ms Garrett, attaching documents relating to ADF and ADF2.

Wylde Street outstanding land tax - 1 December 2009

1. On 1 December 2009, there were email communications between Mr Steel and Mr de Rooy as to Wylde Street's outstanding land tax.

Mr Anderson's communication with superannuation fund investors - 2 December 2009

1. On 2 December 2009 at 10.55am, Mr Anderson sent to Mr King (adviser to Sunsuper) a letter to investors in relation to ADF and ADF2.
2. On 2 December 2009 at 3.16pm, Mr Anderson sent an email to Mr Flett (adviser to LUCRF) copied to Mr McCusker (and also sent to Mr King and Ms Chan), attaching a letter responding to the suggestion for removal of Ashington as trustee and manager. (A copy was forwarded by Mr Flett to Mr Block and Mr Lord, among others. Mr Block forwarded a copy to Ms Garrett) In that letter, Mr Anderson set out in summary form the benefits of the Wingate Proposal; noted that Ashington had been excluded from the process in relation to the Parissen Proposal; and responding to the three points that Mr Lord had spoken about at the meeting asking Mr Anderson to step aside. Mr Anderson sought the opportunity to present directly to investors in order to move forward. Mr Anderson confirmed that he would work with PPB if there was no alternative but said that the superannuation fund investors should be aware that PPB "have contributed to an unsatisfactory set of circumstances to date".
3. On 2 December 2009 at 3.59pm, Mr Gavin sent an email to Mr Anderson indicating that HESTA had "lost confidence" in Ashington when it contravened the terms of the HESTA Side Letter.
4. On 2 December 2009 at 5.51pm, Mr Block sent an email to the asset consultants confirming that they were moving forward with the agreed instructions to remove Ashington as trustee notwithstanding the letter received that afternoon from Mr Anderson.

LUCRF and Military Super approve removal of Ashington - 2 to 3 December

1. In a meeting on 2 December 2009, the LUCRF Investment Committee endorsed Parissen's replacement of Ashington Capital as trustee of ADF and ADF2. On around 2 to 3 December 2009, Military also made the decision to appoint Parissen as trustee of ADF and ADF2.

Investec looking to appoint receiver - 3 December 2009

1. On 3 December 2009 at 9.28am. Mr de Rooy sent an email to Mr Lord indicating that Investec was looking to appoint receivers.

Further steps re removal of Ashington - 3 to 4 December 2009

1. On 3 December 2009 at 6.02pm, Mr Block sent an email to the asset consultants attaching documentation prepared by Arnold Bloch Leibler for the removal of Ashington.
2. On 4 December 2009 at 11.03am, Mr Block responded by email to a request by Mr Dedes (adviser to Military Super) seeking an assurance that despite changing the trustee they maintained the right to pursue Ashington Capital and its directors. On Friday, 4 December 2009 at 11.06am, Mr Block sent an email to asset consultants, as requested by Parissen, forwarding a letter outlining Parissen's role.

Expression of interest re purchase of assets of ADF and ADF2 - 4 December 2009

1. On 4 December 2009 at 1.27pm, Stuart Jones of Rose & Jones Property sent an email to Mr Lord expressing an interest in purchasing the assets of ADF and ADF2.

Valad assert consent required to change trustee of Noosa Trust - 4 December 2009

1. On 4 December 2009 at 5.36pm, Mr Ko sent an email to Mr Tremaine and Ms Garrett, forwarding a letter received from Clayton Utz (representing Valad) in relation to the Noosa Trust. The letter noted that the replacement of Ashington as trustee of the Noosa Trust was a change control event pursuant to the unitholders' agreement between Valad and Ashington and could also trigger a review under the Suncorp-Metway Ltd finance facility; and therefore, required Valad's prior consent. It was said that Valad would also seek the consent of Suncorp.

Wingate Proposal - 7 December 2009

1. On Monday 7 December 2009, Mr Anderson sent an email to Mr Mirams of KordaMentha in which Mr Anderson acknowledged that it was challenging to satisfy the condition precedent in the Wingate Proposal for construction finance.

Arnold Bloch Leibler deliver documents for Ashington's removal - 7 December 2009

1. On 7 December 2009, Arnold Bloch Leibler sent to Ashington original executed resolutions for the removal of Ashington as trustee. At 5:45pm, Mr Block sent an email to the asset consultants reporting that the "package" had been delivered to Ashington that afternoon. Mr Block noted that they decided to have Arnold Bloch Leibler forward the documents in order to "save our bullets for the main game" and had given Mr Anderson until 5pm the following day to sign the documents.

Hamton judgment - 7 December 2009

1. On 7 December 2009, judgment was given by the Supreme Court of Victoria in favour of Hamton against Ashington Capital as trustee of the Stonington Trust for $3.091 million. The judgment noted that the plaintiff wholly discontinued that proceeding as against the second defendant, being Mr Anderson.

Sale of Wylde Street Property - 7 December 2009

1. On 7 December 2009, in an email to Mr Mirams of KordaMentha, Mr Anderson said that Ashington had entered into a 'heads of agreement' for the sale of the Wylde Street Property.

Arnold Bloch Leibler rejects Ashington's assertions as to PPB's conduct - 7 December 2009

1. On 7 December 2009, Arnold Bloch Leibler (acting for PPB) sent a letter to Mr Anderson rejecting assertions made by Ashington about PPB's conduct and confirming that PPB was acting for the existing superannuation fund investors in their own right and not for the Trust Funds.

PPB prepares for court action against Ashington - 8 December 2009

1. On 8 December 2009 at 4.47pm, Mr Block sent an email to the asset consultants seeking their confirmation as to whether their organisation would be prepared to support a court action to force Ashington to execute the signed resolution of a 90% majority of members to remove Ashington as trustee. At 5.34pm, Mr Hastings responded confirming that HESTA was supportive of court action being taken if Ashington failed to execute the resolution. Mr Block's response at 6.29pm was that Ashington had advised that Mallesons would respond on its behalf; and he said that Mr Ko was considering whether Alter/Acorn would contribute to funding the contemplated court action against Ashington.

Communications between Mr Anderson and Mr King - 9 to 11 December 2009

1. At around 10am on 10 December 2009, Mr King and Mr Anderson had a lengthy telephone discussion about Ashington's removal. Mr King emailed his synopsis of that conversation to the asset consultants and PPB at 10:18am on 11 December 2009. Mr King conveyed that Mr Anderson: was critical of PPB; defensive of the HESTA Side Letter; concerned about reputational damage to Anderson; said that Ashington would resign subject to certain conditions.
2. On 11 December 2009 at 10.13am, Mr Anderson sends an email to Mr King saying that Ashington was agreeable to an amicable resolution. Mr King's response at 10.24am was that investors would meet when they received the note of the terms of Ashington's retirement.
3. On 11 December 2009 at 10.32am, Mr Anderson sent an email to Mr King specifying seven points that, in Ashington's opinion would "facilitate a clean, amicable departure". At 4.20pm, Mr King responded saying that they required further information and that PPB would progress the next stage on behalf of the superannuation fund investors.

Parissen informed of Ashington's proposal - 11 December 2009

1. On 11 December 2009 at 2.21pm, Mr Block sent an email to Mr Ko, attaching the "first offer" of Ashington to retire as fund manager for ADF and ADF2, noting that "there will be plenty of toing and froing yet". Mr Ko forwarded this in separate emails to Mr Winterbottom of KordaMentha, Mr Tremaine and Mr Routley, Ms Garrett and Mr Renauf.

Rose and Jones negotiations - 14 December 2009

1. On 14 December 2009 at 9.40am, Mr Jones (of Rose and Jones) sent an email to Mr Lord following up "to discuss opportunities that may exist in any and all of the properties in the development fund of Ashington". Mr Lord responded at 3.21pm on 15 December 2009 confirming that "this is a matter that is of interest to my clients" and saying that they were progressing with negotiations.

Ashington considers elevating Wingate to head trust level - 14 December 2009

1. On 14 December 2009 at 11.31pm, Mr Steel sent an email to Mr Anderson, copied to Mr Minahan, recording the urgent need to consider elevating Wingate from a sub-trust to a head trust level in order "to trump or match the Alter offer".

Communications between Mr Steel and PPB - 14 and 15 December 2009

1. In the morning of 14 December 2009, Mr Block met with Mr Steel; indicating that an amicable solution made the most sense.
2. On 14 December 2009 at 5.41pm, Mr Steel sent an email to Mr Block, copied to Mr Lord, seeking clarity as to why Alter was being appointed as trustee before its due diligence; noting the possibility of Alter discontinuing after due diligence or "cherry picking" projects. Mr Block responded that Alter's offer had been agreed by all superannuation fund investors and was not subject to further negotiation.
3. On 15 December 2009 at 11.33am, Mr Steel sent an email to Mr Block and Mr Lord, confirming that the variation to the constitution (for removal) would be signed as requested. Mr Steel asked if Ms Garrett or Mr Renauf were involved in any way with the Parissen Proposal.

Investec does not support Wingate Proposal - 15 December 2009

1. On 15 December 2009 at 6.40pm, Mr Anderson sent an email to Mr Levin (Wingate) advising that Mr de Rooy would not be recommending the Wingate Proposal to Credit.

Mr Anderson signs variation of trust deeds - 15 December 2009

1. On 15 December 2009, Mr Anderson sent Mr Block and Mr Lord a letter attaching executed supplemental deeds in relation to ADF and ADF2. Mr Anderson's letter made clear that the documentations was provided on the basis that the conditions Ashington had outlined (see above) would be "dealt with expeditiously and in good faith".

Mr Ko seeks banks' consent for Parissen's appointment - 16 December 2009

1. On 16 December 2009, the unitholders of ADF2 passed a formal resolution. Mr Ko sent an email to Mr Winterbottom at 5.58pm stating that: The ADF investors have now passed the resolutions required to make Parissen Capital Pty Ltd ("Parissen") the Trustee of Ashington Development Fund ("ADF") and Ashington Development Fund 2 ("ADF2"). The final hurdle is the signing of the Deed of Retirement & Appointment. … One of the first orders of business will be to remove ACL as trustee of the sub trust that owns the Double Bay Hotel site and replace it with Parissen.
2. Mr Ko sought a time on 17 December 2009 to speak with Mr Winterbottom regarding obtaining the banks' consent to the appointment of Parissen as trustee at the sub-trust level of Double Bay and a standstill for an agreed period of time to allow a commercial deal to be negotiated with the banks by Parissen Capital. Mr Winterbottom forwarded this to the banks for consideration.

Investec considers arrangement with Wingate - 17 December 2009

1. On 17 December 2009 at 4.20pm, Mr de Rooy sent an email to Mr Levin and Mr Harrison of Wingate saying that: As advised, I still do not believe that Investec has a [sic] appetite to enter into any ongoing financing of the Stonington Project. Please note that the following is for discussion purposes only and is not an offer of finance or agreement to the terms of any proposal. Without any obligation to do so, if Investec were to consider pursuing an arrangement with Wingate in regard to a proposal we would need, as a minimum: ● to see a change in Trustee to a party the bank was comfortable with; ● agreement by the new Trustee to enter into a new arrangement with Wingate; ● an approved Development Manager appointed.

Resolutions for Ashington's retirement - 17 December 2009

1. On 17 December 2009, Arnold Bloch Leibler sent to Mallesons written resolutions from the superannuation fund investors directing Ashington to retire as trustee of ADF and ADF2. Mallesons advised Arnold Bloch Leibler that it did not consider Ashington had an obligation under the trust constitutions to act in accordance with directions from members.

PPB updates Investec - 18 December 2009

1. On Friday, 18 December 2009, at 5.27pm, Mr Lord sent an email to Mr de Rooy, copied to Mr Block and Mr Ko, stating that he had still not yet received confirmation that the directors of Ashington had executed the Deed of Retirement & Appointment as directed by investors. Mr De Rooy referred to his email earlier this week outlining "hurdles" to be overcome in relation to the introduction of fresh capital, including the completion of due diligence in relation to Stonington, in parallel to the Double Bay and Noosa. Mr de Rooy said that the requirement for due diligence was driven by the inability of the existing manager/trustee to provide accurate timely information in relation to certain aspects of the head trusts or sub-trusts.

Possible collaboration between PPB and Parissen - 20 December 2009

1. On Sunday 20 December 2009 at 5.37pm, Ms Garrett sent an email to Mr Lord, copied to Mr Renauf, with the subject "PPG [Parissen] business overview" and attaching a business overview of Parissen. Ms Garrett stated that the attached business overview should give Mr Lord a good feel for her proposed business offering. Ms Garrett said that the key business line in which PPB would be interested was part two of the execution plan (to "deliver expertise, experience and capital to underperforming property assets controlled by financial institutions"). Ms Garrett said that Mr Sam Alter would seed a workout fund with a 20-30% holding and that he put her in touch with three different groups in Melbourne who she had met the previous week and all of which said they would follow Mr Alter into a fund of this nature. Ms Garrett was also confident that Mr McCabe would support the proposed fund. Ms Garrett said that the unresolved challenge for PPB/Parissen was to try to secure some form of priority access over the work-out pipeline. Ms Garrett was hopeful that she could arrange a meeting with "Andrew" at least to float the idea with him.

Ashington confirms imminent retirement - 22 December 2009

1. On 22 December 2009 at 9.46am, Mr Anderson sent an email to Mr Miram at KordaMentha confirming that Ashington proposed to "retire at a head trust level today and at a subtrust level over the next six weeks as Alter complete individual project due diligence".

Ashington letter to investors - 22 December 2009

1. On 22 December 2009 at 1.01pm, Mr Anderson sent an email to Mr Minahan and Mr Steel, copied to Ms Briggs attaching a draft letter as to the proposed removal of Ashington as trustee, saying that as trustee of ADF and ADF2 "we remain focused on our fiduciary duties to investors and will of course act in accordance with the wishes of investors. We are committed to, and continue to be so committed, to an amicable settlement and a handover of fund responsibilities, supported by a request from investors". Mr Block sent an email to asset consultants attaching that letter and saying that it was "merely a stalling/delaying tactic".

KordaMentha questions Parissen Proposal - 22 December 2009

1. On 22 December 2009 at 2.08pm, Mr Mirams sent an email to NAB/St George personnel, copied to Mr Winterbottom and Mr Mouawad at KordaMentha, reporting on a conversation with Mr Anderson that morning (which he there summarised). Mr Mirams said that he had been informed by Mr Anderson that Alter had approached Wingate to see if they would continue with their deal under Alter once Ashington stepped aside and that Wingate was less than impressed. Mr Mirams stated, "the point being that the Alter deal looks more and more like a mere change of personnel while trying to access the capital required from existing known sources being $6m from existing investors, Stonington funding from Wingate, proceeds of sale of Wylde Street".

Mr Ko meets with lenders - 22 December 2009

1. On 22 December 2009, there was a without prejudice meeting in the afternoon by Mr Ko with senior and mezzanine lenders.

PPB updates Investec - 22 December 2009

1. On 22 December 2009 at 5.19pm, Mr Block sent an email to Mr Lord and Mr de Rooy, copied to Mr Ko, in which Mr Block said that he had hoped the Deeds of Retirement/Appointment would have been executed that day; but expected that to occur the following day when an issue regarding the financial services licence was resolved. Mr Block confirmed that as soon as Parissen was appointed it would complete due diligence in relation to the proposed recapitalisation of the sub-trusts and that would include discussions with all financiers including Investec. Mr Block said that he would advise Mr de Rooy once Ashington had signed the Deeds of Retirement.

NAB/ St George provide proposal to Parissen - 23 December 2009

1. On 23 December 2009 at 6.47am, Mr Ko sent an email to Baker McKenzie, copied to PPB, Ms Garret, Mr Renauf and Mr Tremaine, passing on an email from Freehills attaching a proposal by letter dated 22 December 2009 from NAB and St George with regard to Double Bay (the proposal referring to a presentation made on 22 December 2009 by Mr Ko).

Arnold Bloch Leibler letter to Ashington - 23 December 2009

1. On 23 December 2009 at 11.15am, Arnold Bloch Leibler sent a letter to Mallesons, noting an understanding that Ashington was finalising a sale of the Wylde Street Property; and asserting that such a sale would be in breach of Ashington's duties as trustee. Mr Anderson forwarded the email to Mr King, asking that he pass on Ashington's response to other investors, PPB and their solicitors. Mr Anderson said that Ashington had never been involved in any such transaction, and that since the date of their meeting on 10 December 2009, Ashington would not entertain any major transaction without consulting the investors and their representatives. Mr King responded that he did not recall that letter from Arnold Bloch Leibler having been circulated (as had been standard practice) and was not sure why it was sent.

Ashington retires as trustee of ADF and ADF2 - 23 December 2009

1. On 23 December 2009, Ashington Capital resigned as trustee of ADF and ADF2, and Parissen was appointed, pursuant to Deeds of Appointment and Retirement as Trustee. Mr Anderson has deposed that he formed the view that Ashington had no choice but to retire as trustee and manager of the funds, stating in his 19 December 2017 affidavit at [476]: For reasons I could not fathom, the superannuation funds had lost confidence in Ashington as trustee, and against my expectations and the advice I had received from Shorrocks, Patersons had failed to secure a mezzanine funding lender to take out Investec and Hamton on the Stonington project…. I could not understand why I had not been able to achieve the Stonington Capital Raising.
2. Mr Anderson further says that, contrary to his understanding that there would be a swift transition of all of its functions in relation to ADF and ADF2 to Parissen, Parissen failed to develop a transition plan and Ashington Capital remained trustee of the various sub-trusts and Ashington Management remained manager of those sub-trusts well into 2010, although unremunerated.
3. Clause 2 of the respective Deeds of Appointment and Retirement for ADF and ADF2 relevantly provided that: the Retiring Trustee thereby retired on and from the Effective Date as Trustee of the Trust and was discharged, released and retired from all duties and obligations in relation to the Trust arising on and from the Effective Date; and on and from the Effective Date, the Retiring Trustee was discharged, released and retired from all rights and powers reposed in or conferred on it as Trustee of the Trust.
4. Clause 3 of each of the Deeds relevantly provided: On and from the Effective Date, the New Trustee accepts office as Trustee of the Trust effective immediately following the retirement of the Retiring Trustee and on and from the Effective Date: a. covenants to hold the Assets and the trust property of the Trust on the terms and condition and subject to the trust set out in the Trust Deed; b. agrees to be bound by the Trust Deed as if it had originally been a party to it; c. each reference in the Trust Deed to the "Trustee" is to be read as a reference to the New Trustee; and d. the New Trustee may on and from the Effective Date exercise all the powers and enjoy and exercise all the rights of the Retiring Trustee under the Trust Deed.
5. Under cl 5(a) of each of the Deeds, Ashington Capital agreed to transfer all of the assets of ADF and ADF2 to Parissen. The "Effective Date" was defined as the date of the Deed.

Acorn sets out investment requirements - 31 December 2009

1. On 31 December 2009 at 10.14am, Mr Routley sent an email to Mr Ko, copied to Mr Sheehan, outlining Acorn's further due diligence requirements and summarising Mr Routley's understanding of Acorn's proposed investment in Parissen and expectations moving forward. Those expectations were divided into an initial phase and a growth phase. The initial phase involved: Ashington's removal as manager and trustee of ADF and ADF2 and stabilisation of the existing Ashington trusts. As part of the due diligence process Mr Routley asked for formal correspondence on a number of matters, including the organisation structure and delineation of responsibilities (shareholders, board of directors, CV's of Mr Ko, Mr Tremaine, Ms Garrett and Mr Renauf), manager financials, fund financials and investment structure. Mr Routley concluded by commenting, amongst other things, that Acorn "cannot commit until" various issues outlined by Mr Routley in the email "will be resolved", and those issues included "terms for removal of manager" and "audit status and level of assurance around opening balances and contingents".

Parissen due diligence progress - January 2010

1. In January 2010, Parissen conducted accounting and financial due diligence on the funds with the assistance of Moore Stephens and legal due diligence on the funds with the assistance of Baker McKenzie. Parissen reported to the superannuation fund investors about the status of these investigations in January 2010, including that the investigations to date had identified a number of potentially serious matters.
2. On 6 January 2010, Parissen sent separate letters to Ashington for each sub-trust, prohibiting Ashington from incurring debts or entering into agreements while Ashington remained trustee of the sub-trust.

PPB Strategy Update No 4 - 13 January 2010

1. On 13 January 2010 at 3.51pm, Mr Block sent to asset consultants Strategy Update No 4 which summarised the events that had transpired since the retirement of Ashington Capital as trustee of ADF and ADF2 (Fourth PPB Report). This included Parissen's talks with financiers about the various projects, the progress of Parissen's due diligence and the terms put forward by Mr Anderson "to facilitate a clean and amicable departure of Ashington from all roles".

Mr Shorrocks informed as to Acorn investment - 8 February 2010

1. On 8 February 2010, Mr Minahan told Mr Shorrocks at a lunch the two had, that Acorn had invested. Mr Shorrocks gave evidence in his affidavit that this was significant to him as he had no knowledge of this investment, or the manner of the investment, and thought that it may have entitled Patersons to a fee under the Patersons Mandate. After this lunch, Mr Shorrocks called Mr Doherty as to whether he was aware of Acorn's investment and Mr Doherty said that he was not aware of it (Mr Shorrocks' 7 September 2018 affidavit at [42]).

Parissen receive legal advice - 11 February 2010

1. On 11 February 2010, Baker McKenzie emailed to Parissen a document addressing concerns in relation to ADF and ADF2 and prepared a presentation titled "Ashington Legal review report".

Further steps for removal of Ashington - 23 and 24 February

1. On 23 February 2010, Ashington Capital, Parissen and Mallesons signed an escrow letter concerning the transition process of Ashington retiring as trustee from each sub-trust.
2. On 23 February 2010, Anderson and two Parissen entities entered into a Deed of Indemnity whereby Mr Anderson was indemnified against the personal guarantees he gave in respect of the Hamton Vendor Finance.
3. On 24 February 2010, Ashington Capital, Ashington Management and various Parissen entities entered into a Deed of Termination and Release concerning the termination of the Development Management Deeds for the Project X Hotel Trust, Potts Point Trust, Stonington Trust and Wylde Street Trust.

PPB Strategy Report No 5 - 10 March 2010

1. On 10 March 2010, Mr Block sent an email to asset consultants attaching Strategy Report No 5 which noted that Ashington Capital did not meet any of the capital calls and that Ashington had agreed to pay a $20 million fee to Valad in connection with the Noosa Project (Fifth PPB Report). The report attached legal advice from Baker McKenzie and accounting advice from Moore Stephens. Amongst other things, the report identified various accounting and trustee irregularities in how Ashington had managed ADF and ADF2.

Presentation by Parissen to Acorn - 26 March 2010

1. After Parissen had completed due diligence, Parissen gave a presentation dated 26 March 2010 to Acorn on the terms of a proposed deal for Acorn to become a shareholder of Parissen.
2. The first bullet point of the executive summary in that presentation stated that "Parissen Property Group Pty Ltd ('Parissen') has been established as a boutique institutional property fund manager focused on distressed and opportunistic property investment". Parissen's strategy was identified as being that: Parissen will employ an entrepreneurial investment strategy to achieve solid risk adjusted returns by investing in real estate opportunities throughout Australia, with particular emphasis on the Eastern Seaboard … Distressed REITs [Real Estate Investment Trusts] and Unlisted Funds suffering redemption and debt covenant pressures provide significant acquisition opportunities to the informed and well capitalised investor.
3. (The plaintiff says that this strategy is identical to Ashington's strategy for AOF3.)

Further steps to transition - March to August 2010

1. In March 2010 there were complaints by Mr Anderson as to the progress of the transition plan and in April 2010 an assertion that Parissen is in breach of the transition plan. An amendment to the Deed of Termination and Release was entered.
2. In April 2010, various Ashington and Parissen entities entered into a Deed of Acknowledgement with Ms Garrett and Mr Renauf. That deed noted (at cl 2.1): 2.1 The parties agree that the Individuals had their employment with the Ashington Parties (Employment) terminated on: (a) 16 November 2009 in relation to Garrett; (b) 23 December 2009 in relation to Renauf
3. On 16 April 2010, Ashington, Parissen and others entered into a Deed of Release - Cross+ Trust whereby Ashington Bayswater took over the ownership and control of that trust, subject to the debt, without any further obligation to ADF.
4. In or around April 2010, Acorn decided to invest in the Parissen model by acquiring shares in Parissen together with structured debt which involved advancing loan funds to, and purchasing existing debt owed by, the Double Bay Project X sub-trust. On 19 April 2010, Acorn's investment committee approved the investment in Parissen and on 20 April 2010 Acorn's directors resolved for Acorn to enter into the relevant documents for the investment in Parissen.
5. On 22 April 2010, Acorn, through a custodian company (National Nominees Ltd), became a shareholder of Parissen. Mr Routley became a director of Parissen on 23 November 2010, a position he held until 20 February 2012.
6. On 22 April 2010, Ashington and Parissen Capital (Project X) Pty Ltd entered into a Deed of Appointment and Retirement as trustee of the Project X Hotel Trust (Double Bay property).
7. On 13 May 2010, Ms Garrett issued a press release announcing the involvement of Mr McCabe and the Scarborough Group in the Parissen Group.
8. On 14 May 2010, Ashington Capital retired as the trustee of the Stonington Trust by Deed of Appointment and Retirement as Trustee; and of the Wylde Street Trust on 26 August 2010. Parissen entities never became trustee of the Potts Point Trust (despite, it is said, having agreed to do so) and in April 2010 Ashington ultimately agreed to retain management of the Cross+ Trust and purchase the units in that trust from ADF.

Liquidation of Ashington Capital and Ashington Management - 14 April 2011

1. On 14 April 2011, Ashington Capital and Ashington Management were placed into liquidation.

Mapeline Proceeding - 2013 to 2015

1. In 2013 proceedings were commenced in the Commercial List of this Court (the Mapeline proceedings) by Mapeline Pty Ltd (Mapeline) effectively against the superannuation fund investors, alleging a breach of an agreement (the Retirement Agreement) allegedly entered into between Ashington Capital (on its behalf and on behalf of Ashington Management) with the defendants. The terms allegedly breached by the superannuation fund investors were for all untis held by "Ashington and Associates" to be redeemed at the 30 June 2009 audited unit price and for a "wind up" fee of $2.5 million to be paid to Ashington Capital.
2. Mapeline was the assignee of all of the right, tile and interest of Ashington Capital and Ashington Management in the closes in action being the causes of action pleaded in the Commercial List Statement.
3. The total loss and damage there claimed was $6,253,125.
4. Mr David Hartley (Sunsuper's then Chief Investment Officer), swore an affidavit in the Mapeline proceeding which relevantly stated (at [73]-[74]): …shortly after the teleconference on 29 July 2009, I had a conversation with Ms Chan and this confirmed some of my concerns about ADF2, and Ashington's performance as trustee and manager. I was forming the view that Sunsuper and other unitholders should consider whether Ashington should be removed as Trustee… I was also concerned that Ashington, including Mr Anderson, had not been transparent in their dealings with unitholders. I no longer trusted Mr Anderson and I had lost confidence in Ashington as trustee and manager of the Ashington Funds…
5. Mr Dedes swore an affidavit in the Mapeline proceeding, deposing at [22]: …By late August 2009 I had formed the opinion that ACPL [Ashington Capital] and AMPL [Ashington Management] needed to be removed as trustee and manager respectively of the ADF, ADF2 and Sub-trusts. At this time I was aware that ACPL [Ashington Capital] had used capital for various purposes that had been invested in ADF2 by the unitholders on the basis that it would only be used for the Double Bay project. My view was that it was necessary to remove Ashington if the Unitholders hoped to extract any value from the remaining trust assets…

Deed of Option Agreement - 29 September 2015

1. By Deed of Option Agreement dated 29 September 2015, pursuant to his powers under s 477 of the Corporations Act, the liquidator of Ashington Capital and Ashington Management granted the plaintiff an option to acquire the "Conspiracy Claim".
2. Clause 2.1 of the Deed of Option provided that: In consideration of payment of the Option Fee, receipt of which is hereby acknowledged, the Liquidator hereby grants to Anderson the Option to acquire the Conspiracy Claim, subject to the terms and conditions of this Deed, during the option Period.
3. "Conspiracy Claim" was defined in cl 1.1 as: any Claim of one or more of the Companies [i.e. Ashington Capital and Ashington Management] against any or all of the Defendants in relation to, or in connection with their acts, conduct, silence or omissions occurring, in the Period (defined as 1 January 2009 to 14 April 2011], in relation to or in connection with the: a. replacement of ACPL [Ashington Capital] as trustee of ADF and/or ADF2 and their sub-trusts; and the b. replacement of AMPL [Ashington Management] as development manager of the Projects by a new trustee and development manager.
4. As to the manner of exercise of the option, cl 3 provided that the plaintiff could exercise the option by forwarding a notice in writing to the liquidator within six months of the date of the Deed of Option. The exercise of the option was subject to the conditions, those being the making of payments to the liquidator: the "Conspiracy Claim Payment" (being $250,000 (including GST)) and the "Costs Contribution" (being the sum of $5,000 (including GST)).
5. Upon exercising the Option, under cl 5.1, the plaintiff was obliged to "use reasonable endeavours to fund and pursue the Conspiracy Claim, against one or more of the persons the subject of the claim". If the outcome of so doing is a "Tangible Benefit" (defined in cl 1.1 as "the amount of any judgment, arbitration, award or settlement of the Conspiracy Claim, as the case may be"), the plaintiff is obliged to pay the liquidator an amount equivalent to 10% of that Tangible Benefit, upon the Tangible Benefit or any part of it being received by the plaintiff or anyone else on behalf of the plaintiff.
6. The option was exercised on 29 September 2015.

Key Dates

1. In summary, as to the timeline of events, it is relevant to keep in mind the following key dates.
2. On 15 September 2008, the collapse of Lehman Brothers triggered the GFC. As at September 2008, Ashington Capital, as trustee for ADF2, was already committed to the purchase of the Stonington Property (pursuant to the contract entered into in May 2008) and was seeking funding for that acquisition; and Ashington Capital, as trustee for ADF2, was also seeking funding in connection with the proposed development of the Double Bay Property (and had recorded in internal documents that it was in breach in that it had exceeded the $30 million limit on funds invested in that property).
3. In October 2008, Ashington Capital entered into a finance facility with NAB for the Project X Trust (i.e., the Double Bay Property) as part of which it gave the Project X Uncalled Capital Undertaking.
4. On 10 November 2008, Ashington Capital issued the request for an additional $20 million in equity from the ADF2 unitholders, this capital raising being for the Double Bay Project ($18 million for the project itself and around $2 million to meet the banking requirements - i.e., the Project X Uncalled Capital Undertaking). This gave rise to a level of disquiet amongst superannuation fund investors, who nevertheless met the call for additional equity and applied for additional units in ADF2 in the period December 2008 to January 2009. However, one of the superannuation fund investors (HESTA) demanded (and received) a side letter dated 21 January 2009 from Ashington Capital, pledging that the funds raised would be used exclusively for the Double Bay Project. The quarantining of these funds was, in effect, required to honour the representation in the ADF2 Information Memorandum, namely that each acquisition and development would occur in a special purpose vehicle and that liabilities would be quarantined at the sub-trust level. That pledge was breached when Ashington Capital entered into the Investec Stonington Facility documents in late February 2009.
5. By mid-December 2008, the Board of Ashington Capital had recorded that existing ADF2 investors were unlikely to invest in the proposed new development fund (ADF3); that ADF was unable to meet its commitments as an ADF2 unitholder in relation to the Double Bay Project and so ADF 2 was meeting those contributions; and that ADF was experiencing a fund performance downgrade and liquidity issues.
6. On 23 December 2008, Ashington Capital signed the Investec indicative term sheet in respect of funding for the Stonington acquisition (a fact not disclosed to superannuation fund investors until June 2009). The Investec terms included an undertaking to have $10 million uncalled capital available (i.e., the Stonington Uncalled Capital Undertaking). Ashington Capital had earlier in December 2008 entered into an agreement for the provision of vendor finance in connection with that acquisition (Hamton Vendor Finance).
7. On 27 December 2008, Ashington Capital's CFO (Mr Steel) made a strong recommendation that Ashington Capital not proceed with the Stonington acquisition, pointing out among other things, that the combination of undertakings for the Stonington and Double Bay Projects meant that Ashington Capital would not be in a position realistically to meet the banking covenants for the duration of the Investec Stonington Facility. Mr Anderson formed the view that the best way to protect investors' equity was to proceed with the acquisition and refinance the Investec Stonington Facility within six months.
8. On 25 February 2009, the Stonington Property settled. The amended Investec Stonington Facility for mezzanine finance of $10 million was entered into on that date, with a required repayment date of 25 August 2009. By entering into the Investec Stonington Facility, Ashington Capital put itself in breach of the respective Uncalled Capital Undertakings (and had obtained borrowings at the head trust level contrary to the representations made in the ADF2 Information Memorandum).
9. On 26 February 2009, the Ashington Capital Board revised the close date for the proposed ADF3 to 31 March 2009 and recorded that it was unlikely that Australian industry superannuation fund investors would subscribe to it.
10. In March 2009, Ashington's CFO pointed to cashflow difficulties and a likely deficit across ADF and ADF2 for the period up to 30 July 2009.
11. By April 2009, arrangements were being put in place for Ms Garrett and Mr Renauf to join Ashington (their precise start dates being uncertain due to "gardening leave" requirements imposed by their former employer, Valad).
12. By letter dated 31 May 2009, Mallesons advised Ashington Capital as to "fund issues with the finalised Investec documents" and advised that Ashington make disclosure to superannuation fund investors of certain matters in relation to the Investec Stonington Facility. (Mr Anderson did not do so at that time.)
13. On 1 June 2009, Ashington Capital sought the superannuation fund investors' commitment to an additional $15 million equity raising for the Stonington Project (to pay out the mezzanine facilities and allow a $2.5 million buffer for additional interest and costs). This led to further disquiet on the part of superannuation fund investors and discussions amongst the investors and their asset consultants with a view to providing a coordinated response to the second request for additional capital. (By early July 2009, Ashington's CFO was advising Mr Anderson that the $15 million requested would not be enough.)
14. On 10 June 2009, in response to a request for information from the superannuation fund investors, Mr Anderson advised that neither the Westpac nor the Investec facilities had recourse to other ADF2 projects (which was incorrect - a matter to which Ashington's CFO drew Mr Anderson's attention on 11 June 2009). Mr Anderson informed the superannuation fund investors that the Investec Stonington Facility was secured by uncalled capital.
15. On 12 June 2009, there was a meeting between the superannuation fund investors and Mr Anderson, at which Mr Anderson's personal guarantee of the Hamton Vendor Finance was disclosed and superannuation fund investors communicated that they would not provide any further equity to ADF2.
16. On 19 June 2009, Ashington Capital drew down the 13th capital call (of $4 million) from unitholders in ADF2 (said to be for Double Bay expenditure, leaving only $6 million undrawn capital for Double Bay - and hence involving a breach of the Investec $10 million Uncalled Capital Undertaking). That draw down was cancelled on 26 June 2009 to avoid "the risk of breaching the Stonington lending covenant" but Mr Anderson pointed out that this would have other implications. The 13th capital call was later re-made on 30 June 2009.
17. On 26 June 2009, Mr Anderson acknowledged that ADF2 was not sufficiently capitalised to undertake all three projects (including Stonington and Double Bay). Internally, Mr Anderson suggested that investors had no choice but to put in $15 million or blow up the fund. On 29 June 2009, Ashington's property managers held a conference call with the superannuation fund investors at which the seriousness of the funds' liquidity issues were discussed.
18. By 1 July 2009, one of the superannuation fund investors (Military Super) was querying whether Ashington was in breach of its obligations to investors and suggesting appointing an investigating accountant to look at the investments for unitholders - this was seemingly the genesis of the idea that led to the appointment of PPB (see below).
19. Also, in around July 2009, Mr Renauf commenced as Head of Acquisitions at Ashington Management.
20. On 10 July 2009, Mr Anderson sent an email to the superannuation fund investors, with a paper that acknowledged that the Investec Stonington Facility was non-compliant with the ADF2 Information Memorandum and that ADF2 did not have enough capital to meet both the Double Bay and Investec Facility covenants and was thus in breach of those facilities.
21. By 13 July 2009, it appears that there was some recognition within Ashington of the possibility of action by investors to terminate the management agreement (see Mr Bouris' 13 July 2009 email).
22. On 16 July 2009, the PPB Mandate was signed, pursuant to which the superannuation fund investors appointed PPB to undertake an independent review of Ashington's financial modelling of the Stonington Project and to provide a strategic and financial review of ADF2 more generally. (In PPB's proposal document issued before the PPB Mandate was signed, one of the key issues was said to be "management" and there was reference to consideration of all options "potentially including a compulsory retirement and replacement if necessary" (although I note that this was not included in the signed PPB Mandate.)
23. On about 21 July 2009, PPB and Ashington Capital signed the PPB Confidentiality Agreement dated 20 July 2009 under which PPB was required to maintain the confidential nature of the confidential information provided to it by Ashington Capital and related entities for the "Approved Purpose" (that being the purpose of assisting PPB to conduct a review and prepare a report of ADF2 as instructed by investors in ADF2).
24. On 29 July 2009, there was a meeting between the superannuation fund investors and PPB at which, among other things, a structural problem with the trusts and sub-trusts was identified (and Sunsuper's representative noted "very messy, need to change trustee"). Military Super's representative indicated that the superannuation fund investors had started a review which would focus initially on, among other things, the process for termination of the manager and responsible entity.
25. As at early August 2009 (whether or not associated with the structural problems that had been identified or otherwise), the superannuation fund investors and PPB were considering the removal of Ashington Capital as trustee (and PPB was also looking at a "review of management").
26. On 14 August 2009, PPB produced its First Strategy Report to superannuation fund investors, recommending among other things that a stand-still arrangement be sought with Investec and other lenders pending a short-term sale of the Stonington Property; and recommending that PPB be "additionally retained" by Ashington Capital to provide advice to it in respect of "investor supported strategies". The report identified that, to implement the strategy set out in the report, PPB would require a mandate including "to assist the company in achieving a legally effective restructure of the current trustee and security arrangements".
27. On 19 August 2009, Investec issued a notice of default, demanding repayment of some $10.139 million and cancelled the Investec Stonington Facility. Investec utilised its power of attorney to call for the $6 million in uncalled capital. Its lawyers put Ashington Capital and its directors on notice of claims which Investec had against the company in its personal capacity and against the directors.
28. On 19 August 2009, Mr Bouris resigned as chairman of the Ashington companies.
29. Meanwhile on 14 August 2009, Mallesons had written to Mr Anderson regarding the structuring of Ashington Capital's development funds. By 20 August 2009, Mr Anderson had instructed Ms Briggs to seek Mallesons' advice about the removal process. Also, on 20 August 2009, Mr Steel sought advice from Ms Briggs as to any breach by him of his duties as a potential director or officer.
30. On 20 August 2009, PPB forwarded to Mr Anderson a draft mandate letter concerning its role going forward and stating that PPB had been engaged by the superannuation fund investors to assist Ashington Capital as trustee (including to achieve a legally effective restructure of the current trustee and security arrangements). The mandate letter emphasised that PPB would not be acting for Ashington Capital in any capacity.
31. On 21 August 2009, Ms Briggs gave advice to Mr Steel and Mr Minahan (responding to a request the day before) as to the entitlement to development management fees if Ashington Capital was removed as trustee and a new trustee appointed.
32. On 21 August 2009, PPB produced its second strategy report, on receipt of which the superannuation fund investors agreed not to provide further information to Ashington Capital without approval of their lawyers and that it was necessary to involve the superannuation fund investors' lawyer (Mr Burridge of Norton Gledhill) in discussions. Around this time, it appears that various (if not indeed all) of the superannuation fund investors formed the view that Ashington should be removed as trustee and manager of ADF and ADF2.
33. On 25 August 2009, the second PPB Mandate was signed (a revised version of the 20 August draft). It recorded that PPB had been engaged by the "investors in the Funds" and authorised the provision of information to assist the mandate which included "achieving a legally effective restructure of the current trustee and security arrangements" and recommending a medium-term strategy for the Funds. It also made clear that PPB was not acting for the trustee in any capacity.
34. On 25 August 2009, the Investec Stonington Facility expired and Ashington Capital was in default thereunder.
35. On 27 August 2009, Ashington's CFO proposed an alternative short-term solution for consideration by superannuation fund investors in respect of ADF2, questioning the decision as to the sale of Stonington and proposing the deferral of decisions on all assets until 31 October 2009, continued attempts to procure construction funding for Stonington, and for superannuation fund investors to contribute $15 million additional capital to take out Investec and the Hamton Vendor Finance, supported by a principal guarantee from Ashington.
36. On 28 August 2009, the Westpac Stonington Facility of $26 million expired. Westpac reserved its rights, advising that it would require a reduction of the facility to $17.6 million.
37. On 31 August 2009, PPB wrote to superannuation fund investors advising as to the expanded scope of its original review (now encompassing both funds); and proposing that the mandate be split as between transaction management for Ashington Capital to manage the sale of Stonington (on the one hand) and investor advisory services to the superannuation fund investors .
38. From at least September 2009, Ms Garrett held the role of Heads of Funds Management at Ashington Management.
39. On 1 September 2009, Investec threatened immediate action against Ashington Capital and unitholders of ADF2 if the uncalled capital call was not paid. PPB proposed to Investec that there be a sale of the Stonington Property to pay the Investec Stonington Facility.
40. On 3 September 2009, Norton Gledhill responded to Investec advising that the superannuation fund investors considered that equity had been pledged in breach of various agreements. This was followed by a discussion between PPB and Investec in which there was a threat to "collapse the trusts" in order to access any equity value in the trusts.
41. On 7 September 2009, Allens Arthur Robinson, acting for Investec, issued breach notices. By 9 September 2009, Investec was threatening the appointment that day of receivers to Ashington Capital.
42. On 10 September 2009, the superannuation fund investors instructed PPB to advise Investec that the superannuation fund investors would grant it an exit fee of $1 million in exchange for a standstill agreement to allow an orderly sale of Stonington and that Ashington Capital would be instructed to proceed with the sale of Wylde Street.
43. From 11 September 2009, Ms Garrett and Mr Carolan were in communication as to the terms of a proposed Patersons mandate, whereby Patersons would be mandated to undertake a capital raising of $15 million in relation to the Stonington Project.
44. On 15 September 2009, a data room was set up at Mallesons in relation to the Stonington Capital Raising.
45. On 23 September 2009, after various revisions, the Patersons Mandate was signed by Ashington Capital and Patersons. The mandate provided that Patersons was engaged to raise $11-15 million in mezzanine finance to restructure the existing debt facilities for the Stonington Property (i.e., the alternative proposal to the sale of Stonington).
46. On 25 September 2009, within Ashington, Ms Garrett and Mr Renauf were put in charge of communications with PPB and superannuation fund investors.
47. On 25 September 2009, the development application for Double Bay was refused (a decision regarded by all as having significant detrimental impact for Ashington).
48. On 29 and 30 September 2009, there were meetings by Ms Garrett and Mr Renauf with superannuation fund investors at which agreement was reached for amendment to the Patersons Mandate (for the Stonington Capital Raising) and for the PPB mandate in relation to the sale of Stonington to be put on hold for a 14-day period. There seems to have been some suggestion at the meeting of 30 September 2009 (see Mr Hastings' note) that Hamton might have been willing to "become the manager of the project"; and there was reference to removal of the trustee and to the expiry of facilities making "a change of management cleaner".
49. From 30 September 2009, Patersons commenced forwarding the proposed Patersons Stonington Term Sheet to potential investors.
50. On 30 September 2009, the proposed term sheet was sent by Mr Doherty of Patersons to Mr Routley of Acorn, with reference to an investment opportunity in the form of a mezzanine finance facility. Mr Routley's response was that Acorn could not do pure debt and needed to have some equity convertibility. Later, on 30 September 2009, in response to Mr Doherty's query of whether a conversion into equity in an unlisted property fund would be of interest, Mr Routley advised that Acorn's preference would be to invest in the manager. Significantly, this appears to be the first suggestion in the contemporaneous documents in evidence that there might be a transaction involving investment in the manager (other, perhaps, than the cryptic reference to Hamton becoming the manager of the project). Thus, at this stage any suggestion in relation to the manager did not emanate from either PPB or from Ms Garrett and Mr Renauf. However, this expression of preference by Mr Routley clearly led to some consideration being given to the ongoing role of manager of the fund(s) (and in due course the proposal for replacement of the manager).
51. On 1 October 2009, there was default in relation to the Investec facilities (because superannuation fund investors did not meet the $3 million uncalled capital call) and shortly thereafter the NAB/St George Facility with respect to Double Bay also went into default.
52. On 1 October 2009, Apex Capital sent an email with an indicative proposal in relation to Stonington that contemplated Apex Capital taking over management of the development and having a substantial majority equity stake; and seeking a 14-day exclusivity period to complete due diligence. An indicative non-binding proposal was sent through on 2 October 2009. Ms Garrett's comment to Mr Renauf on this was that "if we want to execute on the plan we discussed with PPB then this offer does not work for us as it involves APEX taking over the management of the Stonington development".
53. On 2 October 2009, Ms Garrett sent an email to Mr Doherty (copied to Mr Carolan) signed off as "will be the new Fund Manager" setting out the opportunity for an incoming investor to invest in the Stonington Project and have a significant equity interest in "Newco" which would be established by existing equity investors and would replace Ashington as manager of the funds. This email referred to concerns held by existing equity investors about the security arrangements adopted by Ashington. (The plaintiff places much emphasis on this email as effectively being the "Garrett plan".)
54. Over the weekend of 3 to 4 October 2009, in advance of meetings scheduled in Melbourne on 5 October 2009, Ms Garrett and Mr Carolan worked on a PowerPoint presentation that included a "Go Forward" corporate structure that contemplated a new entity being established as the fund manager to replace Ashington. There seemed to be some doubt expressed in the communications as to whether that proposal would proceed; or be included in the slides.
55. On 3 October 2009, Ashington's CFO (Mr Steel) communicated to Ms Garrett concerns he had as to non-disclosure of a $20 million fee to Valad in relation to the Noosa Trust and as to alteration to Board minutes (as to which there is nothing other than his assertion in this email).
56. On 5 October 2009, Ms Garrett and Mr Renauf met in Melbourne (with Mr Carolan and Mr Doherty of PPB) first, with Mr Routley (of Acorn) and then (at Mr Routley's suggestion but without his attendance) with Mr Ko (of Albany), at which a proposal for funding which involved the replacement of Ashington as trustee and manager was discussed.
57. Meanwhile, on 5 October 2009, Mr Anderson appears to have been progressing other opportunities for the Stonington Capital Raising. Mr Anderson reported on 6 October 2009 that there were three additional parties that were interested (Wingate, Icon Constructions and a high-net-worth individual from Melbourne). (A signed confidentiality agreement was forwarded by Wingate to Ms Briggs in relation to the Stonington Project on 7 October 2009.)
58. On 6 October 2009, confidentiality agreements were forwarded to Mr Ko and subsequently to Mr Routley (and in due course executed).
59. On 6 October 2009, NAB issued notices of default in relation to Double Bay.
60. Also on 6 October 2009, there was an email within PPB as to the "newco opportunity", listing the Alter family (Albany) and Acorn as potential investors; and referring to the new management team. Mr Block of PPB sent to Mr Renauf and copied to Ms Garrett an email asking for resumes for the "team" and referring to management fees and the scope of the management agreement.
61. On 7 October 2009, there were communications updating Investec as to progress in relation to the Patersons Mandate for the Stonington Capital Raising and referring to a telephone conference with an overseas investor (Mr McCabe); and communications with Apex Capital.
62. On 7 October 2009, PPB emailed superannuation fund investors to the effect that any recapitalisation proposal would see the management and trustee arrangements changed so that Ashington was no longer involved. Later on 7 October 2009, Arnold Bloch Leibler sent advice in relation to the procedure for removal of Ashington Capital as trustee to PPB, which advice was forwarded to Ms Garrett and Mr Renauf.
63. On 8 October 2009, Mr Routley sent an internal briefing note to his colleagues at Acorn (Mr Swan and Mr Sheehan), which he copied the next day to Mr Ko. Among other things it recorded Mr Routley's understanding that a decision had been made to terminate Ashington as manager and responsible entity of both ADF and ADF2. The note referred to the consortium as "Albany/Acorn"; said that the recapitalisation/rescue effort was being led by Ms Garrett (who was believed to be known and endorsed by the investors and PPB). Interestingly, the note stated that "PPB contacted her and let her know that Ashington was not going to retain [I assume] management rights for the funds and that she should work with them [PPB] to solve current funding issues and work out how to move forward. Mr Routley stated that Ms Garrett's focus has been to "resolve the senior debt issues" and confirm "the ability to transfer the management rights before firming up the new mezz investor and manager".
64. On or about 9 October 2009, a discussion took place between Ms Garrett, Mr Renauf, PPB and the superannuation fund investors at which the plaintiff says the "Garrett plan" was revealed (see superannuation fund investors' notes of that meeting).
65. On 10 October 2009, seemingly expressing some frustration with the dealings with Mr Ko, Ms Garrett sent an email to Mr Renauf suggesting that she was "actually ready to provide her resignation". That frustration may have been mirrored by Mr Routley, who was critical of the level of information in the Stonington Data Room (see his email of 11 October 2009 to Mr Sheehan).
66. On 12 October 2009, Ms Garrett and Mr Renauf met with Mr Ko and Mr Routley in Melbourne. It seems that around this time Ms Garrett was avoiding responding to Mr Anderson's calls.
67. On 14 October 2009, the Albany and Acorn joint letter of offer to superannuation fund investors was provided to PPB.
68. Meanwhile, on 14 October 2009, Mr Anderson communicated with Mr Orloff of Victor Smorgon as to the Stonington Project Investment Opportunity Presentation; and on 15 October 2009, Mr Anderson sent this to Wingate.
69. On 16 October 2009, PPB sent to Ms Garrett a key issues paper which included reference to the advice received from Arnold Bloch Leibler as to the removal of the trustee.
70. Around 16 October 2009, information was provided by PPB to Acorn and Albany (with the consent of the superannuation fund investors) but potentially beyond the scope of the PPB mandate.
71. On 19 October 2009, NAB and St George appointed KordaMentha as investigating accountants to review the Double Bay Project.
72. Also on 19 October 2009, Ms Garrett and Mr Ko communicated in relation to the proposed new salary arrangements for Ms Garrett and Mr Renauf.
73. On 21 October 2009, a second joint Acorn/Albany offer was sent to the superannuation fund investors via PPB. It also contemplated the contribution by the superannuation fund investors of further capital.
74. On 22 October 2009, Mr Ko sent an email to Ms Garrett and Mr Renauf referring to the possibility of a "hit and run" on the Ashington assets if the superannuation fund investors did not set out the proposal.
75. On 23 October 2009, referring to a telephone conversation the previous day, Mr Ko sent an email to PPB, copied to Acorn suggesting that the legacy issues created by Ashington as a management team may have resulted in hurdles too high for Albany/Acorn to meet; and indicating an intention not to proceed if that were to be the case.
76. On 23 October 2009, PPB's response was that the existing investors did not wish to pursue a strategy that involved them providing further funding; rather, they wished to pursue a strategy which delivered both a capital and management solution from a third party,
77. Also on 23 October 2009, Norton Gledhill wrote to Mr Anderson and Mr Minahan requesting that the superannuation fund investors be kept properly informed about the activities of the funds.
78. On around 24 October 2009, Ms Garrett and Mr Renauf flew to London to meet with Mr McCabe (Mr Anderson understood at the time that this was to pursue the Stonington Capital Raising). Ms Garrett in her liquidator's examination says that she discussed with Mr McCabe the proposal to replace Ashington as trustee and manager.
79. On 26 October 2009, Wingate forwarded an indicative term sheet to refinance the Wylde Street debt facility.
80. On 29 October 2009, Mr Ko advised PPB that Albany and Acorn were considering putting a "final proposal" to the superannuation fund investors. That proposal (summarised in an email sent on 30 October 2009 by PPB to superannuation fund investors) was presented in meetings held on 6 November 2009.
81. On 30 October 2009, Ashington's auditor expressed concerns as to Ashington's ability to meet its debts as and when they fell due and advised that it was required to inform ASIC of this.
82. On 30 October 2009, Mr Anderson passed on to PPB a copy of Wingate's indicative term sheet to refinance Wylde Street; and updated Investec on the Stonington Capital Raising deal with Wingate, Alter and Mr McCabe.
83. The plaintiff places commencement of execution of the Garrett plan from about 1 November 2009.
84. On 4 November 2009, Mr Ko and Mr Routley prepared for the presentation to superannuation fund investors to be held on 6 November 2009; and on 5 November 2009 there were communications with Ms Garrett and others in relation to the presentation. On 6 November 2009, Ms Garrett forwarded a copy of the presentation to Mr Carolan to be printed, which was then forwarded to Mr Routley.
85. Presentations to the superannuation fund investors were made on 6 November 2009.
86. Meanwhile on 6 November 2009, Wingate indicated that it would prepare a term sheet that was not conditional on construction finance.
87. On 8 November 2009, Mr Ko forwarded to Ms Garrett and Mr Renauf a memorandum in relation to a proposed consultancy agreement suggesting that they give consideration to resigning from Ashington as soon as practicable after completion of a term sheet (and referring to planning to enable conflict issues to be minimised).
88. On 9 November 2009, Wingate provided an indicative term sheet with a mezzanine funding proposal for Stonington (i.e., the Wingate Proposal).
89. On 10 November 2009, Norton Gledhill wrote to Ashington requesting information in relation to the Wingate Proposal and stated that the superannuation fund investors expected to be properly consulted in advance of any decision with respect to the dealings with Wingate. (Mr Anderson's view was that, as it was a debt transaction, he was not obliged to consult with them).
90. On 10 November 2009, Mr Steel found an email Ms Briggs had sent to him and Mr Anderson on 21 August 2009 about the significance of the removal of Ashington Capital as trustee for Ashington Management's fees; and at 9.43pm on 10 November 2009, Mr Steel asked Ms Briggs about her advice on that matter. On 11 and 12 November 2009 there were emails between both Mr Steel and Ms Briggs, and also Mr Steel, Ms Briggs and Mr Anderson about the financial consequences for Ashington Management if Ashington Capital was removed as trustee.
91. On 11 November 2009, PPB sought details from Mr Anderson about the Wingate Proposal and expressed concerns about the process.
92. On 11 November 2009, a draft term sheet in relation to the Acorn/Albany proposal was sent to PPB (i.e., the Parissen Proposal). Separately, a revised refinance offer was sent by Wingate.
93. On 16 November 2009, Mr Carolan sent his "we will be shot email", asking Mr Doherty to keep anything in relation to the Alter investment 100% confidential.
94. On 16 November 2009, Ms Garrett resigned her employment with Ashington (and Mr Ko sent a draft employment term sheet to Ms Garrett and Mr Renauf).
95. On 19 November 2009, the superannuation fund investors met with PPB and agreed to appoint Parissen as long as there was a strong process regarding the retirement of Ashington and the appointment of the new trustee. The superannuation fund investors agreed to give PPB a mandate to commence discussions with Ashington for its removal as trustee and manager.
96. On 19 November 2009, Parissen was incorporated.
97. On 20 November 2009, Mr Anderson executed an amended Wingate term sheet (without advising Norton Gledhill, PPB or the superannuation fund investors).
98. On 22 November 2009, Mr Ko advised Investec that the superannuation fund investors had accepted the Parissen Proposal and said that he had written to PPB and Arnold Bloch Leibler requesting a conference to discuss the timetable for its implementation.
99. On 23 November 2009, KordaMentha reported that its review of the balance sheet of ADF2 indicated that the Ashington unitholders had not funded approximately $4.6 million of capital calls in ADF2 and that there was no capacity for the respective entities to fund their outstanding capital calls or their portion of the remaining $6 million in uncalled capital.
100. On 23 November 2009, Mr Anderson instructed payment of part of the Wingate establishment fee.
101. On 25 November 2009, the superannuation fund investors were advised by PPB that PPB had learnt that Ashington had executed the Wingate Proposal and sought immediate instructions for PPB to expedite the process for removal of Ashington as trustee/manager. That approval was given on 26 November 2009.
102. On 27 November 2009, PPB informed Mr Anderson and Mr Minahan that the superannuation fund investors wanted to remove Ashington as trustee and manager. Discussions in relation to this ensued, including instructions given to Arnold Bloch Leibler for preparation of documentation for that to occur.
103. On 22 December 2009, Mr Anderson confirmed to KordaMentha that Ashington proposed to retire as trustee at the head trust level that day and at sub-trust level over the next six weeks (as Alter completed due diligence on the individual projects).
104. On 23 December 2009, Ashington Capital retired as trustee of the two funds and Parissen was appointed.
105. On 14 April 2011, Ashington Capital and Ashington Management went into liquidation.

Most likely genesis of the "plan" to remove Ashington as trustee/manager

1. It seems to me from the above chronology of events, and placing weight on the contemporaneous documents, that the most likely genesis of the so-called plan to remove Ashington as trustee and manager was the response from Mr Routley of Acorn when he received the Patersons Stonington Term Sheet from Mr Doherty on 30 September 2009 to the effect that Acorn could not do "pure debt" and that there needed to be some equity convertibility. That led to Mr Carolan asking whether Mr Routley would look at converting equity into an unlisted property fund (which Mr Carolan suggested might be a "fall back option" - presumably a fall back to the Stonington Capital Raising per se); and Mr Routley's response that, while this would allow Acorn to do the deal, Acorn would still be a "low probability to complete" and that its preference would be to invest in the manager.
2. True it is, that there had been consideration of the structure of the trusts and head trusts at an earlier time (prompted by the concern that arose when it was discovered that the Investec Stonington Facility had been secured at head trust level) and it is clear that there was discussion amongst superannuation fund investors to the effect that the structure of the trusts was very "messy". However, at that stage I consider that the matters recorded as having been discussed were focussed on the structure of the head trust and sub-trusts in the context of the fund borrowings; not on the removal of Ashington due to concerns raised about the funds' performance, or Mr Anderson's conduct, or the quality of communications, or the like.
3. It is evident that from before 30 September 2009 one or more of the superannuation fund investors or their consultants was or were dissatisfied with Ashington's performance and, in particular with Mr Anderson; and there was contemplation by one or more of them from a time earlier than 30 September 2009 as to the possible removal of one or both of the Ashington companies from their roles as trustee and manager. However, I am not persuaded that there was a clear consensus on the part of superannuation fund investors as at 30 September 2009 for the removal of the Ashington companies from their then roles (and indeed the meetings on 29 and 30 September 2009 are inconsistent with there having been a decision as to their removal at that time).
4. It is also apparent that Mr Anderson was alive at a relatively early stage to the possibility that Ashington might be removed as trustee or manager (or perhaps both) insofar as advice was sought around the end of August 2009 from Mallesons on that issue; and again this issue was apparent when Mr Bouris resigned as chairman. The context in which the Mallesons advice was sought seems to have been a concern as to the ongoing entitlement to development management fees if there was a change but there was nevertheless recognition of the possibility for removal of the trustee or manager to which Mr Anderson had turned his mind at the time.
5. In terms of the proposal for the refinancing of the Stonington facilities, the relevant chronology appears to be that: PPB (appointed by the superannuation fund investors) had promulgated the proposal that the Stonington Property be sold (a proposal with which Mr Anderson did not agree) and the superannuation fund investors at first agreed with that course; Mr Anderson then pursued the Patersons Mandate under which potential investors were sought to raise $11 to $15 million in mezzanine finance in order to pay out Investec (and Hamton) and permit construction of the proposed development of Stonington to commence (i.e., the Stonington Capital Raising). Ms Garrett (in particular) and Mr Renauf were active in the development of the Patersons Mandate and Ms Garrett was credited with persuading the superannuation fund investors (at the 29/30 September 2009 meetings) to put the sale of Stonington (and PPB's sale mandate) on hold for a short time to permit the Stonington Capital Raising to be pursued. As at late September 2009, they were the only two options apparently being considered in relation to the refinancing of the Stonington debt.
6. The first suggestion that involved the position of manager of the funds (subject to the qualification I make below as to Mr Hastings' undated file note after the meetings on or around 29/30 September 2009) was, as noted above, Mr Routley's response to the Patersons Stonington Term Sheet (i.e., that Acorn could not do pure debt and that Acorn's preference would be to invest in the manager). That response (to Mr Doherty) was conveyed to Mr Carolan, who the suggested to Ms Garrett that Acorn "might look at a direct investment into the manager".
7. While Mr Hastings' file note (see chronology above) suggests that there was some consideration at around this time that Hamton might become the manager of the Stonington Project; and there was a reference in the file note both to removal of the trustee (it being said that, to do so, the unsecured creditors would need to be removed) and to a "change of management" (which was said to be "cleaner" with facilities "expired/coming due"), there is no reference in Mr McCusker and Mr Tieu's file note of the meeting on 30 September 2009 to the removal of the manager or trustee. I consider it more likely that Mr Hastings' file note was prepared at a later time (albeit including reference to some matters going back to around 30 September 2009). The plaintiff places this file note at some time around 9 October 2009 by reference to its contents.
8. Therefore, I am not persuaded that as at 30 September 2009 the superannuation fund investors had turned their minds as a group to the replacement of the Ashington companies as trustee/manager. What is clear is that Mr Carolan considered that Mr Routley's response pointed to the possibility of Acorn investing in the manager (hence the position of the manager was under consideration at least in that context).
9. The next relevant document to consider in relation to the genesis of the "plan" is the making of an indicative non-binding proposal by Apex Capital on 1 October 2009 (followed up by a letter the following day) which contemplated the refinance of the existing mezzanine debt facilities but on the basis that the "investor" would take over management of the Stonington development. The significance to be attached to this proposal, to my mind, lies in the response to it by Ms Garrett in her email to Mr Renauf (namely that "if we want to execute on the plan we discussed with PPB then this offer does not work for us as it involves Apex taking over the management of the Stonington development"). I do not attach so much significance to the comment that this offer "does not work for us", since the "us" could conceivably be a reference to Ashington or to those pursuing the Patersons Mandate. However, what it does clearly indicate is that there had been something discussed with PPB, to which Ms Garrett ascribed the description of a "plan" or from which Ms Garrett had drawn the conclusion that a "plan" of some description had been discussed. Again, I do not attach particular significance to the reference to a "plan", as such; it could perhaps have simply been a reference to some discussion as to proposed steps or a strategy that might be followed. Rather, what is significant is that it shows that there must have been some discussion with PPB at least about a strategy or proposed steps (if not a concluded "plan", as such) proposed to be executed or at least being considered, with which a take-over by Apex Capital of the management of the Stonington development would be inconsistent.
10. Certainly, there appear to have been discussions between Ms Garrett and Mr Renauf with PPB on or around 30 September 2009 (for example, there is a reference in an email from Mr Renauf on 30 September 2009 to a meeting to be held at PPB's office at 10.20 am on 1 October 2009 ) and the inference to be drawn from the 2 October 2009 email is that the meeting with PPB was before receipt of the Apex Capital letter of 2 October 2009. However, it is unclear what "plan" Ms Garrett was suggesting they might want to "execute on" (except to the extent that it would not have involved Apex Capital taking over the management of the Stonington development). (PPB, as I discuss in due course, submits that it is most likely that there was a meeting on 1 October 2009 at which Ms Garrett referred to a proposal to replace the Ashington entities as trustee and manager. I accept that a meeting at that time is likely to have occurred. I am just not persuaded that I can conclude that at that meeting Ms Garrett proposed the replacement of the Ashington entities - though I accept that the possibility of such a replacement may well have been discussed; since at the very least the proposal in relation to management rights being assumed by Apex Capital was inconsistent with whatever was then in contemplation by Ms Garrett and Mr Renauf).
11. By 2 October 2009, there is no doubt that Ms Garrett was seeking to progress what she described as a "significant opportunity to invest in to the Manager", as she raised with Mr Carolan and then explored in more detail in her 2 October 2009 email to Mr Doherty. It is in that email (with the sign-off from Ms Garrett as "will be the new Fund Manager") that there is the first suggestion that superannuation fund investors had been prompted to "investigate options to transfer key assets to a new Manager" (albeit no suggestion that there had been a decision to that effect); and, significantly, the reference to an opportunity for an incoming investor to invest in a new company that would replace Ashington as manager of the funds and receive the fund management fees. I accept that what can be drawn from the reference to "will be the new Fund Manager" is problematic - it might be, as suggested for Ms Garrett and Mr Renauf, a mere cutting and pasting error but there is no evidence of this (and Ms Garrett gave no evidence herself that this was a typographical error); it might also be a tongue in cheek reference to an anticipated or hoped for management role. At the very least, it would surely have conveyed to the reader that Ms Garrett was anticipating some part to play in the new fund manager role that was contemplated as part of the significant investment opportunity there being touted.
12. Further, and again I consider this to be significant, Ms Garrett here emphasised that the process (which contemplated the removal of Ashington as manager) was "highly confidential", from which I would comfortably infer (coupled with the fact that at no time did Ms Garrett communicate to Mr Anderson that such a proposal was being considered) that Ms Garrett was seeking to conceal, from at least Mr Anderson, that she was promoting or proposing to promote a proposal whereby an investor would be offered the opportunity to replace the manager. It is hard to see what would otherwise be particularly confidential about the opportunity to refinance the Stonington Project (since it was already being marketed under the Patersons Mandate by way of the Patersons Stonington Term Sheet). That said, the fact that (with hindsight) I would infer that Ms Garrett was seeking to conceal this proposal from Ashington or Mr Anderson at the time does not mean that those with whom Ms Garrett was dealing at the time would thereby have been put on notice that this was the case.
13. As I have commented already, I consider it relevant that by this stage there is no evidence that the superannuation fund investors had made any (formal or informal) decision to terminate the appointment of Ashington Management as manager (or Ashington Capital as trustee, for that matter) of the funds; yet Ms Garrett is here clearly conveying to Mr Doherty that the superannuation fund investors are at least investigating options for this to occur.
14. As to the weight to be placed on the assertion by Ms Garrett that the process "is being managed by PPB and myself and Sam Renauf", one difficulty that I have in attaching much weight to that statement as against PPB is that, on the plaintiff's own case, Ms Garrett was lying to the superannuation fund investors when she told them that incoming investors would only invest if the manager was replaced and lying to potential incoming investors when she told them that the superannuation fund investors had decided to replace Ashington as manager of the funds. If so, there is nothing to enable me to place much weight on her assertion in this email that the process was being managed by Ms Garrett and PPB (since this could equally have been a misleading statement, for example, it could equally have been the situation that this was a process being "managed" by Ms Garrett with Mr Renauf's assistance and with no real input at this stage at least from PPB; and the reference to PPB on that hypothesis could simply have been an attempt to introduce credibility into the scenario). I note that Ms Garrett's propensity to stretch the truth is evident in various other communications, not least the suggestion conveyed to Mr Anderson that she was ill at the time that it appears she must have been in Melbourne progressing the Parissen Proposal. Thus, once one embarks on speculation that Ms Garrett was lying in certain of the communications, it is difficult not to speculate as to other communications. What is more relevant is what such a statement would have conveyed to a reasonable person in the position of the reader of the communications.
15. What next appears in the documents is the suggestion in the "Go Forward" presentation slides prepared by Ms Garrett (with Mr Carolan's assistance) over the weekend 3 to 4 October 2009, is the assertion by Ms Garrett that PPB had recommended that the sub-trusts containing key projects be transferred out of the existing Ashington structure to a new corporate trustee (to quarantine them from any possible future issues within the Ashington Group), which new corporate trustee would replace Ashington as manager of the key projects and receive the fund management fees; and that the superannuation fund investors had unanimously supported this recommendation. The slide also referred to a recommendation by PPB that Ms Garrett and Mr Renauf be the replacement key personnel in the new corporate trustee with back office support from PPB. Whether or not this recommendation in fact came from PPB (as asserted), it is a clear indication that one proposal then being considered involved the replacement of Ashington Capital as trustee and Ashington Management as manager, with PPB, and Ms Garrett and Mr Renauf, to be involved in the new management role.
16. It is difficult not to conclude otherwise than that the statement that the superannuation fund investors had unanimously supported the recommendation for the replacement of Ashington as trustee and manager was untrue or at the very least a misleading overstatement (although, as I explain in due course, there are cogent submissions put forward by at least Albany for the proposition that this was in fact the case). Certainly, there is nothing in the documents of the superannuation fund investors that records any such formal approval at that stage (and in this regard it is not insignificant that when a decision was ultimately made in November 2009 it was formally documented). At most, this statement could have been conveying the sentiment of the superannuation fund investors as conveyed in meetings or discussions with them but the notes of the 29/30 September 2009 meetings do not go so far as to suggest an unanimous support of any recommendation for the replacement of Ashington as either trustee or manager at that stage. Nor is it clear on the evidence that there was any recommendation to that effect by PPB at that stage.
17. Intriguingly, it appears that something happened in the course of that weekend to make Ms Garrett suggest to Mr Renauf (in her 4 October 2009 emails at 2.19pm and 2.41pm) that the "Go Forward" structure had become redundant but I cannot see from the documents what may have led to that comment. However, what is telling is Ms Garrett's email of 4 October 2009 at 2:41pm to Mr Renauf where she states that she will take the "go-forward corporate structure section…as a separate set of slides as this is probably more appropriate". Ms Garrett goes on to refer to having promised Mr Routley that something would be forthcoming (in the context of the reference to the removal of the go forward slide), which suggests at least that Ms Garrett had had a discussion with Mr Routley in which some such document had been promised. What was said in any such discussions is little more than speculation other than it seems evident that Ms Garrett understood that a document of some kind would be produced as to the proposal. However, the recognition that is "more appropriate" to keep that slide separate to me indicates that Ms Garrett was very aware that the information in the "go forward" structure was not in line with her employment.
18. By 6 October 2009, whatever PPB's involvement had been up to that point in formulating or developing the idea for a "Newco" replacement of the trustee and manager, it is clear that Mr Block of PPB was endorsing that proposal internally within PPB as the "only sensible way forward". That 6 October 2009 email recorded that Ms Garrett and Mr Renauf had "recently joined Ashington" and were currently working on a proposal "with our input" to replace Investec and to re-capitalise the Stonington sub-trust (which was objectively true) and stating that the potential incoming investors would only consider a "re-cap" proposal with a new structure (which was not so evidently the position at the time). The letter also said that "[w]e" are working with Arnold Bloch Leibler to action that plan (and referred to PPB as a potential equity investor in the new company). This is consistent with the fact that Arnold Bloch Leibler in due course provided advice as to the procedure for the removal of the trustee/manager.
19. Thus, whoever's "plan" it had initially been, by 6 October 2009 the key person at PPB involved in discussions with the superannuation fund investors (Mr Block) was here acknowledging to others at PPB that PPB was working on it with Ms Garrett and Mr Renauf. The relevance of whose plan it actually was in fact is suggested by various of the defendants to be moot (and I largely agree). It seems to me at most to go to the knowing assistance claims since PPB was never retained by the Ashington companies and was surely able to put to the superannuation fund investors whatever proposal it thought merited consideration. However, the complaint is that, in so doing (in relation to the replacement of the trustee and manager), PPB knowingly assisted breaches of fiduciary duty by Ms Garrett and Mr Renauf. To that extent it might arguably be relevant as to whether or not it was PPB's idea in the first instance or whether PPB simply took on board and assisted an idea that Ms Garrett and Mr Renauf concocted. Ultimately, however, I consider that nothing turns on whose idea it was; and that there are equally plausible arguments that it was PPB's initial "plan" after PPB became aware of Acorn's potential interest in investment in the manager or it was Ms Garrett and Mr Renauf's suggestion after they had become aware of the potential for investment in the manager. As for the claim against Ms Garrett and Mr Renauf, themselves, it does not seem to advance matters much whether or not it was originally their "plan" as such; the real complaint is as to their conduct in pursuing it without disclosure to Mr Anderson and Ashington.
20. In this context it is relevant to note how the formation of the so-called Garrett plan is pleaded by the plaintiff and the time at which the "Consortium Objective" was allegedly formed (since that pre-dates the involvement of at least Albany and, to a large extent, Acorn as well): 95. On 30 September 2009, in a series of emails passing between Doherty and Robert Routley of Acorn (Routley), in respect of the Stonington Capital Raising, Acorn Capital said it did not do pure debt deals and it needed to have some equity convertibility, but said its preference was to invest into the manager, in this case Ashington. Doherty advised Carolan of these matters by email on 30 September 2009 at 11.48 am. Neither Doherty or Carolan advised Shorrocks. 96. On 30 September 2009 at 11.51 am, Carolan sent an email to Garrett which attached the string of emails between Doherty and Routley, and which said in part: "Look at the email below, Acorn would be low probability to invest into the deal .... however they might look at a direct investment into the manager. Let me know your thoughts." 96A. At 10.30am on Thursday 1 October 2009, Garrett, Renauf, Block and Lord held a meeting. 97. On 2 October 2009 at 12.15 pm, Garrett sent an email to Carolan headed "Why is it so good", which said in part: "Investec security arrangements that Ashington have entered into have the potential to impact on other assets of the Fund. Accordingly, it is critical to Ashington that it quickly replaces the mezzanine facility to ensure its other projects are quarantined from Investec action." "basically, Investec can come after other assets cos Ash fukt up and now they need to move quickly." The second quoted paragraph of the email above was to the knowledge of Garrett incorrect. 98. On 2 October 2009 at 12.48 pm, Garrett sent an email to Carolan as to whether Doherty could arrange a meeting with representatives of Acorn, due to a significant opportunity to invest in the manager, and that Garrett needed 30 minutes with Doherty before the meeting to explain the situation. Such "significant opportunity" was inconsistent with and outside the Patersons Mandate. 99. On 2 October 2009 at 1.45 pm, Garrett sent an email to Doherty and a copy to Carolan and: (a) Stated that the existing equity investors in the Ashington Funds have had concerns about the security arrangements adopted by Ashington and stated falsely this combined with the Double Bay decision had prompted them to investigate options to transfer key assets to a new manager. The Double Bay decision was a reference to a decision by the Department of Planning to reject Ashington's part 3A Application for the Double Bay Project. (b) Said there was an opportunity for an incoming investor to receive a significant equity interest in a new entity Garrett referred to as Newco that would be established by the existing investors in the Ashington funds, replace Ashington as manager of the funds and receive the fund management fees. (c) Said the process is in its early stages and is being managed by PPB, Garrett and Renauf. (d) Said the process is highly confidential and that Doherty should ensure that the information in the email is managed carefully. (e) Said or inferred that Garrett would be the new fund manager. "Ashington" was used generally to refer to the Ashington companies (the matters stated above hereinafter are referred to as "Garrett's plan"). 99A.On 2 October 2009 at 16:22 Doherty emailed Garrett replying to the email referred to at paragraph 99 above, copying Carolan, saying that he had arranged a meeting with Routley on 5 October 2009. 99AA. By reason of the above matters, as at 2 October 2009: (a) the interest of Acorn to "invest into the Manager" had been converted by Garrett and Renauf to a proposal that Ashington would be replaced as manager of the funds and that Garrett and Renauf would be the new fund managers; (b) Renauf and Garrett were working together in respect of Garrett's plan; (c) Carolan did not tell Shorrocks about the interest of Acorn or Garrett's plan, and kept the secrecy of the matters stated in the email pleaded in paragraph 99 above; (d) Doherty did not tell Shorrocks about the interest of Acorn or Garrett's plan, and kept the secrecy of the matters stated in the email pleaded at paragraph 99 above; (e) Doherty and Carolan knew that Garrett's plan was contrary to the Patersons Mandate; (f) Garrett, Renauf and PPB were working together, or had formed an intention to work together, to bring Garrett's plan to fruition, so that by 2 October 2009, a consortium had been formed or was forming involving Garrett, Renauf, Doherty, Carolan and PPB in respect thereof. 100. Anderson and the Ashington companies were unaware of Garrett's plan and wrongly believed that Garrett was assisting Patersons to progress Patersons Mandate, which she was in fact not doing. 101. By 4 October 2009, PPB was working with Garrett and Renauf to work out options with respect to key projects in both funds, a purpose inconsistent with the Stonington Capital Raising but consistent with Garrett's plan.

State of ADF and ADF2 as at September 2009

1. At this point it is convenient to note the position of the respective development funds as at September 2009. Marketing material prepared in contemplation of AOF3 in early 2009 included statements that "Ashington Development Fund No. 1 and Ashington Development Fund No. 2 are forecast to return 18% and 21% IRR [internal rates of return] respectively". Ms Garrett and Mr Renauf say that, although Mr Anderson sought to distance himself from the significance of these representations in cross-examination, neither fund was performing as had been promised and this was central to investors' decision to remove Ashington as trustee. (In that regard, the contemporaneous documents certainly support the conclusion that the superannuation fund investors were most concerned by the financial performance of their investments - which is unsurprising since this was money held on trust by the superannuation funds, ultimately for the benefit of those for whom superannuation funds were held; and the evidence of various of the superannuation fund witnesses in the hearing made that abundantly clear.)

ADF

1. First, as to ADF, a Board Meeting Paper dated 16 December 2008 identified a substantial downgrade to the overall investor IRR, and that "Liquidity within [ADF1] remains a major issue". At 16 December 2008, the IRR was forecast to reduce from 17.7% to 6.9% in the period between 20 June and 30 September 2009. By 30 June 2009, ADF had ceased reporting its IRR figure to the superannuation fund investors and the net tangible asset (NTA) per unit was 0.639. By 30 September 2009, the NTA per unit was 0.381.
2. It is apparent (and I do not understand it to be disputed by the plaintiff) that each of the sub-trusts of ADF was in financial distress by September 2009.
3. As to 10 Wylde Street, the development depended on Investec's support. By March 2009, there was difficulty as to further funding from Investec; and Mr Steel had advised Mr Anderson that demolition could not be commenced without the consent of Investec, which was unlikely to be provided unless the facility was extended. The report for the board meeting on 4 May 2009 confirmed that "a decision has been made to put the demolition of the building on hold due to financiers increasing their requirements for pre-sales from the previously agreed $20m sale, and Investec (the land lender) becoming uncomfortable that the demolition was adding value to the property". By 30 September 2009, the asset strategy for the 10 Wylde Street Trust had been revised to dispose of the site, in order to create liquidity in ADF, because of difficulties in obtaining finance. Ms Garrett and Mr Renauf note that the report also revealed that as at 30 September 2009, the project was expected to result in an overall loss of $5.163 million. Mr Steel's board report from July 2009 noted that it was not possible to give Investec the security it required at the head trust level, "without investor approval, because the security indirectly affects the other assets within the fund".
4. Second, as to the Potts Point Property, by 31 March 2009 the project had a gross realisation (of $94,000) and the IRR was also forecast to be negative (-2.61%). By September 2009, the negative gross realisation was -$2.219 million. A draft valuation was expected to be 20-25% lower than expected.
5. Third, as to the Cross+ Trust, by 31 March 2009 the project had a negative gross realisation of -$6.872 million. By 30 September 2009, it was noted that marketing of the project had been limited due to a lack of capital and finance available, and the project had a negative gross realisation of -$9.074 million. The target IRR was 21% but by the end of the project it was down to -5% (T 302.26-9).
6. Fourth, as to Double Bay (in which Ashington Capital held a 25% interest as trustee for ADF), by September 2009, ADF did not have enough cash to meet its contributions to the Double Bay project and contributions were met from ADF2 (without the superannuation fund investors in ADF2 being so informed).

ADF2

1. As to ADF2, by 30 June 2009 the NTA per unit was 0.8798; and by 30 September 2009 the NTA per unit was 0.9172, but with a market adjusted value of 0.347. Two of the three sub-trusts were in financial distress.
2. First, as to Double Bay (in which project the ADF2 trust owned 75%). An undated (and unauthored) position paper, following the rejection on 29 September 2009 of the Double Bay development approval application, stated that the banks were likely to "reduce the LVR on the current facility from 65% to ~50%. With the re-valuation of the property (refurbishment scheme) likely to be the same or less than the previous valuation, $77.5m, this will leave a funding gap of ~$25m that will need to be filled". The paper stated that any new development approval of the site would take approximately 9-12 months, and that the redevelopment was estimated to cost an additional $5.5 million. Ms Garrett and Mr Renauf say that Ashington simply did not have the time or the funds to pursue any alternative plan.
3. Second, as to Stonington, on 16 December 2008, a paper to the Ashington board noted that Ashington was unable to procure debt funding for the following reasons: "a) [s]ources of Capital have dried up; b) the capacity of ADF2 to meet its future commitments without the certainty of a sell down in Double Bay was challenged by financiers; c) the ability of ADF2 to remain onside of its existing covenants further restricted the capacity of the fund to borrow; d) financiers unwillingness to lend on non income-producing assets; e) lateness of the request for funding due to delay in receiving the evaluation; f) financiers inundated with funding requests; g) lower Senior LVR's being offered by Banks, resulting in the need for Mezzanine finance". On 22 July 2009, Charter Keck Cramer prepared a Valuation Report of the Stonington Property for Westpac giving a valuation of $35.2 million (excluding GST) (which Ms Garrett and Mr Renauf emphasise was well below the purchase price paid by Ashington only five months earlier of around $45.5 million). Although there was a revised valuation, this only resulted in an increase in the value to $42.244 million, and the value was subject to assumptions and exclusions provided by Ashington, it being noted that the valuation "does not represent the market value of the land as a whole, but rather the collective value of the five stages, assuming they are developed independently from each other, and importantly, on a project related basis".
4. Third, as to the Noosa Property, by at least 30 September 2009, the original plans to develop Noosa were essentially put on hold, with the commencement of development deferred by at least 12 months, and a further delay anticipated depending on the outcome of negotiations with the hotel manager. (Further, as noted in due course, it appears that the $20 million Valad Noosa fee was not disclosed to the superannuation fund investors).

Plaintiff's claims

1. In summary, the plaintiff's claims as against the various defendants are as follows.
2. As against Ms Garrett and Mr Renauf, the claims are for breach of fiduciary duties (not to use his/her position for their own or a third party's advantage; and to avoid any potential or actual conflict between their duties as an employee and officer of Ashington Management (or alternatively their role and duties with respect to Ashington Capital and Ashington Management) and their personal interest or the interest of any third person); knowing assistance in the alleged breaches by each other and by Patersons of their respective alleged fiduciary duties to Ashington Capital and Ashington Management; and breach of implied terms of good faith and honesty in her employment contract with Ashington Management; as well as implied terms of confidentiality and non-disclosure.
3. As against Patersons, the claims are for: breach of fiduciary obligations to Ashington Capital and Ashington Management, in relation to the performance of the Patersons Mandate, not to use its position for its own or a third party's advantage and to avoid any potential or actual conflict between its duties as an advisor to the Ashington companies and its own personal interest or the interest of any third person (by reason of Patersons' involvement in the alleged Consortium); for breach (again through its involvement in the Consortium) of various terms of the Patersons Mandate (express terms of good faith and non-disclosure of information of which it became aware in relation to the mandate; and an implied term that it would act in a manner to avoid conflicts of interest or, if a conflict of interest arose, would advise Ashington Capital forthwith, make full disclosure and take instructions on whether to cease acting); for knowing assistance in respect of the alleged breaches of fiduciary duty by Ms Garrett and Mr Renauf; and for breach of obligations of good faith and confidence (or alternatively equitable duties of confidence) allegedly owed to Ashington Capital and Ashington Management by gaining access to the information of Ashington Capital and Ashington Management in order to further the objective of the Consortium and concealing that matter from Mr Anderson, and Ashington Capital and Ashington Management.
4. As against PPB, the claims are for knowing assistance in Ms Garrett's and Mr Renauf's breaches of fiduciary duties; and for breach of obligations of confidentiality and good faith under the PPB Confidentiality Agreement.
5. Finally, as against both Albany and Acorn, the claims are for knowing assistance in Ms Garrett's, Mr Renauf's and Patersons' alleged breaches of fiduciary duties; and for breach of their respective confidentiality undertakings.

Summary of conclusions

1. In summary, for the reasons set out below, I have concluded as follows.
2. First, that the causes of action for breach of fiduciary duty, insofar as those duties were owed to Ashington Capital in its capacity as trustee, were not assignable by the liquidator since, by then, the proper plaintiff in whom any such cause of action reposed was Parissen. Similarly, the causes of action for breach of contract and for equitable duties of confidence were not assignable insofar as they relate to obligations owed to Ashington Capital in its capacity as trustee and not in its own right.
3. That said, any cause of action for breach of fiduciary duties owed by Ms Garrett or Mr Renauf arising out of their common law employment relationship with Ashington Management (or the Ashington group entities as a whole) or for breach of contractual or other obligations owed to their employer, would be a cause of action reposing in the relevant Ashington entity or entities in its or their own right and I find that such a cause of action was assignable (and validly assigned) by the liquidator of the Ashington entities.
4. As to the assignment of a bare right to litigate (in the form of the chose in action for knowing assistance in breach of fiduciary duty), on the reasoning of the Court of Appeal in Western Australia in Krishell Pty Ltd v Nilant (2006) 32 WAR; [2006] WASCA 223 (Krishell), this would not be assignable by the liquidator. However, I have concluded that the reasoning in EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183 (EC Dawson Investments); Re Colorado Products Pty Ltd (In Prov Liq) (2014) 101 ACSR 233; [2014] NSWSC 789 (Re Colorado Products) should be followed and such claims were assignable. Given the findings I make in relation to the knowing assistance claims, nothing turns on this conclusion.
5. Second, as to the position of Ms Garrett and Mr Renauf, I find that they were in an employment relationship with Ashington Management and thus owed duties of good faith and loyalty, as an incidence of that employment relationship to the Ashington entities as a group, in particular to Ashington Management but extending to Ashington Capital as part of their employment role with Ashington Management (albeit that there was no concluded and binding contract of employment). I accept that there would also be duties of confidence arising out of that employment relationship (although in the absence of a concluded contract there might be issues as to the identification of the confidential information subject to any such obligation).
6. Although there is complaint that there was no pleading of a common law employment relationship, it seems to me apparent that the pleading alleges an employment relationship (and I note that the existence of such a relationship was acknowledged by Ms Garrett and Mr Renauf when resolving the dispute after the termination of their employment) and there does not appear to me to be any real prejudice occasioned by the fact that the particulars of that relationship were not expressed to be as such, since the facts and circumstances as to their employment were squarely in issue on the pleaded case in any event. The fact that the reference to "employment relationship" was deleted in the course of amendment in the plaintiff's submissions in relation to Mr Renauf does not alter my conclusion in this regard as I consider it to be clear that the allegation was an allegation that Mr Renauf was employed within the Ashington group (and that the evidence establishes that he was) from which such duties would flow as an incident of that relationship.
7. However, I do not accept that Ms Garrett and Mr Renauf owed fiduciary duties to the Ashington entities. While they occupied roles that, at least by title, accorded them seniority within the companies; and while they were given the responsibility of being the primary communication with the superannuation fund investors and PPB, the ultimate exercise of decision-making power and discretion reposed in Mr Anderson (and, perhaps to a lesser degree, Mr Minahan). The Ashington entities were no more vulnerable to an abuse of their employment position than any other employer who reposes trust in an employee to liaise with clients or potential clients without immediate supervision. That does not render all such employees fiduciaries.
8. Third, as to the position of Patersons, I find that it did not owe fiduciary duties to the Ashington entities; rather, that the relationship was a conventional commercial relationship governed by the contract entered into with Ashington Capital as trustee for ADF2, and that Patersons was not in the position of a trusted financial adviser giving rise to fiduciary obligations.
9. Those conclusions dispose of the bulk of the claims against the defendants other than Ms Garrett and Mr Renauf. However, in the event that I am wrong on any of the above conclusions, I have addressed the breach of fiduciary duty and knowing assistance claims and in that respect I have concluded as follows.
10. If Ms Garrett and Mr Renauf did indeed owe fiduciary duties to Ashington Capital in its own right or to Ashington Management, then I find that those duties were breached by their conduct in pursuing (and not disclosing to Mr Anderson or anyone else at the relevant level within the Ashington group, such as Mr Minahan) the proposal for the refinancing of the Stonington Project that involved the replacement of the Ashington entities from their trustee and management roles (and hence, inevitably, the loss of development, management and trustee fees for those roles), particularly when coupled with the prospect of personal benefit for them in the form of roles within the contemplated replacement manager. I do not accept that it is an answer to this breach of fiduciary duty to say that they perceived it to be (or indeed that it objectively may have been) in the best interests of the underlying beneficiaries of the trusts (or authorised by those beneficiaries - the superannuation fund investors).
11. Moreover (and this does not depend on a finding that there were fiduciary duties owed), I have concluded that Ms Garrett and Mr Renauf were in breach of the duties of good faith, honesty and loyalty owed to the Ashington entities as an incident of their employment relationship by reason of the conduct referred to above. (And, hence, the claims for breach of contract as against Ms Garrett and Mr Renauf are made good.)
12. As to Patersons, I do not accept that either Mr Carolan or Mr Doherty was himself in a position vis-à-vis the company to constitute its directing mind and will for the purposes of the primary rules of attribution of knowledge to corporate entities. In the case of Mr Carolan, it is accepted by Patersons that, by reason of the delegation to him by Mr Shorrocks of responsibility in relation to the Patersons Mandate, his knowledge and actions would be attributed to it provided they were in the course of his employment and not derived or committed as a frolic of his own. However, in that regard, I have concluded that Mr Carolan was indeed acting on a frolic of his own (and consciously contrary to his obligations to his employer) when assisting Ms Garrett and Mr Renauf on the proposal for the replacement of Ashington entities as trustee and manager; and hence his knowledge and conduct should not be attributed to Patersons.
13. As to the issue of vicarious liability, I consider that the reasoning of Coulthard v South Australia (1995) 63 SASR 531 (Coulthard) (see below) should be followed and I proceed on the basis that vicarious liability principles can apply to equitable wrongs such as a second limb knowing assistance Barnes v Addy claim (see Barnes v Addy (1874) LR 9 Ch App 244) (and, in response to the criticism that this is an impermissible usurpation of the role of the ultimate appellate court, I can do no more than say that that is not my intention and simply plead in aid the fact that I am following intermediate appellate court authority which as a matter of judicial comity I would be bound to follow unless convinced it was plainly wrong). However, again, nothing turns on this since I consider that those principles do not assist the plaintiff where Mr Carolan was clearly acting on a frolic of his own - outside the scope of his employment and in fraud of his employer.
14. Had I concluded otherwise in relation to Mr Carolan's position then I would have concluded that Patersons was in breach of any fiduciary duty it owed to the Ashington entities in all the circumstances by reference to his conduct and knowledge in relation to the abandonment of the Stonington Capital Raising and pursuit of a plan that involved the removal of the Ashington entities from their respective trustee and manager roles. As it is, however, the breach of fiduciary duty claim is not made good.
15. As to the various breach of contract claims, relating to the alleged confidential information, I have concluded that none has been made good.
16. As to the knowing assistance claims (assuming I be wrong on the issue as to whether Ms Garrett and Mr Renauf owed and were in breach of fiduciary duties - and assuming that such causes of action were assignable by the liquidator to the plaintiff), I nevertheless find that they are not made good other than in respect of Ms Garrett and Mr Renauf (who clearly had the requisite knowledge and assisted in the steps that in this hypothesis would amount to breach of fiduciary duty by each other and, assuming Patersons owed and breached any fiduciary duty, by Patersons). As to Patersons, it would be liable for knowing assistance in Ms Garrett and Mr Renauf's breaches of fiduciary duty assuming Mr Carolan's knowledge was (contrary to my conclusions) attributed to it.
17. As to the remaining defendants (PPB, Acorn and Albany), I do not accept that each had the requisite knowledge of facts and circumstances to give rise to a second limb Barnes v Addy knowing assistance claim, particularly having regard (in the case of Acorn and Albany) to what was conveyed to them at the time they were approached to the effect that a decision had already been made by the superannuation fund investors to replace the trustee/manager of the funds (and irrespective of whether such a decision had in fact been made at that time).
18. If the fiduciary duty/knowing assistance claims had been made good, then on the issue of causation I would have found that Ms Garrett and Mr Renauf's conduct had a sufficient causal nexus to the claimed loss of the opportunity for the Ashington entities to receive the income streams from their roles as trustee and manager respectively and the opportunity to expand those roles into future funds (albeit that there were clearly also other contributing causes to the decision of the superannuation fund investors to replace the Ashington entities and to accept the Parissen Proposal).
19. While I consider that the prospects of the counterfactual posited by the plaintiff were very low (i.e., that the Stonington Capital Raising would have been achieved within the requisite time frame) and I consider that, even if achieved, on the balance of probabilities, it would not have resolved the financial difficulties for the Ashington entities or the group as a whole, on the issue of causation per se, I would have been satisfied that Ms Garrett and Mr Renauf's conduct (and other defendants' knowing participation therein - assuming the requisite knowledge had been established) satisfied the test of causation for equitable compensation. On that basis, it also would have satisfied the test for causation for damages for breach of contract, since it was clearly foreseeable that such an opportunity would be lost as it was the very aim of the conduct that the Ashington entities be replaced.
20. As to the quantification of loss, I have concluded that, as at 30 September 2009, the Ashington companies (and relevant sub-trusts) were not a going concern and, indeed, if not insolvent already then bordering on insolvency. I have concluded that even on the plaintiff's counterfactual that position would not have been resolved by the Stonington Capital Raising (which, in any event, I consider unlikely to have been achieved within the relevant timeframe). I place no weight on Mr Halligan's opinions (which are based on assumptions not made good and overly optimistic scenarios). I also consider that the claim could not extend to loss of the business of Ashington Real Estate. As to whether the Ashington entities in question would have been the entities that would have participated in the future funds, the contemporaneous documents suggest otherwise; though I accept that there could have been a change in decision at a relevant stage in order to leave the business in the hands of the entities then in control of the Ashington business.
21. I place weight on, and accept, the conclusions of Mr Hall to the effect that the value of the business as at 30 September 2009 (on any of the scenarios considered) would have been nil. However, there must have been a slim chance that if the financial difficulties had been overcome then Mr Anderson may have been able to continue the business and, although I accept that it is highly unlikely that the superannuation fund investors would have continued in future funds it is also inherently improbable that if something could have been salvaged from the debacle confronting the Ashington funds at the time the superannuation investors (and financiers) would not have been prepared to accommodate this (provided, and this is the critical provision, that it did not require good money to be thrown after bad; and from financiers' perspectives resulted in a prompt repayment of the facilities).
22. I accept the force of the complaint by the defendants as to the mixture of scenarios across the different arithmetical calculations (the MFI 36 document handed up in closing submissions by the plaintiff for example) but ultimately if I were to assess the loss for the purposes of an equitable compensation claim, I would have held that there was an opportunity that was lost; that the percentage likelihood of the Stonington Capital Raising being achieved in a sufficient timeframe (or doing more than providing a brief respite) was very small (less than 10%; indeed I would place it at no more than 5%); that the likelihood of AOF3 proceeding within a timely fashion was also very small (noting that it had been deferred once already and would have been affected to at least some extent by reputational damage if ADF and ADF 2 had produced losses; and the proposal of future funds was (to adopt Patersons' words) vanishingly small. The compensation exercise was so beset with difficulties in the way of contingencies and the like that any equitable compensation that I would have awarded would have been no more than 5% of an amount representing a calculation where all projects were sold or abandoned and there were no repeating funds. Mr Hall's 18 April 2019 report produces a negative figure for those assumptions (i.e., -5.8 million) even without considering issues such as the offsetting deductions. Even on Mr Halligan's calculations the figure (albeit including a value for the Ashington units in the respective funds) was $5.247 million (from which deduction would need to be made).
23. The plaintiff's aide memoire (MFI 36) put forward two scenarios, each commencing with Mr Hall's calculations (based on Attachment 10 to his second report (Table 6) (which assumes ADF, ADF2 and AOF3 and no repeating funds; the projects completed computed as per the June 2009 costs reports; Wyle Street sold; the remaining projects completed a year late and AOF3 capitalised at $200 million starting in January 2011) i.e., $6.7 million and then adding or deducting various amounts and applying a 10% discount for the possibility of failure of the Stonington Capital Raising, to produce a value of the lost business, on the first scenario at $29 million and on the second at $10.6 million. Both scenarios have an air of unreality about them. Adopting for present purposes Mr Halligan's (optimistic) $5.247 million figure and discounting to reflect a 5% prospect of the lost opportunity (i.e., the Stonington Capital Raising occurring) would produce a loss of roughly $260,000. Even a 10% prospect of success does not assist the plaintiff greatly. A 5% prospect on the plaintiff's second scenario still produces only around $530,000. On the most realistic scenarios the loss is therefore much smaller than the plaintiff has contended, even adopting favourable assumptions to the plaintiff.
24. Had I been required to assess the amount payable for equitable compensation I would therefore have concluded that it was no more than $930,000 (pre-interest) and more likely $260,000 (pre-interest) and that this would be reduced to nothing by the offsetting claims, in particular the unpaid capital calls (as to which there was some dispute as to the amount for which allowance should be made but even adopting the lesser figure in the plaintiff's calculations). As it is, the issue does not arise on the findings I have made as to the claims for which equitable compensation would have been payable.
25. As to the damages for breach of contract, the same exercise would follow. I interpose only to note that in circumstances where the loss of opportunity cannot be accurately quantified (and indeed on the most likely scenario seems to have reduced to nil) only nominal damages should be awarded. I consider that the conduct of Ms Garrett and Mr Renauf in breaching their duties of good faith and honesty had serious, if not precisely quantifiable financial consequences, and should be reflected in an award of nominal damages to vindicate the plaintiff's position (albeit only in a small amount).

Issues as to assignment of choses in action to plaintiff

1. The plaintiff's standing to sue the respective defendants rests on the Deed of Option Agreement dated 29 September 2015 pursuant to which the liquidator of Ashington Capital and Ashington Management, invoking the power pursuant to s 477 of the Corporations Act, granted to the plaintiff an option to purchase all the rights, title and interests of Ashington Capital and Ashington Management in the causes of action pleaded (see [182A] of the pleading). In [182] of the statement of claim, the plaintiff alleges that the causes of action identified in [182A] were the property of Ashington Capital and Ashington Management.
2. It is convenient at this point to deal with the issues raised by the defendants as to the efficacy of the purported assignment of various of the causes of action here sought to be maintained by the plaintiff.
3. There is no dispute that the Deed of Option was entered into between the plaintiff and the liquidator; nor that the option was duly exercised by the plaintiff insofar as it required her to pay the requisite fees to the liquidator. It is, however, emphasised by the defendants that what the liquidator purportedly assigned were causes of action of Ashington Capital and Ashington Management (but not those of any other member of the Ashington group of companies) which arose out of the events in 2009.
4. In their respective defences, the defendants variously allege: (i) that the plaintiff lacks legal title to the causes of action sued upon (due to a failure to comply with s 12 of the Conveyancing Act 1919 (NSW) (Conveyancing Act), including a failure to give the defendants notice that the Deed of Option had been entered into before the proceeding was commenced); (ii) that the liquidator was unable to assign various causes of action because they were not property of Ashington Capital and/or Ashington Management capable of disposition under s 477(2)(c) of the Corporations Act; and (iii) that each of the causes of action was an "Asset" as defined in the constitution of ADF or ADF2 (and so was held on trust by Ashington Capital for the benefit of ADF or ADF2, respectively) and was transferred as part of all trust assets to Parissen when Ashington Capital retired as trustee of ADF and ADF2 on 23 December 2009 (and hence that Ashington Capital ceased to have standing to pursue any of the causes of action and could not have assigned them to the plaintiff pursuant to the Deed of Option). I address each in turn.

(i) Failure to comply with s 12 Conveyancing Act

1. As to the alleged failure to comply with s 12 of the Conveyancing Act, the plaintiff points out that this issue relates only to the legal causes of action brought in the proceeding for breach of contract and not to the equitable causes of action (which the plaintiff says were effectively assigned to her in equity upon the exercise of the plaintiff's option to purchase them). It is said that an action commenced by the assignee of a legal cause of action before notice to perfect the legal assignment under s 12 of the Conveyancing Act is given (i.e., when the assignee is a mere equitable assignee of a legal chose in action) is not a nullity; rather, that, at most, the assignor should be joined to the proceeding prior to judgment (as has here occurred by the joinder of Ashington Capital and Ashington Management as the 7th and 8th defendants) to ensure that the assignor is bound by the judgment and cannot sue again on the cause of action. It is further noted that the need to join the assignor is a rule of procedure, compliance with which may be the subject of dispensation.
2. The defendants did not dwell on this issue in submissions. Having regard to the joinder of the 7th and 8th defendants, I consider that the issue here raised as a defence to the claim goes nowhere, for the reasons submitted by the plaintiff.

(ii) Inability to assign fiduciary duty/knowing assistance claims

1. The second of the contentions raised by the defendants in this context is that certain of the causes of action (namely, the claims for breaches of fiduciary duty and knowing assistance in such breaches) were not assignable to the plaintiff by the liquidator under s 477(2)(c) of the Corporations Act, on the basis that such claims are purely personal rights (or bare rights to litigate) and therefore do not fall within the definition of "property" of the company in s 9 of the Corporations Act. It is said by Patersons (whose submissions on the assignment issue were broadly adopted by other defendants) that, but for her husband's involvement in the proceeding, the plaintiff has no personal or genuine commercial interest.
2. Pursuant to s 477(2)(c) of the Corporations Act, the liquidator of a company may "sell or otherwise dispose of, in any manner, all or any part of the property of the company". Under s 9, "property" is defined to mean "any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action". The expression "thing in action" is the equivalent of a chose in action (see Krishell) at [73]; [100]). The power "otherwise [to] dispose of" property of the company "in any manner" includes a disposition of a chose of action by way of an assignment (see Krishell at [75]; [101]).
3. Patersons points to the reasoning of McLure JA, as her Honour then was, in Krishell (at [73]-[75]) to the effect that: "thing in action" in s 9 of the Corporations Act means chose in action; chose in action is a personal right of property which can only be claimed or enforced by action, as distinct from taking physical possession; an essential criterion of the chose in action is that the right be of a proprietary character, so that a purely personal right is not a chose in action because it is not property; and some bare rights to litigate (for example, a right to litigate in tort) are not capable of being assigned under the general law (her Honour referring to Poulton v The Commonwealth (1953) 89 CLR 540 at 602 per Williams, Webb and Kitto JJ).
4. I note that in Krishell McLure JA went on to state (at [77]) that "[a] bare right of action that is itself incapable of being assigned can be assigned if it is annexed or ancillary to property", including a right of action in tort; and (at [78]) that a sufficient interest or genuine commercial interest in the right to litigate may render a right of action property that is capable of assignment (citing Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 703).
5. In Krishell, Wheeler JA similarly said (at [39]) that a right of litigation can be considered property if it can be characterised as a chose in action (that be a right of a proprietary or quasi-proprietorial nature); and that a right to sue may be incapable of assignment because it is not a chose in action and thus, not property capable of assignment (or because of the rules of maintenance, or for other reasons).
6. Patersons also points to MG Corrosion Consultants Pty Ltd v Gilmour (2012) 88 ACSR 170; [2012] FCA 383, where Barker J held that a derivative action on behalf of a company against one of its directors (including a claim for breach of fiduciary duty) was not a claim "in relation to any of [the company's] property" within the meaning of s 440D(1) of the Corporations Act (referring to the reasoning in Krishell) (see at [11]-[13]).
7. Patersons acknowledges that other first instance courts have not adopted the Krishell chain of reasoning in considering whether a breach of fiduciary duty claim is assignable by a liquidator (citing EC Dawson Investments and RE Colorado Products); but contends that it is open to this Court to reach such a conclusion (and that this is correct in principle).
8. To the extent that the approach in Krishell to the question of assignments of bare causes of action was informed by the cases that consider principles of maintenance and champerty (see at [39]), the public policy roots of this principle are emphasised. Patersons points out that the present proceeding involves: a purported assignment of the causes of action on the final day of the limitation period to a plaintiff who is a stranger to the subject matter of the proceeding; a proceeding being commenced against six defendants, comprising a myriad of claims, which proceeding has extended for some five years at significant cost to all parties; the proceedings being brought by an impecunious plaintiff against whom the defendants can have little prospect of recovering any amount to which they are entitled above the security provided; the conduct of a six-week trial; and a contest over a business which it is submitted was worth nothing at the relevant time.
9. Patersons submits that the pursuit of speculative bare rights to litigate by impecunious strangers to the underlying facts and the alleged equitable wrongs committed by the prospective defendants should not be encouraged (noting that the plaintiff is here funded by third-party litigation funding).
10. Pausing here, a number of those propositions are of course contentious, not least the proposition that the Ashington business was worth nothing at the relevant time. Furthermore, the complaint as to the time that has elapsed and costs incurred in the litigation is one that will no doubt be emphasised in other contexts.
11. Patersons accepts that an assignment may be valid by a liquidator to: (a) an entity controlled by a former director of the company of a cause of action for breach of fiduciary duty against the former director (as was the context in EC Dawson Investments at [910]-[916] per Beech J); or (b) two former shareholders in the company said to be the victim of the breaches of fiduciary duty (as was the context in Re Colorado Products at [344]-[346] per Black J); but says that this does no more than reflect the already existing exception to the principle that a personal right to litigate cannot be assigned (which applies where the assignee has a genuine and substantial commercial interest in the claim that exists independent of the assignment). Patersons argues that such an exception is not available here, the context being quite different from those cases referred to above. (Pausing here, it does not appear from their Honours reasons in EC Dawson Investments and Re Colorado Products, respectively, that their Honours relied solely on that exception (as to this, see below).)
12. The plaintiff in response maintains the contention that the causes of action were assignable by the liquidator under s 477(2)(c) of the Corporations Act, and says that there is no basis for reading down the liquidator's ample powers under s 477(2)(c), which the plaintiff says extend to the assignment of a "bare" cause of action to a person with no prior interest in it. The plaintiff says that there is nothing otherwise inherent in the species of causes of action brought in the present case which would render them unassignable.
13. As to the question whether s 477(2)(c) renders assignable a bare right to litigate, the distinction between personal and proprietary rights to litigate is not expressly drawn in the statutory provision itself.
14. In EC Dawson Investments, Beech J noted that a third exception (to the otherwise unassignability of a bare right to litigate) arises in the exercise of the power of a liquidator or trustee in bankruptcy to sell the property of the company (or bankrupt), and that this turns on an interpretation of ss 477(2)(c) and 9 of the Corporations Act (see at [891]-[892], [898]). Beech J considered the authorities in support of the view that a claim by a company for breach of fiduciary duty is property capable of being sold or assigned by its liquidator (see [898]-[904]). Beech J understood the reasons of Wheeler and McLure JJA in Krishell to mean that s 477(2)(c) only empowers a liquidator to assign a right of action if that right is "proprietary" in nature; and disagreed with that construction.
15. As to whether a right of action is only assignable if it is of a proprietary nature, Beech J stated: 911. In the passage from Starke, Assignment of Choses in Action in Australia (pp 2-3) referred to by Wheeler and McLure JJA, the learned author states that an essential criterion of a chose in action is that the right concerned is one of a proprietary character; a purely personal right is not a chose in action as it is not property, referring to Jack v Smail (1905) 2 CLR 684, 705. That case was not concerned with a right of action, but with a statutory licence to conduct a grocer's business. In my respectful view, Starke does not support the proposition that only rights of action of a "proprietary" character are choses in action. In the same chapter (pp 8-9), the learned author lists a number of things that have been held to be choses in action, including debts, shares, various intellectual property rights, shares in a partnership, and rights enforceable by action, including a claim of a company against directors for breach of fiduciary duty (citing Re Park Gate Waggon Works). 912. As I have said [887]-[888], in Starke (pp 62-64), and in the cases relied on in Poulton (602), the non-assignability of a bare right of litigation is based on public policy relating to maintenance and champerty, not on its "non-proprietary" nature.
16. Beech J followed authority to the effect that the non-assignability of a right of action was based on public policy related to maintenance and champerty and not the proprietary nature of the right of action, and that, as those policy reasons do not apply to an assignment by a liquidator (or trustee in bankruptcy), there is no impediment to the assignment of a right of action such as that of breach of fiduciary duty. Beech J concluded (at [915]), that the breadth of the definition of property in s 9, combined with the purpose of s 477(2)(c), similarly supported the interpretation that a claim for breach of fiduciary duty was capable of assignment under those statutory provisions. Black J in Re Colorado Investments considered that Beech J's reasons were thorough, and his Honour's conclusions correct (I agree). Black J also noted the desirability of consistent decision-making with respect to uniform national legislation, and said that, in circumstances where the correctness of Beech J's decision was not in doubt, it should be followed. I consider it appropriate to take that course.
17. Therefore, I find that the breach of fiduciary duty and knowing assistance claims were capable of assignment under ss 477(2)(c) and 9 of the Corporations Act.

(iii) Standing

1. As to the last of those contentions (in essence that some of the causes of action were not the liquidator's causes of action to assign), this relates to the capacity in which the relevant choses in action were held by Ashington Capital (i.e., whether in its personal capacity or as trustee). This relates to the "Conspiracy Claim" as defined in the Deed of Option and the claims for breach of contract (variously the Patersons Mandate or the respective confidentiality agreements) or for breach of confidentiality obligations or breach of confidence made variously against Patersons, PPB and Acorn/Albany. (It does not relate to the breach of knowing assistance claims.)
2. For this submission, reliance is placed by the defendants on the fact that, under the constitutions of both ADF and ADF2 (see cl 2.1), the trustee was required to hold the "Assets" of the Trust for Members (which in respect of both trusts was Ashington Capital until its retirement and the appointment of Parissen as trustee of the two trusts on 23 December 2009).
3. The definition of "Assets" (see cl 27.1 of the ADF constitution extracted earlier and mirrored in cl 25.1 of the ADF2 constitution) is clearly broad enough to capture the "Conspiracy Claim" as defined in the Deed of Option (and the plaintiff accepts this).
4. As to the contract claims, it is contended by the defendants that the various contracts (the Patersons Mandate and the respective confidentiality undertakings) were entered into by Ashington Capital in its capacity as trustee for ADF 2 and for the benefit of the trust/unitholders. It is said that this is consistent, for example, with the purpose of the Patersons Mandate being to raise finance so as to discharge a liability of the ADF2 trust to Investec at the head-trust level; and with the fact that any fees earned by Patersons under the Patersons Mandate would presumably have been paid from the trust property of ADF2.
5. It is argued that, upon a change of trustee under both constitutions, the "Assets" of ADF and ADF2 become the property of the new trustee (Parissen) (for "Members") and thus that, upon its retirement as trustee, Ashington Capital did not continue to hold or have any interest in those Assets (whether for Members or otherwise). Patersons points out that, under cl 14.5 of the ADF constitution and cl 14.3 of the ADF2 constitution, any replacement trustee was required to execute a deed by which it covenanted to be bound by the relevant constitution as if it had originally been a party to it; and it refers to cll 2-3 and 5(a) of the respective Deeds of Appointment and Retirement of Trustee for both ADF and ADF2, entered into on or about 23 December 2009 (see above).
6. Thus, it is said that Ashington Capital's retirement as trustee of ADF2 and the agreement to transfer all of the Assets of ADF2 to Parissen had the effect that, by the time Ashington Capital was placed into liquidation on 14 April 2011, the Assets of the respective trusts (including any causes of action arising out of the Patersons Mandate) were not Ashington Capital's assets; and, therefore, they were not assets that the liquidator was able to sell or dispose of under s 477(2)(c) of the Corporations Act. In other words, it is said that the entity with standing to enforce a pre-existing right of action arising from a contract (such as the Patersons Mandate) that was held on trust by the former trustee is the new trustee (i.e., Parissen). Reliance is placed in this regard on the decision in Owners of Strata Plan No 5290 v CGS & Co Pty Ltd (2011) 81 NSWLR 285; [2011] NSWCA 168 at [59], where Sackville AJA (with whom Giles and Campbell JJA agreed) concluded in effect that s 477(2)(c) of the Corporations Act does not empower a liquidator to sell or dispose of the property which the company itself is not able to assign or which is property inherently incapable of being assigned. Applying that reasoning, it is said that this issue affects all of the claims against the defendants for breach of contract or breach of confidentiality obligations owed to Ashington Capital as trustee of ADF or ADF2.
7. Acorn further says that, in the absence of a vesting order under s 474(2) of the Corporations Act, the appointment of a liquidator to a company does not divest the company of its beneficial ownership in, or render the liquidator a trustee of, the company's assets (noting that no order was obtained under s 474(2) before the purported assignment by the liquidator pursuant to s 477(2)(c) of the Corporations Act of causes of action held by Ashington Capital and Ashington Management).

Plaintiff's response

1. The plaintiff's response to the assertion that the relevant causes of action (i.e., those other than knowing assistance claims) were not trust assets transferred to Parissen, the plaintiff points out that this issue can only relate to the claims brought by Ashington Capital (since Ashington Management never held any assets as a trustee).
2. The plaintiff maintains that the specific causes of action assigned by the liquidator of Ashington Capital were not rights held by Ashington Capital on trust for the benefit of the unitholders of ADF and/or ADF2.
3. As to the claims for breach of fiduciary duty owed by Ms Garrett and Mr Renauf, it is said that such duties arose from their engagement as senior employees of (or contractors to) Ashington Management, being duties to advance the interests of the Ashington Group (including Ashington Capital). It is said that their position is akin to that of directors owing fiduciary duties to a trustee company (referring to Young v Murphy; Swinbank v Murphy (1994) 13 ACSR 722; [1996] 1 VR 279 (Young v Murphy), where the Victorian Court of Appeal found that such duties were owed to the company irrespective of its business activities as a trustee, and rejected an argument that a cause of action for breach of such a duty was trust property).
4. As to the first of those propositions, I accept that the assets of Ashington Management were not held by it as a trustee. As to the second proposition, I accept that a cause of action by Ashington Capital for breach of fiduciary duty owed to it in its own right (say, as here argued, in its capacity as employer of Ms Garrett and Mr Renauf) is not a cause of action held by it as trustee for the benefit of beneficiaries of the trust (it is a different issue as to whether there is any fiduciary duty owed at all). Similarly, a claim for breach of contract arising out of employment or an employment relationship with Ashington Management or Ashington Capital is not one that would be held on trust by either of those entities.
5. In respect of all of the causes of action brought in the proceedings, the plaintiff says that relief is sought for damage caused to Ashington Capital's existing and potential income stream in the form of trustee fees to which it was personally entitled, and in which the unitholders of ADF and/or ADF2 had no beneficial interest; and that those causes of action do not involve any loss caused to the investments held by Ashington Capital on behalf of the unitholders of ADF or ADF2. As such, it is said that there is no basis upon which such causes of action were rights held on trust by Ashington Capital for the benefit of unitholders of either ADF or ADF2.
6. As to the plaintiff's assertion that the relevant causes of action against the defendants were not "vested" in Ashington Capital in its capacity as trustee of the Stonington Trust because the relief sought is for damage caused to Ashington Capital's existing and potential income stream (a matter said to be personal to Ashington Capital), I agree with the defendants' submission that the nature of the relief is not the issue. If the relevant contract in question was held by Ashington Capital in its position as trustee, then so also must be the cause of action for breach (which would ultimately enure for the benefit of the beneficiaries of the trust). Similarly, causes of action for breach of duties of confidence owed to Ashington Capital in its capacity as trustee must be for the benefit of the trust and ultimately would enure to the benefit of the beneficiaries (i.e., the unitholders).
7. In the alternative, the plaintiff submits that nothing in the Deeds of Appointment and Retirement evinces an intention to extinguish Ashington Capital's accrued rights, such that (at most) their effect was either to transfer to the new trustee (for the benefit of unitholders) only that part of the causes of action which related to the unitholders' losses or the entire cause of action subject to Ashington Capital retaining a beneficial interest in the part of the cause of action related to its personal loss. In either case, it is said that Ashington Capital remains beneficially entitled to the relief sought. I accept the distinction between Ashington Management and Ashington Capital (and that there is a distinction to be drawn between claims held by the latter in its own right and those held as trustee) and I agree that the Deeds of Appointment and Retirement operated only to transfer causes of action held by Ashington Capital in its capacity as trustee of ADF 2.

Determination as to these issues

1. As to the complaint based on lack of notification pursuant to s 12 of the Conveyancing Act, as noted above, this did not appear to be pursued with any force by the defendants; and it seems to me that it is effectively met by the joinder of the 7th and 8th defendants.
2. As to the "bare right to litigate" argument, as adverted to above I consider that the reasoning in EC Dawson Investments and Re Colorado Products should be followed. I am conscious that Krishell is a judgment of an intermediate appellate court but, to the extent that it proceeds on the basis that a chose in action is only arguable if proprietary in nature the conclusion suffers from the difficulties identified by Beech J in EC Dawson Investments and were it to be necessary I would, with respect, have concluded it to be plainly wrong.
3. As to the assignability of causes of action which were held by Ashington Capital in its capacity as trustee of ADF or ADF2, those were not assignable by the liquidator, having vested in the new trustee (Parissen) before the time of the assignment. As the confidentiality undertakings entered into by each of Albany and Acorn on 8 October 2009 were with Ashington Capital as trustee of the Stonington Trust, any causes of action arising out of breach of that agreement vested in Parissen on its appointment as new trustee; those undertakings clearly being expressed to be enterd into by Ashington Capital as trustee. A similar conclusion must be reached with respect to the various breaches of contract pleaded against Patersons in relation to the Patersons Mandate which was between Patersons and Ashington Capital as trustee for ADF2.
4. As to PPB, the issues is more problematic. The PPB Confidentiality Agreement dated 21 July 2009 was entered into by PPB and Ashington Capital without an express acknowledgment that it was doing so in its capacity as trustee. In its terms, there is nothing to suggest that Ashington Capital was entering into the agreement in that capacity. The fact that its acknowledged purposes was to assist in the review and report of ADF 2 "as instructed by investors" in ADF2 does not to my mind indicate that it was an agreement entered into as trustee; and the reference to the Ashington Capital's related entities suggests otherwise. The agreement was drafted by Mallesons (see the footer). It might be expected that if it had been Ashington Capital's intention to enter to the agreement as trustee this would have been expressly stated.
5. AS to the proposition that the agreement was entered into ultimately for the benefit of the superannuation fund investors, that is not inconsistent with Ashington Capital holding the benefit of the confidentiality obligations under the agreement in its own right.
6. I have concluded that the PPB Confidentiality Agreement was entered into by Ashington Capital in its personal capacity; and, therefore, causes of action relating to breach of that Confidentiality Agreement were capable of assignment.
7. This issue does not arise for claims made by Ashington Management (which was not a trustee). Nor would it affect claims by Ashington Capital in its personal capacity (which to my mind would include claims for breach of duties of good faith arising from the employment relationship between it and Ms Garrett and Mr Renauf, although if the relevant employer was Ashington Management then the cause of action would be its to pursue unless the employment duties related to others in the Ashington group, which conceivably they did).
8. Accordingly, I consider that the Krishell reasoning applies to render ineffective the claims for knowing assistance; that the breach of contract claims in relation to breach of confidence were held by Ashington Capital as trustee and therefore vested in Parissen before the purported transfer by the liquidator and were therefore not assignable property of the company; but that claims for breach of obligations of good faith arising from the employment relationship were owed to the Ashington entities in their own right (not vested in Parissen) and were assignable.
9. Therefore, with respect to the various breach of contract claims pleaded, only the breaches of the PPB Confidentiality Agreement and breaches of implied terms of Ms Garrett and Mr Renauf's alleged employment contracts remain on foot.
10. As to the equitable duties of confidence that are pleaded, to the extent that the claims would be covered by a contractual obligation the terms of that contract would apply. As to my equitable obligations arising, dependently of the relevant contracts, those claims would be assignable, as with the other choses of action for the reasons above.

Mr Anderson

1. Much criticism was made by the defendants of Mr Anderson's evidence. Mr Anderson was variously described as an unsatisfactory and unreliable witness; as a witness on whose evidence, including his affidavit evidence, there should be no reliance except where it is against his interests or independently corroborated; and as not being a witness of truth. Ms Garrett and Mr Renauf also say that reliance should not be placed on any of Mr Anderson's contemporaneous emails or presentations unless contrary to his interest (as I understand it, this is on the basis that Mr Anderson may there have painted a self-serving picture of events in his contemporaneous communications). Ms Garrett and Renauf have prepared an annexure (Annexure C) to their submissions summarising what they submit are some of Mr Andersons's more obvious lies (which I address briefly below).
2. It is, however, relevant at the outset to note the submission by Patersons to the effect that the documentary evidence is sufficient in and of itself to dismiss the plaintiff's case (i.e., without the need for adverse credit findings) but that such credit findings might need to be made in respect of Mr Anderson given that Mr Anderson's affidavit evidence is the foundation for critical assumptions given to the plaintiff's expert witnesses (Mr Wist and Mr Halligan) whose evidence founds the plaintiff's case on loss and damage. Patersons says that one of the reasons why those assumptions have not been proven is that they are wholly dependent on Mr Anderson's evidence being accepted as truthful (as to historical matters) or credible (as to future and hypothetical matters). While I accept that much of the expert evidence of Mr Wist and Mr Halligan turns on the assumptions they were give, ultimately it does not seem to me necessary to make adverse credit findings against Mr Anderson in order to conclude (as I have) that much of the assumptions as to loss and damage were optimistic and not borne out by the evidence. In any event and for other reasons, I consider the expert evidence of Mr Wist and Mr Halligan to be of little assistance (as to which I say more below).
3. Turning then to some of the matters raised as going adversely to Mr Anderson's credit, Ms Garrett and Mr Renauf refer to the evidence as to control of the Ashington group. They say that, contrary to Mr Anderson's evidence that he ran the business with a "collaborative approach" that involved equal contribution from each head of department, in fact Mr Anderson "micro-managed" each aspect of the Ashington group and that Mr Minahan was no co-equal. In particular, it is said that Mr Anderson exercised control over at least: the Patersons Mandate; the decision to sell 10 Wylde Street; the project costs reports; investment papers; the payment of money; decisions about whether to disclose breaches of trust; and access to the data room. Pausing here, I accept that the documentary evidence supports the conclusion that Mr Anderson was the primary decision-maker; however, it is apparent that Mr Minahan was also involved in the decision-making process and I draw little from any down-playing by Mr Anderson of his role in that regard. It is also of relevance in that context that Mr Anderson seems to have been prepared to have allowed senior staff such as Ms Garrett and Mr Renauf considerable latitude in dealing unsupervised with potential investors, which rather tells against the proposition that he was a "micro-manager".
4. Patersons emphasises the following two issues, as matters that it says are particularly damaging to Mr Anderson's credit.
5. First, Mr Anderson's evidence that Ashington Capital (as trustee for ADFIT) and Ashington Group were not required to contribute capital in cash for the subscription price in their units, in accordance with the terms of the ADF2 constitution and their applications for units in ADF2 but, instead, (according to "industry practice") were able to offset those amounts from fees earned by other entities within the Ashington Group (Ashington Capital, Ashington Management and Ashington Real Estate, for example) years into the future.
6. Patersons says that Mr Anderson's evidence that it was an "exception" that was discussed with the superannuation fund investors (in particular, Mr Barry Brakey) is not credible. Patersons points out that it was contrary to the terms of the ADF2 constitution (which Mr Anderson accepted included an express obligation that the trustee was required to treat all unitholders equally). Further, Patersons points out that it was not documented anywhere else, including in Mr Anderson's own affidavits read in this proceeding; and it was not raised with Ashington's auditors. Patersons says that it is extremely implausible that this was an acceptable business practice likely to be accepted by co-investors, and notes that it was not put to any of the superannuation fund investor witnesses in cross-examination that there was any industry practice of the kind suggested.
7. I accept that there is nothing independently to corroborate Mr Anderson's evidence in cross-examination as to a discussion with Mr Brakey to the effect that Mr Anderson has now recalled and that the practice of offsetting contributions by reference to management fees or the like does not appear to have been documented at the time (and was not recorded by the auditors). I cannot conclude on the evidence that this was consistent with industry practice (because there is no evidence as such). However, whether or not it was consistent with industry practice (and whether or not the superannuation fund investors would have accepted it at the time) is not to my mind really to the point. It certainly was a matter that would have done little to assuage superannuation fund investors' concerns or to placate them once they had otherwise lost trust and confidence in Ashington but here it is being raised as going to Mr Anderson's credit as a witness. My observation of Mr Anderson in the witness box was that he appeared genuinely to believe that there was an industry practice that permitted such offsetting to take place. Therefore, at most it seems to me to have been an ex post facto justification of the fact that cash contributions were not made but not something that leads me to make an adverse credit finding.
8. Second, Patersons says that Mr Anderson's evidence that he was shocked and did not think about the potential for Ashington Capital's removal as trustee of ADF and ADF2 as at August 2009, and going forward to November 2009, is inconsistent with the documents produced by the liquidator (which came to light after privilege claims that I considered to be unfounded had been made over them). Patersons says that Mr Anderson's refusal to acknowledge that these documents were illustrative of his acute consciousness of the real possibility of the unitholders' removal of Ashington Capital as trustee at that critical time for the purposes of this case is significantly damning to his credit.
9. I accept that the evidence supports the conclusion that Mr Anderson was aware of the possibility or potential for Ashington Capital to be removed as trustee from at least August 2009. Further, I cannot accept Mr Anderson's evidence in cross-examination that he was unaware of this at the time. However, I bear in mind the passage of years since then and think it not surprising that Mr Anderson may not have recalled seeking advice on that aspect of the matter at that particular time. What I suspect came as a shock to Mr Anderson at the time was not the possibility of the removal of Ashington Capital as trustee but the discovery that the superannuation fund investors were actively pressing that proposal at the time. It is apparent from the contemporaneous evidence (and from Mr Anderson's evidence in the witness box) that Mr Anderson was confident (perhaps in hindsight over-confident) of his ability to placate the superannuation fund investors (and probably "gambled" on being able to regain their confidence or trust). However, I do not regard Mr Anderson's evidence on this issue as particularly damaging to his credit overall.
10. Ms Garrett and Mr Renauf characterise Mr Anderson's evidence in cross-examination as an attempt to cast blame for the failure of the Ashington business in all directions except towards himself, pointing to the following evidence given by Mr Anderson: that the $1.5 million in funds taken from ADF2 to a company he controlled was "lazy accounting" by his accounting staff (T 432.38); that investors would have to be "really stupid" not to see that that he was taking money from ADF2's $20 million raising to fund ADF because "blind Freddy" could see it (T 423.40-44); that Mr Gavin (an asset consultant advising investors) was "possibly" lying when he told Mr Anderson that other investors wanted comfort that the $20 million would only be used for the Double Bay Property (T 337.33); and that superannuation fund investors were "confused" (T 416.11) and had received too much information, which they were struggling to digest (T 391.16-18), did not "understand what they were talking about" (Ex 17) and were "shambolic" in responding to proposals (T 399.39). Ms Garrett and Mr Renauf characterise this proceeding as one further example of Mr Anderson's predilection to blame others for his own business failures (like, they say, the abandoned Mapeline proceeding or any of the previous proceedings in Victoria and in NSW in which Mr Anderson has been involved since 2010 - about which I have little information - see T 316.19).
11. Criticism is made that, despite being a professional trustee, Mr Anderson apparently did not know what a breach of trust was (T 465.22-24); that he believed that investors were not entitled to involve themselves in the decision-making of the trust (at least with respect to whether Ashington accepted the Wingate Proposal) (T 499.42-44); and he repeatedly claimed that he could disregard the representations made in the Information Memorandum and the HESTA Side Letter if he considered any of his proposed actions to be, in his view, in the interests of members (for example, T 404.14-32; T 417.33-418.7; T 418.35-41; T 460.34-40; T 473.1-10).
12. Ms Garrett and Mr Renauf also say that a persistent theme of Mr Anderson's evidence was an arrogant and unwarranted contempt for the abilities of investors and their advisers.
13. I accept that Mr Anderson has shown a tendency in effect to place blame on or be critical of others (particularly, insofar as he was dismissive of the superannuation fund investors or their consultants and was dismissive of Mr Steel's concerns or worries). I cannot comment on other proceedings about which, as noted above, I know very little. Nevertheless, I consider that Mr Anderson's evidence in the witness box was consistent with the flavour that emerged from the contemporaneous documents - i.e., that the position of the Ashington entities and funds in 2009, following the GFC, was one of financial difficulty and one in which Mr Anderson was desperately trying to keep the business afloat and to meet its financing commitments. He was, to speak colloquially, no doubt juggling a number of balls in the air at the time. The contemporaneous documents paint a picture of a business or financial entrepreneur who did not lack confidence in his abilities and who was perhaps less averse to business risk than others (such as, for example, Mr Steel appears to have been).
14. I have no doubt that Mr Anderson may have considered Mr Steel a worrier or the superannuation fund investors too cautious; may have had a tendency to adopt a "crash through or crash" mentality; and may well be accused of painting an incomplete (whether intentionally so or otherwise) or overly rosy picture of certain events (such as his confidence in the likely outcome of the Double Bay development application) or glossing over particular problems. Interestingly, I note that the submissions for the plaintiff concede that Mr Anderson was "perhaps a little too dismissive of the cautious culture in which the investors - as trustees governed by voluminous legislation - operated". That accords with my view that Mr Anderson was confident (and as it turned out over-confident) of his ability to persuade the superannuation fund investors to his view; and that may explain the perceived inconsistency between his exhortation to Mr Steel to treat the superannuation fund investors like gold and the seemingly dismissive attitude displayed by Mr Anderson in the witness box as to their abilities.
15. That said, having had the opportunity to observe Mr Anderson in the witness box over a number of days (including when he was recalled for further cross-examination), and in Court during the whole of the hearing, I considered Mr Anderson to be genuinely attempting to give an accurate recollection of events (imperfect as it was on occasion) and to be a witness of truth - although his recollection was not always reliable and no doubt (unconsciously or otherwise) there was a tendency to gloss over some matters (including those that might not have painted him or Ashington in a good light). Mr Anderson displayed good humour throughout; was not inclined to argument; and was prone to making wry observations of events that to me had the ring of truth. He reacted on the whole calmly to prolonged (and vigorous) cross-examination and, when not in the witness box, paid close attention to the evidence and submissions (not least during the submissions on the quantification of loss when I expressed concerns as to the underlying rationale of some of the expert evidence). Mr Anderson's evidence as to the breach of trust questions should be understood in the context that the Mallesons' advice did not expressly refer to a breach of trust (and there is room for argument as to whether breach of the representations made in the Information Memorandum would amount to a breach of trust. As to the responses given in relation to breach of the Information Memorandum covenants (sch as suggestion that the intention at the time was to do certain things but that intention could change), while that may not reflect well on Mr Anderson it does not mean he was an untruthful witness. I do not accept that Mr Anderson was a dishonest witness.
16. That said, as with all cases where there is oral evidence of events that occurred many years ago, I place more weight on contemporaneous documents than the oral evidence of witnesses (see Watson v Foxman (1995) 49 NSWLR 315). In this case, I also consider that the contemporaneous documents (not just those of Mr Anderson) must be approached with a degree of caution, noting that a number of those have been shown to be self-serving to a degree or are at least likely to have been influenced by the perspective being sought to be advanced by the author of the documents in question. Nevertheless, there are certain contemporaneous documents (to which I have referred and will refer) that seem to me to paint a reliable picture of the relevant author's perception of events at particular times (such as the 6 and 8 October 2009 emails referred to above) and others that shed light on what must have been discussed at the time (such as the 2 October 2009 email on which the plaintiff places much weight).

Ms Briggs

1. Ms Briggs was a junior funds administrator within Ashington at the relevant time (a law graduate but with not much experience in the legal profession at that stage). (Somewhat surprisingly, Ms Briggs' "Linkedin" page states that she was employed by Ashington Group for 4 years and two months, first as "Funds Management", and second as "Corporate Legal Counsl" from January 2009 (a time before she was admitted to practise as a lawyer (see Ex 20) but that was of relevance only to the legal professional privilege claim that was ultimately not maintained by the liquidator of the Ashington companies).)
2. Ms Briggs had taken various notes at the time and I accept that there is no reason not to place reliance on her contemporaneous emails and handwritten notebooks from 2008 and 2009, since it is not suggested that Ms Briggs had any personal interest in the events in question.
3. A striking feature of Ms Briggs' evidence in the witness box was that she had no independent recollection of any aspect of her role during the relevant period for the purposes of this litigation notwithstanding that in Ms Briggs' first affidavit filed in 2017, Ms Briggs recounted details of the contents of documents that were sent a long time ago (and which have since been deleted), including the details of to whom the documents had been sent. In an affidavit filed immediately before the commencement of the hearing (described as significant "back-tracking" from certain of the matters she referred to in her first affidavit), Ms Briggs resiled from much of that evidence, claiming no longer to have any recollection at all; and in the end she was only able to give evidence of her general practice assisted by the contemporaneous documents.
4. With all due respect to her, that seems to me an unsatisfactory state of affairs. One would expect that if a deponent had conscientiously prepared an affidavit by reference to documents at the time, then that would be a matter that would give the deponent comfort in being able to adhere to the (admittedly refreshed) recollection by the time of cross-examination; i.e., that although the witness had no actual recollection of events in the witness box the witness might have confidence in the manner in which an earlier recollection had been deposed by reference to documents at that earlier time. It may be, to give Ms Briggs the benefit of the doubt, that this was all that she was intending by the second affidavit to say, although that was not clear.
5. Patersons submits that reliance should be placed on Ms Briggs' first affidavit. As adverted to above, I would accept that if Ms Briggs had conscientiously abided by her obligations as a witness when the first affidavit was prepared then one would assume that Ms Briggs must have had sufficient independent recollection of events to have been able to attest to the matters therein set out. Nevertheless, by the time of the hearing that earlier recollection could hardly be tested in any sensible fashion given Ms Briggs' lack of recollection in the witness box. For that reason, I place more weight on Ms Briggs' contemporaneous notes (contained in her workbooks) (see Ex 11, Ex 5 and Ex 6) and email communications. I do, however, accept her oral evidence as to matters of general practice (including that email communications would not have been sent by her without authorisation and to the effect that she would have referred matters to Mr Anderson in that regard).

Mr Shorrocks

1. Patersons called Mr Raymond Shorrocks to give evidence and submits (and I agree) that Mr Shorrocks was a reliable witness whose evidence should be accepted. Indeed, the plaintiff does not challenge his evidence in closing submissions. There is no suggestion that Mr Shorrocks personally had any relevant knowledge of the matters of which complaint is here made by the plaintiff. That is amply demonstrated by the fact that Mr Shorrocks made enquiry in 2010 as to whether Patersons was entitled to a fee arising from the Patersons Mandate (an enquiry which would have been pointless had Mr Shorrocks realised that in effect the Patersons Mandate had been abandoned from early October 2009).
2. In this context, I note the submission made for Patersons that it was, in essence, as much a victim of the alleged misconduct of Ms Garrett and Mr Renauf as was Ashington (since it deprived Patersons of a not insubstantial fee), a matter relied upon by Patersons, as I understand it, not as something that would preclude liability for knowing assistance as such; but, rather, as a matter that makes implausible the notion that Patersons would knowingly have been involved in such conduct. It also makes explicable to my mind the "we will be shot email", in the sense that if (as he surely must have done) Mr Carolan appreciated that what was being proposed was inconsistent with the Patersons Mandate and would deprive Patersons of a potential fee, then it makes it more likely that he would have contemplated that reprisals against him within Patersons for engaging in such conduct would be severe.

Representatives of the superannuation fund investors

HESTA

1. HESTA's staff, as noted above, included Mr Fowler and Mr Hastings (investment analysts). Its investment adviser was Mr Gavin (Senior Consultant and Head of Property Research at Frontier).
2. Mr Fowler gave evidence in the proceeding. Mr Fowler's evidence was to the effect that: when he read Mr Anderson's letter of 10 June 2009 (see above) on or about the date of the letter he was extremely concerned to learn that the Investec Stonington Facility was secured by uncalled capital and he regarded this security as being contrary to the commitment made by Ashington Capital in the HESTA Side Letter, an issue which he deposed caused him to lose confidence and trust in Ashington Capital (see his affidavit at [19]-[20]; Ex 14 at [27]); that PPB was engaged to undertake a detailed review of ADF2 as the superannuation fund investors were concerned about the fund's viability and solvency (see his affidavit at [22]-[23]); and that, after reading the PPB Strategy Updates No 1 and 2, he considered that the Investec Stonington Facility was a significant problem, for the reasons set out in his affidavit ([25]-[26]).
3. Mr Fowler said that the reason for his recommendation for Mr Anderson's (effectively Ashington's) removal as manager was because, from June to November 2009, the relationship with the manager was "deteriorating" (T 1038.33-48). Indeed, Mr Fowler's attitude by 11 December 2009, when PPB reported on Ashington's proposed conditions for termination, was that he wanted to agree to as few as possible of Ashington's proposed terms for its removal from ADF2 because of his views that Ashington Capital had breached HESTA's trust in relation to the HESTA Side Letter (see his affidavit at [35]; Ex 14). There can be no doubt that Mr Fowler held a very dim view of the breach of the HESTA Side Letter.
4. Mr Fowler accepted in cross-examination that he was unable to recall events in 2009 without refreshing his recollection from contemporaneous documents; and that in relation to HESTA's investment in Ashington, Mr Fowler relied heavily on information and advice from Mr Gavin and Mr Hastings.
5. I considered Mr Fowler's evidence to be plausible. The contemporaneous communications make clear that Mr Fowler had indeed lost trust and confidence in Ashington and Mr Anderson. The precise timing of this is not critical in my opinion. It is sufficient to note that, by the time of the impugned conduct (i.e., from early October 2009), it is apparent with hindsight that Mr Anderson would have had a considerable task ahead of him to regain that trust and confidence.

Military Super

1. Military Super's staff included Mr Hodgson. Its investment adviser was Mr Dedes of Strategic Capital Management.
2. Mr Dedes gave evidence in the proceeding to the effect that: by July 2009, he had become concerned about the performance of Ashington (and in particular about the performance of Ashington as trustee and manager of ADF, ADF2 and the sub-trusts); he was aware that the projects that comprised the investment were not performing well and he was concerned about Ashington's performance (see his affidavit at [11], Ex 15); by late August 2009, he had formed the opinion that Ashington Capital and Ashington Management needed to be removed as trustee and manager respectively of ADF, ADF2 and the sub-trusts (see his affidavit at [22]); and as at late August 2009 he was aware that Ashington Capital had used capital, that had been invested in ADF2 by the superannuation fund investors on the basis that it would only be used for the Double Bay Project, for various other purposes. Mr Dedes' view was that it was necessary to remove Ashington if the superannuation fund investors hoped to extract any value from the remaining trust assets (see his affidavit at [22]).
3. The plaintiff says that, while Mr Dedes did not recall being aware of Patersons being engaged by Ashington, this is explicable on the basis that it is likely that he did not attend the meetings on 29 and 30 September, and may only have become aware of the proposal in early October once it had "morphed" into a proposal to replace Ashington (or else that he has just forgotten aspects of the events that occurred long ago). Insofar as Mr Dedes stated that the whole purpose of removing Ashington as trustee was to remove the risk to the fund structure arising from the Investec Stonington Facility borrowing being entered into at head trust level, the plaintiff notes that that purpose would have been achieved upon a successful capital raising to replace the Investec Stonington Facility without the removal of Ashington.
4. In my opinion, Mr Dedes' evidence was plausible and corroborated by the contemporaneous evidence. Again, the precise timing of his view that the Ashington entities should be removed is not in my opinion determinative.

LUCRF

1. LUCRF's staff included Mr McCusker and Mr Thow. Its investment adviser was Mr Flett of Arcadia.
2. Mr McCusker gave evidence in the proceeding to the effect that: prior to the June 2009 $15 million additional equity request, he had been losing confidence in Mr Anderson and had serious concerns over the performance of Ashington (his primary concern at that time being the accuracy of information provided to investors as to the performance of the funds in light of the GFC); he was concerned that ADF and ADF2 might not survive for much longer; and he questioned whether Mr Anderson was being truthful in his communications with the group of superannuation fund investors and was dissatisfied with the lack of information provided to support the additional equity request (see his 7 November 2018 affidavit at [28]-[35]). Mr McCusker's evidence was that he was concerned that Ashington's forecasts and reports in 2008 and 2009 were "unrealistically optimistic" (see his 16 February 2021 affidavit at [18]).
3. Mr McCusker's evidence is that he was concerned in June 2009 that the Investec Stonington Facility had been advanced at the ADF2 (or head trust) level and secured against uncalled capital, as this was contrary to the structure of ADF2 where risks and liabilities for each project should be quarantined to a sub-trust (see his 16 February 2021 affidavit at [24]); and he thought Ashington and Mr Anderson had not been candid with superannuation fund investors when he found out that there was a double commitment of uncalled equity (at [24]). Mr McCusker deposed that, while he had not yet formed the view that Ashington should be removed as trustee, he took a very negative view of Ashington and Mr Anderson when he found out (on about 15 June 2009) that Ashington had over-pledged the uncalled equity and that he then had very low trust and confidence in Ashington as a manager (see his 16 February 2021 affidavit at [5]; [29]). He says that he completely lost trust and confidence in Ashington as he learned more about the management of ADF and ADF2 (at [5]).
4. Mr McCusker has deposed that he agreed to the appointment of PPB because "LUCRF had lost or was losing confidence in a manager very quickly. To my mind, such an appointment is a serious step, and was consistent with the very low trust and confidence I had in Ashington at that time" (see his 16 February 2021 affidavit at [35]).
5. In cross-examination, it was suggested to Mr McCusker that he could not possibly place in time the recollection of his state of mind around the time of the Second PPB Report on 21 August 2009, of which he gave the following evidence at [42] of his affidavit of 16 February 2021: I understood from my discussions with Mr Flett that Investec had expressed great displeasure with Ashington. By this stage, I thought that it would be in LUCRF's interests to remove Ashington as fund manager in due course.
6. However, PPB points out that Mr McCusker did place that evidence in time in his affidavit, in that at [43]-[44], Mr McCusker gives evidence of recalling that even though he thought it would be in LUCRF's interests to remove Ashington as fund manager in due course, he chose not to do so because the Minister's decision in relation to the Double Bay development application was still pending and because no suitable replacement had yet been identified. PPB says that, in doing so, Mr McCusker places his evidence in time by reference to events which occurred in late September and early October - he could not have held this state of mind after these events took place. I note that Mr McCusker did not there depose to a concern that a suitable replacement had not been identified but rather, that "removing a fund manager is a difficult process and that at the outset legal advice would need to be obtained".
7. By 24 August 2009, and following the actions taken by Investec in respect of the Stonington Project, Mr McCusker's evidence is that he did not consider Mr Anderson to be an appropriate person to deal with the financiers as it appeared to Mr McCusker that Mr Anderson had lost their confidence and trust. It was Mr McCusker's view that an independent party was required to negotiate with the financiers to the ADF and ADF2 on the investors' behalf so as to avoid the risk of the funds collapsing (see his 7 November 2018 affidavit at [59]).
8. The plaintiff points out that Mr McCusker accepted that his ability in 2021 to recall particular conversations or thoughts he had at particular times in 2009 depended entirely on having his recollection refreshed by reference to contemporaneous documents; but says that Mr McCusker "became entrenched" in adhering to his affidavits as they placed specific events in 2009 in time in the absence of supporting contemporaneous documents (despite accepting that it was "possible" that events may have occurred later than he deposed, on the basis that it was also "possible" that they occurred as set out in his affidavit). It is said that Mr McCusker adopted that position despite having no apparent recollection of fundamental aspects of events in 2009, such as the report by PPB containing Parissen's proposal to recapitalise the Ashington funds and take over its management.
9. The plaintiff says that, at its highest, Mr McCusker's confidence in the accuracy of the time he placed certain events or thoughts was that he was comfortable with their accuracy at the time he swore his affidavits. (I think this overstates the position somewhat in that Mr McCusker was able to place certain of his views by reference to chronological events, as noted above). The plaintiff nevertheless says that Mr McCusker's evidence should not be accepted to the extent that it is not supported by contemporaneous documents.
10. In particular, the plaintiff submits that the evidence at [33]-[34] of Mr McCusker's affidavit of 7 November 2018 should be rejected, as should Mr McCusker's evidence at [42] and [47] of his affidavit of 16 February 2021 (in which Mr McCusker deposes to holding a belief around 21 August 2009 and subsequently having a conversation at an Investment Committee meeting on 2 September 2009 regarding the need to remove Ashington as manager) on the basis that it is not supported by any contemporaneous documents, and to which no reference was made in his November 2018 affidavit or in his earlier Mapeline affidavit. The plaintiff says that, at best, these appear to be expressions of Mr McCusker's unexplained belief as to discussions that "would have come up" at the time. (PPB's response to this has been noted above.)
11. PPB says that Mr McCusker was not challenged as to [52] of his affidavit of 16 February 2021, in which he confirmed holding the view that Ashington should be removed as trustee at the time (around 30 September 2009) when the Double Bay development approval was refused. PPB emphasises that this was before the formation of the Consortium alleged by the plaintiff. I note that it is two days prior to the pleaded date (2 October 2009) on which the plaintiff says that the Consortium had formed "or was forming". (see at 99AA).
12. In cross-examination, questioned about what he remembered outside the documentary evidence, Mr McCusker said (with some feeling, in what seemed to me to be a genuine response that had the ring of truth) that "the things you don't forget are the double pledging. The things you don't forget is the inflated sales report and the lack of awareness of the current market environment" (T 1068.45-48).
13. I regarded Mr McCusker as a genuine witness. I accept that he was basing his recollection largely (but not wholly) on contemporaneous documents but I consider that he was genuine in his views as to what had happened. I accept that Mr McCusker's recollection of the timing of his discussion at the investment committed meeting as to Ashington's removal is not reflected in the contemporaneous documents and as noted earlier, I place weight on the contemporaneous documents. However, what certainly rang true and was wholly plausible was Mr McCusker's unhappiness with the events that had transpired; and that it was tied to events earlier than the alleged formation of the Consortium.
14. Mr Thow gave evidence to the effect that: he first became aware of concerns in relation to the management of the Ashington funds when he read the reports for the Investment Committee meeting on 8 July 2009 (see his outline of evidence at [18], Ex 16); he was particularly concerned to understand why the uncalled capital appeared to have been double pledged to financiers without the approval of the unitholders, why the liabilities in relation to the ADF2 had not been effectively quarantined from ADF, and the serious liquidity issues facing the Ashington Funds; and that learning about those matters led him to start losing trust and confidence in the management of the Ashington funds (see his outline of evidence at [21]).
15. Mr Thow has deposed that, by 2 September 2009, he no longer had any trust and confidence in the ability of Ashington as trustee or manager of the Ashington funds; and his recollection (consistent with Mr McCusker's view) was that at this time the Investment Committee had no interest in committing further capital to the Ashington funds (see his outline of evidence at [29]).
16. By the time of the Parissen Proposal (11 November 2009): Mr Thow had already lost trust and confidence in Ashington acting as trustee and manager of ADF and ADF2; he understood from what he heard at the Investment Committee meetings that it was the collective view of the Investment Committee (and it was one that he held), that LUCRF did not want to work any further with Ashington unless there were no other options available to LUCRF to restore value in its investment in the Ashington funds; and, to Mr Thow, a significant part of the attraction of the Parissen Proposal was that it did not involve working with Ashington (see his outline of evidence at [35]).
17. Mr Thow further deposed that, had he been aware during 2009 that Ashington had been in breach of fiduciary duties or powers as trustee or manager of the Ashington funds, it would have caused him to lose more trust and confidence in Ashington and would have given him further cause to consider removing Ashington as manager of ADF and ADF2 (see his outline of evidence at [41]).
18. In cross-examination, Mr Thow said that the circumstances during this time were unusual because "we'd never had such a distressed asset in our property - property portfolio … lose such value, so everyone was quite concerned about the state of the Ashington funds" (T 1117.48-1118.4) (again, this was said in a heartfelt way and was evidence that rang true to me).
19. The plaintiff points to the acceptance by Mr Thow that, in looking back at events in 2009, he was reliant on documentary records of decisions made and views held. It is noted that Mr Thow's role as a member of the Investment Committee involved reading papers provided to the Committee, but that he was not involved in any of the detailed investment activity which was delegated to Mr McCusker and his team; and that Mr Thow did not have any direct involvement with Ashington. All of that may be accepted but it does not gainsay that, by the time of the events in question (from early October 2009 to December 2009) Ashington would have faced an uphill battle to say the least in attempting to win back the trust and confidence of the superannuation fund investors.
20. Again, I consider that Mr Thow was a genuine witness, whose recollection nevertheless was broadly based on the documents. Mr Thow genuinely, in my opinion, caveated his opinion as to not wishing to work with Ashington by the proposition that this was unless there were no option available to LUCRF to restore value to its investment. This makes clear in my view that Mr Thow's principal concern (unsurprisingly) was the value of the investment for the benefit of the superannuation fund and that he quite properly left open the possibility that, but for the impugned conduct, some other financing proposal that left Ashington in place could have been accepted by LUCRF (which I accept supports, or is at least not inconsistent with, the plaintiff's posited counterfactual). However, what is also apparent from the chronology of events is that there was no other financing option realistically available at the time apart from the Wingate Proposal which presented its own difficulties and was not acceptable to the superannuation fund investors. Therefore, while it supports the loss of a chance theory it does not take matters very far.

Sunsuper

1. Sunsuper's staff included Ms Chan and Mr Hartley. Its investment advisers were Mr King and Mr Cohen of Sovereign. Mr Hartley gave evidence on the basis of an outline of evidence. The plaintiff even accepted (in its submissions at [21]) that, "at its highest", the evidence indicated that Mr Hartley "had an unexpressed expectation that removal of Ashington was an option that PPB might consider".
2. Mr Hartley's evidence was to the effect that: the additional equity request in June 2009 was of concern to him at the time because it came so soon after the first additional equity request and because Sunsuper had been told that financing was in place for Stonington Project (see his outline of evidence at [42]); and, after Ms Chan's report of the 12 June 2009 meeting, he formed the view that meeting that Ashington appeared to have failed in exercising the duties of manager and trustee, had been untruthful in communications with the superannuation fund investors and that the financial difficulties facing the Stonington Project were serious (see his outline of evidence at [45]). Mr Hartley considered that the financing documents for the Investec Stonington Facility were deeply troubling (see his outline of evidence at [49]-[50]).
3. Mr Hartley places the time from which he began to lose trust and confidence in Mr Anderson, and in turn Ashington, as trustee and manager of the Ashington Funds as being from mid-to-late June 2009 (see his outline of evidence at [51]). By at least 29 July 2009, Mr Hartley's opinion was that Ashington had not been transparent in their dealings with unitholders, saying that "I no longer trusted Craig Anderson and I had lost confidence in Ashington as trustee and manager of the Ashington Funds. Further, I was concerned whether ACPL [Ashington Capital] and Ashington Group Pty Ltd (a related entity to ACPL) had met their own obligations as unitholders to pay money in response to calls made by ACPL" (see his outline of evidence at [70]).
4. Mr Hartley's evidence is that, by 25 November 2009, he would not have agreed to the Wingate Proposal if it involved retaining Ashington as trustee and manager and that he was not interested in any proposal in which Mr Anderson and Ashington remained involved (see outline of evidence at [96]).
5. The plaintiff points to the differences between the outline of evidence prepared for Mr Hartley and an affidavit prepared by him in 2014 in connection with the Mapeline proceeding. It is noted that in cross-examination Mr Hartley accepted that it was very difficult for him to pinpoint, without reference to documents, what he was thinking in any particular month in 2009. The plaintiff says that Mr Hartley's evidence was a reconstruction based on the recollection he did have and documents that he had seen. In particular, the plaintiff points out that Mr Hartley's outline of evidence in the present proceeding identified matters said to have deeply troubled him in June 2009 which were not raised in the corresponding passages in his Mapeline affidavit.
6. The plaintiff notes that, in cross-examination, Mr Hartley accepted that, while he was able to identify matters of concern regarding Ashington that arose during 2009, it was impossible for him (unaided by documents) to identify when in 2009 particular concerns arose; and that he could not remember when in 2009 he began to lose trust and confidence in Mr Anderson and Ashington (cf, the statement being included in his outline of evidence, though not in his Mapeline affidavit, that this occurred in mid-to-late June). It is noted that Mr Hartley similarly conceded in cross-examination that it was possible he had misplaced entirely his recollection, recorded in his outline of evidence but not in the equivalent paragraph in his Mapeline affidavit, a concern said to have arisen shortly after 29 July 2009 as to whether Ashington Capital and Ashington Group had met their own obligations to meet ADF2 calls. The plaintiff points out that Mr Hartley only met Mr Anderson once, and was otherwise reliant on Ms Chan, Mr King, and others to pass on information about Ashington.
7. In response to the above criticisms concerning the differences between Mr Hartley's Mapeline affidavit and his outline of evidence, Acorn argues that this criticism proceeds on the false premise that the matters in both proceedings were the same or focused on causation issues in relation to trust and confidence in Ashington (whereas Acorn says that they did not). It is noted that Mr Hartley's evidence in re-examination was to the effect that he did not have a complete understanding of the issues in either the Mapeline proceeding or the current proceeding; and that Mr Hartley prepared the Mapeline affidavit in 2014. Further, it is said that although the issues in that case did not turn on when and whether Sunsuper had determined to remove Ashington, Mr Hartley's evidence did include significant detail about when and why he lost trust and confidence in Ashington.
8. As to Mr Hartley's memory of events, including his thoughts, in 2014 (which it is accepted is likely to have been better than in 2021), Acorn points out that this also applies to the nature of the responses the plaintiff obtained from Mr Hartley in cross-examination, such as Mr Hartley's agreement that the reference in Ms Chan's "Need to change the trustee. Very messy" file note was referring to structural issues which PPB had identified; his acceptance that he might have misplaced his recollection as to the timing of when he lost trust and confidence in Ashington; and his acceptance that he would have been open to considering a recommendation from PPB that included retaining Ashington. Acorn says that, given Mr Hartley's admittedly poor recollection, for the above to hold any relevant weight, the plaintiff needed to take Mr Hartley to the PPB Proposal (to which Sunsuper consented, which expressly referred to the removal of Ashington as trustee and manager - not there in terms limited to a technical structuring outcome); and to the numerous paragraphs in Mr Hartley's Mapeline affidavit (where he explained the progression of his loss and confidence in Ashington), in order to refresh Mr Hartley's memory.
9. I consider Mr Hartley to be an honest witness who sought to give his genuine recollection of events. It is clear that Mr Hartley relied heavily on the documentary evidence to aide his memory. As above, I give greater weight to the chronology of events as it arises out of the documents.

Conclusions to be drawn from superannuation fund investors' evidence

1. The defendants contend that the evidence of the representatives of the superannuation fund investors is evidence of persons disinterested in the outcome of the case and should be accepted. I agree and I accept Patersons' observation that it is unsurprising that all of these witnesses were reliant on documentary records made at the time, since over a decade has lapsed since the matters in issue occurred in mid-to-late 2009.
2. I accept that the evidence of these witnesses is broadly consistent with the chronology of events earlier set out and that the contemporaneous documentary record permits the conclusion that, by 30 September 2009, the superannuation fund investors had lost trust and confidence in Ashington Capital, Ashington Management and Mr Anderson; and had begun seriously exploring issues as to Ashington Capital's and Ashington Management's performance and their possible termination as trustee and manager.
3. I certainly accept that there was a loss of trust and confidence by the time of the impugned conduct. While I have difficulty concluding that the superannuation fund investors had decided to withdraw support for Ashington before the events commencing on around 2 October 2009, I certainly accept that by that time it was a possibility well and truly on the cards.
4. As to the cross-examination of those witnesses on the timing of the loss of confidence, I consider that their evidence is broadly consistent with the contemporaneous documents. I accept that, for whatever reason, by June 2009, the superannuation fund investors were seeking advice about the process and were actively discussing Ashington's removal as trustee; and that, from at least August 2009, Ashington and Mr Anderson were sufficiently on notice of this possibility to have sought advice from Mallesons about the process. Nevertheless, while I accept that there was discussion about the removal of Ashington Capital as trustee from an earlier stage by June/July 2009, I consider that this was most likely in the context of the recognition of the so-called structural problem that had arisen; and, while the fact that Mr Anderson sought advice from Mallesons in August 2009 indicates a concern as to potential removal, it says nothing about what the superannuation fund investors then proposed at the time. Therefore, I do not accept that this compels the conclusion that there was a decision to replace Ashington Capital as trustee because of a lack of trust and confidence as at, say, 2 October 2009. However, it makes clear that it was in contemplation.
5. As to the cross-examination relating to whether the superannuation fund investors failed to appreciate the effect of the Parissen Proposal, in part because it called for the existing equity effectively to be written off, I consider that this is not to the point as the contemporaneous documentary evidence shows that superannuation fund investors had already effectively written off Ashington as an investment by the time that proposal came to be considered.
6. Thus, while I accept that there were the ordinary difficulties in recollection of events and conversations many years before, the evidence of the superannuation fund investor witnesses was consistent with contemporaneous documents and should be accepted (albeit with some caution as to the reliability of the timing placed on events and thoughts).

Jones v Dunkel inferences

1. The plaintiff places weight on the fact that, faced with serious allegations of wrongdoing, only one of the six defendants (Patersons) called a lay witness (not taking into account in this regard, it would seem, the evidence called by representatives of the superannuation fund investors). Reference is made in this regard to what was said in Chong v CC Containers Pty Ltd (2015) 49 VR 402; [2015] VSCA 137 at [212] per Redlich, Santamaria and Kyrou JJA and Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [63] per Heydon, Crennan and Bell JJ, namely, that the rule in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 (Jones v Dunkel) has particular application where the party is the uncalled witness.
2. The plaintiff notes that affidavits attested by each of Ms Garrett, Mr Renauf, Mr Ko and Mr Routley were served in the proceeding; and that it was not until the close of the plaintiff's case that the respective defendants indicated their intention not to call those witnesses. It is said (though I was not made aware of this at the time, it being raised only in closing submissions), that Ms Garrett and Mr Renauf were present in Court during much of the hearing, including the cross-examination of Mr Anderson. I am unable to comment on this submission since I was not in a position to know who was or was not at the back of the courtroom during the hearing - other than Mr Anderson, who gave evidence, and the plaintiff, who was seated with Mr Anderson throughout most of the hearing. Nevertheless, whether or not, or for how long, Ms Garrett and Mr Renauf were physically present in the courtroom probably makes no difference because there was nothing to suggest that either Ms Garrett or Mr Renauf was unable to give evidence in the proceeding had she or he wished to make herself or himself available for cross-examination.
3. The plaintiff says that not only should it be inferred that nothing these witnesses could have said would have assisted their cases (and that adverse inferences may more confidently be drawn from the evidence led by the plaintiff) but also that the failure to give evidence in their own defence has particular significance in relation to Ms Garrett and Mr Renauf, who it is said have foregone the opportunity to explain why inferences of dishonesty that arise on the documents (and which were made explicit in opening) should not be drawn.
4. The plaintiff submits that it should be inferred that, in pursuing the plan to replace Ashington, Ms Garrett and Mr Renauf were acting to advance their own personal interests at the expense of Ashington, as part of a dishonest and fraudulent scheme; and that Mr Ko and Mr Routley were aware that Ms Garrett and Mr Renauf were senior employees of Ashington acting in breach of their fiduciary duties by advancing a scheme to replace Ashington.
5. For completeness, I note that no adverse inference is sought to be drawn against Patersons arising from the fact that neither Mr Doherty nor Mr Carolan gave evidence (this is so on the basis that neither was available to give evidence). With respect to Mr Doherty, the plaintiff and Patersons agreed to the tender of an affidavit prepared by him as well as to the transcript of the liquidator's examination of him.
6. I should note also that extracts of the transcript of Ms Garrett's liquidator's examination were tendered (Ex A) but only as evidence in the case against Ms Garrett (and that these extracts were admitted on the basis that it was admissible as an admission against interest under that exception to the hearsay rule; although a portion was even then only provisionally admitted - see below). Similarly, extracts of the transcript of Mr Ko's liquidator's examination were tendered (Ex B) but only in the case as against Albany. I address below the provisional ruling in relation to a portion of Ms Garrett's transcript.
7. It is not disputed that a Jones v Dunkel inference, where available, is limited to circumstances where the evidence permits an inference adverse to a party to be drawn (see Frangieh v Deputy Commissioner of Taxation (2018) 367 ALR 557; [2018] NSWCA 337 at [131] per White JA (with whom Beazley P, as Her Excellency then was, and Meagher JA agreed). The so-called rule only arises where a party is required to explain or contradict something and the absence of a witness cannot be used to "fill gaps or to convert suspicion into inference" (Jones v Dunkel at 313 per Menzies J). Ms Garrett and Mr Renauf say that, in a case such as this, the possibility of an inference is no substitute for the requirement that a plaintiff prove its case; and they maintain that, in this case, the plaintiff has failed to meet that onus. Pausing here, I accept that this is the case; nevertheless it is also the case that Ms Garrett and Mr Renauf have made a voluntary (no doubt forensic) decision not to give evidence and if there are matters that they could be expected to have explained - such as their knowledge of particular matters or what transpired at meetings or in discussions - then I would more readily draw what are otherwise available inferences on the evidence. (As it is, it has not been necessary to do so; I have drawn the conclusions reached on the basis of the evidence before me placing weight on contemporaneous documents.)
8. I also note that the application of Jones v Dunkel must be carefully approached in a fraud case of the type here pleaded, as it is required to be proved by the plaintiff to the Briginshaw standard (see Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34). In this context, Acorn refers to what was said in Poole v Chubb Insurance Company of Australia Ltd [2014] NSWSC 1832 by Stevenson J at [99] to the effect that, although a fraud case could be proved from circumstantial evidence, it was for the plaintiff to make good the very serious allegations it had made by clear and cogent admissible evidence and that it was not for the defendant to explain that he had not behaved as the plaintiff had contended or to contradict inferences that might be available from documents created by others by calling the author of those documents or others named in them. Acorn also cautions against the drawing of uncertain inferences in favour of a wrongdoer (referring in this regard to the breaches by Ashington of its trustee obligations that have been identified by Ms Garrett and Mr Renauf - see below).
9. As to PPB, it submits that the documentary evidence sufficiently explains what was understood by, or known to, such PPB personnel as Mr Block and Mr Lord in relation to the steps being taken in October and November 2009 to procure the replacement of the Ashington entities as trustee and manager; and that the plaintiff has led no evidence to show that Mr Block or Mr Lord understood the attitude of the potential investors to be otherwise than as described in Mr Block's email of 6 October 2009 to Mr Carson. That being so, it is said that there is nothing for PPB to explain or contradict. I agree. But for that email, I would have been inclined to the view that there was something for PPB to explain - namely, its knowledge as at the time of the proposal put to Acorn and Albany as to the position of the superannuation fund investors. However, there is no reason to suspect that Mr Block was doing anything other than accurately conveying his understanding of events at the time to his colleagues (and superior) at PPB. I consider the email significant for this reason. Hence I draw no adverse inference from the fact that neither Mr Block nor Mr Lord gave evidence.
10. As to the plaintiff's submission that an inference should be drawn from the lack of evidence by Mr Ko and Mr Routley that they were aware that Ms Garrett and Mr Renauf were senior employees of Ashington acting in breach of their fiduciary duties by advancing a scheme to replace Ashington (see plaintiff's closing submissions at [12]; T 1445.06), both Acorn and Albany make submissions against this.
11. Acorn says that this inference departs from the fraudulent "scheme" (defined in the third further amended statement of claim as "Garrett's plan" - see above) but in any event, Acorn says that the totality of the plaintiff's evidence does not enable the drawing of the inference as to knowledge for which the plaintiff contends. It is said that the documentary evidence sufficiently explains what was known (or understood) by Acorn in relation to Ms Garrett and Mr Renauf. In particular, Acorn places emphasis on the 8 October 2009 email from Mr Routley to Mr Swan as setting out in detail Mr Routley's understanding of all matters relevant to the plaintiff's case during the critical days.
12. To the extent that the plaintiff invites the further inference that Ms Garrett spoke to Mr Routley at some point prior to the meeting on 5 October 2009 "about the plan that had been developed with PPB", Acorn says that submission should be rejected for two reasons: first, that the basis for that assumption (being a document tendered by the plaintiff towards the close of the case - Ex C at Tab 8), is one which is not pleaded or particularised by the plaintiff against Acorn (and the plaintiff must be kept to the pleaded case); and, second, that the 8 October 2009 email, having been drafted after the 5 October 2009 meeting, is the best contemporaneous evidence of what Mr Routley knew and understood from the facts he had been told. It is submitted that it would constitute impermissible gap filling and speculation for an inference of knowledge on the part of Acorn (or an honest and reasonable person in Mr Routley's position) to be inferred beyond what is apparent from the content of that email. Acorn submits that Mr Routley did not need to explain that he did not engage in knowing assistance; rather, that the plaintiff must prove that he has. It is said that the absence of Mr Routley as a witness does not, of itself, prove anything other than his evidence would not have assisted Acorn.
13. Finally, Acorn notes that, in oral closing submissions, the plaintiff made an additional Jones v Dunkel submission. The plaintiff submitted that it could be inferred, from the draft letter dated 12 October 2009 prepared by Mr Routley, which refers to "other" Ashington personnel, that Mr Routley knew that Ms Garrett and Mr Renauf were employees of Ashington. Acorn says that it was not necessary for Mr Routley to "explain" the meaning of the use of the word "other", particularly in circumstances where the plaintiff is relying on the fourth category of knowledge as articulated in Baden Delvaux & Lecuit v Société Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA [1993] 1 WLR 509; [1992] 4 All ER 161 (Baden Delvaux) to make out the case of knowing assistance. Acorn says that there is no relevant ambiguity that Mr Routley was required to explain and that the plaintiff's construction of the use of the word "other" can comfortably be rejected.
14. Albany's position differs slightly in that it has admitted in its defence that it knew Ms Garrett and Mr Renauf were employees of Ashington Management (see its defence at [264]) and it says that it is not contentious that they were "in senior roles" (see [283(a)] of the third further amended statement of claim); but Albany contends that there must nevertheless be a close analysis of the interaction between Ms Garrett and Mr Renauf and Albany in the context of the evidence concerning the superannuation fund investors' desire to remove Ashington Capital and Ashington Management.
15. Albany says that the so-called "rule" has no special or different application in claims involving knowing assistance in breaches of fiduciary duty (referring, by way of example, to Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 (Equiticorp) per Clarke and Cripps JJA); and that, in circumstances where the plaintiff has tendered contemporaneous documents which provide Albany with the evidentiary basis to defend the claims against it, there is no basis for the implicit assertion that Mr Ko "fears the witness box" (referring to Equiticorp, Albany says it is entitled to defend the claims against it by reference to the evidence tendered by the plaintiff).
16. Further, Albany says that the plaintiff has not identified (let alone formulated with precision), any specific inference which it is asserted should be more readily drawn by reason of Albany not calling Mr Ko; and that it is not appropriate to contend that effectively the whole of a party's case should be inferred because no witness is called. Albany says that the inferences about Albany's knowledge which can fairly be drawn (which I address in due course) do not require any further evidence from Mr Ko for a finding that Albany's conduct was not unconscionable or unconscientious.
17. I do not draw any adverse inference from the absence of either Mr Routley or Mr Ko from the witness box. The contemporaneous documents in my opinion sufficiently make clear what was made known to them (and through them to Acorn and Albany) as to the position of the superannuation fund investors at the time (whether that information was correct or not is another matter) and the email of 8 October 2009 is significant in this regard.
18. Thus, I consider that, as in many cases where Jones v Dunkel is invoked, it ultimately has little role to play in the determination of the issues here raised.

Ms Garrett - Ex A

1. As noted above, portions of the transcript of Ms Garrett's examination by the liquidator in October 2013 were admitted in evidence. Relevantly, on 2 October 2013, Ms Garrett gave the following evidence.
2. At T 14.11ff, that the option of replacing Ashington as a manager was something that was floated to all of the investors that had been approached post the Double Bay application being rejected; and that it was part of the marketing material that "we" (Ms Garrett and the PPB team) had put together "after we had discussions with PPB".
3. When discussions first commenced with Acorn and with Pacific, Ms Garrett understood that there were two streams being investigated: one was a direct investment into the Stonington sub-trust, either as a two part investment, so the prospective investor could replace the mezzanine finance with a preferred equity piece; or they could invest into Stonington and also into "Newco" (which would replace Ashington as trustee and manager) (T 38.28).
4. At T 41.45, Ms Garrett confirmed, by reference to an email sent on 6 October 2009 that she met with Mr Ko on 5 October 2009; and at T 42.19, Ms Garrett confirmed that the "opportunity" she had referred to being excited about was that of Pacific Group investing into Newco. Ms Garrett also agreed that at least one possible outcome of that investment was the removal of Ashington as manager and trustee of ADF2. As to informing Mr Anderson of this, at T 42, Ms Garrett stated that it was not a very "usual situation" so Ms Garrett felt that it was in the best interests of the superannuation funds to convey progress to PPB not to Mr Anderson or Mr Minahan. However, she agreed that in her mind she was contracted to Ashington.
5. At T 44.32 (which was only provisionally admitted), Ms Garrett's evidence was that she did not recall canvassing the views of "underlying investors" (i.e., the superannuation fund investors) as to whether or not Ashington should be removed as manager and trustee; and that she did not recall whether she had communications herself with any of the investors after the negotiations with the Consortium commenced (but then said that "potentially I did have conversations with them"). The reason that this was only provisionally admitted was that it was not clear that it would fall within the admissions exception to the hearsay rule. I remain doubtful that this aspect of the transcript amounts to an admission that is admissible; at best it is admissible for the statement that Ms Garrett did not recall doing certain things (the weight which could be attached to this being low). The acceptance that "potentially" she did have conversations with the superannuation fund investors does not assist in the determination of the issues in the case because of its vagueness. I reject this portion of the transcript.
6. As to Ms Garrett's meeting with Mr McCabe in London, Ms Garrett agreed that she had discussed with him the proposal to replace Ashington as the trustee or fund manager (T 57.50-58.1).
7. At T 63.41, Ms Garrett accepted that when she provided information to Mr Ko and Mr Routley the purpose was to assist them in doing due diligence for their proposed investment which involved the replacement of Ashington.
8. At T 66, Ms Garrett agreed that, as at 6 November 2009, she had not advised Ashington of its proposed removal and (though this was admitted only as to her understanding of others' conduct) so far as she knew no one else had.

Mr Ko - Ex B

1. Also tendered in evidence were portions of the transcript of Mr Ko's examination by the liquidator on 3 October 2013.
2. At T 32.24, Mr Ko accepted that as at 14 October 2009 it was his intention to assume the management rights for the ADF funds. At T 32.29, he accepted the proposition that "by this stage the plan had crystallised", such that the entities that were coming together to further the investment were Ms Garrett, Mr Renauf, Acorn and Albany.
3. At T 42.24-27, Mr Ko recalled that someone had raised Wingate as a possibility to refinance Investec; and he thought this was Ms Garrett.
4. At T 42.42, Mr Ko gave evidence that he was aware that Ms Garrett and Mr Renauf had gone to London to see Mr McCabe. Mr Ko said that Ms Garrett and Mr Ko said Mr McCabe was interested in being an investor to replace Ashington as manager and that now "we" (presumably Albany) "had expressed that we weren't going to do it that they were going to pursue that".

Expert evidence

1. Objections to the expert evidence of the other party were reserved for argument in closing submissions and for decision in the final judgment. For the plaintiff's part, in the context of the nature of the expert evidence sought to be adduced by the parties and the issues in dispute, it says that the question of strict admissibility need not be decided but, rather, that this informs the assessment of the weight of the evidence.
2. The defendants, however, maintain that there is a fundamental difficulty with the reports of Mr Halligan (and to a certain extent with those of Mr Wist) in that they are almost entirely based on assumed facts which have not otherwise been proven; and, as a consequence, the reports are not admissible. Reference is made to the statement in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 (Makita) at [85] per Heydon JA (approved by the High Court in Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21 (Dasreef) at [37]), that "… if evidence tendered as expert opinion evidence is to be admissible… so far as the opinion is based on 'assumed' or 'accepted' facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it"; and that if this matter "is not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight". The High Court in Dasreef emphasised, however, that the statement of Heydon JA in Makita ought to be read subject to the consideration that "[t]he admissibility of opinion evidence is to be determined by application of the requirements of the Evidence Act rather than by any attempt to parse and analyse particular statements in decided cases divorced from the context in which those statements were made".
3. Relevantly, Patersons says that no assistance can be derived from the reports of Mr Halligan; that not only are the assumptions unproven and wrong, but that Mr Halligan himself expressly disavowed any responsibility to assess the reasonableness of those assumptions, even on such important matters as going concern where he acknowledged he had the expertise and experience to engage on this fundamental issue but declined to do so.

Mark Wist and Stephen Gray - Evidence as to property market conditions

Mr Wist

1. Mr Wist is relied upon by the plaintiff as a "market expert". Mr Wist's expertise is set out in section 4 of his report of 23 February 2018. In his professional career, Mr Wist has worked as a valuer and investment adviser and analyst in relation to the real property market (commencing in 1988 as a valuer, working in 1993 as a property investment analyst and adviser, working in 1998 as an analyst and adviser of listed and unlisted property investments, in 2010, becoming a property asset consultant, and in 2013 becoming the property fund investment manager for eight unlisted property investment trusts). The plaintiff thus submits that Mr Wist has expertise, by dint of his training, study and experience, in property investment valuation and in the management of property trusts, both listed and unlisted.
2. In his first report, Mr Wist was asked (and expressed opinions on the assumption that the "activities of the Consortium had not taken place") about the prospects or likelihood of: Ashington raising equity from offshore investors in AOF3; AOF3 identifying and securing property which suited its intended asset profile on Australia's eastern seaboard; and Ashington establishing further property fund(s) after AOF3 and those further property fund(s) investing in property in the eastern seaboard of Australia. Mr Wist also there expressed opinions about the "reputation" of Ashington in the market in 2009 "prior to the Consortium activities"; and as to the impact of Ashington Management's replacement as fund manager of ADF and ADF2 by Parissen on Ashington's reputation and on Ashington's ability to raise equity from institutional investors.
3. In answering the questions in his first report (see his letter of instructions at [9]), Mr Wist was asked to assume, inter alia, that: each of the events stated in the chronology annexed to the letter of instructions took place on the date stated; the "Consortium was formed as alleged in the Amended Statement of Claim and undertook the activities as alleged"; and the allegations of breaches by Ashington made by Baker McKenzie and Moore Stephens in various PPB Strategy Reports were not communicated to Ashington or the market.
4. In his second report, Mr Wist was asked (and expressed his opinion on) a further five supplementary questions concerning: the likelihood of Ashington constituting particular further funds; whether AOF3 and ADF3 would have been profitable; the typical range of per cent return on capital invested in property funds from 2011 to 2017; Ashington receiving "an incentivised Performance Fee" (on the assumption of AOF3 commencing on January 2010 with equity contributed of $200 million and ADF3 commencing in July 2011 with equity contributed of $150 million); and his opinion on the "reasonableness of the provisional assessment of feasibility" of various properties identified by Ashington as prospective property acquisitions for the purposes of value-adding or redevelopment.
5. A further supplementary report was prepared by Mr Wist shortly prior to the hearing (on 4 February 2021) identifying particular material relied upon in his earlier reports.
6. The plaintiff says that the evidence of Mr Wist establishes the following propositions: (a) that in the aftermath of the GFC there were a number of distressed property assets on the market; (b) that this created an opportunity for investors to purchase property in favourable terms; (c) that the Australian economy was improving relative to the rest of the world; and (d) that both in Australia and overseas there was a substantial market for high-net-worth and institutional investors to pursue a high risk, high return opportunistic strategy even as the majority of investors had made a "flight to quality".
7. In particular, the plaintiff says that (in evidence accepted by Professor Gray), Mr Wist has set out the fact that, by reason of the superannuation in Australia, billions of dollars poured into superannuation funds every year, and that those funds had internal allocation rules that prescribed a certain proportion to be invested into listed and unlisted property funds. In 2010, superannuation funds with more than four members held $36.2 billion in real property investments, 73% of which was in unlisted property investments. By 2013, this had risen to $44.3 billion and 76% respectively. Furthermore, in the period October 2009 to June 2010, JP Morgan reported that wholesale unlisted property trusts had issued $2.31 billion in equity, supplemented by $1.98 billion of secondary units transfers and possible equity raising of another $2.4 billion (Mr Wist's 23 February 2018 report at [10.37]ff).
8. The plaintiff says that this money represented an appetite for investment into unlisted property funds. It is said that although the majority of the market may have been wary of property investments in the aftermath of the GFC, some sophisticated investors with an appetite for risk (and higher returns) would have pursued the countercyclical strategy set out by Mr Wist.
9. The plaintiff argues that the fact that the listed market was liquid and the unlisted market was illiquid (and in respect of wholesale unlisted funds, limited to wealthy private investors and institutions) meant that new investments in listed property funds could be made by purchasing units on the exchange, while new investments in wholesale unlisted funds could generally only be made by subscribing to new funds established for that purpose. In these circumstances, it says that the fact that there were no new IPOs of A-REITS (Australian Real Estate Investment Trusts - i.e., ASX-listed property funds) in the period has no forensic significance (especially when Ashington was pursuing overseas investors for AOF3). The plaintiff emphasises in this context the evidence that Ashington was substantially advanced in its meetings with overseas investors.
10. Further, the plaintiff says that there is contemporaneous evidence that, at the sophisticated edge of the market, an opportunity had developed in the aftermath of the GFC for exactly the kind of strategy that Ashington was pursuing with AOF3; in that this is said also to have been the core of the Parissen strategy (referring to the Parissen presentation to Acorn on 26 March 2010 - see chronology above).
11. The defendants object to the entirety of Mr Wist's evidence.
12. First, it is said that the opinions expressed in the three reports of Mr Wist are not based on specialised knowledge, such that they are not admissible under s 79 of the Evidence Act 1995 (NSW) (Evidence Act). It is noted that, for Mr Wist's opinion to be admissible under s 79, it is necessary that Mr Wist had relevant specialised knowledge based on his training, study or experience and identified with precision his field of specialised knowledge. In this context, "knowledge" connotes more than subjective belief or unsupported speculation; instead meaning "any body of known facts or ... any body of ideas inferred from such facts or accepted as truths on good grounds" (R v Tang (2006) 65 NSWLR 681; [2006] NSWCCA 167 at [137]-[139] per Spigelman CJ (with whom Simpson and Adams JJ agreed); see also Honeysett v R (2014) 253 CLR 122; [2014] HCA 29 at [23] per French CJ, Kiefel, Bell, Gageler and Keane JJ).
13. Insofar as Mr Wist's expertise is said to be in the area of property funds management, the defendants say that there is a serious question as to whether the knowledge possessed by an expert in the securitised wholesale property funds industry is knowledge sufficiently organised or recognised to be accepted as a reliable body of expert knowledge and that Mr Wist has not demonstrated that he has relevant specialised knowledge based on his training, study or experience as required by s 79 of the Evidence Act.
14. Further, it is said that, even if it is possible to glean from Mr Wist's reports that he in fact possesses specialised knowledge, it is not clear how he applies that specialised knowledge to arrive at the opinions he expresses. Complaint is made that, even with Mr Wist's supplementary report served on 4 February 2021, it is difficult to "unscramble" Mr Wist's opinion from other findings, conclusions or inferences of fact drawn by him from the material briefed to him; and that parts of Mr Wist's reports consist of broad-brush conclusions drawn from the set of documents that had been briefed to him (as to which see further below).
15. By way of example, reference is made to [11.12] of Mr Wist's first report, which was based on his review of the exhibits to Mr Anderson's 19 December 2017 affidavit and "the various correspondence documents prepared by Ashington" (not identified with specificity until the 4 February 2021 supplementary report). Mr Wist there opined that "Ashington was a fund manager in the property industry with a reasonable track record and with appropriate property sourcing networks and therefore could have deployed invested capital into acquisitions of property on the eastern seaboard of Australia". Complaint is made that these inferences or conclusions that are drawn from documents and the affidavit evidence of Mr Anderson have not been shown to be based on any specialised knowledge possessed by Mr Wist (and it is said that any such conclusions are ones that could be drawn, if accepted, by reference to the documents alone).
16. The defendant's position is that it is not possible to determine whether Mr Wist's opinions are in fact wholly or substantially based on his specialised knowledge or experience (and it is said that, whether as a matter of inadmissibility or weight, Mr Wist's opinions do not assist the plaintiff). I agree that there is a difficulty in determining from the reports what precisely Mr Wist's conclusions are drawn from and whether they are based on any specialised knowledge or experience as such.
17. As to the admissibility of Mr Wist's evidence, the plaintiff draws a distinction between two kinds of opinions expressed by Mr Wist: first, the general evidence of market conditions (referring to section 9 of his first report and section 7 of his second report), with which it is said the defendants' expert (Professor Gray) agrees (and which the plaintiff maintains is not in dispute); and, second, the opinions contained in the answers to the specific questions put to Mr Wist concerning the prospects of Ashington raising funds.
18. As to the first of those kinds of opinions (i.e., the evidence of general market conditions), the plaintiff says that this is well within Mr Wist's expertise in real property investments and funds management; and is not evidence which could be received on the basis of judicial notice or common experience. (Given that there seems to be no dispute as to the general market conditions at the time, and Professor Gray does not disagree with this evidence, I would simply admit it subject to weight.)
19. As to the second of those kinds of opinion (i.e., the answers to specific questions), the plaintiff accepts that Mr Wist's final answer to each question must be qualified by the fact that he has given general answers not tied to Ashington's specific circumstances. (Pausing here, this of itself seems to me to deprive the opinions there expressed of much use in the proceeding.) The plaintiff accepts that the question of Ashington's ability to raise funds is a question for determination by the Court on all the evidence adduced in the proceeding). However, the plaintiff submits that the factors that Mr Wist identifies as germane to the question of whether funding would have been available fall within his expertise; are not within the common experience of educated persons; are admissible; and of significant probative value.
20. The second basis for the defendants' objection to Mr Wist's evidence (apart from the objection noted above as to Mr Wist's expertise and whether, and if so how, his conclusions are drawn from that expertise), is that the information provided to Mr Wist was selective and that the assumptions on which his evidence is based have not been made good.
21. Mr Wist was provided with the affidavits of Mr Anderson of 19 December 2017 and 19 April 2018 (which the defendants maintain are materially unreliable in significant respects including in relation to AOF3); some exhibits to those affidavits; the PPB Strategy Reports (which the defendants say Mr Wist was effectively asked to ignore); the Information Memorandum for AOF3 and the sample portfolio for AOF3. In his oral evidence, Mr Wist confirmed that his answers assumed the correctness of Mr Anderson's affidavits and said that he was "agnostic" to any of the activities (i.e., of Ashington) about which there might have been evidence before the Court.
22. In particular, the defendants say that the chronology provided to Mr Wist sets out a selective history of events over the course of 2006 to 2010 which does not give an accurate picture of the state of the Ashington funds management business over that period.
23. Relevantly, the following matters are identified as missing from the chronology provided to Mr Wist (and not to be found in the material with which he was briefed): any context in respect of the total loss of confidence as between Ashington and the superannuation funds; any information about the poor financial state of the Ashington business in the lead up to the impugned conduct; any information about the instability experienced at the Ashington Board level in 2009, including the fact that Ashington's independent chairman, Mr Bouris, resigned on 19 August 2009; and any media reports or press commentary going to the reputation and track record of Ashington investors (all of which were matters that Mr Wist accepted in cross-examination were a "very important" or "very relevant" consideration to the likelihood of raising equity for a fund such as AOF3 in 2010; though Mr Wist also said that in his reports he was "agnostic to any Ashington-related media") .
24. The defendants say that the fact that the plaintiff accepts that Mr Wist's "final answer to each question must be qualified by the fact that he has given general answers not tied to Ashington's specific circumstances" does not cure the inadmissibility of his reports. Ultimately, the position of the defendants is that Mr Wist's opinions (at least insofar as they go to the issue of whether Ashington lost the opportunity to establish AOF3 and any of the other future funds and earn fee income from them) do not assist the plaintiff to discharge the evidentiary burden in respect of this issue.

Professor Gray

1. The defendants' expert, Professor Gray, is an academic and a consultant.
2. Professor Gray was asked and answered questions (divorced, the plaintiff says, from the factual circumstances of Ashington) about the general performance of listed and unlisted Australian property funds, and the considerations that would have an impact on the likelihood of investors being willing to contribute equity to an unlisted Australian property fund in the period 2009-2010. Professor Gray then used those opinions as the basis for answering more specific questions about the likelihood that Ashington would have been able to raise equity for AOF3 in January 2010.
3. As to the general performance of Australian property funds during 2009-2010, Professor Gray noted that the period was one of distress and consolidation, and found that: (i) ASX-listed property funds declined in value by over 70%; (ii) Australian property funds traded at a material discount to net tangible assets; (iii) equity capital was raised for the purpose of balance sheet repair -at material discounts to the value of net tangible assets and to the already materially reduced stock prices; (iv) redemptions were frozen for a number of unlisted funds; (v) independent expert valuation reports expressed negative sentiment for the sector; and (vi) borrowing rates rose sharply.
4. As to the prospect of Australian property funds raising equity during 2009-2010, Professor Gray found that a number of such funds did raise equity during that period (that in 2009 generally went towards balance sheet repair and in 2010 generally went towards strengthening balance sheets to support future acquisitions). Professor Gray found that no initial public offerings of new funds occurred in 2009-2010 and that the Australian dollar had recovered by 2009 and remained at elevated levels through to 2013 (a consideration Professor Gray deemed relevant as foreign investors would be disincentivised by the prospect of exchange rate losses).
5. In that context, Professor Gray considered that it was highly unlikely that any Australian property fund would have been in a position to raise equity for the purpose of investing in new assets in the period through to mid-2010. However, Professor Gray noted two examples of listed funds raising equity for new investments in property assets in late 2010. Consequently, Professor Gray concluded that it was unlikely that a new fund would have been able to raise new equity for the initial purchase of assets into the fund until at least late 2012. Professor Gray's view was that: an existing ASX-listed property fund (A-REIT) may have been able to raise new equity to fund new investments to expand an existing portfolio of assets by 2010; there is nothing to suggest that it would have been likely, or even possible, for a new ASX-listed property fund to enter the market until late 2012 (there being no evidence of such an event occurring); it was unlikely that there would have been market appetite for an equity issuance to fund new investment for listed funds before 2010; it was highly unlikely that a new unlisted fund would have been able to issue new equity for the initial purchase of assets into the fund any time during 2009-2010. Professor Gray concluded that investors would have regard to pricing, liquidity, track records of other funds in the same stable, and other equity raising when determining whether to invest into an unlisted fund during 2009-2010.
6. As to whether Ashington Capital would have been able to raise the proposed amount of equity capital in January 2010, Professor Gray concluded that it was highly unlikely due to Ashington's limited track record as a fund manager; its lack of experience in completing the projects proposed; the negative press in relation to Ashington and the high level of gearing (proposed to be 60%).
7. The plaintiff does not suggest that Professor Gray's report is inadmissible. Indeed, the plaintiff accepts that Professor Gray has very impressive credentials as an academic and a consultant (though pointing out that these are in the field of economics and finance and noting that there is only one reference in his curriculum vitae to real property, namely, an article concerned with linkages between the values of financial assets, commodities and real property). Rather, the plaintiff emphasises that, in cross-examination, Professor Gray admitted that he did not have any personal knowledge of what was occurring in the market with respect to unlisted property trusts in the period following the GFC in 2008-2010; and, for that reason, was reliant upon publicly available data. (The defendants argue that Professor Gray's analysis of empirical data is the more reliable.)
8. The plaintiff identifies the most significant dispute between Mr Wist and Professor Gray as being the use of data regarding listed property trusts (A-REITs) in answering the question of the availability of investor funds for an opportunistic development fund of the kind of AOF3 (and in the period after that for both future development and opportunistic funds); and submits that the evidence of Mr Wist (given his expertise in the property market) ought to be preferred.
9. It is noted that Professor Gray stated more than once in cross-examination that he did not use the data concerning A-REITs (ASX-listed property funds) "just because" it was the only publicly available information but, rather, he used that data because what occurred in the property market was so stark that it must have been reflected in the unlisted market. The plaintiff accepts that the impact (of the GFC) on property assets was stark (though it is said that the fall in property prices was not comparable to the 80% fall in listed unit prices); and the plaintiff accepts that the freezing of some unlisted trusts (to which Professor Gray referred) would have been a consequence of this. However, the plaintiff says that Professor Gray was unable to proffer any reason why the same would be the case with respect to investor sentiment for new funds.
10. The defendants' position is that Professor Gray's report, insofar as it is based on facts observed by him (such as the press articles about Ashington with which he was briefed), identifies and admissibly proves those facts. As adverted to above, the defendants say that confidence can be placed in Professor Gray's opinions as they are largely based on empirical analysis and first principles. It is noted in this context that Mr Anderson himself could not point to a single example of a substantial unlisted property fund raising equity capital in the relevant period. The defendants here invoke Blatch v Archer (1774) 98 ER 969 and suggest that, if such evidence existed, Mr Anderson would have been in a position to advance it.

Determination

1. I accept that Mr Wist is in a position to give evidence based on his experience as a property market valuer as to his perception of general market conditions at the relevant time and, as noted above, where this evidence is not broadly disputed by Professor Gray, I would admit it. Ultimately however, all that Mr Wist's evidence goes to in my opinion is that at the relevant time (2009-2010) there was a large pool of superannuation funds available in Australia for investment (and hence there was a possibility that, if AOF3 had been established, there might have been a pool of potential investors who could have been targeted as proposed investors in the fund). Other than that, insofar as Mr Wist's opinions assumes the correctness of the account of events given by Mr Anderson or set out in the chronology provided to him, this has obvious difficulties. Reference has been made above to Makita as to the inadmissibility of experts reports where underlying assumptions have not been made good. Where opinions are founded on underlying assumptions that have not been established, it is difficult to see that they are wholly or substantially based on the expert's specialised knowledge for the purposes of s 79 of the Evidence Act. That seems to me to be the position here.
2. Particularly in light of the plaintiff's concession as to the second report, I consider that reliance cannot be placed on its conclusions; and it should be rejected.
3. As to Professor Gray's report, I do not accept that the criticism of Professor Gray is well-founded. Professor Gray has relied on empirical data and was unable to find data of unlisted real property investment funds in Australia over the relevant period. That does not demonstrate that it was impossible for such a fund to have been established but it makes it difficult to conclude that there was a realistic possibility that it could successfully have been established at the relevant time. In any event, the contemporaneous evidence as to the deferral of AOF3 plans over the period from 2008/2009 of itself establishes that, on the balance of probabilities, even but for the impugned conduct, such a fund would not have been established by Ashington in early 2010.

John Melluish and Peter Gothard - insolvency practitioners

1. The parties ultimately appeared to be agreed that the evidence of these expert insolvency practitioners is admissible only insofar as it concerns the reconstruction of the accounts of the Ashington entities and trusts; but that the ultimate question of solvency in each case is to be determined by the Court on the available evidence as to whether particular debts were due and payable and whether there were financial resources available to meet those debts. In those circumstances, it is not necessary to explore in detail these reports.
2. Nevertheless, for completeness I note that the defendants' insolvency expert, Mr Gothard, in his report of 21 June 2019, concluded that Ashington Capital was insolvent from 19 August 2009 by reason of the debt due and payable to Investec; that at least four of the trusts and sub-trusts were insolvent by 30 September 2009 including ADF2 and the Stonington Trust; and that ADF was likely insolvent. Mr Gothard produced a supplementary report dated 22 October 2019, in which he concluded that his opinion as to the solvency of each of the Ashington funds and sub-trusts had not changed since the preparation of his first report. In respect of Ashington Capital, Mr Gothard maintained his view that it was insolvent from 19 August 2009 because, at that time, it became liable for at least $9 million due and payable under the Investec Stonington Facility and it had insufficient financial resources to satisfy that debt.
3. The plaintiff's insolvency expert, Mr John Melluish (with whom Mr Gothard agreed) accepted that all of the following matters recorded in a file note of the liquidator of Ashington Management (who had reviewed the management accounts for Ashington Management for the financial years 2009 and 2010) were indicators of the insolvency of Ashington Management (T 1127.20-1132.24): trading losses for the 2009 financial year of $478,394.91 and $2,555,576.34 for the 2010 financial year; a working capital deficiency in the 2010 financial year of $4,774,266.42; a net assets deficiency in the 2009 financial year of $930,883.42 and the 2010 financial year of $3,486,459.76; a consistent negative asset position throughout the first half of the 2010 financial year; an overall net loss of $559,661 throughout the first half of the 2010 financial year; increasing tax and payroll liabilities over first half of the 2010 financial year; the other matters identified in [15.2.3] of Mr Gothard's first report which included a loan to Ashington Group (unlikely to be a financial resource available to Ashington Management); that the majority of trade debtors were unrecoverable based on the fact that the funds and sub-trusts were insolvent; that certain assets were not able to be financial resources available to Ashington Management given their estimated nil realisable value; a St George facility was due and payable by Ashington Management from at least 11 November 2009; the balance sheet for Ashington Management as of June 2009 which recorded net assets were negative $930,883.42; and that as at 8 October 2009, Ashington Management had certain "active chaser" creditors to whom moneys in small amounts were outstanding by several months.
4. The difference between the two in essence was as to whether certain debts were due and payable depending on factual assumptions rather than specialised insolvency expertise.
5. Acorn says that Mr Melluish's evidence is misconceived. In supporting his opinion that there were viable third-party borrowing options available to Ashington during the relevant period, Mr Melluish relies upon the Wingate Term Sheet dated 26 October 2009. Mr Melluish considers that the offer was a genuine offer capable of being accepted, and accordingly assumes that $13 million of further borrowings could be available to Ashington. However, Acorn says that the foundation for this analysis collapses at the outset because the conditions precedent to the Wingate Term Sheet were not capable of being accepted by Ashington.
6. On the other hand, Acorn contends that the defendants' expert evidence (from Mr Stephen Gray, Mr Peter Gothard and Mr Jeffrey Hall) is compelling and methodologically robust. Mr Gray concludes that investors would have been wary of investing in property funds in a post-GFC environment, including the funds promoted by Ashington; Mr Gothard concludes that Ashington Capital was insolvent from 19 August 2009 and most of the other entities, trusts and sub-trusts were insolvent or experiencing financial difficulties; and Mr Hall's primary opinion is that the Ashington group was worthless as at 30 June 2009. It is said that this opinion is supported by the contemporaneous concerns of the superannuation fund unitholders as to Ashington's financial state and multiple documents showing that Ashington was increasingly struggling to meet its financial obligations from mid-2009 onwards.

Brendan Halligan and Jeffrey Hall - valuation experts

1. The most significant area of dispute in the expert evidence was as to the value based on the loss claimed by the plaintiff. This was variously expressed in the course of the hearing but ultimately seemed to be put as being the loss of the chance to retain or continue the whole of the existing (and prospective future) funds management business of Ashington, or, alternatively, the loss of Ashington Capital and Ashington Management to receive (or the loss of the chance to continue to earn) three streams of revenue in relation to ADF, ADF2, AOF3 and future funds (those being trustee fees, development management fees and sales commissions).
2. The plaintiff served a number of reports from Mr Halligan (six out of seven of which were tendered in the proceeding). Mr Halligan was instructed, on the basis of various assumptions, to determine the market value of the consolidated Ashington group as at 30 June 2009 or 30 September 2009.
3. Pausing here, one of the issues that arose was as to the extension of the loss claimed to loss of other entities in the Ashington group. For example, the claim to real estate agency commissions by Ashington Real Estate. Other issues that arose were as to whether the funds management business was in fact ever that of Ashington Capital and Ashington Management - but, rather that of the head company, Ashington Group; and as to whether the loss of an opportunity to establish future funds was a loss of Ashington Capital and Ashington Management, in circumstances where the contemporaneous documents revealed that other entities were to be established to conduct AOF3. Those issues are more appropriately dealt with when it comes to consideration of the quantum of loss. However, it does illustrate the difficulties associated with Mr Halligan's reports, to the extent that those reports proceeded on the basis that the business being valued was of the consolidated Ashington group.
4. Further, there was an issue as to the date at which the valuation was to be varied out (30 June 2009 or 30 September 2009). It is difficult to see any basis for the former, in circumstances where the impugned conduct was not alleged to commence until late September or early October 2009.
5. Depending on the funds included in the valuation, and the particular assumptions utilised, Mr Halligan's valuations ranged from $5.25 million to a staggering $140.9 million. The defendants' expert, Mr Hall, to the contrary, valued the business of Ashington Capital and Ashington Management, as well as the consolidated group, as at both 30 June 2009 (since that was a date adopted by Mr Halligan) and 30 September 2009; and determined a nil valuation on a variety of assumptions (including on the basis of certain assumptions adopted by Mr Halligan). In closing submissions, to much complaint from the defendants, the plaintiff produced an aide memoire containing a series of calculations (adopting in effect figures drawn from different calculations that had been performed by Mr Hall) from which yet a further figure as to the calculation of loss was put forward. l consider the quantification of the plaintiff's claimed loss in due course. Suffice it here to note that it may not be surprising that there was no commercial resolution of the dispute at an earlier stage if figures at the upper end of Mr Halligan's range were being bandied around.
6. Insofar as it is said in the plaintiff's closing submissions (at [241]-[242]) that the determination of the market value of the business (at whatever date) is an irrelevant exercise to the assessment of any equitable compensation owing to the plaintiff, Patersons submits that (if the exercises undertaken by both Mr Halligan and Mr Hall are in fact wholly irrelevant), then on one view both sets of reports could be put to one side and the conclusion should be that the plaintiff has not proven any loss and is not entitled to equitable compensation. I note that this perhaps oversimplifies the plaintiff's submission at [241]-[242], which is that, rather than determining loss by assessing the market value of the business at the time, the loss should be calculated by valuing the net present value of the future income streams of fees and commission less the expenses it would have incurred in earning those income streams (i.e., the discounted cash flow method).
7. In any event, it is submitted that Mr Halligan's reports are inadmissible because they proceed on factual assumptions for which there is no proper foundation (i.e., Mr Anderson's evidence that Ashington was going to constitute new development funds which would have generated substantial profits). It is noted that Mr Halligan's report assumes a counterfactual in which, had the alleged wrongful conduct not occurred, Ashington would have been successful in the Stonington Capital Raising and would not have been removed as either trustee or manager of ADF or ADF2. Acorn says that the objective and contemporaneous evidence does not support that assumption.
8. It is said that it follows, applying Makita at [85], that Mr Halligan's reports are inadmissible or of de minimis weight (irrespective of whether they were of any weight in the first place, given the plaintiff's case that an assessment of the market value of the business is irrelevant to equitable compensation).
9. The plaintiff on the other hand contends that many of the opinions of Mr Hall are inadmissible (and entitled to no weight) on the basis that they are beyond his expertise (see below).

Expert Witness Code of Conduct

1. Before I turn to the question of the assumptions on which Mr Halligan's report is based, it is relevant to note one area of dispute between the parties, namely as to the criticism made of Mr Halligan for not forming his own view on particular matters. Mr Halligan and Mr Hall, pursuant to orders for expert witness conclaves, met in conclave and produced a joint report. That joint report contained large sections in which Mr Halligan's response was simply not to engage on the issue by reference to his instructed assumptions.
2. The plaintiff says that any suggestion that Mr Halligan did not abide by the Expert Witness Code of Conduct is not correct. The plaintiff notes that cl 6(b) of the Code provides that experts are to "endeavour to reach agreement with the other expert witness (or witnesses) on any issue in dispute between them". It is said that, where Mr Halligan has made an assumption (I would interpose to note an "instructed assumption"), he is not "in dispute" with an opinion on that topic expressed by Mr Hall and therefore is not to be criticised for failing to express, for the first time, an opinion during the conclave of experts. I consider, with all due respect to Mr Halligan, that this does not sufficiently take into account the duty of an expert to assist the Court; and because of my concern that the stance adopted has led to unnecessary (and in all likelihood wasted) cost, I feel it incumbent to record my observations in this regard.
3. The Expert Witness Code of Conduct contained in Sch 7 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) makes clear that an expert witness has an overriding duty to assist the Court impartially on matters relevant to the expert witness' area of expertise (see cl 2). The paramount duty of the expert witness is to the Court and not to any party in the proceedings (including the person retaining the expert witness. An expert witness is also not an advocate for a party (cl 2).
4. The expert witness must abide by any direction of the Court (cl 5), and the Court retains control over the giving of expert evidence (see, for example, r 31.17(a); r 31.20(1) of the UCPR). As per cl 3(i), the expert witness' report must contain a declaration that the expert has made all the inquiries which the expert believes are desirable and appropriate (save for any matters identified explicitly in the report), and that no matters of significance which the expert regards as relevant have, to the knowledge of the expert, been withheld from the Court. The expert witness should identify any qualifications to which his or her report or opinion is subject (cl 3(j)).
5. With regard to conferences between experts (per cl 6), each must: (a) exercise his or her independent judgment in relation to every conference in which the expert participates pursuant to a direction of the court (for example, one given pursuant to rr 31.17 or 31.20 of the UCPR) and in relation to each report thereafter provided; and must not act on any instruction or request to withhold or avoid agreement; and (b) endeavour to reach agreement with the other expert witness (or witnesses) on any issue in dispute between them, or failing agreement, endeavour to identify and clarify the basis of disagreement on the issues which are in dispute.
6. Practice Note SC Gen 11 deals with Joint Conferences of Expert Witnesses and specifies the objectives of such conferences as including: the just, quick and cost effective disposal of the proceedings; the identification and narrowing of issues in the proceedings during preparation for such a conference and by discussion between the experts at the conference; the consequential shortening of the trial and enhanced prospects of settlement; apprising the Court of the issues for determination; binding experts to their position on issues, thereby enhancing certainty as to how the expert evidence will come out at the trial; and avoiding or reducing the need for experts to attend court to give evidence.
7. In the present case, the starting point must be that the primary duty of Mr Halligan as an expert witness was to furnish the Court with criteria enabling evaluation of the validity of the expert's conclusions (see Makita at [87] per Heydon JA, as his Honour then was). In Makita, Heydon JA considered (at [79]) (citing National Justice Compania Naviera SA v Prudential Assurance Co Ltd (The 'Ikarian Reefer') [1993] 2 Lloyd's Rep 68) that an expert witness should provide independent assistance to the Court by way of objective, unbiased opinion in relation to matters within his or her expertise, and should make it clear when a particular question or issue falls outside his or her expertise.
8. In Allianz Australia Insurance Ltd v Mashaghati (2018) 1 Qd R 429; [2017] QCA 127 Sofronoff P (with whom McMurdo JA and Applegarth J agreed), noted the expert's paramount duty to the Court (at [90]) as follows: 90. Experts occupy a special position as witnesses. With irrelevant exceptions, no other witness can give opinion evidence. An expert's opinion often, perhaps usually, relates to disciplines that are unfamiliar to a judge hearing a case. Consequently, unlike the position of a witness of fact whose duty is merely to answer questions in a responsive way, an expert has a duty positively to assist the Court. This duty may require a level of candour and voluntary disclosure on the part of an expert that might involve prejudicing the case of the party that called the expert. Nevertheless, the duty to the Court, that is to say the duty to assist the Court in finding the truth of the matter, overrides any obligations owed to the party who pays the expert's fees. [Emphasis added]
9. See also the observations of von Doussa J in Chapman v Luminis Pty Ltd (No 4) (Highland Island Bridge Case) (2001) 123 FCR 62; [2001] FCA 1106 at [297]: 297. Legal practitioners appearing as advocates before a court, and expert witnesses, (usually members of skilled professions), giving evidence, owe duties to the court in addition to duties owed by them to their clients under their retainers. Those additional duties may require them to bring matters adverse to the interests of their client to the attention of the court. Those duties, however, are owed to the court, not to the opposing side in the litigation. They arise because the legal practitioner is an officer of the court, and in the case of expert witnesses because the curial process, the oath and in some instances practice directions of courts, require that an expert witness owes a paramount duty to the court to assist in the elucidation of the true facts. [Emphasis added]
10. The requirements that the Code of Conduct imposes on witnesses were considered in Wood v R (2012) 84 NSWLR 581; [2012] NSWCCA 21 at [725]-[729] by McClellan CJ at CL (with whom Latham and Rothman JJ agreed). His Honour there concluded that the Expert Witness Code of Conduct is not merely aspirational and that "[w]here an expert commits a sufficiently grave breach of the Code, a court may be justified in exercising its discretion to exclude the evidence under ss 135 or 137 of the Evidence Act".
11. In Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 4) [2019] QSC 199, where Bond J considered whether to grant leave for the plaintiffs to adduce further expert evidence, in circumstances where a joint expert report and conclave had been commissioned by way of case management orders, his Honour noted (at [40]) that: 40. If, consistently with the expert's overriding duty to the Court, an expert felt that she or he could not answer a question properly except by reference to material which was outside the specified material (and therefore not properly before the conclave), then the proper discharge of that expert's duty consistently with the order I made would be for the expert to say just that in the joint expert report. Once the report was signed, the question whether such an expert could be permitted to answer the question by reference to new material could be considered and ruled upon. ... [Emphasis added]
12. The difficulty I have in the present case is that, in Mr Halligan's unwavering adherence to his instructed assumptions or facts, he would not engage with issues arising from Mr Hall's reports when participating in the joint conclave and was not in a position to offer any opinion on those issues when the experts participated in the concurrent hearing of their evidence during the trial. To my mind that resulted in a waste of time and cost (as well as being of little use to me as the tribunal of fact). For an expert simply to refuse to engage in debate on issues arising in his or her opposing expert's report makes a mockery of the expert witness process. It may well technically be correct to say that, where Mr Halligan has made an assumption as instructed, then he is not "in dispute" with an opinion on that topic expressed by Mr Hall but, if so, then it seems to me that he has not engaged in the process in any meaningful way. Indeed, one would not know if Mr Halligan was or was not "in dispute" at the end of the day on particular issues (such as the going concern issue) because Mr Halligan simply refused to express any view on the matter beyond, it would seem, parroting his instructed assumptions. I find that most unsatisfactory; and I rather think that the appropriate course would have been for there to have been a clearer articulation in the joint report of the impasse that had arisen and for the matter to have been relisted to explore the issue at a time when it would still conceivably have been possible for Mr Halligan meaningfully to engage in the joint conclave process.
13. In any event, what I am left with effectively is no assistance from Mr Halligan as to a number of issues on which Mr Hall has expressed an opinion (and where those opinions are relevant and not challenged by competing expert evidence there can hardly be complaint if those opinions are accepted).

Mr Halligan's reports

1. Turning then to the admissibility of Mr Halligan's reports, as noted above, it is submitted that Mr Halligan's reports are inadmissible on the basis that the assumptions on which they are based have not been made good. Most of Mr Halligan's assumptions are to be found in his letter of instructions in his first report dated 17 May 2018. Apart from the submission that the foundation for this report fails because Mr Anderson's evidence should be rejected, Patersons (whose submissions were broadly adopted by the other defendants) says the following as to the key assumptions that have an impact on Mr Halligan's calculations and why they have not been made good.

(i) The financial statements of Ashington Group and its controlled entities (which are unaudited, special purpose financial statements for the 2008 financial year and unaudited, consolidated management accounts for the 2009 financial year) present fairly the financial performance and financial position of Ashington Group and its controlled entities.

1. Patersons says that this assumption was called into question by the evidence of Mr Anderson himself, pointing to his acceptance in cross-examination (when shown the Ashington Group management accounts for 30 June 2009) that the management accounts "aren't always a particularly accurate reflection" of the financial position of the companies (T 543.9). It is noted that Mr Anderson also agreed that audited financial accounts for both the funds, and Ashington Group and its subsidiaries, are plainly preferable (i.e., to unaudited reports) (T 539).
2. As to the unreliability of the management accounts, Patersons says that it is telling that the auditors were not willing to sign off on the accounts for the 2009 financial year because of going concern issues associated with the funds management business. It is noted that Mr Halligan was not briefed with this material, yet he agreed in the witness box that if the auditors considered themselves unable to sign off on the accounts for 30 June 2009 for ADF and ADF2 due to significant doubt as to whether Ashington was a going concern, that would be a "red flag" (T 1289-1290). It is said that Mr Halligan then acknowledged all of the matters of considerable relevance to the issues in this case that a prudent, independent auditor would have examined.
3. To the extent that Mr Halligan criticised (as being "naïve") Mr Hall's working capital analysis and construction of a balance sheet as indicative of the Ashington group not being a going concern, Patersons says that such criticism goes nowhere because, on Mr Halligan's own admission, he had himself not "done the work" (on the basis of an instructed assumption that Patersons says has proven to be unreliable).
4. Leaving aside the complaint as to compliance with the Expert Witness Code, to which I have referred above, I agree that this first assumption is not made good. In particular, I have regard to the concerns expressed by Ashington's own auditors as to the accounts at this time (including the concerns raised in the draft letter to ASIC) and the basis on which Mr Steel explained to KordaMentha that there was a delay in the finalisation of the audited accounts (see chronology of events above).

(ii) But for the "wrongful conduct", the ADF and ADF2 development projects and associated funds in progress at the valuation date would have continued to run their course as stated in Mr Anderson's affidavit of 19 December 2017

1. Patersons says that the values attributed by Mr Halligan to the unitholdings in ADF and ADF2 are based on this assumption (i.e., to the effect that all of the projects in these funds would have been fully developed) and that this bears no relation to the actual prospects for these projects as at 30 September 2009. It is said that this is plain on the documentary material with which Mr Halligan should have been provided and which should have been properly considered.
2. It is noted that Mr Hall, in his second report (at [50(iv)]), (which Patersons points out was not challenged by either Mr Halligan or the plaintiff in cross-examination) identifies the following assumptions made by Mr Halligan as to the relevant projects.
3. First, that the Wylde Street Project is assumed by Mr Halligan to be completed and fully sold by December 2010 (and to return a cash flow of $4.5 million above the original equity investment), which Patersons says is untenable (and see the defendants' submissions later on this issue).
4. Second, that the Double Bay Property is assumed to have obtained all the necessary approvals and funding, with construction to commence in October 2010 and to be completed (with partial sales) by September 2012 (and ultimately to return a cash flow of $4.5 million above the original equity investment). Patersons says this ignores that the NAB and St George senior debt facility on the Double Bay Property of $6 million was in default; and that at the end of September 2009 the development application for the Double Bay Property was refused. To the extent that this assumption rests on Mr Anderson's affidavit evidence that there would have been a successful appeal of this decision in the Land and Environment Court, Patersons says that evidence was not credible. Patersons says (and I agree) that the evidence was that the prospects of a successful appeal were difficult to assess and the position highly uncertain. Moreover, it is said that the alternative options proposed by Ashington in lieu of the original development plan would not have generated the cash flow assumed by Mr Halligan in his discounted cash flow models. It is noted that Mr Anderson accepted that the only option that might have yielded the return Mr Halligan assumes was if an appeal to the Land and Environment Court were successful; and that Mr Anderson accepted the risks and uncertainties inherent in this appeal (T 582). Patersons says that it would not be assumed that the superannuation fund investors would have injected more equity in the project given the chronology set out above. I agree.
5. Third, that the Stonington Project is assumed by Mr Halligan to commence construction in August 2009 with Stage 1 being completed by December 2010 and remaining stages completed and fully sold by December 2012 (and to return a cash flow of $18 million above the original equity investment). Patersons says that this assumption is wholly unrealistic, even if it is assumed that the Stonington Capital Raising were to have been successful. It is noted that the Stonington Capital Raising had the sole purpose of paying out the Investec Stonington Facility; and that there was no construction funding in place as at 30 September 2009 (and it is said that this was highly unlikely to be obtained in the timeframes assumed by Mr Halligan given the credit squeeze caused by the GFC, and the financial position of the Ashington group at the time). I agree that there were issues as to this assumption by Mr Halligan (and see the consideration of this issue in more detail when I come to consider the plaintiff's posited counterfactual).
6. Fourth, that the development of the Noosa Property was in its early stages as at 30 September 2009, yet it is assumed by Mr Halligan to be completed and fully sold by September 2013 (and return a cash flow of $48.2 million above the original equity investment). It is said that as at 30 September 2009, little by way of tangible progress on the development appeared to have occurred and the superannuation fund investors were canvassing a sale of the property without development. I agree that the assumptions on which Mr Halligan's opinions were made appear to be problematic as they are not supported by anything more than Mr Halligan's instructions and Mr Anderson's belief as to the project. (It is also not clear whether account has been taken of the $20 million Valad fee for this project.)

(iii) The forecasts of the amounts and timing of development management fees, sales commissions, return on equity of the projects in ADF and ADF2 are as set out in the project cost reports dated June 2009 for each project are reasonable and appropriate

1. Patersons says (and I agree) that it follows from the above that the assumption given to Mr Halligan (i.e., that the forecasts of the amounts and timing of development management fees, sales commissions, return on equity of the projects in ADF and ADF2 as set out in the project cost reports dated June 2009 for each project are reasonable and appropriate) is also undermined. It is noted that Mr Halligan has relied on these project cost reports, and the forecasts in them, as informing his discounted cash flows not only for his valuations as at 30 June 2009, but also for his valuations as at 30 September 2009. Patersons says that there is a fundamental difficulty with this approach given that the situation of the project changed substantially in the period up to 30 September 2009; and that the forecasts Mr Halligan relies upon are divorced from the realities of what was occurring in the funds management business. I agree.

(iv) But for the wrongful conduct, AOF3 would have been constituted in January 2010, with equity commitments of $200 million

1. Patersons contends that, even accepting that one does not speculate against the plaintiff (and assuming that the Stonington Capital Raising would have been achieved), AOF3 would not have been constituted in January 2010, with equity commitments of $200 million (cf, plaintiff's closing submissions at [278]-[282]). Patersons says that is so for the following reasons.
2. First, that even Mr Anderson (who Patersons says, and I would accept, was highly optimistic to say the least) accepted that the fund would not have been constituted with equity commitments of $200 million as at January 2010, it being noted that Mr Anderson accepted that the capital raising process is a "long, arduous, process" that could take up to 18 months (T 557). Patersons notes that this process had barely commenced as at 30 September 2009; and indeed that, by 3 July 2009, the preparation of documentation (that was being done with the input of lawyers particularly given the international focus of AOF3), had been put on hold until the end of 2009. It is noted that Mr Anderson ultimately maintained that the establishment of the fund was achievable by the second quarter of 2010 but Patersons says that, having regard to the objective facts, that too was unrealistic (T 569.1-5; T 605.41-44). I agree.
3. Second, that all the documentation that had been developed to launch AOF3 (such as the Ashington Opportunistic Funds Service Investor Presentation of June 2009) was outmoded and would have had to have been updated if preparation resumed at the end of 2009. For example, it is noted that the investor presentation referred to the chairman being Mr Bouris (though he had earlier resigned in August 2009). It is said that any plans for his replacement were amorphous and that there is no documentary record of such plans in evidence. Moreover, it is noted that the information as to Ashington's past performance in that investor presentation would need to be updated to take into account the significantly worsened forecasts for the projects by 30 September 2009 and the significant development delays. Patersons says that the Information Memorandum also required updates (including with respect to its propounding of "Ashington's strong brand equity" which Patersons says was far from the case as at 30 September 2009 having regard to Ashington Capital's and Ashington Management's relations with the superannuation fund investors at the time). Patersons also says that this is another matter which diminishes the weight which can be attached to Mr Wist's opinion as to the likelihood of AOF3 being established by January 2010 because, as Mr Wist stated in cross-examination, he simply did not judge whether the Information Memorandum was complete and accurate (T 1193.25-26).
4. I accept that there would have been a need to update the investor presentation material if preparation for AOF3 resumed at the end of 2009 (although some of the changes required do not seem to have been likely to involve much delay - such as updating the position of the by then retired chairman). That said I accept that updating the Information Memorandum is likely to have required more significant time (and no doubt external legal input).
5. Third, that in the lead up to January 2010, there had been press coverage which (as Mr Anderson conceded) was damaging to Ashington's brand and would have been a relevant consideration for potential investors into AOF3, making it less likely they would invest. Patersons says that this is supported by the opinion of Professor Gray who says that one of the key reasons why he is of the view that Ashington would not have been able to raise the proposed amount of equity capital in January 2010 was that there was recent negative press in relation to the fund manager. It is noted that Mr Wist ignored this negative press coverage (as instructed) but agreed generally that the reputation of the fund manager is an important consideration in evaluating the likelihood of raising equity in a fund such as AOF3 in 2010 (T 1183.10-12; T 1193.43-48). Properly to assess this factor would seem to me to require an analysis of the negative media coverage (which I do not here propose to explore) simply because if the negative coverage was due to any of the impugned conduct then it would surely need to be excluded on this counterfactual. That said, insofar as the negative press related to the Double Bay development approval rejection, then that is unrelated to the impugned conduct.
6. Fourth, it is said that (as both Professor Gray and Mr Wist agreed) the past performance of ADF and ADF2 would have been a highly relevant consideration as to whether investors would commit to $200 million in capital in AOF3 by January 2010. Patersons says in this regard that, as at September 2009: each of the sub-trusts of ADF was in distress (and, for ADF2, both the Project X Trust and the Stonington Trust were in financial distress); in respect of both ADF and ADF2, the internal rate of return for each of the projects had fallen significantly below the 20% return which is what Ashington was targeting for prospective investors in AOF3; Ashington Capital had committed numerous breaches of trust causing a loss of confidence in Ashington by the superannuation fund investors (a matter that Mr Wist agreed would be an important consideration for investors in AOF3); the chairman of the Board had resigned, thus destabilising the corporate governance of the Ashington Group (again, a matter Mr Wist agreed would be an important consideration for investors in AOF3); and the development application for the Double Bay Property had been refused at the end of September 2009 and yet this property was a significant selling point in the marketing material for AOF3.
7. Patersons submits that it can readily be inferred that these matters, all of which it says would have been revealed in due diligence undertaken by any potential investor in AOF3, would have dissuaded those investors from committing capital in AOF3 by January 2010 or at any time thereafter (and certainly not in 2010-2011).
8. Fifth, that in terms of the progress that Ashington had done to investigate potential properties for the proposed future fund (AOF3), Patersons says that all it amounted to was a sample, or indicative portfolio undertaken by Mr Minahan and Mr Paul Cloke (Ashington's Head of Research). It is said that, while some preliminary discussions occurred with respect to Project Spring (the Four Seasons Hotel), they went nowhere. Moreover, it is said that, in terms of discussions that were had with potential investors in AOF3, Mr Anderson remembered names such as Ochziff and Shearwater but there is no evidence that those potential investors even committed to pursuing due diligence. Patersons says that the evidence of Mr Shorrocks does not assist the plaintiff (cf, the plaintiff's closing submissions at [282]), since he merely thought there would be sufficient interest to pursue a trip to Asia; and it is said that this is far from establishing that capital would be committed by January 2010. It is said that, while the Board papers for the 9 July 2009 Board meeting recorded some "possible", and two "probable", potential investors for due diligence into the fund, Mr Anderson himself recognised that the process from that point to an investor committing capital was a "very slow process" with ADF taking "18 months to get three [super] funds" (T 573). It is noted that Mr Wist also agreed that even if Ashington was "coming off a standing start" from January 2010, the capital raising would have taken several months (T 1194).
9. Sixth, it is said that it would have been near impossible for Ashington to obtain around $400 million of debt finance in respect of the purchase and development of the properties the subject of the indicative portfolio for AOF3, particularly having regard Ashington's relations with financiers in the second half of 2009 (which has been detailed above). It is said that this is another matter which diminishes the weight which can be attached to Mr Wist's opinions (as to the likelihood of AOF3 being established by January 2010) because he agreed in cross-examination that he was not saying anything about the timing upon which the debt finance piece would have to be raised (T 1193).
10. Patersons says that all of these matters tend in favour of a conclusion that there was no substantial prospect of $200 million in AOF3 being raised in January 2010 (even assuming the impugned conduct of the defendants did not occur). I agree (and it is telling that Mr Anderson himself (quite fairly) accepted that the proposed AOF3 fund would not have been constituted by January 2010.
11. In that sense, Patersons says that it is not necessary to determine the dispute between Mr Wist and Professor Gray as to the use of data regarding listed property trusts to answer the question of the availability of investor funds for an opportunistic development fund of the kind of AOF3 (cf, plaintiff's closing submissions at [233]-[235]). It is said that, even giving Mr Wist the benefit of the doubt, and assuming there was an appetite for international investment into unlisted property funds in the aftermath of the GFC (by pursuing the counter cyclical strategy set out by Mr Wist), that does not matter because on the facts of this case it can comfortably be concluded that there was no prospect of international investors committing $200 million into AOF3 by January 2010 or any time thereafter. I agree that that is certainly the case as to a commencement date of January 2010. I do not accept that it would not have been possible at any time thereafter (given the right set of circumstances and assumptions) but that is speculation and in any event it is immaterial when considering Mr Halligan's reports which expressly assumed the correctness of this assumption.
12. Patersons says that it follows that, to the extent that Mr Halligan has adopted an assumption to the contrary (that AOF3 would be established in January 2010) and has run his models accordingly, his calculations are inadmissible. Patersons says that his assumption that Mr Wist's reports are "valid" does not cure this problem. Patersons says that reliance on this assumption affects all of Mr Halligan's reports, save for the fourth report (as amended by his sixth report) because in all of the other reports, Mr Halligan has included AOF3 in his calculations (see fourth column in MFI 32). I agree.

(v) After the creation of AOF3, the consolidated Ashington group would create a new development fund every 2 years with equity commitments of $200 million and a new opportunistic fund every 2 years with equity commitments of $250 million (the future funds).

1. Patersons says that, if there was no prospect of AOF3 being established, then there could be no confidence that further development and opportunistic funds would be established every 12 months from January 2010.
2. It is said that such "explosive growth" (including that Ashington would have been able to take advantage of the "notorious recent property boom" in Australia which commenced in 2013) cannot be assumed (cf, plaintiff's closing submissions at [283]). Patersons says that the present case is very different from the cases relied upon by the plaintiff - namely, Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473; [1999] NSWCA 323 (Fightvision) and Norris v Blake by his Tutor Porter (No 2) (1997) 41 NSWLR 49 (Norris) - because here the funds management business of Ashington Capital and Ashington Management had a significant history (in respect of ADF and ADF2) and its past performance was strained. As reasoned with respect to AOF3, Patersons says that the evidence did not rise so high as to establish a "significant potential for growth" (cf, the position in the authorities to which reference has here been made).
3. Patersons says that it follows that, to the extent that Mr Halligan has adopted an assumption to the contrary (i.e., that those future funds would have been established) his calculations are inadmissible; and that this affects his first report as well as his fifth report (see second and third rows of MFI 32). I agree.

Conclusion as to Mr Halligan's reports

1. Patersons submits that, given the difficulties with Mr Halligan's assumptions, reliance cannot be placed on his calculations as informing the quantification of any equitable compensation owed by the plaintiff. I agree (and in any event the plaintiff effectively does not rely on these reports given the way the loss of opportunity claim is now put - ironically, now relying instead on the calculations prepared by Mr Hall; as to which see the submissions as to loss considered later in these reasons). I therefore reject this evidence.

Mr Hall's reports

1. In essence, Mr Hall's opinions are that: (a) Ashington (or more accurately Ashington Capital and Ashington Management) was (or were) not a going concern as at 30 September 2009; (b) consequently, the net realisable assets methodology is appropriate and that yields a valuation of nil; if it is assumed that Ashington was a going concern, the appropriate valuation methodology is a multiple of EBITA which also produces a nil figure as 30 September 2009; (c) as a cross-check to (b), applying a DCF (discounted cash flow) methodology on the assumptions Mr Hall considers are reasonable and that would be made by a prudent and informed purchaser as at 30 September 2009, the figure is also nil; (d) applying Mr Halligan's DCF to his valuation of $5.25 million (excluding AOF3 and future funds) once proper regard is had to the effect of the offsetting arrangements (which the defendants contend are dubious) the figure is close nil and clearly less than nil once the revenue stream from Ashington Real Estate is removed.
2. The plaintiff says that (like Professor Gray, Mr Gothard and Mr Halligan), Mr Hall is not an expert in either property trusts or funds management, noting that there is no reference to either in his curriculum vitae. Complaint is made that Mr Hall has expressed opinions on topics such as the likely timeframes of developments and the likelihood of Ashington being replaced as trustee and manager (which Mr Hall does on the basis that, first, as an expert valuer he is experienced in applying valuation principles to a wide array of sectors, and second, he is applying valuation expertise because he is not in fact assessing how a development will progress or whether the superannuation fund investors would move to replace Ashington but, rather, he is assessing what a knowledgeable and willing purchaser would likely believe at the time). The plaintiff says there would be no criticism of such a method if Mr Hall were advising a potential purchaser or investor at the time but that this is not the circumstance in which Mr Hall's evidence falls to be assessed.
3. Pausing here, this is in effect an issue that arises in my opinion due to the changing ways in which the claimed loss has been articulated - if what is said to have been lost is the "business" or funds management business of Ashington entities or the Ashington group as a whole, then I see no difficulty with the way that it has been valued by Mr Hall (and the criticism as to the assumptions he has adopted as to what a reasonable purchaser or investor would pay is not pressed by the plaintiff). However, as the case has progressed, what the plaintiff now presses is a claim for the loss of a chance to continue in business, continue to receive the revenue stream, and to establish future development and opportunistic funds. On that articulation of the claimed loss, it seems to be the plaintiff's position that one simply works out (by way of adopting aspects of the experts' modelling) the net present value or discounted cash flow of future prospective income streams and then applies a percentage discount to reflect the probability of that chance eventuating. Insofar as that is a very different exercise to the one initially contemplated, there is more than a little unfairness to the criticism of Mr Hall's opinion evidence (and more than a little force to Patersons' submission that if the market value of the business or group is now conceded to be irrelevant one could simply jettison much if not all of the expert reports going to the issue of loss).
4. The plaintiff says that there are two fundamental defects in Mr Hall's evidence: first, that, as a question of law, the task of assessing the plaintiff's loss in these proceedings is to be done by reference to the likely future cash flows and expenses on the counterfactual with the full benefit of hindsight (hence it is said that what a purchaser at the time would have paid for the Ashington business is entirely irrelevant); and, second, that, as a question of evidence, Mr Hall's opinions on the matters which form the substratum of his calculations (such as the matters referred to above) are beyond his expertise (and in any event, are matters to be determined by the Court on the basis of evidence which in many respects has not been provided to Mr Hall).
5. The plaintiff emphasises that the determination of proper equitable compensation must be with the "full benefit of hindsight" (citing O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 (O'Halloran) at 273 per Spigelman CJ (with whom Priestley and Meagher JJA agreed); Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484; [2003] HCA 15 at [35] per Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ). It is noted that Mr Hall admitted that, with one exception, he did not have regard to evidence after 30 September 2009. The plaintiff points to the fact that the reports state that Mr Hall is assessing matters from the position of a potential purchaser or investor at the time. The plaintiff says that (though faithful to Spencer v The Commonwealth (1907) 5 CLR 418 (Spencer)) this is here an almost irrelevant exercise. (I interpose to note that this is the genesis for the observation by Patersons as to what flows from the now perceived irrelevance of the reports.) The plaintiff says that there is no suggestion in the evidence that the Ashington business might be sold.
6. Insofar as the plaintiff in closing submissions (at [238]-[243]) argues to the contrary, Patersons says that the orthodox approach on "ordinary valuation principles" of assessing fair value, including for loss of a commercial opportunity, in Spencer, applies irrespective of whether Mr Anderson was considering a sale of the Ashington business.
7. It is noted that Mr Halligan himself accepts that Spencer is the governing touchstone for his valuation. Patersons says that Spencer is not concerned with the subjective intentions of the putative seller; that while it hypothesises a notional sale in June or September 2009 as an assumption of such an analysis, the Spencer analysis is an objective exercise; that it proceeds on the basis of an hypothetical negotiation and sale between an hypothetical purchaser and hypothetical seller informed of all matters bearing on the value of the Ashington business at the date of valuation; and it presupposes a reasonable person being prepared to give what is valued in exchange for money. Patersons says that what matters in terms of valuing the loss of commercial opportunity upon a hypothesised sale on a Spencer analysis is not whether Mr Anderson would have in fact sold the Ashington business at that time but the value a fully informed hypothetical purchaser would have attached to it at the relevant time. It is significant that in concurrent evidence there was a large measure of agreement between the experts as to the application of the principles of Spencer to the valuation task in this case and the considerations that a hypothetical purchaser would investigate and take into account. Patersons emphasises that only one of the experts, Mr Hall, embarked on that exercise. I agree but, as explained above, this is not how the plaintiff now puts the claimed loss.
8. The plaintiff thus maintains that the market value of that business at the time has no bearing on the plaintiff's loss and says that it follows that the capitalised maintainable earnings method is not appropriate (designed as it is solely to determine a market value). Further, it is said that the capitalised earnings method is also irrelevant because it was only performed by Mr Hall in relation to the value of the Ashington business as at 30 June 2009, which the plaintiff says renders that dispute now moot in any event.
9. The plaintiff in written submissions maintains that the lost business is, rather, to be valued by the net present value of the future income streams of fees and commission less the expenses it would have incurred in earning those income streams, in other words, by the discounted cash flow method (or DCF).
10. It is submitted that those income streams are to be determined with the full benefit of hindsight and in accordance with findings of fact on the counterfactual; and that (once it is understood that what a potential purchaser or investor, no matter how "knowledgeable", thought at the time is irrelevant), Mr Hall's opinions on matters not based on his valuation expertise are irrelevant. In this regard the plaintiff says that Mr Hall's conclusions on the likely progress of the Ashington developments and the likelihood of Ashington being replaced are based on a careful review of the documents to which he has had access, not based on Mr Hall's expertise. The plaintiff submits that Mr Hall's opinions are those of an "expert (from a particular field or discipline) who is well endowed with intelligence, insight and common sense [which] may help someone unravel a problem in another field of expertise or discipline; but, he or she will not be proffering opinions on that subject matter that will be either helpful or admissible as evidence in Court" (Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 171 at [671] per Allsop J, as his Honour then was). Furthermore, given that Mr Hall has not had regard to evidence after 30 September 2009, or attempted to adjust those events in accordance with an appropriate counterfactual, the plaintiff says that any assistance that might otherwise be gained from Mr Hall's views falls away.
11. The plaintiff thus submits that, in those circumstances, all one is left with is Mr Hall's reconstruction of Ashington's accounts and (like Mr Halligan), his calculations based on various assumptions. The plaintiff contends that (despite complaint as to valuation models such as the one used by Mr Halligan) there is nothing in Mr Hall's evidence to the effect that Mr Halligan's spreadsheets make incorrect calculations on the discounted cash flow method (so long as the correct assumptions are made).
12. Patersons submits, in contrast, that reliance can be placed on the valuations of Mr Hall (noting that his opinions and the core assumptions he has applied are summarised in MFI 32).
13. Insofar as the plaintiff appeals to hindsight, Patersons says that there is no evidence that when Parissen took control of the Ashington funds business, it was profitable, and that hindsight does not assist the plaintiff. Further, Patersons says that it is wrong to say that the likely views of investors and purchasers at the date of valuation in 2009 are irrelevant to the quantification exercise in this particular case. It is submitted that, to conclude so much, is effectively to disavow the ordinary principles of fair value under Spencer that Mr Halligan himself purported to apply. In addition, Patersons says that the suggestion that the Court is not determining the fair value of Ashington in 2009 is directly inconsistent with the expert evidence upon which the plaintiff's case on quantification relies.
14. Patersons points out that the plaintiff now propounds Mr Halligan's valuation of the core business including AOF3 as at 30 September 2009 as a "good starting point" (see plaintiff's submissions at [289]) and refers to Mr Hall's Attachment 10 to his second report as the low end of the range the plaintiff is propounding (plaintiff's closing submissions at [289]-[290]). Patersons says that should not be accepted. It is noted that Mr Hall's Attachment 10 is based on Mr Halligan's model, which Patersons says is flawed because of the unproven assumptions it adopts (and it is noted that Mr Hall was at pains in his oral evidence to make that clear).
15. Patersons says that this leaves Mr Hall's unchallenged analysis, based on his significant experience as a valuer across a range of industries. It is said that it is a rigorous review of the primary records with which Mr Hall has been briefed, together with the application of reasonable assumptions that a financial advisor to a willing but not anxious hypothetical purchaser of the business would make as at the valuation date and following due diligence. Patersons points out that those assumptions were not reviewed by Mr Halligan and it is said that they were not seriously tested or challenged by the plaintiff through the cross-examination of Mr Hall. Patersons says that they are the only evidence of the assumptions that a prudent purchaser would have made in valuing the Ashington funds management business at 30 September 2009.
16. It is noted that Mr Hall's analysis has led him to conclude that as at 30 September 2009 the Ashington funds business was not a going concern, a conclusion which Patersons says aligns with the conclusion that can be reached on the primary materials. It is said that Mr Hall was not challenged on his analysis and that Mr Halligan did not disagree with it (he simply expressed no view on it, despite it being within his expertise). It is noted that Mr Halligan also accepted in his oral evidence various indicia of the business not being a going concern, namely: the failure to complete a project; an important development application being refused; breaching banking covenants; a receiver being appointed to sell an asset; and threats from financial institutions to enforce debts that were due (T 1329-1331).
17. As to the appropriate valuation method, Patersons says that the plaintiff's argument that equitable compensation's appeal to hindsight necessarily means the discounted cash flow method is the only appropriate valuation method (plaintiff's closing submissions at [241]) should be rejected. It is noted that Mr Halligan conceded that the discounted cash flow method "requires spelling out the expected cash flows going forward"; and it is said that it requires a sufficient amount of information (at least 10 years' forecasts). Patersons says that there were no projections of expected cash flows generated by Ashington at the time and with which the experts were briefed; rather, that Mr Halligan's discounted cash flow models are based entirely on his unfounded assumptions (which Patersons says are wrong or unreliable). It is said that, in the absence of suitable replacement information, there is no rationale for using the method. As to the discount percentage, it is noted that Mr Halligan conceded he assumed (although it was not part of his express assumptions) that the cash flows he used had already been probability weighted; he accepted that he did not apply his independent judgement to that exercise and did not know who undertook that step (if it was undertaken at all) (T 1313).
18. It is said that, even if the discounted cash flow methodology was accepted as being more apt to the assessment of equitable compensation, Mr Hall cross-checked his capitalised earnings methodology valuation against his own discounted cash flow (adopting his own, Patersons says, reasonable assumptions); and that this cross-check revealed that as at 30 September 2009, the value of the consolidated business was still nil using either method.
19. Patersons says that, because the value of what Ashington Capital and Ashington Management lost is zero, even on Mr Halligan's methodology, it is not necessary to make the deductions for the offsetting and the discount referred to in the plaintiff's closing submissions (at [292]). Patersons says that even if it were to be undertaken, the offsetting calculations undertaken by Mr Hall in his report of 16 March 2021 should be preferred; and that any discount applied to take into account the failure of the Stonington Capital Raising should be far greater than 10%.
20. Patersons also says that any figure of nominal loss would require a very significant discount to take into account the multiple, and to some degree independent, contingencies barring Ashington's path to future profitability as at 30 September 2009, if there had been no alleged breach by the defendants. At the level of principle, Patersons accepts that the Court is not to approach discounts and contingencies in a rigidly arithmetical way. It is said that the discounting exercise associated with the assessment of the loss of opportunity is fundamentally of a qualitative nature.
21. Patersons says that it is significant in this regard that Mr Halligan recognised the importance of probabilistic-weighting in his discounted cash flow analysis but did not undertake such analysis himself and acknowledged that he did not even know whether the information he had been asked to base his figure on reflected any such analysis. Patersons says that plainly it did not; and that this is very significant as it means that even Mr Halligan's final figure of $5.25 million is significantly inflated insofar as it takes no account of the contingencies and probabilities associated with the cash flows he has used.
22. Patersons emphasises that the plaintiff's case is not a single loss of opportunity claim. Patersons says (rather evocatively) that it is a compounding loss of opportunity claim that "cascades to a point it ultimately collapses upon its own infinite regress into a sea of probability and speculation". Patersons says that it depends on the contingencies and probabilities in such matters as: a successful Stonington Capital Raising on satisfactory terms and within a reasonable of time; the likelihood of that capital raising in turn solving the myriad of other problems confronting the financial position and prospects of ADF and ADF2 and of Ashington itself; the likelihood of retaining Ms Garrett and Mr Renauf well into the future to restore and build the business; the likelihood of future developments of the underlying properties of the sub-trusts, including a successful appeal in respect of Double Bay; and the likelihood of raising AOF3 and further future funds.

Determination

1. I consider that Mr Hall's opinion is admissible and that the complaint as to the basis on which certain opinions have been expressed goes to weight (given that the complaint does not seem to be applicable on the scenario that Mr Hall was considering - namely the assessment of value of the business pursuant to Spencer).
2. For the reasons set out above, I consider that Mr Halligan's reports are inadmissible and I reject them on the basis that the assumptions on which they are based have not been made good.
3. The real difficulty in the competing experts' reports on this issue is that the experts have in a very real sense been addressing different issues, which makes assessment of the competing propositions difficult in the extreme. Ultimately, I accept that if the value of the business (or the group as a whole) is to be assessed as at 30 September 2009, then on the methodology explained capably by Mr Hall, it had a nil value. That is consistent with my conclusion (see below) that the group was insolvent or bordering on insolvency as at 30 September 2009.
4. If what falls to be considered is simply an arithmetical assessment of hypothetical future income streams (offset by liabilities or expenses of incurring such income streams) and discounted back to net present value, then Mr Hall's calculations would produce again a nil value. The only way that a positive value seems to be postulated by the plaintiff is to take various parts of the calculations and to add in not simply AOF3 but a succession of future funds beyond the limit of the existing or replacement funds (i.e., on the assumption that once a fund comes to an end it will be replaced by another of equivalent or perhaps greater value). There is a large degree of speculation in that exercise (although I finally grasped the logic underlying it - see the debate at T 1514ff). However, even assuming that the figures put forward in closing submissions might be a realistic assessment of future fund income flows, there would then need to be a substantial discount to reflect a qualitative assessment of the contingencies that would have been faced on the plaintiff's counterfactual and to apply a percentage to the prospect that the lost opportunity would have been achieved.
5. Ultimately, as I explain below, I consider that it is highly likely that the Stonington Capital Raising would not have been achieved; that even if it had been achieved it would not have resolved the financial difficulties faced by the Ashington group; and hence, that the prospect of obtaining the future income flows that it is said has been lost was extremely slim. I would apply a 5% chance at best of the future income flows having been achieved.

Provisional and deferred evidentiary rulings

1. I have ruled above on the remaining issue as to provisionally admitted evidence from Ms Garrett's liquidator's examination; and on the deferred objections to the expert reports.
2. As to Mr Anderson's 25 May 2018 affidavit, I provisionally read [23] on the basis that the plaintiff needed to clarify that the statement was Mr Anderson's evidence of Ashington's business practices based on his experience. I will admit that paragraph.

Loss of trust and confidence in Ashington

1. It is convenient at this point to consider the submissions as to the superannuation fund investors' loss of trust and confidence in Ashington and/or Mr Anderson, as this sets the context in which the defendants emphasise that the decision was ultimately made by the superannuation fund investors to pursue the Parissen Proposal (and is relied upon by the defendants variously for the proposition that the impugned conduct was not the cause of the claimed loss or that no loss was sustained as a result of the impugned conduct). The defendants maintain that this loss of trust and confidence made inevitable the ultimate retirement of the Ashington companies as trustee and manager, respectively. For example, Acorn and Albany submit they could not have caused any damage to Ashington Capital and Ashington Management because the decision to remove them occurred before Acorn and Albany were even approached.
2. Ms Garrett and Mr Renauf have also identified a number of alleged material breaches of trust committed by Ashington Capital by September 2009 which they say were of significant concern to the superannuation fund investors (I consider these in due course). It is submitted that (contrary to the pleading at [160]; [162]; [181]), the superannuation fund investors and financiers had lost confidence in Ashington and Mr Anderson due to these breaches of trust, the breaches of the finance facilities and the poor performance of the funds.
3. As noted above, each of the superannuation fund investors gave evidence as to the said loss of trust and confidence and there can be little doubt, having regard to the contemporaneous documents referred to in the chronology of events set out above, that there was a serious loss of trust and confidence (albeit that the timing of when that occurred for each of the superannuation fund investors was not entirely clear).

Defendants' submissions on loss of trust and confidence

1. The defendants submit that this loss of trust and confidence in the Ashington entities (and Mr Anderson himself) occurred before the end of September 2009, pointing to: the contemporaneous documents revealing the concerns of Mr Gavin of HESTA that started in late 2008 and early 2009; and Mr Gavin's communication to other superannuation fund investors on 17 August 2009 that it was highly unlikely that HESTA would be committing any additional equity to ADF 2 "at least not in the timeframe required for Investec and the vendor finance, and probably never"; and to the 27 August 2009 response by Mr Gavin to one of Mr Anderson's recapitalisation proposals (see above). The defendants submit that the plaintiff's suggestion, that the 27 August 2009 response demonstrated a willingness to consider proposals that involved Ashington remaining as trustee, ignores the reality that the willingness was qualified by an unachievable pre-condition (i.e., "$15m of hard cash put up").
2. Reference is also made to the communications of concern by Mr Gavin on 1 September 2009 that a proposed letter to Investec did not really "convey the loss of confidence from the investors towards the Manager"; to the discussion on 9 September 2009 between Mr Gavin and others at HESTA as to the possibility of writing the investment in ADF and ADF2 down to zero (although concluding that this was premature); the 29 October 2009 fund management update by Mr Fowler that was critical of existing management to date (although positive as to the addition of Ms Garrett and Mr Renauf to Ashington); and the response to Mr Anderson's Wingate Proposal, on 2 December 2009, in which Mr Gavin said that "as I have explained before, we lost confidence in management as soon as you contravened the terms of the side letter between HESTA and Ashington". It is submitted that these communications cannot be reconciled with the notion that the loss of trust and confidence arose only after September 2009.
3. Acorn also points to the evidence of Mr Anderson in cross-examination to the effect that he never thought about keeping the superannuation fund investors happy (T 631.29-33) (although I note that Mr Anderson went on to state as part of his response that he thought about keeping them informed, making decisions in their best interest and keeping them content as investors).
4. Albany says that, by July 2009 (and independent of Ms Garrett and Mr Renauf's involvement), the investors and the asset consultants who advised them had lost trust and confidence in Ashington, and in Mr Anderson specifically. Reference is made in this regard to the following: that the purpose of the PPB strategic and financial review of ADF2 was initially to "provide comfort to unit holders of the current and future viability" of ADF2 (see Mr Dedes' approach of 2 July 2009); that at the time of this approach and in subsequent weeks and months, the asset consultants already had in their collective contemplation the termination of the Ashington entities. In this regard, Albany refers to: an email from Mr Hodgson to Mr Dedes on 10 July 2009, where Mr Hodgson asked about organising advice for the termination of the manager; Ms Chan's meeting file note of 29 July 2009 where she notes "need to change trustee"; Mr Dedes' 29 July 2009 property sector update report for ADF2 where he states that the PPB review will focus on "the process for termination of the manager and responsible entity"; and the email from Mr Flett to Mr Lord on 6 August 2009 in which Mr Flett notes information that is required to consider "how we might change the trustee"; the 13 July 2009 email by Mr Bouris to Mr Anderson (Mr Bouris having spoken to Mr Dedes on 9 July 2009), in which Mr Bouris raised that the "possible action" of the investors was to terminate the management agreement - although I note that it is unclear that Mr Bouris' view was in any way informed by his discussion with Mr Dedes; and the proposal PPB submitted to the investors on 15 July 2009 in which PPB stated it would consider all options "potentially including a compulsory retirement and replacement if necessary". Albany also points to Mr Hartley's evidence that prior to the appointment of PPB, he expected PPB would specifically consider the removal of Ashington in its review when it considered "all options" (T 985.10-986.23).
5. Reference is made to the meeting between PPB and Ashington with the investors on 18 August 2009, at which the superannuation fund investors became aware of further significant breaches by Ashington, including the double pledging of uncalled capital to both NAB/St George and to Investec and entry into the Investec Stonington Facility at the head trust level; and events that followed receipt of that information.
6. Albany thus says that the "writing was on the wall" by late August 2009, without any involvement of Ms Garrett and Mr Renauf: that Ashington's role with ADF and ADF2 was to end; and that it was simply a matter of how that was to be achieved without the investors losing the remaining value (if any) in their investments.

The plaintiff's submissions on loss of trust and confidence

1. The plaintiff accepts that the superannuation fund investors were "unhappy"; that Mr Anderson and Ashington had failed commercially to obtain satisfactory terms to finance the acquisition of Stonington; and that Mr Anderson had, in the perception of the superannuation fund investors, been too slow to bring that matter to their attention and to find an acceptable solution that did not involve them putting in additional equity. However, the plaintiff says that no decision was taken, at any time until October/November 2009, to remove Ashington companies either as trustee of the funds or as manager of any of the developments.
2. The plaintiff submits that there is no contemporaneous documentary evidence to determine the precise time at which the superannuation fund investors formed views that would permit a conclusion that they would have resolved to remove Ashington in 2009. In particular, it is noted that there is no record of any superannuation fund investor recommending the removal of Ashington prior to November 2009. Reference is made, for example, to the minutes of Sunsuper Investment Committee meetings for August and November 2009 in which there is reference to management concerns in relation to another matter but not in relation to Ashington (references to Ashington being limited to a record of a write-down of Sunsuper's investment in the November 2009 minutes) (Ex D).
3. It is noted that Mr Hartley accepted in cross-examination that if he had formed a fixed view about the need to replace Ashington that would have been raised at the Investment Committee level (T 1010.4-10); that he was not aware of Sunsuper giving any instruction prior to November 2009 for PPB to advise superannuation fund investors on the removal of Ashington (T 982.33-983.17). The plaintiff says that, at its highest, Mr Hartley had an "unexpressed expectation" that removal of Ashington was an option that PPB might consider; and maintains that in mid-August 2009 a change of the manager was not under active consideration.
4. Further, the plaintiff contends the removal of Ashington as trustee and manager of ADF and ADF2 was not part of PPB's mandate from the superannuation fund investors. Reference is made in that regard to the draft scope of engagement provided by Mr Dedes to Mr Carson of PPB on 10 July 2009 (which noted that the purpose of that engagement was for PPB to perform a strategic and financial review of ADF2). The plaintiff says that while the anticipated scope of the engagement included PPB summarising the corporate and organisational structure of the fund and their implications for unitholders, the superannuation fund investors were not seeking legal advice from PPB. It is noted that PPB's advice was sought by 25 August 2009 (when the Stonington facilities expired) as to the operation and viability of ADF2 (reference being made to Mr Dedes' email of 14 July 2009 to PPB and to the definition of the "Approved Purpose" in the 20 July 2009 PPB Confidentiality Agreement).
5. Insofar as it is suggested that the reference to PPB's role in assisting the trustee in "achieving a legally effective restructure of the current trustee and security arrangements" (see the PPB letter to Ashington on 25 August 2009) included consideration of the potential replacement of Ashington, the plaintiff notes that this phrase first appeared at page 12 of the First PPB Report dated 14 August 2009, setting out a proposal as to "PPB's Ongoing Role" and that on 20 August 2009 (prior to Ashington signing the 25 August 2009 letter) PPB provided Ashington with a copy of this report. The plaintiff says that the meaning of the phrase is apparent from section 2.3 of that report, which identified as a risk of Ashington's business structure that Ashington Capital acted as trustee for each of the ADF and ADF2 sub-trusts, with a number of charges registered against Ashington Capital. It is noted that PPB considered that this structure gave rise to a risk if any of the charges were acted upon; and that Mr Hartley understood the reference to "achieving a legally effective restructure" as referring to this concern (T 989.22-42). Similarly, it is said that Ms Chan's notation, "[v]ery messy, need to change trustee" in her file note of the 29 July 2009 meeting between PPB and superannuation fund investors is a reference to this issue; and not to a proposal to replace Ashington as trustee and manager (as Mr Hartley accepted in cross-examination). The plaintiff also says that it appears that Norton Gledhill had doubts about whether PPB's concerns in relation to this issue were well-founded (and that the concerns were never acted upon) (T 1086).
6. Insofar as the defendants assert that Ashington would have been replaced in any event (due to loss of trust and confidence on the part of the superannuation fund investors), the plaintiff points out that, on the relevant counterfactual, the Parissen Proposal is absent (though the plaintiff goes further and suggests that the counterfactual includes that the Stonington Capital Raising is successful). It is submitted that there is unlikely to have been anyone else willing and able to become trustee and manager (noting that the Parissen presentation to Acorn of 26 March 2010 referred, among other things, to the "majority of existing property fund managers facing financial and operational issues").
7. The plaintiff points out that the management contract did not permit termination (I interpose to say, without cause) and says that it was appreciated that removing Ashington Management as the manager would have been very difficult (the plaintiff points out that the Parissen presentation to Acorn notes that the management agreements did not have termination rights and that the possible damages for repudiation of the agreements could total $9 million).
8. It is said that the contemporaneous (and the plaintiff contends reliable) evidence of the superannuation fund investors was that, although they were unhappy with Mr Anderson, they would have continued working with Ashington if there were no real alternative (and the plaintiff submits that this is especially so with Ms Garrett placed as the face of Ashington and in the context of the Stonington Capital Raising being successful, on the counterfactual the plaintiff propounds).
9. The plaintiff contends that, contrary to the suggestion that the removal of Ashington as trustee and manager was, in any event, probable or inevitable, the evidence demonstrates that the superannuation fund investors were (consistent with their own roles as trustees) open to consider a range of options that would protect their investments in ADF and ADF2. It is noted that, by 30 September 2009, the superannuation fund investors had agreed to the Stonington Capital Raising; and that the impetus for removing Ashington came from PPB, Ms Garrett and Mr Renauf, and was presented to the superannuation fund investors as a requirement of any new investors.
10. The plaintiff also points out that the provision to Investec of a shortfall guarantee (as recommended by PPB in its Second Report dated 21 August 2009) was not accepted by superannuation fund investors; and that (while the alternative proposal put forward on 27 August 2009 by Ashington which involved a deferral of any asset sales and a short-term injection of additional capital subject to a principal guarantee from Ashington) was not adopted, it was actively considered by PPB and the superannuation fund investors (with PPB expressing the view that it may be worthwhile but required additional and better quality collateral). It is said that that proposal would have involved Ashington continuing to progress the Stonington development, at least up until October 2009.
11. The plaintiff says that the principal concern of Mr Thow of LUCRF was to restore value to LUCRF investments in the Ashington funds; and that, in evaluating various options, LUCRF was heavily dependent upon PPB for independent advice. It is noted that Mr Hartley of Sunsuper accepted that he was open to consider whatever recommendations PPB made, whatever that implied in respect of the future involvement of Ashington; and that it was his expectation that any potential refinance option would be considered by PPB and, if thought viable, be put to investors whether or not it involved a change in management. The plaintiff says that an email from Mr Routley to Mr Sheehan on 13 October 2009 also supports the view that the superannuation fund investors' main priority was dealing with the Investec default, rather than replacing Ashington.
12. By the end of October 2009, investors were also considering whether there was any value in continuing their engagement of PPB given the fees that they were incurring in doing so, and the risk that their investment in ADF and ADF2 may be worthless. In circumstances where the superannuation fund investors were contemplating writing off their investments entirely, the plaintiff says that it is implausible that they would not have considered proposals which offered a chance to recover some capital even if it involved retaining Ashington as trustee and manager.
13. The plaintiff also points to the difficulty in removing Ashington as trustee and manager of ADF and ADF2 as an additional factor weighing against the possibility that the superannuation fund investors would in any event have moved to do so. It is noted that Mr Hartley considered that removal of a trustee and manager would be complex, would take time, and that it would not be a simple exercise to find a replacement entity. Mr Hartley accepted that it would be necessary to find someone with the necessary standing and skills in both funds management and property development, with capacity and willingness to take over the Ashington projects which included partially completed developments, for the remaining fees available. Mr Hartley agreed that this would not be likely to be easy to identify. The plaintiff says that it would also be necessary to find someone willing to pick up existing relationships with the planners, architects, builders and designers engaged in each project.
14. The plaintiff says that this evidence is supported by the evidence of Mr Wist. The plaintiff submits that, on the counterfactual, with the Stonington Capital Raising successful, Ashington and the funds recapitalised, and with Ms Garrett and Mr Renauf as the new face of Ashington (with, if necessary, Mr Anderson having stepped aside from any role in funds management), and the absence of any rival proposal, that the superannuation fund investors would have continued to work with Ashington because that was the only way they could fulfil their duty to their own investors to maximise the equity of their investment.
15. The plaintiff says that the decision that the superannuation fund investors took to replace Ashington in late November 2009 must be understood in the context of urgency presented to them by PPB, and the incomplete and inaccurate picture provided by PPB as to the Parissen and Wingate Proposals.
16. As to the issue of urgency, it is noted that PPB's Third Report referred to a clear and imminent risk of a further deterioration in the solvency position of both ADF and ADF2 as a consequence of potentially capricious behaviour of the manager (i.e. the signing of the Wingate Proposal).
17. The plaintiff points to Mr Hartley's outline of evidence to the effect that his lack of interest in considering any proposal in which Ashington and Mr Anderson was involved (not referred to in his Mapeline affidavit) arose as a result of the matters concerning Mr Anderson's conduct in relation to the Wingate deal as reported by PPB on 25 November 2009. The plaintiff notes that Mr Fowler gave evidence that oral updates were also provided to the Board as to the deteriorating relationship with Ashington during 2009 but the plaintiff points out that Mr Fowler does not recall meeting or speaking to the directors on the Board Executive in relation to the 27 November 2009 note, and would not necessarily have done so. The plaintiff submits that, in circumstances where Mr Fowler's report to the board meeting immediately prior to the 27 November 2009 note (the report dated 29 October 2009) stated that positive developments had occurred at Ashington, it is improbable that any other reasons were advanced to the Board Executive in taking its decision to approve the removal of Ashington than those in the 27 November 2009 note.
18. As to the complaint made about the Third PPB Report, the plaintiff says that PPB failed to make clear that the Parissen deal involved the abandonment of the superannuation fund investors' existing equity investments in ADF2 (totalling $94 million) and that this failure was replicated in a summary presented to the LUCRF Investment Committee on 2 December 2009. It is noted that the contents of PPB's email of 25 November 2009 were communicated almost verbatim to the LUCRF Investment Committee in an Investment Oversight Report dated 27 November 2009.
19. The plaintiff notes that at various points PPB was considering an equity interest in the new manager, managing ADF assets itself, and forming a "joint venture" with Parissen. The plaintiff says that this interest was never disclosed to the superannuation fund investors. It is noted that Mr Hartley accepted that this was a matter that should have been brought to his attention and might have affected his willingness to treat PPB as an independent (rather than an interested) adviser; that Mr Fowler similarly would have expected to have been informed if PPB had an interest in the transaction other than as advisor to the superannuation fund investors; and that Mr McCusker had no recollection of being aware that PPB had in mind that it would have a role for itself in the recapitalisation and new management.

Findings as to loss of trust and confidence

1. While I accept that the contemporaneous documents do not record that a decision to replace the Ashington entities had been made by the end of September 2009, there is no doubt that there was serious dissatisfaction on the part of superannuation fund investors by the end of August/early September 2009; and it is not insignificant that the superannuation fund investors had determined not to meet capital calls. I accept that the 2 December 2009 email certainly places Mr Gavin's contemporaneous recollection of when he lost confidence in Ashington at a much earlier date than that for which the plaintiff now contends; and that the evidence of other superannuation fund investors similarly places their loss of trust and confidence earlier than the time of the impugned conduct.
2. That said, the conclusion that superannuation fund investors lost confidence in Ashington earlier that September/December 2009 does not lead to the conclusion that they had, at that earlier time, decided to replace Ashington entities as trustee/manager.

Perceived breaches of trust

1. As noted above, in the course of submissions as to loss of trust and confidence on the part of superannuation fund investors, various breaches of trust were identified as having been committed by Ashington Capital. This conduct is said to have contributed to the decision of superannuation fund investors to remove the Ashington entities. The plaintiff points out that such allegations are not pleaded. However, Ms Garrett and Mr Renauf cavil with the need to do so, referring to their denial that the Consortium was the cause of the plaintiff's retirement, and pointing to Patersons' defence at [64]. It is not necessary in my opinion to make any finding as to these alleged breaches of trust because the issue is not - with one qualification - so much an issue as to whether the conduct identified amounted to a breach of trust but, rather, as to whether there was a perception by the superannuation fund investors that there may have been or even that this was conduct contributing to the loss of trust and confidence in Ashington. The qualification I make is that the defendants rely on certain of this conduct as precluding reliance on the trustee's right of indemnity (as I explain below).
2. The relevant duties said to have been breached are, variously, the proscriptive fiduciary obligations owed by Ashington Capital to its beneficiaries: first, the obligation to refrain from acting in circumstances where there is an actual conflict or a real or substantial possibility of conflict between duty and personal interests (the no-conflict rule); second, the obligation not to obtain or receive any benefit or gain for itself or another person by reason of its fiduciary position (the no-profit rule).
3. Reference is also made to the obligation of a trustee at general law to perform its duties and exercise its powers in the best interests of the members of the fund (those interests usually being equated with their financial interests). It is noted that this requires that a trustee make decisions with an adequate process to ensure that the decision is appropriate having regard to the financial interests of members. Ms Garrett and Mr Renauf submit that adequate processes must include, at a minimum, the processes promised to investors by Ashington in the Information Memoranda.
4. Finally reference is made to the duty of the trustee to exercise the same care and diligence as an ordinary prudent person of business would take in conducting the trust business as if it were the trustee's own, including the duty to seek advice on matters which the trustee does not understand, and on receiving that advice to act with the same degree of care (pointing out that this requirement is not discharged merely by showing that the trustee acted in good faith and with sincerity). Ms Garrett and Mr Renauf further submit that a higher standard of care is to be exacted from a corporate or professional trustee which both holds itself out as having a special or particular knowledge, skill and experience, and which also, directly or indirectly, invites reliance upon itself by members of the public by virtue of that knowledge, skill and appearance.
5. It is noted that breach of the best interests and care duties is a breach of trust (citing, by way of example, Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd (in liq) (2002) ATPR 41-864; [2002] NSWCA 29 (Gatsios Holdings) at [14]-[15] per Spigelman CJ) and that, to the extent that any of these breaches is outside the relevant power, done in bad faith, or exercised with an absence of the care and diligence that a person of ordinary prudence should exercise, the trustee would not be entitled to an indemnity from the trust assets (citing Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39 (Nolan v Collie) at [53] per Ormiston JA (with whom Batt and Vincent JJA agreed)).
6. Turning then to the breaches of trust said by Ms Garrett and Mr Renauf to have occurred, they are as follows: first, Ashington Capital's use of funds from the December 2008 capital raising for purposes other than the purpose that was promised in the subscription documents; second, the failure by Ashington Capital to quarantine costs and assets within each sub-trust (particularly in respect of the decision to execute the Investec Stonington Facility); third, the entry by Ashington Capital into undocumented "loans" to ADF and Ashington Group duty of Ashington Capital, as trustee of ADF2 (by December 2008, an undocumented loan by Ashington Capital of $1.8 million to Ashington Group and by 30 June 2009, an undocumented loan of $2.268 million to ADF) which it is submitted may be inferred were not on arms' length terms; fourth, failure by Ashington Capital and Ashington Group to contribute capital in cash for the subscription price for units; fifth, the double pledge of uncalled equity in relation to the 2008 Double Bay capital call; sixth, the giving by Mr Anderson of a personal guarantee in connection with the Hamton Vendor Finance; and, seventh, the making of personal payments as "bonuses" at a time when it is said Mr Anderson knew there was no entitlement to the funds.
7. It is said that most of the above breaches amounted to a fundamental breach of trust, causing superannuation fund investors concern and causing them to remove Ashington Capital as trustee. It is said that this is a further reason to find that Ashington Capital was insolvent from June 2009, and that Ashington Capital was not a going concern.
8. Reference is also made in this context to disclosure breaches; breaches of accounting and audit obligations; and the breaches of finance facilities.
9. I do not propose to consider in detail the identified breaches (for the reason that what seems to me to be significant is the perception of breach rather than whether there would be liability for the contended breach). I simply note as follows.

Use of the December 2008 capital raising for purposes other than the purpose in the subscription documents

1. As to the first, it is submitted that Sch 1, cl (b) of the Written Resolution of Members dated 22 December 2008, as incorporated into the Applications for Units dated 24 December 2008 and 4 February 2009, provided that the capital raising of $3.75 million in December 2008 and $6.25 million in January 2009 only be used to meet bank covenants on the Double Bay Project. Clause (b) of Sch 1 states that Ashington Capital "expects to use the Additional Commitment [i.e., the capital raising of up to $20 million] to meet existing and expected bank finance covenants on Fund projects (or other Fund costs) imposed as a result of a tougher lending environment" and that in particular, Ashington Capital "intends to use the Additional Commitment to meet bank finance covenants on the Double Bay project". (I interpose to note that cl (b) clearly envisioned the use of the capital raising for projects other than Double Bay and that the aspirational language of "expects" and "intends" does not itself evince an intention to require use of the funds only for Double Bay.) By contrast, cll 1.1 and 1.2 of the HESTA Side Letter dated 21 January 2009 provided that Ashington Capital "will use the Additional Capital to meet the existing bank finance covenant, as specified in the Security Trust and Intercreditor Deed…for the project located at 33 Cross Street, Double Bay" and that it "will not reallocate any of the Additional Capital that is not required under the covenant".
2. Ashington Capital in fact used the funds for purposes other than the meeting of bank covenants, in at least the following ways (Ex 8): on 18 February 2009 paying Hamton $218,496.91; paying Investec at least $162,706.85 in March 2009 and $180,139.73 on 27 April 2009 (i.e., the Stonington financer); contributing equity to Stonington of $6.2 million on 25 February 2009 and then continuing to make further material contributions to Stonington throughout 2009; on 13 March 2009 paying fees of $270,416 to Ashington Capital; and paying ADF the sum of $155,000 (possibly for its contribution to Double Bay). Most of the money was thus spent on Stonington rather than Double Bay and material amounts of money were used to pay fees and to support ADF.
3. It is noted that Mr Anderson ultimately acknowledged to superannuation fund investors that the capital had not been applied exclusively to the Double Bay Project (see chronology of events above). Ms Garrett and Mr Renauf say that the explanation given in re-examination by Mr Anderson (that payments to the Stonington sub-trust were actually re-payments of amounts that had been "borrowed" from Stonington) should be rejected as a lie. It is said that, aside from the fact that the explanation is unsupported by contemporaneous documents (such as loan ledgers, management accounts or loan documents), it would be an admission of a further breach of the obligation to quarantine assets. It is said that if Stonington was "lending" its equity to other sub-trusts, that would involve a failure to quarantine the assets and liabilities of each of the sub-trusts (this being an example of the second kind of breach identified). It is noted that, given the lack of contemporaneous documents, that "lending" would also be undocumented, and it should be inferred that it would not be on arms' length terms. It is also noted that in the Mapeline proceeding (commenced in 2013), the plaintiff alleged that superannuation fund investors removed Ashington Capital as trustee because of this very breach, referred to as a "technical non-compliance in the allocation of [the] funds".

Failure to quarantine costs and assets within each sub-trust

1. As to the second, reference is made to the Information Memorandum for ADF2, which stated that "all revenue and costs associated with an acquisition, development and sale within an SPV will be quarantined to that SPV".
2. The plaintiff cavils with this description as an obligation as such. In any event, it is clear that Ashington Capital acted contrary to this obligation (or representation) by executing the Investec Stonington Facility on 11 December 2008 on terms that provided for the debt of $10 million to be held at the head trust level rather than to be quarantined within the Stonington sub-trust. Not only did the facility include a charge given at the head trust level, it included a power of attorney that gave Investec the ability to call on the uncalled capital that was held at the head trust. I accept that the Investec Stonington Facility involved both debt and security at the head trust level.
3. Ms Garrett and Mr Renauf say that the gravity of the breach was compounded by Mr Anderson's conduct in attempting to cover the breach up rather than frankly disclosing it to investors. It is submitted that it should be found that Mr Anderson's evidence in relation to the breach displayed contempt for the investors and beneficiaries. Reference is made to the fact that: Mr Steel advised Mr Anderson not to proceed with the Stonington transaction because it was better to lose the deposit than put the entire fund in jeopardy by breaching the Double Bay Facility (Ex 17 at 173); both Ashington and Mr Anderson knew from at least November or December 2009 that some form of head trust debt or security would be required (referring to the disclosure by Ashington of Investec's proposed terms to Hamton); that Ashington, and Mr Anderson, received specific advice from Mallesons about this by 31 May 2009, including the advice that Ashington Capital should disclose this to the superannuation fund investors.
4. Ms Garrett and Mr Renauf accuse Mr Anderson of falsely claiming in his affidavit that he did not know that there were a number of breaches of trust at either the head trust or sub-trust levels (Mr Anderson's 9 December 2019 affidavit at [86]). Ms Garrett and Mr Renauf note that in cross-examination, Mr Anderson accepted that he was aware of "potential breaches of trust" but, when asked whether he understood from the advice that there was a breach of trust, said that "I still today don't know what a breach of trust is, but I know that we certainly made what we believed was the very correct decision to protect investors' capital at that time" and that "I don't believe there was necessarily a view formed [in the Malleson's advice] that there was a breach of trust" (T 465.17-24; T 473.1-10). Ms Garrett and Mr Renauf say that this evidence indicates Anderson's persistent untruthfulness and his defiance of the obvious, even when contained in contemporaneous documents.
5. Ms Garrett and Mr Renauf also contend that Mr Anderson continued to obfuscate this issue by representing to the superannuation fund investors in the quarterly report that it had not been possible to obtain their consent to the issue because the changes were demanded by Investec at the last minute. Ms Garrett and Mr Renauf say that this was untrue because: it was Ashington, not Investec, who had proposed the head trust borrowing some time in November 2008; Ashington had known about the issue for months, as it was negotiating for additional equity; at the same time that Ashington was admitting the breach to investors and promising reform in its practices, it was proposing further breaches by offering up similar security to Investec in respect of the Wylde Street Facility (although I note that in support of this proposition Ms Garrett and Mr Renauf refer to an email of Mr Steel to Ms Briggs seeking advice on how to provide such a guarantee under the Information Memorandum or Trustee deed/constitution); and Ashington had also tried to pledge this equity to Hamton to avoid giving a personal guarantee.

Entry into undocumented "loans" to ADF and Ashington Group

1. As to the third, Ms Garrett and Mr Renauf say that the excess contributions were made by ADF2 to meet obligations to the Project X Hotel Trust, due to "ADF1's cash constraints". They note that on 30 September 2008, the inter-trust loan (but not the loan to Ashington Group) was disclosed to the Ashington Board in a Compliance Report. It is said that Mr Steel and Mr Anderson attempted to remove the loan by reallocating the equity stakes in Double Bay (which they say would itself have involved a breach of trust, namely erasing ADF's equity interest in Double Bay without investor consent). Ms Garrett and Mr Renauf point to Mr Steel's statement to the effect if those payments were treated as a loan, it likely gave Investec rights against ADF under Investec's fixed and floating charge over ADF2.
2. In respect of the "loan" to Ashington Group, it is noted that Mr Anderson's evidence is that he had no idea at the time that the money was transferred out of the trust accounts (T 431.1). However, Mr Anderson said that he did know about the loan's repayment (which Ms Garrett and Mr Renauf say is both incredible and illogical) (T 433.4-15; T 430.25). It is said that Mr Anderson sought to place the blame on his "lazy" accountants (T 430.40-46; T 432.35-41). Ms Garrett and Mr Renauf say that this evidence should be rejected as a lie (and that it was a lie to cover up his obvious self-dealing at the expense of beneficiaries). It is submitted that, given the general liquidity failures of the Ashington Group, the reasonable inference to draw is that the funds were withdrawn from the trust for Ashington Group's benefit so that Ashington Group could continue as a going concern.
3. Insofar as Mr Anderson's evidence was that investors would have to be "really stupid" not to see that was happening, because "blind Freddy" could see it (T 423.40-44), it is said that this should be rejected; that it should be found that superannuation fund investors were not aware of the extent of Mr Anderson's misconduct because Mr Anderson did not tell investors about the breach. Ms Garrett and Mr Renauf say that investors certainly did not give fully informed consent to the breach (and that Ashington itself had not worked out how to document or resolve these issues). It is noted that Mallesons gave advice about the conflicts created by the inter-trust loans as early as July 2009 (Ex 17 at 142), noting that the process set up to manage conflicts was unable properly to resolve the issue, because the conflicts committee for each fund had overlapping memberships.

Failure by Ashington Capital and Ashington Group to contribute capital in cash for the subscription price for units

1. As to the fourth, it is noted that each of Ashington Capital and Ashington Group was under an obligation to contribute capital in cash for the subscription price in units. It is said that Ashington Capital breached these obligations by failing to contribute cash in answer to various calls ($0.825 million in answer to the fourth call on 11 June 2008; $0.6 million in answer to the fifth call on 10 July 2008; $1.125 million in answer to the sixth call on 19 September 2008; $0.375 million in answer to the seventh call on 20 October 2008; $0.375 million in answer to the eighth call for capital on 3 November 2008; $0.3 million in answer to the ninth call on 1 December 2008; and $0.3 million in answer to the tenth call on 5 February 2009); and that Ashington Capital also breached these obligations by failing to require Ashington Group to contribute cash in answer to the relevant calls ($0.275 million in answer to the sixth call on 19 September 2008; $0.2 million in answer to the seventh call on 20 October 2008; $0.375 million in answer to the eighth call on 3 November 2008; $0.1 million in answer to the ninth call on 1 December 2008; and $0.1 million in answer to the tenth call on 5 February 2009).
2. Ms Garrett and Mr Renauf say that Ashington Capital and Mr Anderson understood that the superannuation fund investors required this equity commitment to demonstrate an alignment of interest; and that the failure to contribute was an express breach of the terms of the additional equity raising. It is noted that the superannuation fund investors relied on this breach in the Mapeline proceeding as part of their defence.
3. Insofar as Mr Anderson asserted that the calls were satisfied by a set-off (T 263.47) authorised in 2007 by three separate conversations, Ms Garrett and Mr Renauf contend that this is absurd and plainly false. Ms Garrett and Mr Renauf say that the evidence about these conversations is inconsistent with at least the following: (a) the email from Mr Anderson to Mr Dennis Mothoneos of SCM stating that "Ashington's co-investment is in cash as was the case with ADF No. 1" (Ex 12); (b) the ADF and ADF2 constitutions (cll 6.2, 7.3(b), 7.5); (c) Mr Anderson's affidavit evidence that Ashington Group and Ashington Capital invested in ADF2 on the "same" basis as the superannuation funds (his 19 December 2017 affidavit at [95]); (d) the matter not being mentioned in any of Mr Anderson's earlier affidavits or in any contemporaneous email; and (e) Mr Halligan not being provided with an assumption about these matters.
4. Ms Garrett and Mr Renauf say that the document relied on by Mr Anderson relies on amounts for a set-off that: did not involve the same parties; included "invoices" for amounts said to be owing months or years after the capital call; and includes invoices for development management fees in 2010 despite Ashington Management and Ashington Capital retiring. It is noted that Mr Anderson's evidence about this is that he gave the instructions about the offsetting arrangements after the fact (see T 279.26-29). It is noted that Mr Steel made no mention of this supposed instruction when he admitted to KordaMentha at the time that the contributions had not been met and noted that the amounts may not be recoverable. Ms Garrett and Mr Renauf point to Mr Anderson's acceptance in cross-examination that "without further explanation" it "may appear absurd" that he had thought it was appropriate to meet a call in 2008 with an offset from a year later using money owed to another company (T 323.17-20). Ms Garrett and Mr Renauf say that in this respect Mr Anderson was correct; that the position is absurd. It is noted that Mr Anderson also accepted that there was no suggestion by Mr Steel in that correspondence that there was any set-off arrangement with institutional investors (T 278.45).
5. It is submitted that the failure of Ashington Capital and Ashington Group to contribute almost $4 million was likely a material contributing factor to the solvency issues in ADF2, and the inability of Ashington Capital and Ashington Group to satisfy their financial liabilities; and that these breaches compound the unlikelihood of AOF3 ever being established. It is said that, given that Ashington supposedly intended to use future fees to meet the calls that had already been made, it is difficult to see where the funds would come from to meet the $5 million contribution that it was proposing to make to AOF3.
6. It is said that this is a further reason to find that Ashington Capital and Ashington Group were insolvent from June 2009, and a further reason to find that Ashington Capital and Ashington Group were not a going concern. It is submitted that the solvency of these entities should be assessed on the basis that the obligation to meet these calls was a debt that was owing and that had not been paid.

The double pledge of uncalled equity in relation to the 2008 Double Bay capital call

1. As to the fifth perceived breach (double pledging of the uncalled equity), reference is made to Ms Briggs' representation on 12 January 2009 to Mr Gavin that "Ashington would not promise equity two or three times, nor will investors need to be replenishing the Double Bay undertaking" and Ms Briggs' evidence that with important emails such as this the usual practice was that the text of the email would have been dictated to her or checked by Mr Anderson prior to her sending it (T 803.35-40). It is noted that, less than a month later, Mr Anderson had agreed to "double pledge" the uncalled capital which was meant to be security for the St George/NAB Double Bay Facility ($15 million) as security for the Investec Stonington Facility ($10 million); and that, since only $20 million had been raised, the money was double pledged from the beginning and the situation then worsened as Mr Anderson continued to draw on the capital and use it for various purposes.
2. Ms Garrett and Mr Renauf point out that this was not drawn to the attention of investors until 3 July 2009, when Mr Anderson provided a schedule of debt for ADF2. Reference is made to Mr Steel's communications on 10 July 2009 and 20 August 2009 as to the requirement to notify the banks when Ashington Capital became aware of a potential default, and his view that the Double Bay Facility was most likely was in default.
3. Reference is made to the Mallesons advice as to this issue (that the uncalled capital pledge was a breach of the Information Memorandum) and advising full and frank disclosure of this issue to the superannuation fund investors; and to Ms Briggs' advice that the drawdown notice issued in August 2009 was a possible breach of various directors' duties, including the good faith and reasonable care obligations and the duty to avoid insolvent trading (Ex 17 at 159).

Mr Anderson's personal guarantee over the Hamton Vendor Finance

1. As to the sixth identified breach, the allegation is that the personal guarantee of $2.5 million to secure the Hamton Vendor Finance (that was required to be repaid by 31 August 2009) gave rise to a personal conflict between Mr Anderson's interests and the interests of the superannuation fund investors in the negotiation of the refinance. It is noted that Hamton began recovery proceedings against Ashington Capital in or around September 2009, joining Mr Anderson as a defendant to that proceeding; and that, by the time of the Stonington Capital Raising, Hamton was taking steps to strike out Mr Anderson's defence. Ms Garrett and Mr Renauf say that Mr Anderson therefore had a material personal interest in the Stonington refinance and that this conflict was not reported to the superannuation fund investors until June 2009 and appears never to have been considered by Ashington's corporate governance committee (whose role included the management of conflicts).
2. Ms Garrett and Mr Renauf say that superannuation fund investors were understandably concerned that Mr Anderson's actions at this time (particularly in pressing the Wingate Proposal) were focussed on his personal desire to avoid bankruptcy (referring to the 27 November 2009 internal HESTA memorandum - see above). However, Mr Anderson denied that the personal guarantee made the Hamton litigation the "biggest risk" from his perspective, stating that "the debt issue and repayment was a bigger issue for Ashington than my personal guarantee" (T 478-479).
3. It is submitted that it should be inferred that Mr Anderson knew that this was a material conflict that should have been disclosed at the earliest opportunity; and that Mr Anderson did not follow the proper procedure for addressing conflicts. It is said that this was clearly a matter about which, according to the terms of the Information Memorandum, the conflicts committee ought to have made a decision, and then referred the issue to investors for approval. As such, it is submitted that any suggestion by the plaintiff that the Wingate Proposal did not require investor approval would be rejected.

Payment of "bonuses" when Mr Anderson knew there was no entitlement to the funds

1. The seventh alleged breach (which is not given as much emphasis as the first six) relates to various payments made from 7 October 2008 by Ashington Management to Josloe (a company controlled by Mr Anderson). The ledger recorded those payments under the heading "bonus payable", in an account that remained in debit. It is said that Mr Anderson knew that he had no entitlement to the funds because Mr Steel had reminded him in the months before that the directors had agreed not to take bonuses. Ms Garrett and Mr Renauf say that, even though these are small amounts, they demonstrate on Mr Anderson's part a willingness to treat the company's funds as his own. It is said that, while these were not trust funds, the manner in which funds were "borrowed" from the trust to fund the Ashington Group suggests that Ashington Management's capacity to make these payments to Mr Anderson was in part funded by trust proceeds. It is said that Mr Anderson's statements about these matters should be treated with scepticism.

Remaining breaches

1. As to the disclosure obligation breaches (i.e., its obligation to provide superannuation fund investors with quarterly reports informing them of acquisitions, project delivery and financial status, marketing and sales of each project, and distributions), these arise by failing to disclose significant matters to the superannuation fund investors, including that: the Investec Stonington Facility had been executed on 11 December 2008 on terms that provided for security to be given at the head trust level rather than to be quarantined within the Stonington sub-trust; Ashington had agreed to pay a $20 million fee to Valad in connection with the Noosa Project; and that various loans had been made to ADF and Ashington Group which were undocumented, on terms that were not arm's length, and likely unrecoverable.
2. Reference is made to the statement by Mr Steel to Mr Anderson on 25 June 2009 (Ex17 at 87) that "[w]e are continually knocked for selective disclosure ... and we continually ignore this criticism by being selective in our disclosure". Ms Garrett and Mr Renauf say that members of Ashington staff were aware from at least July 2009 that there was a "high risk" that Ashington would default in making the payment to Valad (Ex 33 at 528-331). Reference is made to the 3 October 2009 email from Mr Steel to Ms Garrett as to this issue and to KordaMentha's report of 23 November 2009 which identified the $20 million fee to Valad and stated that "whilst the fee payable may be capitalised, it is likely that impairment testing will be required resulting in further write downs".
3. It is said that Ashington Capital was also in breach of its accounting and audit obligations. It is noted that Ashington Capital was required to distribute audited financial statements of ADF2 within 120 days of the 30 June balance date. Audited financial statements for the 2008 year were not issued to investors by 31 October 2008. An Ashington Board Meeting paper dated 16 December 2008 stated that, "[i]t is expected that audited financial statements will be issued to investors during the week ended 12 December 2008".
4. Ms Garrett and Mr Renauf say that the reason for the failure to provide accounts appears to have stemmed from significant audit concerns raised by the auditors, pointing to the 30 October 2009 email (see chronology above) from Ashington Capital's auditor to Mr Steel, attaching a draft letter to ASIC setting out RSM Bird Cameron's view that Ashington was in financial difficulty; and the revised letter prepared on 10 November. Reference is also made to Mr Steel's 12 November 2009 explanation for the audit delay (as to which see the chronology above).
5. Finally, reference is made to the alleged breaches by Ashington of all of its material finance facilities (as summarised in Annexure A to their closing submissions). Ms Garrett and Mr Renauf say that Mr Anderson's evidence (to the effect that the banks would never enforce against Ashington) should be rejected as implausible. Ms Garrett and Mr Renauf point out that the contemporary notes prepared by Westpac, one of the financiers of Ashington, make clear that in 2009 there were a number of parties who could "collapse this group" and that unless the directors were able to raise more equity in the short term, Ashington would run out of working capital and likely be forced into voluntary administration.

PPB's breach of trust pleading

1. For its part, PPB pleads a breach of trust in its defence as follows: 141. In further answer to paragraphs 180 and 181 of the 2FASOC, PPB: … (b) says that even if PPB had not engaged in the conduct alleged in the 2FASOC: … (v) further or in the alternative by reason of the matters pleaded in subparagrahs 34(s) to 34(se) above ACPL as trustee of ADF was not entitled without the fully informed consent of the ADF2 Investors or without their ratification of ACPL's breach of duty as trustee described in subparagraphs 34(s) to 34(se) above: (A) to borrow or raise funds in order to refinance or otherwise to permit ACPL as trustee of ADF2 to repay, the Investec Stonington Facility (Investec Refinance)' or (B) to grant any security interest in respect of any asset of ADF2 or the Stonington Trust to secure any Investec Refinance' or (C) to use any of the income or assets of either ADF2 or the Stonington Trust to repay any Investec Refinance, as such steps would have constituted breaches of trust involving the preferment of ACPL's personal interests over those of the ADF2 Investors (vi) in the premises the plaintiff cannot for the purposes of establishing causation of loss set up a counterfactual in which the Stonington Capital Raising (or any raising of funds by ACPL as trustee for ADF2 for the purpose of repaying the Investec Stonington Facility) was or might have been successful as any such capital raising would itself have been a breach of trust…
2. PPB relies on this for the argument that Ashington Capital cannot raise, for the purpose of the counterfactual analysis, the prospect of a successful Stonington Capital Raising or execution of the Wingate Proposal, because these proposals would have involved breaches of trust on the part of Ashington Capital (for the reasons that I set out in due course in considering the causation issue).

Plaintiff's response to allegations of breach

1. The plaintiff says that although Mr Anderson was criticised for the entry into the Investec Stonington Facility, no defendant put to him that there was some other better course that he should have adopted. It is said that this is critical to any allegation of wrongdoing. Complaint is made that much of the cross-examination of Mr Anderson on this issue alleged wrongdoing or breach of obligation without properly identifying the source of the obligation that was breached or the nature of the wrongdoing. Further, it is said that Mallesons did not advise Mr Anderson that that conduct was in breach of trust. The plaintiff accepts that entry into the Investec Stonington Facility was inconsistent with the intention expressed in the ADF2 Information Memorandum. However, it is said that that fact alone does not make it a breach of trust (a matter said to be explicitly acknowledged by the Information Memorandum). Indeed, it is said that, if there was no better option for investors (other than breaching the Stonington contract, losing the deposit, and making the fund liable for damages), then it might well have been a breach of Ashington Capital's duties as trustee not to accept the terms offered by Investec.
2. (Pausing here, that gives rise to an interesting debate as to what a trustee ought to do if faced with the dilemma here postulated - one might well think that this would be a situation where judicial advice might be sought or, if that not be an appropriate case because it would involve determination of contested issues as to rights of beneficiaries or the like, that a prudent trustee might seek absolution in advance for a proposed breach of trust (see generally, Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42). Here, to the extent that there was any concern that breach of the Information Memorandum might be a breach of trust - and I understand the distinction being here drawn between failure to honour a representation made in an Information Memorandum, which may or may not ultimately be a breach of trust; and failure to act in accordance with express obligations under the trust deed - the only conclusion I would here make is that Mr Anderson appears to have been prepared to take the risk of committing a breach of trust (albeit that it is said that this was in order to avoid a greater loss to the beneficiaries), which would still be relevant to the issue as to the loss of trust and confidence on the part of the superannuation fund investors.)
3. Second, it is said that there is no merit to the suggestion advanced in cross-examination that Mr Anderson should have consulted with the superannuation fund investors before entering into the Investec Stonington Facility. It is said that nothing in the trust documents suggests that this was required, or appropriate; and that no witness for the superannuation fund investors suggested that they expected to be consulted as the transaction occurred, or that they would have made any other decision in the circumstances. Pausing here, whether or not there was any legal obligation to consult with the superannuation fund investors at that time, it is relevant to note that after disclosure in relation to the non-compliance with the Information Memorandum and at a time when the position in relation to refinancing seems to have been of no little urgency, the superannuation fund investors clearly sought through their lawyers to be consulted before decisions were made in relation to the refinancing and Mr Anderson did not do so before signing the Wingate Proposal.
4. Third, the plaintiff says that there is no merit to the suggestion that Mr Anderson sought to deceive the superannuation fund investors about the fact that the Investec Stonington Facility was borrowed at the head trust level. It is said that that suggestion was made on the basis of the fact that the email of 19 June 2009 did not attach the Investec Stonington Facility. However, it is noted that Mr Hartley accepted that reading the documents provided by Mr Anderson on 19 June 2009 revealed to him that the facility had been entered into at the head trust level. The plaintiff maintains that the fact that the borrowing had been undertaken at the head trust level was readily apparent from documents included in that pack identifying Ashington Capital as trustee for ADF2 as the borrower, including the company guarantee warranty and security documentation. (Pausing here, whether concerns of the superannuation fund investors or their asset consultants were well-founded in this regard does not seem to me to be to the point. The fact is that superannuation fund investors clearly had a perception at that time as to a breach of trust or the like. Indeed, Mr Gavin went so far as to suggest there might be fraud, which must surely be relevant to the issue as to their lack of trust and confidence in Ashington and Mr Anderson; that being relevant at the very least when assessing the counterfactual propounded by the plaintiff.)
5. Fourth, it is said that the fact that Mr Anderson had given a personal guarantee to support the vendor finance was not, of itself, a matter of particular concern to investors (referring to Mr McCusker's evidence). That may or may not have been the case. It did, however, give rise to at least a potential conflict of interest on Mr Anderson's part which he does not appear to have recognised at the time.
6. I consider these issues, so far as relevant, in considering the submissions on causation in due course.

Defendants' claim that Ashington insolvent as at 30 September 2009

1. The various defendants raised issues as to the solvency of the Ashington companies, the trusts and the sub-trusts (an issue to which, as noted above, there was some expert evidence).
2. Broadly, it is submitted that, in the second half of 2009, and more particularly as at 30 September 2009, both Ashington Capital and Ashington Management, as well as most of the trusts and sub-trusts, were unable to pay all of their debts as and when they fell due (for reasons that had nothing to do with the conduct or activities of the defendants). It is said that the plaintiff's submissions that the Ashington business was a going concern if the Stonington Capital Raising had completed must be considered in this light.
3. Albany does not plead that the Ashington companies or trusts were insolvent. Rather, Albany pleads (at [64(gg)]) that "the Ashington companies and the assets over which they had control were illiquid, under significant distress and of questionable value as at mid-late 2009".
4. In that regard, Albany points to the distinction observed by Mr Hall (T 1295.1-33) between insolvency in accordance with the statutory definition and incapacity to fund business operations (the latter being in the defendants' submission more significant in the present case). Further, Albany says that the distinction between solvency of the trusts/sub-trusts and solvency of the Ashington companies is of importance.
5. It is said that Ashington Capital and Ashington Management had suffered long-standing solvency issues; noting that it appears that as far back as 2007 Ashington entities had stopped paying superannuation; that, from at least 30 June 2007, the consolidated Ashington Group had increasing statutory taxation and payroll liabilities which increased from $721,825 in 2007 to in excess of $3 million by 30 June 2009; and that from at least 15 March 2007 (if not a year earlier) Ashington had a reputation from of not paying creditors within payment terms (Ex 17 at 12-13).
6. Mr Anderson in his oral evidence accepted that: the Ashington companies, and the ADF funds in particular, were "slow paying" everyone in their whole business (T 939.40); and, as at 1 July 2009, the Ashington companies were experiencing "cash flow challenges" (T 326.5-12), ADF was having financial "challenges" and the debt equity position of the funds was a "looming issue" (T 327.1-34).
7. Reference is made to the emails on 12 January 2009 and in March 2009, referring to cashflow difficulties, to the demands for payment and the winding up applications that were made (see chronology above), including the commencement of proceedings in late September 2009 by Savi Communications (in respect of a debt ultimately paid by a third party), which it is said, Ashington appears to have had no intention or ability to repay.
8. Reference is also made to Mr Steel's 22 July 2009 email and to Mr Marsden's communication on 26 August 2009 (as to the position) and the response to this; as well as the recognition in the First PPB Report dated 14 August 2009 that a critical flaw in the structure of the fund was that Ashington Capital as head trustee could be wound up if any of the debts was enforced. It is noted that the sub-trust structure was a source of fundamental risk because even an unsecured creditor had the power to collapse the whole fund. It is said that any submission by the plaintiff that this issue had resolved itself should be rejected; as resolution required Ashington Capital's replacement as trustee and the introduction of separate trustees for each of the projects.
9. As to the position of the financiers, on 19 August 2009, Investec demanded immediate repayment of the debt under its $10 million mezzanine facility, also making demand on the guarantors; and by 9 September 2009, Investec was considering the appointment of receivers. (Albany emphasises that the Investec Stonington Facility had expired almost a month before Ashington took steps to source alternative finance in mid-September 2009.) This debt is significant in that it affected the solvency of the head trusts, not just the Stonington sub-trust; and Albany emphasises that there is no suggestion that Investec ever extended the due date or otherwise gave time to pay, notwithstanding that it did not immediately take steps to enforce its rights. Accordingly, Albany submits that those trusts were and remained insolvent after 19 August 2009, notwithstanding any hope or expectation that replacement funding might be obtained or that assets might be sold.
10. The Hamton Vendor Finance (of around $2 million), which had already been extended, was due and payable on 25 August 2009, together with penalty interest. Neither the Stonington sub-trust nor ADF2 had capacity to repay immediately that debt. In September 2009, Hamton commenced proceedings to recover that debt; judgment was entered in its favour on 7 December 2009. Thus, it had remained due and payable without any form of extension from 25 August 2009.
11. The Westpac Stonington Facility of $23 million expired on 26 August 2009 and Westpac reserved its rights in respect of that default. Again, Albany notes that there is no evidence of extension of due date or agreement to give time to pay. Accordingly, it is submitted that neither the Stonington sub-trust nor ADF2 had the capacity immediately to repay $23 million at any time after 26 August 2009; and that the sub-trust was and remained insolvent after that date.
12. On 30 September 2009, the NAB/St George senior debt facility on the Double Bay development of $6 million was not repaid; thus the facility went into default. None of the Project X Hotel sub-trust, ADF or ADF2 had the capacity to pay that amount on 30 September 2009. On 2, 6 and 9 October 2009, notices of default were issued and NAB/St George subsequently appointed KordaMentha and prepared a receivership plan. Accordingly, Albany notes that the debt remained due and payable without any form of extension from 30 September 2009.
13. The creditor summaries for Ashington entities and the various trusts at 30 September 2009 disclose creditors of: (a) $939,690.27 for the Project X Hotel Trust, of which over 70% were aged over 60 days; (b) $1,269,327.23 for the Stonington Trust, of which over 90% were aged over 60 days, and over 70% were aged over 90 days; (c) $522,295.10 for the 10 Wylde Street Trust, of which over 90% were aged over 60 days.
14. By 7 October 2009, Mr Dedes had sent an email referring to insolvency rumours. On 8 October 2009, there was communication within Ashington as to staff costs and on 12 October 2009 there was a meeting in which there was reference to a running schedule of creditors and ongoing difficulties in October 2009. (Reference is also made to the November communications from Mr Steel (see chronology of events) as to the account basically being frozen.)
15. Mr Anderson accepted that: by 16 October 2009, over $900,000 of creditors had been unpaid for over 90 days in the Stonington Trust (T 685.32); by early November 2009, head office expenses were not being paid, even in respect of very small amounts (T 686.6); as at 4 November 2009, ADF and ADF2 were "facing a number of financial challenges" (T 478.5); by 10 November 2009, "to some extent", creditors of Ashington in relation to Double Bay "couldn't be paid as and when their debts fell due … [but] as and when funds could be available", including in relation to "quite small amounts, some of which had been outstanding since May 2009" (T 686.25-687.13); and by 23 November 2009, the Ashington Group's financial difficulties, financier defaults and growing list of ageing unsecured creditors "needed resolution and a way forward" (T 547.7-19). Mr Anderson also accepted that, throughout the course of 2009, Mr Steel had expressed increasing concerns about the financial position and liquidity of the funds (although Mr Anderson did not accept those concerns were necessarily warranted) (T 548.15).
16. Meanwhile, on 31 October 2009, the Investec senior debt facility for the Wylde Street development ($10.78 million) expired and a demand for repayment of that debt was issued on 3 November 2009.
17. On the question of insolvency, the defendants point to: first, the lack of audited accounts for Ashington Capital, Ashington Management or the trusts for the 2009 financial year (pointing to the draft letter prepared by Ashington's external auditors, RSM Bird Cameron, on 29 October 2009 to ASIC); second, (consistent with the auditors' views at the time) the evidence that Ashington Capital did not have any means to pay several of its financiers or to continue to operate several of the projects held in the sub-trusts; and, third, that Ashington Management was also in financial difficulties and could not pay its debts when they fell due.
18. As to the first, it is noted that none of the matters referred to by RSM Bird Cameron (the impact of the economic conditions experienced by the sector which had the dual effect on both sales generated and property valuations; difficulties in obtaining finance and funding; the recent unsuccessful development application for the Double Bay Property) had anything to do with the activities of the defendants the subject of these proceeding; and pointing out that Mr Steel had forwarded the draft letter to Mr Anderson (and Ms Briggs) commenting that "this may be something that Investors would be interested in". It is noted that in a separate email on 10 November 2009 to Ms Briggs, Mr Steel had stated that he could not and would not certify that Ashington Capital was able to pay all of its debts as and when they are due as all of Ashington Capital's cash on hand was committed to supporting the St George "MOF" (multi option facility) for all Ashington Group entities. Patersons says that while there is no evidence that the auditor's draft letter was ever shared with the superannuation fund investors; Mr Anderson did share it with Mallesons.
19. By 12 November 2009, Mallesons notified Mr Anderson of Ashington Capital's ongoing obligations to notify ASIC of various circumstances as they arose in relation to its financial services business, including becoming aware of a significant breach of its licence conditions or general licensee obligations under ss 912A and 912B of the Corporations Act. Mallesons also advised Ashington Capital and its directors of the legal implications of trading while insolvent.
20. It is noted that on 12 November 2009, PPB enquired of Mr Steel as to the status of the audited accounts and that Mr Steel reported that the accounts had certain "disclosure/compliance issues" upon which Ashington was seeking RSM Bird Cameron's and Mallesons' advice (as detailed in the chronology).
21. As to the second, reference is made to the financiers' demands referred to above. As to the third, the defendants emphasise this (i.e., Ashington Management's financial situation) in circumstances where the plaintiff claims that Ashington Capital and Ashington Management lost the chance to retain the property management business and receive future income including development management fees.
22. As to the prospect of Ashington securing replacement funding, Albany says that the evidence shows: first, that the terms on which funding was sought were "very attractive" and looked "too good to be true" (indicating, it is said, that this was not an attractive investment and that a significant "sweetener" was required to gain any interest in the proposal); second, per cl 3.2(c) of the Patersons Mandate, that Patersons provided no assurance in relation to the capital raising and there is no evidence that Patersons ever received or provided to Ashington any offers on the terms proposed; third, the fact that investors such as Apex Capital and the Victor Smorgon Group may have been prepared to provide mezzanine funding for the Stonington Project if Ashington was removed and replaced by Acorn and Albany says nothing about the terms, if any, on which they would have been prepared to deal with Anderson and Ashington in late 2009; and, fourth, that the only proposal that Ashington actually received to refinance Stonington was the Wingate Proposal (see Mr Anderson's own contemporaneous report to investors which refers to the "absence of any other offer") and, for the reasons explained in PPB's submissions, Albany says the terms of the Wingate Proposal could not be met (see below).

Solvency of Ashington Management

1. The defendants contend that the solvency of Ashington Management is of much greater significance to the issue of the loss of a chance to continue and develop a business, as that case is now put by the plaintiff (T 1505.18), because, if Ashington Management was, on the probabilities, insolvent in 2009 and, on the probabilities, likely to remain insolvent, even without the removal of Ashington Capital as trustee and Ashington Management as project manager, then that is an important factor relevant to the "'going concern" issue and the business valuation issue. Albany says that the solvency of Ashington Management is intertwined with the capacity of the sub-trusts to pay management fees and thus with the solvency of the sub-trusts, but it is nevertheless relevant to consider the solvency of Ashington Management itself during the second half of 2009.
2. It is noted that neither Mr Gothard nor Mr Melluish addressed the position of Ashington Management, saying that there was insufficient information available to do so at the time they prepared their respective reports, including the joint report. However, Albany submits that there is sufficient evidence available in the proceeding to establish on the balance of probabilities that Ashington Management was unable to pay its own debts as and when they fell due from at least June 2009 (referring, for example, to the creditor summaries detailed above; an "outstanding creditors" table of 9 November 2009 emailed from Ms Briggs to Mr Anderson; Mr Steel's 12 November 2009 response as to the delay of the audited accounts; Mr Steel's email of 10 November 2009 as to the order in which creditors are to be paid - see the chronology; KordaMentha's report dated 23 November 2009). It is said that these financial difficulties, particularly in respect of the payment of creditors, were clearly being experienced across the whole of the Ashington Group.
3. Albany says, significantly, that the profit and loss statement for the financial year ending 30 June 2009 showed a significant loss (of $478,394.91); that the balance sheet as at 30 June 2009 showed a significant deficiency of assets compared to liabilities; that there were substantial liabilities for unpaid taxes and superannuation; that small debts were outstanding for many months; and that the only source of income was from the sub-trusts, including Stonington and Double Bay (T 687.7).
4. The management accounts for August 2009 forecast cash flow losses for most months in 2009 in circumstances that the largest expense category was salaries payable by Ashington Management and the management fees from the sub-trusts were insufficient to meet those expenses. It is noted that there is no evidence of any inclination by directors or shareholders of Ashington Management in 2009 to fund its debts or of their capacity to do so. Mr Anderson confirmed that directors did not in fact inject any capital (T 687.5-15).
5. Albany says that there is evidence that not only were the debts of the sub-trusts being paid by reference to threats of enforcement rather than as and when they fell due but the same applied to Ashington Management. Albany says that, notwithstanding Mr Halligan's suggestion that this situation may simply be indicative of poor bookkeeping rather than insolvency (T 1292.29), the contemporaneous documents do not support that possibility. Albany submits that, based on the contemporaneous material which is available, the probabilities are that Ashington Management was not in fact paying its debts as and when they fell due from at least June 2009, and that the compelling inference is that that was because it could not do so. I agree.
6. Further, Albany notes that, as Ashington Management's income in 2009 depended upon the capacity of the sub-trusts, particularly Stonington and Project X Double Bay, to pay management fees (T 687.7; T 1130.40-50), the prospect of Ashington Management ceasing to be insolvent before it was wound up on a creditor's petition depended upon those sub-trusts continuing to pay management fees. It is noted that this in turn depended upon the Stonington sub-trust obtaining funding of at least $15 million and on the Double Bay sub-trust obtaining funding of at least $6 million. Albany says both were improbable.
7. Thus, Albany says that the probabilities are that, even without any decision by the investors to remove Ashington Management as project manager for the sub-trusts and even without any improper conduct by any of the defendants, Ashington Management would have been wound up in insolvency, if not by late 2009 then in 2010.
8. Further, to the extent that it makes a material difference to the question of the value of the Ashington Management business as at either 30 June 2009 or 30 September 2009, it is said that Ashington Management was insolvent at both those dates and during the period between them, not merely in financial distress.
9. Patersons emphasises in this context that: there are business records in evidence which suggest that Ashington Management was unable to pay its own debts as and when they fell due, prior to 30 September 2009; Mr Anderson made certain admissions about the financial difficulties being experienced by not just the funds and sub-trusts but also Ashington generally, including in respect of the growing list of creditors over the second half of 2009; and Ms Briggs also admitted that part of her role was managing creditors, which included creditors of Ashington Management, in particular those who had commenced legal action in the second half of 2009. It is noted that Ms Briggs also acknowledged that by October 2009, staff cuts had to be made to Ashington Management having regard to the impact of the refusal of the development application for the Double Bay Property.
10. It is noted that, even after 30 September 2009, amongst the superannuation fund investors there was the view that "Craig Anderson is still delusional and still thinks this is a plan to keep his fund (and his business) going" (see Mr Gavin's email on 16 October 2009 at 1.02pm to Mr Fowler and Mr Hastings). Acorn points out that Mr Anderson was still in control of Ashington at all relevant times; and says that the view expressed in this email demonstrates the attitude of the superannuation fund investors towards Ashington with Mr Anderson at the helm.

Determination as to solvency

1. I accept that, on the balance of probabilities, both Ashington Capital and Ashington Management, as well as most of the trusts and sub-trusts, were unable to pay all of their debts as and when they fell due during at least the second half of the 2009 calendar year. I consider that by 30 September 2009 they were insolvent or bordering on insolvent and clearly not a going concern. Of particular significance is not only the inability to pay the debts but also for the auditors to finalise audited accounts and the lack of a source of repayment.

Attribution of knowledge and vicarious liability issues

1. Next I address issues which arose as to attribution of knowledge and vicarious liability (relevant to the claims made against Patersons), bearing in mind that, as observed, by Gleeson JA in Optus Administration Pty Ltd v Wright (2017) 94 NSWLR 229; [2017] NSWCA 21 at [280]: Vicarious liability is to be distinguished from the rule of attribution that a company must necessarily have attributed to it the state of mind of its directing organ under the constitution, that is, (usually) the board of directors, or those relevant agents to whom the directing organ has delegated the conduct of its "directing mind and will".
2. It is significant, in both contexts, whether the relevant knowledge or acts/omissions occurred within the scope of the employee's employment.
3. Those involved within Patersons in various aspects of the relevant events are three of its employees at the relevant time: Mr Shorrocks, Mr Doherty and Mr Carolan. It is not suggested that Mr Shorrocks had any personal knowledge of the impugned conduct on the part of Ms Garrett and Mr Renauf. Rather, the issue arises as to the knowledge and acts/omissions of Mr Carolan (who was Patersons' contact in respect of the Patersons Mandate) and, to a lesser degree, Mr Doherty.

Patersons' submissions as to attribution of knowledge

1. As to the principles applicable to the attribution of knowledge to a corporation, Patersons points to common law principles, including the principle of agency. Patersons notes that the knowledge of an agent is presumed to be that of the principal in circumstances where: the knowledge was acquired within the agent's actual or apparent authority (including in the course of a transaction in which the agent was engaged on the principal's behalf); the agent is under a duty to communicate the knowledge to the principal (noting that in many instances agents are under a general duty to communicate to their principal all material information they possess that pertains to the agency relationship); and the agent is not acting in total fraud of the principal. As to the latter, Patersons places weight on the principle applied in the United Kingdom that the law will not attribute the fraud or other unlawful conduct of the director to the company when it is itself the intended victim of that conduct.
2. Reference is made to the primary rules for attribution of knowledge, concerning identification of the "directing mind and will" of the corporation as stated by Reid LJ in Tesco Supermarkets Ltd v Nattrass [1972] AC 153; [1971] 2 AII ER 127 (Tesco) at 170. The distinction drawn in Tesco at 170 was as between a person who acts or speaks as the embodiment of the company and someone who is merely the company's servant or agent; as to the latter case, it was said that any liability of the company can only be a statutory or vicarious liability.
3. Patersons says that the knowledge of the directing mind of a company will generally not be attributed to a company where the controlling mind was acting outside the scope of his or her authority and only for his or her own personal benefit (or presumably also the benefit of some related third party). The plaintiff says that the argument that conduct not intended to benefit a principal is outside the scope of an agent's authority was rejected in Lloyd v Grace, Smith & Co [1912] AC 716; [1911-13] AII ER Rep 51 (Lloyd v Grace) at 735-738 per Macnaughten LJ, noting that Brennan J observed in National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251; [1986] HCA 21 (National Commercial Banking v Batty) at 276 that Lloyd v Grace established "that a principal is liable for the torts of an agent committed in the course of the business the agent is authorised to transact whether or not the tort is for the benefit of the principal".
4. It is noted that where there may be more than one directing mind and will of a company it is necessary to consider the role and experience of an employee whose belief, opinion or state of mind is said to be attributable to the company (i.e., to specify some person or persons "so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company" - Brambles Holdings v Carey (1976) 15 SASR 270 (Brambles) at 279 per Bray CJ; Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; [1995] HCA 68 (Krakowski) at 582-3 per Brennan CJ, Deane, Gaudron and McHugh JJ). Closeness or connection may be measured by reference to the relevant decision-making process and/or functional unit of the company. Knowledge of directors and senior management will usually be attributed to the company as a result of the application of principles of agency (Tesco at 171 per Reid LJ).
5. As to the question of aggregation of knowledge (relevant where knowledge of particular facts is distributed among a number of individuals such that no single person possesses all information necessary to establish a requisite element of a cause of action), Patersons notes that in Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421; [2016] FCAFC 186 (Kojic), Edelman J (sitting in the Federal Court as his Honour then was) suggested (at [94]) that there was little historical support for a concept of aggregation of knowledge and (at [101]) that there was "scant support in England and Australia for a doctrine which permits attribution to a corporation of an aggregate of the knowledge of various different agents" (see also at [80] per Besanko J; and [67] per Allsop CJ)).
6. Patersons argues that there is particular reluctance to make findings of dishonesty based on the application of attribution and aggregation rules in circumstances where no single person held a dishonest state of mind (citing Armstrong v Strain [1951] 1 TLR 856 at 872 per Devlin J albeit the reference there being to an aggregation of knowledge where there are two innocent states of mind (upheld in Armstrong v Strain [1952] 1 KB 232; [1952] 1 AII ER 139 (Armstrong)); and Frank Hammond Pty Ltd v Huddart Parker Ltd [1956] VLR 496 at 499-500, where Duffy J applied Armstrong).
7. Reference is also made by Patersons in this context to: the observation of Moore J in Elliott v Nanda (2001) 111 FCR 240; [2001] FCA 418 at [170], to the effect that "a corporation does not act fraudulently where several of its employees (involved in a corporation's conduct) possess discrete pieces of information (by itself innocent information) which, if known to one employee, would evidence fraud"; Port Stephens Shire Council v Tellamist Pty Ltd (2004) 135 LGERA 98; [2004] NSWCA 353, where Ipp JA, in the context of an exemplary damages claim, doubted (at [408]) that the requisite mental element could be established by "a theory of collective knowledge"; Australian Competition and Consumer Commission v Radio Rentals Ltd (2005) 146 FCR 292; [2005] FCA 1133 at [176]-[183] per Finn J; and to Bilta (UK) Ltd (in liq) v Natwest Markets plc [2020] EWHC 546 (Ch); [2020] AII ER (D) 82 (Mar) (Bilta (UK) v Natwest), where, in the context of the attribution of knowledge of several employees for the purposes of a claim for knowing assistance, Snowden J observed (at [223]) that the Court should "not, of course, suggest that the separate states of knowledge of [the relevant employees] can be combined in any way for this purpose".
8. In the present case, Patersons submits that there is no room for attributing the requisite knowledge to Patersons based on the primary rules of attribution for knowledge.
9. Patersons accepts that, as head of the corporate finance division, Mr Shorrocks arguably had the necessary seniority within Patersons to constitute the mind of Patersons (at least for the purposes of its capital raising activities) but it says (and I agree - see below) that Mr Shorrocks' state of mind is one without any knowledge of the facts and circumstances here alleged to constitute the dishonest and fraudulent design by the alleged defaulting fiduciaries.
10. As to Mr Carolan and Mr Doherty, Patersons submits that in their appropriate areas, both were far removed from the embodiment of the company.
11. As to Mr Doherty, it is noted that he was not in charge of institutional dealing at Patersons and he did not occupy a position of high-level seniority within the organisation. Instead, it is said that Mr Doherty was a "relatively senior employee" on the institutional sales desk of Patersons (a trader with a book of clients and contacts). Similarly, it is noted that Mr Carolan reported to Mr Shorrocks (who in turn reported to Mr Aaron Constantine, Patersons' Executive Director and Head of Corporate Finance) and it is said that Mr Carolan was evidently several layers below senior management within the corporate finance division. Patersons submits that, within their appropriate spheres, both Mr Doherty and Mr Carolan were a long way from an embodiment of the company.
12. The plaintiff refers to Mr Shorrocks' evidence in cross-examination to the effect that Patersons' role was to market the Stonington Capital Raising, to assist with investor due diligence and assist with financial close (with Mr Carolan principally responsible within Patersons for undertaking those tasks). It is said that, having placed Mr Carolan in that position, Patersons is answerable for the manner in which Mr Carolan has conducted himself in doing the business which it was the act of Patersons to place him in, even if it had not authorised any particular act or omission.
13. Patersons accepts that, as a general principle if a person is granted with authority to act on behalf of a company, by a directing organ of the company representing the directing mind and will, in relation to a transaction (or similar transactions), that person may, along with others, form part of the directing mind and will of the company for the transaction. Thus, it accepts delegation to a person as the directing mind and will of the company for the purpose of performing a particular function or "transaction" in question, without necessarily being its directing mind and will for other purposes. Patersons says that it is a question of fact whether Mr Shorrocks (who signed the Patersons Mandate on behalf of Patersons) and Mr Carolan (an "Associate Director" working under Mr Shorrocks) were both clothed with the necessary grant of authority to act on behalf of the corporate finance department of Patersons for the Patersons Mandate because of their identification as contact persons in the term sheet. However, Patersons emphasises that the corollary of the delegation principle is that it is only the delegated person's acts and knowledge within the grant of authority to act on behalf of the company for the particular transaction that are directly attributed to the company and Patersons emphasises that Mr Carolan's knowledge was inextricably bound up with knowledge substantially acquired from personal communications with his wife (which it says was outside of any authority given to him with respect to the Patersons Mandate and also his contract of employment).
14. As noted above, Mr Carolan was married to Ms Garrett. Patersons admits that Mr Carolan had the knowledge of Ms Garrett by reason of their personal relationship (a proposition that seems surprisingly broadly stated but, as I understand it, is meant to be limited to Ms Garrett's knowledge of the relevant transactions relating to the Stonington refinancing and her employment with Ashington). However, Patersons says that Mr Carolan acquired that knowledge outside the scope of his employment, and his actual or apparent authority under the Patersons Mandate. Moreover, it is said that the acts and omissions of Mr Carolan which are alleged by the plaintiff to establish Patersons' wrongdoing, were also acts and omissions outside the scope of Carolan's employment with Patersons and his authority under the Patersons Mandate. Accordingly, it is submitted that Patersons is not liable for Mr Carolan's conduct. Patersons emphasises the need for the plaintiff to satisfy on the Briginshaw standard, the level of knowledge required to sustain the serious allegations made against Patersons.
15. Further, Patersons says that the principle of attribution of knowledge has no application where the actions of the employee are in total fraud of the interests of the company and the company is itself a victim of the actions of the errant fiduciary and the participating employee. Patersons says that this is an apt description of the present situation, emphasising that the alleged actions of Ms Garrett and Mr Carolan, on the plaintiff's case, operated to deprive Patersons of the prospect of a substantial fee for its capital raising activities under the Patersons Mandate.
16. Patersons says that, in the knowing assistance context, special and more difficult considerations arise when seeking to impute a corporation with the knowledge of its employees (referring to Royal Brunei Airlines v Tan [1995] 2 AC 378; [1995] 3 AII ER 97 and to the dissenting judgment of Van Rensburg JA in DBDC Spadina Ltd v Walton [2018] O.J. No. 578; [2018] ONCA 60 (DBDC v Walton), which reasoning was unanimously adopted on appeal by the Supreme Court of Canada - Christine DeJong Medicine Professional Corp v DBDC Spadina Ltd [2019] 2 SCR 530; [2019] SCC 30). It is noted that Rensburg JA held that: the director's breaches of fiduciary duties were to both the applicants and the respondents (the alleged participants) (at [214]); and that equity ought not to allow a knowing assistance claim in these exceptional circumstances, where one group was defrauded and a claim is made against another group that was defrauded in a similar manner (at [248]); the knowledge of the directing mind of a company will not be attributed to a company where the controlling mind was acting totally in fraud of the company or only for their own benefit (at [232] to [237]); whilst knowing assistance does not require a defendant to have received a benefit, the issue of benefit was relevant to attribution because the very entities sought to be made liable for knowing assistance were themselves victims of the errant fiduciary's fraud (at [234] and [246]); and, where a company is sued for knowing assistance, the plaintiff must demonstrate through evidence that the corporation committed specific acts that helped the errant fiduciary; and that being "used" by the errant fiduciary is not sufficient to find the company liable (at [221]-[231], [246]).
17. Patersons argues that, had it (through Mr Shorrocks) become aware of the alleged conduct by Ms Garrett, it could have brought a claim itself against Ashington under the Patersons Mandate. It is said that, in its dealings with Patersons (including Mr Shorrocks), Ashington had clothed Ms Garrett with actual and ostensible authority to further the Patersons Mandate for the mutual benefit of both parties; and that, by her actions, Ms Garrett caused Ashington to act in breach of the Patersons Mandate by failing to do all things necessary to advance it. Thus, it is said that, on the plaintiff's case, the actions of Ms Garrett and Mr Carolan were contrary to the interests of both Ashington and Patersons; and resulted in Ashington itself breaching the Patersons Mandate. It is said that on such a characterisation of the situation the plaintiff itself would be driven to emphasise that Ms Garrett herself was off on a "frolic of her own".

Plaintiff's submissions as to attribution of knowledge

1. The plaintiff says in response that any argument that knowledge may not be attributed to a corporation from an agent acting contrary to its interests is inconsistent with developments since Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500; [1995] 3 AII ER 918 (Meridian) (citing Hurd v Zomojo Pty Ltd [2015] FCAFC 148 at [168] per Beach J). It is noted that the central proposition advanced by Hoffmann LJ in Meridian, that "an attribution rule for a particular purpose" must be "tailored … to the terms and policies of the substantive rule" of liability at hand, has been readily accepted by intermediate appellate courts in Australia (citing Director of Public Prosecutions (Reference No 1 of 1996) [1998] 3 VR 352 at 354-355 per Callaway JA (with whom Phillips CJ and Tadgell JA agreed); Director General, Department of Education and Training v MT (2006) 67 NSWLR 237; [2006] NSWCA 270 at [16]ff per Spigelman CJ (with whom Ipp JA and Hunt AJA agreed); North Sydney Council v Roman (2007) 69 NSWLR 240; [2007] NSWCA 27 at [28] per McColl JA; Hallmark Construction Pty Ltd v Harford (2020) 294 IR 359; [2020] NSWCA 41 at [73] per Basten JA (with whom Meagher JA and Emmett AJA agreed)). It is said that, on that approach, the recognition that a dishonest agent cannot assert attribution to his or her corporate principal in defending a claim by that principal, on grounds of policy, does not imply that the employer is also immune from the agent's knowledge in a claim by a third party. It is said that so much has been recognised by the Hong Kong Court of Final Appeal (in Moulin Global Eyecare Trading Ltd v Commissioner of Inland Revenue (2014) 17 HKCFAR 218; [2014] HKCU 608 at [80] per Lord Walker of Gestingthorpe NPJ (with whom Ma CJ, Ribeiro PJ and Bokhary NPJ agreed), and twice by the Supreme Court of the United Kingdom, in decisions cited without disapproval by the Victorian Court of Appeal (see Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1; [2015] UKSC 23 (Bilta (UK) v Nazir) at [85]-[86] per Lord Sumption JSC, [208] per Lord Toulson and Lord Hodge JJSC; Singularis Holdings Ltd (in liq) v Daiwa Capital Markets Ltd [2020] AC 1189 at [30] per Baroness Hale of Richmond PSC (with whom Lord Reed DPSC, Lord Lloyd-Jones, Lord Sales JJSC and Lord Thomas of Cwmgiedd agreed); Australia Kunquian International Energy Co Pty Ltd v Flash Lighting Co Ltd [2020] VSCA 239 at [149]-[150] per Kyrou, Niall and Hargrave JJA).) It is thus submitted that knowledge acquired by Mr Carolan is attributable to Patersons regardless of whether his actions were for the benefit of the company.
2. Patersons accepts that authorities such as Meridian provide for a flexible approach to the attribution of knowledge as each case will largely turn on its own facts and the particular statutory or general law setting (Meridian itself being an example of this). Similarly, Patersons says that references to partnership cases such as Polkinghorne v Holland (1934) 51 CLR 143; [1934] HCA 28 and National Commercial Banking v Batty concern the attribution of conduct in a very different legal context.
3. The plaintiff further says that Patersons has also failed to advance evidence that establishes the pursuit of the plan was totally contrary to its interests. (Pausing here, Patersons responds that there is no substance to this submission. Apart from the fact that it is obvious from the structure of the Patersons Mandate, Patersons says it is not disputed that it received no fee under the Patersons Mandate from the ultimate transaction and that Mr Shorrocks' evidence confirms as much.)
4. As to Mr Shorrocks' statement in cross-examination to the effect that the institutional dealing side of Patersons would generally earn a fee for effecting transactions on behalf of institutional clients with whom Patersons had relationships. The plaintiff says it should be inferred that Mr Doherty perceived that a benefit to his relationship with Mr Routley (from which Patersons would generate fees) arose by introducing Mr Routley to a transaction which accorded with Mr Routley's expressed preference to "invest in the manager". (Apart from the complaint that this allegation forms no part of the plaintiff's case as pleaded or particularised, Patersons says that the plaintiff has also mischaracterised the effect of Mr Shorrocks' evidence as to the fee earned by the institutional dealing side of Patersons. It is said that that was not some free-standing fee separate from the fee earned under the Patersons Mandate; rather, it was a reference to the portion of Patersons' fee under the Patersons Mandate that the institutional dealing side would receive. Patersons says that, since no fee was received at all under the Patersons' Mandate, Mr Doherty and the institutional dealing arm received no fee. Patersons notes that there is no evidence for the suggestion of some other amorphous benefit Mr Doherty derived in furthering his "relationship" with Mr Routley; nor was any such suggestion put to him by the liquidator (who Patersons notes retains a 10% interest in the plaintiff's claims) in his liquidator examination.)
5. It is further said that even if Mr Carolan's intentions precluded attribution of his knowledge to Patersons, it would not preclude vicarious liability founded upon Mr Carolan's wrongdoing (as to which see below).

Patersons' supplementary submissions as to attribution of knowledge

1. In supplementary submissions as to the issue of attribution of knowledge, Patersons referred to Bilta (UK) v Nazir, which addressed the question of attribution of unlawful acts of a director of a company where the company is the victim of the unlawful act. Patersons urges caution in considering the decision of the Supreme Court of the United Kingdom in Bilta (UK) v Nazir (since its full effect on Australian law has not been comprehensively considered by an intermediate Australian appellate court or the High Court).
2. Patersons notes that Bilta (UK) v Nazir was principally concerned with "primary rules of attribution", to use Hoffman LJ's terminology in Meridian, as to when the knowledge and acts of a company's agents (usually its directors and senior management) will be directly attributed to the company (the issue in that decision being the application of the illegality defence). It is noted that the issue of primary attribution arises in these proceedings because Patersons contends (see its closing submissions at [156]) that neither the knowledge nor acts of Mr Carolan or Mr Doherty is directly attributable to Patersons based on ordinary principles.
3. Patersons refers to the decisions of Neuberger LJ at [7]-[9]; Mance LJ at [35]-[50]; Toulson and Hodge LJJ at [180]-[208], to the effect that consideration must be given to the nature and factual context of the claim in question; context including the factual and statutory background, and also the nature of the proceedings in which the question of attribution arises.
4. As to the plaintiff's reference to various statements of Sumption LJ ([81]-[89]) in Bilta (UK) v Nazir as supporting a very restrictive operation of the so-called "fraud exception" or "breach of duty exception" to the primary rules of attribution, Patersons argues that the thrust of the plaintiff's submission is that the exception is essentially confined to the "paradigm case" of a claim by the company against its directors where the directors seek to impute their fraud or dishonesty back to the company so as to defeat the claim; noting that a distinction was also drawn by the plaintiff with "third parties" suing a company.
5. Patersons accepts that it is generally true that, where the purpose of attribution is to apportion responsibility as between a company and its agents, it might give rise to a different outcome to when the purpose is to apportion responsibility between the company and a third party. However, Patersons point to the following matters in relation to this submission.
6. First, it notes that the exception is not confined to the paradigm case suggested by the plaintiff (referring to the observations of Toulson and Hodge LJJ in Bilta (UK) v Nazir (at [181]) to the effect that the fraud exception is the classic example of non-attribution but not the only exception to the otherwise general rule that attribution occurs (their Lordships expressing the view that the fraud exception "is not confined to fraud but is simply an instance of a wider principle that whether an act or a state of mind is to be attributed to a company depends upon the context in which the question arises"). Patersons points out that the decision from which the exception is often traced (In re Hampshire Land Company [1896] 2 Ch 743) was not an instance of the paradigm case.
7. Patersons also refers to von Doussa J's exposition of the exception in Beach Petroleum NL v Johnson (1993) 43 FCR 1 (Beach Petroleum) at 31-32, where the limitation on the exception identified was where the director's activities were partly for the benefit of the company. Patersons notes that in the present case Mr Carolan's activities were not partly for the benefit Patersons and says that there has been no suggestion otherwise. Further, it is noted that (as noted in Bilta (UK) v Nazir), the exception has been deployed in situations where the issue is the legal effect of relations between the company and a third party.
8. In that regard, Patersons emphasises its submission that attribution does not apply where the party seeking to rely on attribution (the plaintiff), as against the other party to the transaction (Patersons), was itself engaged in the very fraud and deception about which it complains. Patersons says that the joint conduct of Ms Garrett and Mr Carolan was clearly conduct between a husband and wife (and not their respective employers) and to the mutual detriment of both Ashington and Patersons; and submits that this is also a relevant consideration in assessing whether vicarious liability should be imposed).

Determination

1. Generally, the state of mind of an individual who, on the facts, acts as the directing mind and will of a company, will be imputed to the company. It is broadly accepted (and does not appear to be in dispute between Patersons and the plaintiff) that individuals who may constitute the directing mind and will of a company are more likely to hold senior roles as directors and officers of the company, although this is ultimately a question of fact. However, an individual may also represent the directing mind and will of a company with respect to a particular transaction, if that individual has been granted authority to act on behalf of the company in relation to that transaction (see Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 225 FLR 1; [2008] WASC 239 at [6143]-[6144] per Owen J). Patersons does not cavil with this proposition.
2. A company will not be imputed with the knowledge of the relevant individual unless that individual was acting with the scope of his or her actual or apparent authority (Beach Petroleum). Further, the company will not be imputed with the knowledge of the agent if that knowledge is obtained by the individual otherwise than in its capacity as agent, unless the agent was under a duty to communicate the information to the company and the company under a duty to investigate it (Halsbury's Laws of Australia at [120-3045]; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 (Farah Constructions) at [127] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ). Further to that point, knowledge that is acquired privately by the agent or in a previous transaction is not necessarily imputed to the principal (El Ajou v Dollar Land Holdings Plc [1993] 3 AII ER 717 at 741 per Millett J). The agent's knowledge will be imputed to the company regardless of whether the agent acted for the benefit of the company (Lloyd v Grace; Beach Petroleum).
3. The issue of aggregation of knowledge was not raised by the plaintiff, but it was addressed in some detail by Patersons. The authorities diverge on whether the knowledge of a number of agents to a transaction can be aggregated to ascertain the company's state of mind. This debate turns on an interpretation of the High Court's reasons in Krakowski; and in particular, the statement (at 583) that "a division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them".
4. In Westpac Banking Corporation v Bell Group (in liq) (No 3) (2012) 44 WAR 1; [2012] WASCA 157 (Bell Group), Drummond AJA (with whom Lee J agreed on this point at [1100]) interpreted Krakowski as a case "in which knowledge held by separate employees and agents of a company was aggregated to enable a finding that the company had a fraudulent state of mind not held by any individual employee"; and understood the High Court to have justified this approach because the various officers, employees and external agents "had responsibility to act for the company in different aspects of the one transaction" (see at [2183]-[2184]).
5. Edelman J, then sitting in the Full Court of the Federal Court, took the view in Kojic (at [149]) that the Bell Group decision on this point was plainly wrong for multiple reasons, including that (contrary to the understanding in Bell Group), the High Court did not aggregate the knowledge of the three relevant agents in Krakowski; rather, the High Court considered that the lack of fraudulent knowledge on the part of the agent that made the false representation did no dispose of the matter, as two other agents of the impugned company possessed the relevant knowledge that amounted to fraudulent intention (at [125]). Allsop CJ agreed with Edelman J on this point (see at [31], [62], [65]); as did Besanko J (at [78]). I do not propose to detail the extent of the Full Court of the Federal Court's reasons; however, I note that I respectfully consider the reasons of the Full Court of the Federal Court persuasive in relation to this issue. Regardless, while this point was argued by Patersons, I note that the plaintiff has not made submissions on aggregation of the knowledge of the Patersons employees and it does not appear to form part of the plaintiff's argument or their particulars of knowledge (Ex L).
6. As to the so-called "exception" to attribution, the ordinary rule of attribution does not apply where the person whose knowledge is sought to be attributed to the company acted totally in fraud of the company with respect to the transaction, or as a whole; and not partly for the company's benefit (Beach Petroleum). As stated by von Doussa J in Beach Petroleum, "[i]f the director is guilty of fraudulent conduct which is not totally in fraud of the corporation, and by design or result the fraud partly benefits the company, the knowledge of the director in the transaction will be attributed to the company". In Bilta (UK) v Nazir, Neuberger LJ (with whom Clarke and Carnwath LJJ agreed), stated (at [9]) that this rule "is certainly not limited to cases of fraud", and considered that: … the question is simply an open one: whether or not it is appropriate to attribute an action by, or a state of mind of, a company director or agent to the company or the agent's principal in relation to a particular claim against the company or the principal must depend on the nature and factual context of the claim in question.
7. (See also the judgment of Toulson and Hodge LJJ at [181].)
8. As adverted to above, I find that Mr Shorrocks' knowledge, as head of the corporate finance division of Patersons, was attributable to Patersons. Mr Doherty's knowledge is not attributable to Patersons on an application of the primary rules of attribution. Even within the transaction, Mr Doherty's level of involvement and decision-making were below that of a "directing mind and will". As to Mr Carolan, I accept that, to the extent that he was subject of at least an informal delegation by Mr Shorrocks of responsibility under the Patersons Mandate his knowledge may be attributed to Patersons. However, I have concluded that the relevant knowledge (of Ms Garrett's so-called plan) was acquired outside the scope of his employment, and hence is not properly to be attributed to Patersons. I reiterate that I do not consider that the knowledge of Mr Shorrocks, Mr Doherty and Mr Carolan can be aggregated so as to construct a state of mind held by Patersons.
9. In those circumstances it is not strictly necessary to consider the ambit of the "fraud" exception to the principles of attribution of knowledge to a corporate entity. I consider that there is force to the submission of the plaintiff that the fraud exception is more applicable where the attribution of knowledge is being raised in circumstances where the claim is for fraud against the employer, but I accept that that is not the only circumstance in which it would be inappropriate to attribute knowledge to the company. The concerns raised by Patersons in that context might more appropriately be dealt with in moulding the equitable relief to suit the particular circumstances. Nevertheless, had it been necessary to consider the exception, I would have found that, as Mr Carolan's actions were clearly in fraud of Patersons, and its interests and obligations under the Patersons Mandate, and Patersons did not benefit from those actions (and indeed lost the potential to receive a fee had the mandated capital raising been successful), Mr Carolan's knowledge should not be imputed to Patersons.

Vicarious Liability

1. As an alternative argument, the plaintiff contends that Patersons is vicariously liable for Mr Carolan's and/or Mr Doherty's conduct. Patersons says that the application of the doctrine of vicarious liability to equitable liability remains uncertain. Patersons points out this question arises only if it is concluded that the knowledge and acts of Mr Carolan and Mr Doherty are not attributable to Patersons under the primary rules of attribution.

Patersons' submissions - vicarious liability

1. It is noted that vicarious liability is founded, broadly, on the premise that an employer is liable for the wrongdoing of an employee where that wrongdoing is done in the course of the employee's employment (citing Deatons Pty Ltd v Flew (1949) 79 CLR 370; [1949] HCA 60 at 381 per Dixon J, as his Honour then was).
2. Reference is also made to New South Wales v Lepore (2003) 212 CLR 511; [2003] HCA 4 (NSW v Lepore) (at [40]; [51]), where Gleeson CJ noted the distinction between unauthorised acts which are within, and those that are outside, the course of the employment; and referred (at [42]) to Sir John William Salmond's Salmond on Torts (9th ed, 1936, London: Sweet & Maxwell) (Salmond), where it is said that "an employer is liable even for unauthorised acts if they are so connected with authorised acts that they may be regarded as modes - although improper modes - of doing them, but the employer is not responsible if the unauthorised and wrongful act is not so connected with the authorised act as to be a mode of doing it, but is an independent act". Patersons notes the limitation on the test, as articulated in Salmond, as noted in Lloyd v Grace at [733] and NSW v Lepore at [228], that even where the fraudulent employee acts for its own benefit and not the benefit of the employer, the employer may be liable for "the particular act" performed without authority where it has placed the employee in a position "to do that class of acts" giving rise to the liability.
3. It is noted that in NSW v Lepore (at [231]), Gummow and Hayne JJ identified two elements indicative of vicarious liability: first, that vicarious liability may exist if the wrongful act is done in intended pursuit of the employer's interests or in intended performance of the contract of employment (which Patersons says would not cover the conduct of Mr Carolan in this case); and, second, that vicarious liability may be imposed where the wrongful act is done in ostensible pursuit of the employer's business or in the apparent execution of authority which the employer holds out the employee as having.
4. Patersons says that, in the present case, the person at Ashington (with ostensible authority herself) to whom Mr Carolan's actions were being projected or "held out" was Ms Garrett (the alleged errant fiduciary). It is noted that Gummow and Hayne JJ (at [232]) emphasised as relevant the question as to who stood to benefit from the employee's conduct. (This seems to overstate their Honours reasons, which noted that light may be shed on the central question of "what the employer was actually employed to do and held out as being employed to do", by looking to the "subsidiary question of who stood to benefit from the employee's conduct" - but their Honours cautioned "that inquiry must not be permitted to divert attention from the more basic question we have identified".) Patersons again emphasises that Patersons did not stand to gain from Mr Carolan's conduct since the conduct alleged by the plaintiff served to deny Patersons the prospect of the benefit under the Patersons' Mandate.
5. Patersons refers to the observation by the High Court in Prince Alfred College Incorporated v ADC (2016) 258 CLR 134; [2016] HCA 37 (Prince Alfred College), at [80], to the effect that "the fact that employment affords an opportunity for the commission of a wrongful act is not of itself a sufficient reason to attract vicarious liability"; the majority there considering whether the role given to the employee and the nature of the employee's responsibilities provided not only an opportunity but also was the occasion for the commission of the wrongful act. Similarly, emphasis is placed by Patersons on the decision of the Supreme Court of the United Kingdom in Various Claimants v Wm Morrison Supermarkets plc [2020] 2 WLR 941; [2020] UKSC 12 (Morrison), where it was said (at [35]) that vicarious liability requires consideration of more than whether employment provided an employee with an opportunity to carry out the relevant wrongful act and whether the conduct was exclusive to the employee's duties, as even so, the conduct may so clearly depart from the scope of employment. Their Lords in Morrison also considered it significant that the employee was not acting in furtherance of his employer's business but for purely personal reasons (at [31]-[32]). Reed LJ referred (at [47]) to the distinction drawn by Nicholls LJ in Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366; [2002] UKHL 48 (Dubai Aluminium) at [32], between cases "where the employee was engaged, however misguidedly, in furthering is employer's business, and cases where the employee is engaged solely in pursuing his own interests: on a 'frolic of his own'".
6. As to whether conduct is in the course of employment or, rather, the employee was "on a frolic" of his own, reference is made to origins of the phrase in the summing up of Parke B in Joel v Morison (1834) 172 ER 1338 and to authorities which have applied the doctrine. For example, NSW v Lepore at [46], where Gleeson CJ stated that acts are outside the course of employment when they are independent of the employment "of which no more could be said than that the employment created the opportunity for the wrongdoing"; and Zakka v Elias [2013] NSWCA 119 (Zakka v Elias), where there was no vicarious liability for want of the solicitor's work being undertaken in the scope of her employment (see at [137]-[142]).
7. If vicarious liability applies to Barnes v Addy claims, Patersons accepts that it is responsible for Mr Doherty's knowledge and acts, but contends that Mr Carolan is outside of the operation of principles of vicarious liability.
8. Patersons submits that what is decisive on the present facts is that Mr Carolan's conduct, in assisting to advance what (on the plaintiff's case) was his wife's agenda, was: squarely outside the scope of his employment; directly inconsistent with what he had been tasked by Mr Shorrocks to do under the Patersons Mandate; totally contrary to the interests of his employer (indeed, so contrary to the interests of his employer that Mr Carolan wrote the "we will be shot" email); for his own personal benefit (in furthering the private interests of his wife); undertaken without any disclosure to his superior (Mr Shorrocks); and was conduct enabled from knowledge derived substantially from personal communications with his wife outside the scope of his professional employment with Patersons. Hence, it is said that, the insufficiency of the nexus between Mr Carolan's unauthorised acts, undertaken in combination with the acts of his wife on behalf of Ashington, and the scope of his employment with Patersons, render Mr Carolan's conduct outside any theory of vicarious liability.

Plaintiff's submissions - vicarious liability

1. The plaintiff says that, as Mr Carolan was plainly an employee for whose conduct Patersons was ordinarily liable, the only issue raised is whether he so acted "as to be in effect a stranger in relation to his employer" on "a frolic of his own" (see Bugge v Brown (1919) 26 CLR 110; [1919] HCA 5 at 118, 128 per Isaacs J). It is submitted that English and Australian authority has long rejected the argument that an employee's conduct done without actual authority, and contrary to an employer's interests, is beyond the scope of his or her employment. It is noted that the Privy Council stated in Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1981] 2 NSWLR 1; [1982] AC 462 at 5 that, since the decision in Lloyd v Grace "it has never been held, or contended, that for liability to exist, the act must be done for the benefit of the master". The plaintiff says that the significance of Lloyd v Grace (in recognising vicarious liability for unauthorised acts contrary to an employer's interests) was specifically recognised in the two High Court authorities cited by Patersons in its opening submissions (i.e., NSW v Lepore at [44] per Gleeson CJ, at [110] per Gaudron J, at [229], [232], [239] per Gummow and Hayne JJ; and Prince Alfred College at [48] per French CJ, Kiefel, Bell, Keane and Nettle JJ).
2. Applying the language of Gummow and Hayne JJ in NSW v Lepore, the plaintiff says that, as the "class of acts" that Mr Carolan was authorised to do plainly included marketing the Stonington Capital Raising, assisting with investor due diligence and assisting with financial close, the plaintiff says that Patersons is answerable for his liabilities even if his particular acts or omissions were unauthorised or contrary to Patersons' interests.
3. In supplementary submissions, the plaintiff expanded on the question of vicarious liability, arguing that the application of the principle of vicarious liability to equitable wrongs generally (including knowing assistance) is supported by authority in England, Canada and Australia, by general principles of equity and by the policy considerations underpinning vicarious liability (see Majrowski v Guy's and St Thomas's NHS Trust [2007] 1 AC 224; [2006] UKHL 34 (Majrowski) at [10] per Nicholls LJ).
4. Reference is made to the observation of the plurality in the High Court (Kiefel CJ, Keane and Edelman JJ) 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 [5], that "there is no novelty in equity attributing to one person the wrongful acts of another"; and to the statement of Millett LJ in Dubai Aluminium at [104] that "the vicarious liability of partners for equitable wrongdoing was certainly known to the Court of Chancery at least as early as 1842". It is noted that in both the above decisions, reference was made to Brydges v Branfill (1842) 12 Sim 369 (Brydges v Branfill) at 389, in which solicitors were held jointly and severally liable for a fraud by their client that was known by their co-partner. Millett LJ noted in Dubai Aluminium at [105] that the guilty partner in Brydges v Branfill was "guilty of dishonest assistance, not of knowing or even dishonest receipt, and the only basis on which his partners could have been liable was that they were vicariously liable for his wrongdoing".
5. The plaintiff here submits that vicarious liability has been applied to wrongdoing involving fiduciaries, including knowing assistance, in several cases in the partnership context (Dubai Aluminium at [104]; Strothier v 3464920 Canada Inc [2007] 2 SCR 177; [2007] SCC 24 at [100] per Binnie, Deschamps, Fish, Charron and Rothstein JJ; Northampton Regional Livestock Centre Co Ltd v Cowling [2016] 1 BCLC 431; [2015] EWCA Civ 651 at [45], [89]-[96] per Tomlinson LJ (with whom King and Arden LJJ agreed); and the plaintiff refers to RA Banks, Lindley & Banks on Partnership (20th ed, 2017, Sweet & Maxwell) at [12-89]-[12-91], [12-103], [13-13]).
6. The plaintiff contends that there is no principled basis for distinguishing the vicarious liability of partners from that of employers (noting that when the vicarious liability of partners was codified in s 10 of the Partnership Act 1890 (UK) (and its successors), it was assimilated to that of employers and the same criterion adopted (as recognised in Dubai Aluminium at [106] per Millett LJ)).
7. The plaintiff says that the vicarious liability of employers for equitable wrongs generally was accepted by Millett J (as his Lordship then was) in Agip (Africa) Ltd v Jackson [1990] Ch 265; [1992] 4 AII ER 385 at 296, where an accountant was held liable for acts by his partner and his employee constituting knowing receipt of trust money. Reference is also made in this context to Bilta (UK) v Natwest at [214]-[216] per Snowden J (to which Patersons has also referred, as noted above), where the Snowden J considered that, to the extent that the employees of the relevant company dishonestly assisted in breaches of duty or knowingly participated in fraudulent trading, the relevant company would be vicariously liable for the employees' conduct (the plaintiff thus saying that the application of vicarious liability to equitable wrongs "is now taken for granted in England").
8. The plaintiff points to intermediate appellate authority in Australia in support of it position, noting that in Coulthard, all members of the Supreme Court of South Australia in banco proceeded on the basis that an employer could be vicariously liable for breach of an equitable duty of confidence. King CJ there noted (at 353) that it was "to be expected that equity would follow the law in such circumstances and that the common law doctrine of the vicarious liability in tort of an employer for the acts of employees in the course of their employment would apply in equity to breaches of confidence".
9. The plaintiff says that the maxim that "equity follows the law" (to which King CJ referred in Coulthard) is reflected not only in the recognition of legal entitlements by courts of equity, but also in the application by analogy of common law and statutory rules to equitable rights, duties, powers and liabilities (referring by way of example to Friend v Brooker (2009) 239 CLR 129; [2009] HCA 21 (Friend v Brooker) at [38] per French CJ, Gummow, Hayne and Bell JJ; Gerace v Auzhair Supplies Pty Ltd (in liq) (2014) 87 NSWLR 435; [2014] NSWCA 181 at [71] per Meagher JA, (with whom Beazley P, as Her Excellency then was, and Emmett AJA agreed). Thus, it is said that, in the absence of any "ground for refusing to apply" a rule of law to equitable relations the principle is that equity follows the law (Sexton v Horton (1926) 38 CLR 240; [1926] HCA 25 at 250 per Higgins J); and that where that principle applies, equity follows "the rules of law in their current state" from time to time (Delehunt v Carmody (1986) 161 CLR 464; [1986] HCA 67 at 473 per Gibbs CJ).
10. The plaintiff says that, as vicarious liability would reinforce the strictness of fiduciary obligations, it does not prompt any "concern with proceeding by analogy with tort" of the kind recognised in other contexts (particularly on issues of causation) (the plaintiff there referring to Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 (Canson Enterprises) at [3] per McLachlin J for Lamer CJ and l'Heureux-Dubé J). It is said that, not only would an employer's vicarious liability leave the primary or ancillary liability of the employee intact, but it would further protect the beneficiary against the risk of non-recovery from the employee and furnish an incentive for the employer to deter breaches of fiduciary duties by its employees. Thus, the plaintiff argues that vicarious liability would advance the "goals of equity" in regulating any fiduciary relationship, by serving both "to enforce the trust which is at its heart" and "to deter fiduciaries from abusing their powers" (the plaintiff citing from Canson Enterprises at [3], [10]).
11. As a matter of policy, the plaintiff says that the predominant policy consideration underpinning the principle of vicarious liability is that "under contemporary Australian conditions, the conduct by the defendant of an enterprise in which persons are identified as representing that enterprise should carry an obligation to third persons to bear the cost of injury or damage to them which may fairly be said to be characteristic of the conduct of that enterprise" (citing Hollis v Vabu Pty Ltd (2001) 207 CLR 21; [2001] HCA 44 (Hollis v Vabu) at [42] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ; Ira S Bushey & Sons Inc v United States (1968) 398 F 2d 167 at 171 per Friendly J; Bazley v Curry [1999] 2 SCR 534 at [22] per McLachlin J for the Court).) It is noted that this primary policy consideration was set out by Professor Fleming in The Law of Torts (9th ed, 1998, Law Book Co) at 410, as quoted in Hollis v Vabu at [86] by McHugh J): Most important of these is the belief that a person who employs others to advance his own economic interest should in fairness be placed under a corresponding liability for losses incurred in the course of the enterprise; that the master is a more promising source of recompense than his servant who is apt to be a man of straw without insurance; and that the rule promotes wide distribution of tort losses, the employer being a most suitable channel for passing them on through liability insurance and higher prices… [footnotes omitted]
12. Reference is made to the statement of Nicholls LJ in Majrowski (at [10]) that "the policy reasons underlying the common law principle are as much applicable to equitable wrongs and breaches of statutory obligations as they are to common law torts" and to the observation of Millett LJ in Dubai Aluminium (at [107]) that, given the loss distribution rationale of vicarious liability, "there is no rational ground of restricting the liability to torts, or for excluding liability in equity, particularly when equitable liability often has its counterpart at common law".
13. The plaintiff further says that, as equity is "peculiarly adapted to provide a law of business organisations", equitable wrongs are at least as characteristic of enterprises in an information economy as torts were in an industrial economy (citing Gageler J, writing extra-judicially in ch 8, "Expansion of the Fiduciary Paradigm into Commercial Relationships: The Australian Experience", in Devonshire and Havelock, The Impact of Equity and Restitution in Commerce (2019, Hart Publishing) at 165; Leeming JA, "The Role of Equity in 21st Century Commercial Disputes" (2019) 47 Australian Bar Review 137; cf, GT Schwartz, "Tort Law and the Economy in Nineteenth-Century America: A Reinterpretation" (1981) 90 Yale Law Journal 1717 at 1742-1743). Further, it is said that vicarious liability is at least as effective a deterrent against the commercial misconduct typically regulated in equity as it is against torts which may involve a failure to take reasonable care.
14. As to the first instance decision in Lifeplan Australia Friendly Society Ltd v Woff (2016) 259 IR 384; [2016] FCA 248 (Lifeplan Australia), where Besanko J at [374] was not prepared to apply the principle of vicariously liability for equitable wrongdoing, the plaintiff says that that decision is distinguishable (or should not be followed), having regard to his Honour's reasons.
15. First, the plaintiff says that the proposition that vicarious liability is generally concerned with loss to a third party rather than gains made by a defaulting fiduciary or their employer is inapplicable in the present case, where only equitable compensation is sought.
16. In respect of the second reason (the lack of Australian authority for vicarious liability for equitable wrongs), the plaintiff points out that his Honour declined to follow Coulthard without any suggestion that it was "plainly wrong" (cf, Farah Constructions at [135] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
17. As to his Honour's third reason (that recognition of vicarious liability would "make significant inroads on the carefully constructed rules of third party liability discussed in Barnes v Addy" - at [374]), the plaintiff says that this was expressly limited to the situation there under consideration, namely, one involving the liability of the new employer of the defaulting fiduciary. The plaintiff submits that such a concern has no application where (as here) the question is as to an employer's vicarious liability, applying ordinary principles, for its existing employee's liability arising under Barnes v Addy principles.
18. The plaintiff submits that it follows that vicarious liability applies (subject to its ordinary limitations) to make an employer liable for the employer's employees' knowing assistance to a third party's breaches of fiduciary duty.

Patersons' supplementary submissions - vicarious liability

1. Patersons' supplementary submissions address in some detail the issue of whether vicarious liability applies to equitable wrongs.
2. Patersons submits that the extension of common law principles of vicarious liability to equitable Barnes v Addy claims is not supported by authority; nor is it supported by legitimate modes of development of the common law; or by broader considerations of principle and coherence in the law.
3. As to the question of authority, Patersons refers to the rejection in Lifeplan Australia, by Besanko J (at [362]-[374]) of the application of vicarious liability to equitable wrongdoing; and to the decision by the Queensland Court of Appeal in Illuzzi v Edwards (1997) Q ConvR 54-490; [1997] QCA 204 (Illuzzi) per Fitzgerald P and Lee J.
4. Patersons says that the extension of the common law doctrine of vicarious liability to the distinct species of equitable wrong for knowing assistance in a dishonest and fraudulent design for breach of a fiduciary duty would be a significant change to the existing common law position that can only be taken by the High Court (noting that this was the view Nettle JA, as his Honour then was, in Narain v Euroasia (Pacific) Pty Ltd (2009) 26 VR 387; [2009] VSCA 290 (Narain) at [44], in considering whether to expand the common law principle in Yerkey v Jones (1939) 63 CLR 649; [1939] HCA 3 beyond instruments of suretyship). (I interpose to note that in Narain, Nettle JA stated that "we are not to depart from another state appellate court's interpretation of the common law of this country unless we think it is plainly wrong", a seemingly different proposition from the one put by Patersons.) Patersons points in this regard to the admonition by Gaudron and McHugh JJ in Breen v Williams (1996) 186 CLR 71; [1996] HCA 57 at 115 (Breen v Williams) as to the limits of the development of common law (i.e., that advances in the common law must begin from a baseline of accepted principle and proceed by conventional methods of legal reasoning). Patersons says that the effect of "enmeshing" vicarious liability and the specie of equitable wrongdoing for knowing assistance "would fracture the skeleton of principle which gives the body of our law its shape and internal consistency" (citing Mabo v Queensland (No 2) (1992) 175 CLR 1; [1992] HCA 23 at 29 per Brennan J).
5. Patersons points to the distinct historical and theoretical foundations and rationales for these two separate streams of jurisprudence (vicarious liability and liability for knowing assistance) and makes the following submissions.
6. First, that the doctrine of vicarious liability is an unstable and incoherent foundation for doctrinal expansion into equitable wrongs; and would be at odds with the cautious, incremental approach based on decided cases advanced by the High Court in Breen v Williams. It points to the observation by Professor Atiyah as to the difficulty in identifying a compelling and unifying justification for this species of liability in tort (PS Atiyah, Vicarious Liability in the Law of Torts (1967, Butterworths), ch 2).
7. Reference is made to the observation of the High Court in Prince Alfred College (at [39]) that "[c]ommon law courts have struggled to identify a coherent basis for identifying the circumstances in which an employer should be held vicariously liable" and the conclusion (at [46]) to "continue with the orthodox route of considering whether the approach taken in decided cases furnishes a solution to further cases as they arise"; and to NSW v Lepore (at [106] per Gaudron J).
8. Patersons says that Lloyd v Grace is a problematic case and submits that a majority of the High Court in NSW v Lepore was disposed to explain Lloyd v Grace on an alternative basis or to construe it very narrowly (citing NSW v Lepore at [127] per Gaudron J, at [237]-[238] per Gummow and Hayne JJ, at [343] per Callinan J). Reference is also made to Prince Alfred College at [49]-[50], [56] and [80] in this regard.
9. Patersons argues that vicarious liability should be confined to negligence and good faith torts, noting the observation of Gageler and Gordon JJ in Prince Alfred College at [128], that decisions concerning vicarious responsibility for intentional wrongdoing are particularly fact specific. Patersons says that they provide no general justification for vicarious liability for intentional or dishonest wrongdoing more broadly; and, as such, they provide no principled and compelling justification for extension of vicarious liability generally to equitable claims for knowing assistance in a dishonest and fraudulent design. (Although, I note that (at [80]) in Prince Alfred College, French CJ, Kiefel, Bell, Keane and Nettle JJ stated that, "the fact that a wrongful act is a criminal offence does not preclude the possibility of vicarious liability", referring to Lloyd v Grace, and noted the need to consider "any special role that the employer has assigned to the employee and the position in which the employee is thereby placed vis-à-vis the victim" and particular features including "authority, power, trust, control and the ability to achieve intimacy with the victim". Of course, much of what is said is particular to the kind of case there under consideration. However, the majority's reasons indicate that, where appropriate, vicarious liability may be imposed for intentional wrongdoing; and also highlight the fact specific exercise of assessing whether the employee's acts are within the course of employment.)
10. Patersons says that: the "within the course of employment" test has led to factual distinctions and that the sufficiency of connection test for vicarious liability, and its application under Australian law, is uncertain; and the test itself provides no independent conceptual support for extending vicarious liability into equitable wrongdoing. Patersons argues that the accessorial involvement in the primary breach of fiduciary duty owed by a non-employee to another third party is far from intuitively connected to what the employee has been tasked to do by the employer under the employee's contract of employment (I interpose to note that the correctness or not of this submission could only be determined by application of the facts of each particular case). Patersons says that the difficulty in finding a principled basis for extending vicarious liability to equitable wrongs is that a principled explanation for this branch of the law has itself remained elusive.
11. Second, Patersons maintains that the doctrine of vicarious liability is fundamentally directed to common law torts (not equitable wrongs) and should properly be seen as part of tort law. Patersons points in this regard to the disparate rationales and policy considerations that have been advanced in support of vicarious liability in the employer/employee context, noting that each of these rationales has been discredited to varying degrees as a satisfactory all-embracing theory for vicarious liability. Patersons argues that all the rationales are peculiar to tort law and says that none of these rationales justifies expansion of vicarious liability to equitable wrongs. Patersons notes that the rationale for Barnes v Addy liability is to protect the integrity of the office of fiduciary and "is bound up with the historically strong prophylactic and protective function of equity's trust jurisdiction" (citing P Ridge in ch 6 "Participatory Liability for Breach of Trust or Fiduciary Duty" of J Glister and P Ridge, Fault Lines in Equity (2012, Hart Publishing) at 137). It is submitted that imposing strict, vicarious liability on an employer for an employee's participation in a primary breach of fiduciary duty owed to another person would not rationally serve that function and purpose. While accepting that many "economic torts" have a general affinity with knowing assistance equitable wrongdoing; and many instances of "wrongdoing" are capable of being characterised as either or both economic torts and knowing assistance equitable liability, Patersons says that economic torts should not be conflated with knowing assistance liability in equity (especially for the purposes of the tortious doctrine of vicarious liability).
12. Insofar as there is a suggested competing thesis advanced by Professor Neyer as a justification for the doctrine of vicarious liability (referred to by the High Court in Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161; [2006] HCA 19 (Sweeney) at [12] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ) (in an employer's promise in the contract of employment to indemnify the employee for legal liability suffered by the employee in the conduct of the employer's business), Patersons says that this theory of vicarious liability would not support extension of vicarious liability to knowing assistance in a dishonest and fraudulent design of another.
13. Third, Patersons emphasises the need for coherence in the law and for any change and extension in the common law to be achieved in a doctrinally coherent way. Patersons argues that the effect of applying the doctrine of vicarious liability to knowing assistance equitable wrongdoing would be significantly to extend the field of operation and reach of this distinct species of equitable participatory liability; and would also constitute a significant expansion in the operation of accessorial liability to corporations. Patersons submits that the use of the common law doctrine of vicarious liability to extend the reach of Barnes v Addy liability for knowing assistance would be to commingle two separate and distinct streams of jurisprudence in an unpredictable, unprincipled and incoherent manner (and would not be consistent with the orthodox methods of developing equitable principles).
14. Fourth, Patersons says that there is a conceptual asymmetry with Barnes v Addy (endorsing the reasoning of Besanko J in Lifeplan Australia). Patersons submits that it would attach no-fault liability to a defendant for conduct that is quintessentially fault-based (i.e., that even though the employer's conscience is not ex hypothesi tainted, the employer would be held liable for an equitable wrong that has conscience at its heart). Patersons says that moulding appropriate relief for a defendant in such a circumstance highlights the conceptual asymmetry in combining the common law doctrine of vicarious liability to equitable participatory liability rooted in unconscientious conduct (since the classic remedy for knowing assistance liability of an account of profits would rarely, if ever, be available because the corporation would have derived no benefit to which an account of profits could attach).
15. Fifth, Patersons says that the plaintiff's reliance on English decisions in the partnership context affords no principled justification for the extension of common law vicarious liability for corporations into equitable wrongdoing, noting that Dubai Aluminium is explicable on a different basis (the question before the House of Lords there concerning a claim for contribution against a partner in a firm of solicitors who was held liable for knowing assistance in a fraudulent scheme and turned on the meaning and scope of the phrase "any wrongful act or omission" in s 10 of the Partnership Act 1890 (UK)). (I consider the reasoning in Dubai Aluminium in detail below.)
16. As to the reference by the plaintiff to the observations of Kiefel CJ, Keane and Edelman JJ in Ancient Order of Foresters at [5], Patersons notes that Foresters knew (through the knowledge of its Board and Chief Executive Officer) that the errant fiduciary's company was appropriating the business connections of Foresters' competitors and was found liable accordingly; and that the further question raised was whether further acts of the errant fiduciaries could be attributed to Foresters from when it subsequently employed them on the basis of vicarious liability. It is noted that that issue arose in circumstances where it had already been found that Foresters had assisted the errant fiduciaries in their dishonest and fraudulent design. Patersons says that this is a very different situation to the attribution of Mr Carolan's knowledge and acts to Patersons here, so as to ground equitable liability in the first place. It is said that the observation of the plurality (at [5]) was made in that context and was unremarkable in the observation that equity will sometimes attribute the wrongful acts of one to another. As noted, Patersons points out that the plurality expressly eschewed deciding the issue of vicarious liability and Gageler J (at [64]) concluded the circumstances presented an "inappropriate vehicle for exploring any question of vicarious liability for equitable wrongdoing". (I note briefly that the issue of vicarious liability did not need to be decided by the High Court in Ancient Order of Foresters as to hold Foresters vicariously liable could add nothing to Foresters' duty to account as a knowing participant in Mr Woff's and Mr Corby's breaches of duty, that being the reason why it was inappropriate for the Court to come to a conclusion on the issue in that case, but I deal in further detail with this case below.)

Determination

1. As to the principle of vicarious liability, as emphasised by Patersons, vicarious liability is a form of strict (no fault) liability; a rule of law that imposes liability upon an employer for the acts of its employee notwithstanding that the employer had no involvement in or knowledge of the employee's wrongdoing (see Bartonshill Coal Company v Jane McGuire (1858) 3 Macq 300 at 306 per Chelmsford LC).
2. The liability of an employer for the acts of his or her employee does not extend to acts that occur outside the scope of the employee's employment. As King CJ noted in Coulthard: The vicarious liability of an employer is for a wrongful act committed by an employee in the course of the employment. The liability will attach even to an unauthorised or prohibited act if the act is performed in the course of the carrying out of the employee's assigned or authorised duties, so as to be merely an unauthorised mode of performing the duties. If, however, the employee's act does not occur in the course of the performance of his duties, but is an unauthorised action outside the scope of the employment, the employer is not liable.
3. As already noted, in Australia, the application of vicarious liability to equitable wrongs is unsettled (see Ancient Order of Foresters at [64]). That said the majority (Kiefel CJ, Keane and Edelman JJ) observed in Ancient Order of Foresters (at [5]) that "there is no novelty in equity attributing to one person the wrongful acts of another" (an observation that would no doubt encompass the well-established principles of third-party liability in Barnes v Addy).
4. In Coulthard, the Full Court of the South Australian Supreme Court, considering whether the State could be held vicariously liable for the unauthorised disclosure of confidential information by an unknown employee (or person), held that the State was not vicariously liable for the act of the unknown employee who disclosed the confidential information as there was no evidence to show that the information was taken by a person in the course of their employment. The issue was thus determined by application of the principles of vicarious liability. On the question whether vicarious liability applies to the equitable wrong of breach of confidence raised in that case, King CJ stated (at 535): No authority has come to my attention which establishes that vicarious liability of an employer can exist under the equitable doctrine of breach of confidence. Nevertheless a breach of the equitable obligation of confidence is analogous to a common law tort. It is to be expected that equity would follow the law in such circumstances and that the common law doctrine of the vicarious liability in tort of an employer for the acts of employees in the course of their employment would apply in equity to breaches of confidence. It is to be expected that equity would act upon the conscience of the employer by requiring the employer to accept responsibility for the employee's breach of confidence.
5. King CJ's reasoning was thus on the basis of: first, the analogy of the particular equitable wrong with a common law tort; second, the equitable maxim that equity follows the law; and, third, that equity would act upon the conscience of the employer to accept responsibility for the employee's wrong. The separate judgments of Perry and Debelle JJ in Coulthard proceeded on the basis that vicarious liability applied to equitable wrongdoing. The application of the principle of vicarious liability was thus there applied to the breach of an equitable obligation of confidence (here, it is sought to be applied to a different equitable wrong).
6. Two years later, the Queensland Court of Appeal had cause to consider this issue in Illuzzi. There, the appellant claimed that the particular religious institution in question was vicariously liable for the conduct of the respondent (Edwards) who held an official position within the institution as a "counsellor". The appellant had succeeded at first instance in obtaining a judgment against Edwards, however, it was unsuccessful as against the religious institution. The trial judge found that Edwards had neither actual nor apparent authority from the religious institution to obtain a financial benefit from the appellant. On appeal, Fitzgerald P and Lee J dealt with the submission as to the issue of vicarious liability as follows: The remaining possibility for consideration is that the "vicarious" liability which the appellant sought to attribute to the respondent derived from the respondent's respective relationships with the appellant and Edwards. Shortly stated, the argument must be that the respondent is vicariously liable in equity to compensate one of its members who is financially disadvantaged by the exercise of undue influence or other unconscionable acts done by one of its "officers" whose misconduct was facilitated by his position with the respondent. Although the theoretical foundation for such a conclusion did not clearly emerge, to the best of our understanding it was Edwards' liability to the appellant not his misconduct, which the appellant submitted equity attributed to the respondent. Whichever approach was intended, the source of such a principle was not identified and, in our opinion, the general proposition upon which the appellant must rely is unsustainable. The reference to vicarious liability seems to add nothing of substance but merely serves to disguise the appellant's reliance upon breach of a duty allegedly owed to her by the respondent. Her claim is unsupported by any authority to which the Court was referred. The foundation of equitable relief is conduct which offends against conscience, and although the respondent is a church, we can find nothing in its conduct which makes it conscientious for it to compensate the appellant or makes its refusal to do so unconscionable.
7. In a separate judgment, Williams J expressed reservations as to the application of the concept of vicarious liability, stating that: In so far as the reasoning of the learned trial judge addressed the question whether or not the respondent was vicariously liable for the conduct of the first defendant it was correct. I must say that I have some reservations about determining a claim for equitable damages by relying on a common law concept such as vicarious liability. In my view equity would prefer to consider the direct relationship between the plaintiff and the church and then determine whether or not that relationship gave rise to fiduciary obligations which were breached by the church.
8. Thus, while in Coulthard, King CJ concluded that equity would act upon the conscience of the employer to accept responsibility for the employee's breach of confidence occurring in the course of the employee's employment, in Illuzzi, the majority did not find anything in the religious institution's conduct which would make it conscientious for it to compensate for the acts of a "counsellor" within the institution (without expressly holding that the principle of vicarious liability was inapplicable to an equitable wrong). Given the differences between Edwards' role as a "counsellor" within the religious institution and an employment relationship, and the relationship that Edwards held with the appellant beyond the scope of Edwards' role within the institution, a direct comparison between Coulthard and Illuzzi is problematic.
9. Turning then to Lifeplan Australia, the applicants had alleged that Ancient Order of Foresters in Victoria Friendly Society Ltd (Foresters) was vicariously liable for the equitable wrongdoing of two former employees of Lifeplan Australia (Mr Woff and Mr Corby) (see at [362]), who, in late 2010, became employees of Foresters, a newly established competitor of Lifeplan Australia (taking with them confidential information of Lifeplan Australia). As noted by Besanko J at [363], the applicants had submitted that the wrongful conduct had occurred in the course of the employees' employment by Foresters "in the sense that Foresters received and used the benefit of the contract pads and the funeral directors' mailing list, and that it was part of the funeral fund business". Reliance was placed by the applicants on Dubai Aluminium for the proposition that Foresters should be held vicariously liable for the equitable wrongdoing of Mr Woff and Mr Corby, in the same way as it would be held liable for torts committed by Mr Woff and Mr Corby in the course of their employment.
10. Besanko J extracted (at [365]), the following passage from Millett LJ's judgment in Dubai Aluminium (at [107]): Vicarious liability is a loss distribution device based on grounds of social and economic policy. Its rationale limits the employer's liability to conduct occurring in the course of the employee's employment. "The master ought to be liable for all those torts which can fairly be regarded as reasonably incidental risks to the type of business he carries on": see Atiyah, Vicarious Liability (1967), p 171; Lister v Hesley Hall Ltd [2002] 1 AC 215. The American Law Institute, Restatement of the Law, Agency, 2d (1958), section 229 is to the same effect: "the ultimate question is whether or not it is just that the loss resulting from the servant's acts should be considered as one of the normal risks to be borne by the business in which the servant is employed." Since this is the underlying rationale of the doctrine there is no rational ground for restricting the liability to torts, or for excluding liability in equity, particularly when equitable liability often has its counterpart at common law. Why should a firm be vicariously liable if a partner procures or induces a breach of contract but not if he procures or participates in a breach of trust or fiduciary duty? If the risk of wrongdoing is one which can fairly be said to be reasonably incidental to the employer's business, why should it matter that the liability arises in equity and not at common law or by statute?
11. Besanko J also referred (at [366]-[367]) to the decision of the High Court as to the rationale for vicarious liability in NSW v Lepore (Gleeson CJ at [45]; and the discussion by Gummow and Hayne JJ at [197]-[201]; and by Kirby J at [301]-[306]). His Honour observed (at [368]) that if the rationale for vicarious liability was loss distribution, that rationale would not support an extension of the doctrine to equitable wrongdoing where the particular relief claimed is an account of profits (there is, of course, no claim for an account of profits in the present case).
12. His Honour then referred to the two Canadian authorities, relied upon by the applicants, that held vicarious liability applied to equitable wrongdoing (57134 Manitoba Ltd v Palmer [1989] BCJ No 810 (Manitoba) at [24] per Esson JA (with whom Hinkson and Macdonald JJA agreed) and Clayburn Industries Ltd v Piper [1998] BCJ No 2831 per Burnyeat J), before turning to the decision in Coulthard.
13. At [374]-[375], his Honour concluded: 374. I am not prepared to hold that Foresters is vicariously liable for the equitable wrongdoing of Mr Woff and Mr Corby for the following reasons. First, at least in the general run of cases, vicarious liability is concerned with loss to a third party, rather than any gains made by the defaulting fiduciaries or their employer. Secondly, there is no authority in Australia, other than Coulthard, to the effect that vicarious liability applies in the case of equitable wrongs. The authority of Coulthard is limited because the point does not appear to have been raised, or at least it does not appear to have been raised, in a major way. Thirdly, vicarious liability would make significant inroads on the carefully constructed rules of third party liability (where the third party is a new employer) discussed in Barnes v Addy and the long line of cases which have followed Barnes v Addy. 375. I should add that, even if I am wrong and vicarious liability applies and can lead to an account of profits, there is a good deal of force, at least on the face of it, in Foresters' submission that the account relates to the profits made by the defaulting fiduciary rather than profits made by the new employer. I do not need to decide this point.
14. It is clear from Besanko J's reasoning that his Honour was only considering the application of vicarious liability to equitable wrongs where the remedy sought is an account of profits as opposed to equitable compensation. Besanko J's reasons for not applying vicarious liability to equitable wrongdoing was that: (i) generally, vicarious liability is concerned with loss to a third party rather than gains made by breaches of fiduciary duty; (ii) the authority of Coulthard is limited as this issue was not extensively discussed; and (iii) vicarious liability would impinge on principles of third-party liability in Barnes v Addy.
15. On appeal in the Full Court this issue was not addressed. In the High Court of Australia the issue was raised in Ancient Order of Foresters (at [5] per Kiefel CJ, Keane and Edelman JJ and at [64] per Gageler J). At [5], the majority said: 5. Another way of putting this point is to say that Foresters could not limit its liability to disgorge profits by claiming that only limited profits were caused by particular acts of knowing assistance when the consequences of those acts were inseparable from the consequences of Woff and Corby's general scheme of breach of fiduciary duty. This point is further reinforced by the cross-appeal, which relied upon other acts by Woff and Corby for which Foresters was said to be vicariously liable. Although it is unnecessary to decide this issue of vicarious liability, it should be noted that there is no novelty in equity attributing to one person the wrongful acts of another. As Lord Millett observed in Dubai Aluminium Co Ltd v Salaam, the Court of Chancery recognised vicarious liability of partners in this manner at least as early as 1842. [emphasis added]
16. Dowsett J, in Oliver Hume South East Queensland Pty Ltd v Investa Residential Group Pty Ltd (2018) 259 FCR 43; [2017] FCAFC 141 (Oliver Hume), did not need to consider the point in detail but noted that Besanko J's decision in Lifeplan Australia cast doubt on the application of vicarious liability to equitable wrongdoing, stating at [110] that: 110. Secondly, the case against Oliver Hume seems to have been put in a number of ways other than that dealt with above. One case seems to have been based on Oliver Hume's alleged vicarious liability for Mr Barclay's conduct. There is reason to doubt the applicability of the concept of vicarious liability to the incurrence of accessorial liability for breach of equitable duties. See the decision of Besanko J in Lifeplan Australia Friendly Society Ltd v Woff [2016] FCA 248. On appeal ([2017] FCAFC 74), the Full Court found, at [123], that it was unnecessary to consider, "this important question of principle". As I understand it, the problem is that to apply the doctrine of vicarious liability in order to impose upon an employer, liability for a breach of trust (or fiduciary duty) by an employee, without more, would go beyond the ambit of accessorial liability as identified in Barnes v Addy (1874) LR 9 Ch App 244 and subsequent cases. In the present case, it is unnecessary that I consider the matter, as the case can be appropriately dealt with on the basis of Oliver Hume's imputed knowledge.
17. As it stands, therefore, the case law remains inconclusive on this point. Lifeplan Australia (at first instance) and Illuzzi indicate that there is no application of the principle of vicarious liability to equitable wrongs in Australia. However, the decision in Illuzzi is seemingly complicated by the nature of the relationship between Edwards and the religious institution, which was not one of employer and employee and one where Edwards' relationship with the appellant extended beyond the ambits of his role within the religious institution and his impugned acts were not with the apparent or actual authority of the institution. Moreover, it does not appear that their Honours' attention was drawn to Coulthard. Besanko J's reasoning in Lifeplan Australia is yet to be considered by an appellate court. Kiefel CJ, Keane and Edelman JJ, while not delving into Besanko J's reasoning, noted that "there is no novelty in equity attributing to one person the wrongful acts of another" and pointed to the long history of the application of vicarious liability for equitable wrongs to partnerships in the United Kingdom (indeed spanning 32 years prior to the seminal decision in Barnes v Addy ‒ see Brydges v Branfill at 389). Dowsett J, also not dealing with the issue, recognised that Lifeplan Australia provided "reason to doubt" the application of vicarious liability to equitable wrongs but his Honour did not treat the issue as settled.
18. The principles as to the precedential status of judicial decisions are well-known (see Hamilton Island Enterprises Pty Ltd v Commissioner of Taxation (1982) 1 NSWLR 113 at 119 per Rogers J; La Macchia v Minister for Primary Industries and Energy (1992) 110 ALR 201 at 204 per Burchett J; Hunter v Hanson [2014] NSWCA 263 at [71] per McColl JA (with whom Macfarlan JA agreed); Farah Constructions at [135] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ; BHP Billiton Iron Ore Pty Ltd v National Competition Council (2007) 162 FCR 234; [2007] FCAFC 157 (BHP Billiton) at [86] per Greenwood J (with whom Sundberg J agreed)).
19. As noted in BHP v Billiton "the circumstances which might properly lead to a departure from an earlier authority will necessarily vary according to the content of the case and the issues and therefore no prescriptive rules ought to be formulated". As the plaintiff here points out, Besanko J in Lifeplan Australia made no finding that Coulthard was "plainly wrong". Rather, his Honour formed the view that the issue of whether vicarious liability applied to equitable wrongs was not raised, or at least not raised in "a major way", in Coulthard and departed from it on that basis.
20. Where that leaves the issue, in terms of authority, is that there is intermediate appellate authority (Coulthard) where the issue has been considered and where it has been concluded that vicarious liability can apply to equitable wrongdoing (at least for breach of equitable confidence claims) whereas in Illuzzi doubt was cast on that proposition and it was rejected at first instance by Besanko J in Lifeplan Australia.
21. The plaintiff here places some weight on the position in the United Kingdom on this principle. Cognisant of the caution raised by the defendants on reliance on those authorities it is nevertheless helpful to review the position in England.
22. Dubai Aluminium (relied upon by the plaintiff and considered by Besanko J in Lifeplan Australia) concerned the liability of innocent partners in a firm for the equitable wrongdoing of one of the firm's partners (Mr Amhurst). The matter proceeded on the assumption (as the substantive claimed had been settled) that Mr Amhurst was liable for dishonest assistance in breach of fiduciary duty or trust, in drafting a bogus consultancy agreement for a client (Mr Salaam) and giving advice and assistance to other wrongdoers who were not clients of the firm. The firm was seeking contribution from Mr Salaam (and another participant) for the $10 million payment made in settlement of the claim against the firm. In order for the firm's contribution claim to be successful, it needed to show that it was liable for the wrongful acts of Mr Amhurst. This gave rise to consideration of s 10 of the Partnership Act 1890 (UK), it being submitted that this was limited to common law torts and therefore, the firm could not be vicariously liable for Mr Amhurst's equitable wrongdoing under that section.
23. The House of Lords held that a fault-based equitable wrong constituted a "wrongful act" within the meaning of s 10 of the Partnership Act 1890. Although it is plain that Dubai Aluminium turned on the interpretation of that statutory provision, their Lordships' reasons provide insight into the application of vicarious liability to equitable wrongs. Indeed, academic commentary on the decision has observed that although the discussion in Dubai Aluminium was within the framework of s 10 "the approach of the House of Lords was to treat the issue as one which engaged issues of vicarious liability generally" (see A Stafford QC and S Ritchie Q, Fiduciary Duties: Directors and Employees (2nd ed, 2015, Jordan Publishing Limited)), the authors there considering that "it is evident from the speeches delivered by Lords Nicholls and Lord Millett that they would decide a claim on the same principles of vicarious liability whether or not the claim was governed by the Partnership Act 1890". This accords with my reading of their Lordships' judgment (and how it has been dealt with in the United Kingdom subsequently). Therefore, I find it difficult to dismiss their Lordships' reasoning on the basis that it is purely a matter of statutory construction (as the defendants here contend).
24. Nicholls LJ (with whom Slynn and Hutton LJJ agreed) began by stating (at [10]-[11]) that: 10. …. There is nothing in the language of s 10 to suggest that the phrase 'any wrongful act or omission' is intended to be confined to common law torts. On the contrary, the reference to incurring a penalty points away from such a narrow interpretation of the phrase. The liability of co-partners for penalties incurred, for instance, for breach of revenue laws was well established when the 1890 Act was passed (see Lindley on Law of Partnership (6th edn, 1893) p 160, and A-G v Stranyforth (1721) Bunb 97, 145 ER 608). 11. In addition to the language the statutory context points in the same direction. Section 10 applies only to the conduct of a partner acting in the ordinary course of the firm's business or with the authority of his co-partners. It would be remarkable if a firm were liable for fraudulent misrepresentations made by a partner so acting, but not liable for dishonest participation by a partner in conduct directed at the misappropriation of another's property. In both cases the liability of the wrongdoing partner arises from dishonesty. In terms of the firm's liability there can be no rational basis for distinguishing one case from the other. Both fall naturally within the description of a 'wrongful act'. [Emphasis added]
25. It is relevant to note that at [11], although in the context of an analysis of s 10, the reasoning of Nicholls LJ is similar to that of King CJ in Coulthard in that his Lordship there draws an analogy between the relevant equitable wrong and a common law tort, and highlights the inconsistency of holding an employer vicariously liable for the latter and not the former. Nicholls LJ went on to state (at [12]) that: 12. In 1874 Lord Selborne LC's famous statement in Barnes v Addy (1874) LR 9 Ch App 244 at 251-252, made plain that a stranger to a trust could be liable in equity for assisting in a breach of trust, even though he received no trust property. On the interpretation of s 10 advanced for Mr Al Tajir and Mr Salaam, a firm could never be vicariously liable for such conduct by one of their partners. I can see nothing to commend this interpretation of the statute.
26. Unlike Besanko J in Lifeplan Australia (at [374]), Nicholls LJ in Dubai Aluminium (at [12]) appears to consider that holding an employer/partner liable for the equitable wrong of an employee/partner accords with the principles of third-party liability in Barnes v Addy. Hobhouse LJ did not wish to add anything on the s 10 point.
27. Millett LJ's judgment in Dubai Aluminium to which reference was made in Lifeplan Australia began by concurring that the scope of the phrase "by any wrongful act or omission of any partner" was in the widest terms with no indication that it ought to be limited to common law torts. His Lordship then considered the history of the application of vicarious liability of partners for equitable wrongdoing (from [104]ff), including the passage (at [107]) that has been extracted above. At [108] his Lordship said: 108. The vicarious liability of an employer for his employees' torts, however, was still in course of development in 1890, and the circumstances in which he could be liable for his employee's intentional and dishonest wrongdoing was still problematic. It was not settled until the decision of your Lordships' House in Lloyd v Grace, Smith & Co [1912] AC 716, [1911-13] All ER Rep 51: see in particular [1912] AC 716 at 732, [1911-13] All ER Rep 51 at 58, where Lord Macnaghten traced the development of the doctrine in relation to fraudulent and criminal wrongdoing. Wisely, and no doubt deliberately, s 10 was drafted in the widest terms to embrace every kind of wrong capable of causing damage to non-partners, so that there was no danger that the vicarious liability of partners (unlike that of employers) might be ossified by the terms of the statute and fail to keep step with future developments.
28. Pausing here, I note that s 10 of the Partnership Act 1892 (NSW) (Partnership Act 1892) is in materially the same terms as the UK counterpart. Young J, as his Honour then was, stated in Chittick v Maxwell (1993) 118 ALR 728 (Chittick v Maxwell) at 733-734 that s 10 of the NSW legislation was directed to common law wrongs and not to breaches of fiduciary duty (see Estate Realties Ltd v Wignall [1992] 2 NZLR 615 at 633-5) and went on to say that: Even though there may have been a breach of fiduciary duty during the course of the ordinary business of the firm, an innocent partner may not be held to be a constructive trustee unless and until he had such notice or knowledge of the circumstances as to make it appropriate to tax him as a constructive trustee (at 635).
29. However, in Hraiki v Hraiki [2011] NSWSC 656 (Hraiki), White J (as his Honour then was), having referred to the decision in Chittick v Maxwell, considered the reasoning of the House of Lords in Dubai Aluminium to be persuasive and followed that reasoning as to the scope of the similarly worded s 10 in the Partnership Act 1892 (see [75]-[76]). Therefore, at least within the context of the application of s 10 of the Partnership Act 1892, the reasoning of Dubai Aluminium has been followed in Australia; and vicarious liability has been held to apply to equitable wrongdoing.
30. The application of vicarious liability to equitable wrongs outside of an analysis under s 10 of the Partnership Act 1890 is now well established in the United Kingdom and Dubai Aluminium is seen as authority for that proposition (see Morrison at [51], [55] per Reed LJ (with whom Hale, Kerr, Hodge, Lloyd-Jones LLJ agreed); and see Majrowski at [10] per Nicholls LJ). See also the inclusive statement of the principle of vicarious liability in McGowan & Co Ltd v Dyer (1873) LR 8 QB 141 at 145 by Blackburn J with reference to Joseph Story, Commentaries on the Law of Agency (1839, Cambridge Press) (Story on Agency) (as referred to in Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd (2016) 250 FCR 136; [2016] FCAFC 78 at [145] by the Full Court of the Federal Court (Davies, Gleeson and Edelman JJ)).
31. The plaintiff also refers to the decision in Manitoba, to which I have referred above, and in which Esson JA (with whom Hinkson and Macdonald JJA agreed) approved the following passage of Broom's Legal Maxims (as quoted by Southin J, as her Honour then was, in Allen v Richardsons Greenshields of Canada Ltd [1988] BCJ No 123 (Allen v Richardsons) at 23): It is not only for the negligence of his servant while acting within the scope of his employment that a master is liable; for the rule is that 'the master is answerable for every such wrong of the servant or agent as is committed in the course of the service and for the master's benefit, though no express command or privity of the master be proved,' and 'no distinction can be drawn between fraud and any other intentional wrong' (Barwick v. English J.S. Bank, L.R. 2 Ex. 259, at p. 265; see also Mackay v. Commercial Bank, L.R. 5 P.C. 394; Swire v. Francis, 3 App. Cas. 106; Houldsworth v. Glasgow Bank, 5 App. Cas. 317, at p. 326).
32. Of the cases cited in Allen v Richardsons in support of the application of vicarious liability beyond tort law, reference may be made to Barwick v English Joint Stock Bank (1867) LR 2 Exch 259 (Barwick), where the Court of Exchequer considered whether a bank would be answerable for the fraud of its employee and Willes J stated, when delivering judgment of the Court (Blackburn, Keating, Mellor, Montague Smith and Lush JJ) at 266 that "… with respect to the question, whether a principal is answerable for the act of his agent in the course of his master's business, and for his master's benefit, no sensible distinction can be drawn between the case of fraud and the case of any other wrong" and went on to say that: … In all these cases it may be said, as it was said here, that the master has not authorized the act. It is true, he has not authorized the particular act, but he has put the agent in his place to do that class of acts, and he must be answerable for the manner in which the agent has conducted himself in doing the business which it was the act of his master to place him in.
33. Thus, in Barwick, the Court of Exchequer placed emphasis on the application of the principle of vicarious liability but saw no reason to discriminate between the various types of wrongs to which the principle may apply. Sir Montague Smith, delivering the judgment of their Lordships (Sir James Colvile, Sir Barnes Peacock, and Sir Robert Collier) in Mackay v The President, Directors and Co of the Commercial Bank of New Brunswick (1874) LR 5 PC 394 (Mackay v Commercial Bank), emphatically approved the reasoning in Barwick at 411-412, stating that "the best definition of [vicarious liability], in their Lordships' judgment, is to be found in the case of Barwick, when the judgment of the Exchequer Chamber was delivered by one of the most learned Judges who ever sat in Westminster Hall".
34. In Houldsworth v City of Glasgow Bank (1880) 5 App Cas 317, having restated the principle of vicarious liability applicable to "every such wrong of his servant or agent" as stated by Willes J in Barwick, Selborne LJ opined (at 326) that there is "no exception" to that principle. Selborne LJ stated that the principle was "not of the law of torts, or of fraud or deceit, but of the law of agency" (at 327). Selborne LJ went on to note (at 328) that: In Equity, one of the main heads of which has always been the redress of fraud, the constructive imputation of fraud to persons not really guilty of it has never been treated as the ground of relief, though the law of agency was administered according to the same rules in Equity as at Common Law, and though in Equity, as well as at law, an innocent principal might suffer for the fraud of an agent.
35. In Equity, one of the main heads of which has always been the redress of fraud, the constructive imputation of fraud to persons not really guilty of it has never been treated as the ground of relief, though the law of agency was administered according to the same rules in Equity as at Common Law, and though in Equity, as well as at law, an innocent principal might suffer for the fraud of an agent. It may readily be accepted that a satisfactory rationale for the application of vicarious liability to the employment relationship has remained elusive (see Sweeney at [11] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; NSW v Lepore at [196] per Gummow and Hayne JJ, at [299] per Kirby J; Hollis v Vabu at [35] per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ; C Sappideen and P Vines, Flemings The Law of Torts (10th ed, 2011, Lawbook Co) (Flemings) at 438-439), but there can be little doubt that the nature (or incidence) of the employment relationship has significantly evolved since the origins of the principle of vicarious liability, and that the modern doctrine emerged "not by way of an exercise in analytical jurisprudence but as a matter of policy" (Hollis v Vabu at [34]; see also NSW v Lepore at [300] per Kirby J).
36. Further, it is recognised that none of the various policy reasons for the imposition of vicarious liability on an employer has been accepted as completely satisfactory (see the High Court in Hollis v Vabu at [35]) and that the policy behind the principle has not been "fully articulated" (at [11]). Regardless of this, Kirby J cautions in NSW v Lepore (at [331]) against turning "the clock of vicarious liability backwards" and "ignoring recent legal developments that have grown out of the recognition of the character of, and risks inherent in, the typical enterprise that employs others". Moreover, the continued application by the High Court of vicarious liability to tortious conduct (including conduct amounting to intentional and criminal wrongdoing) means that some combination of these policy reasons must justify the doctrine and its imposition on employers.
37. As adverted to above, the principal policy reason, stemming from the significance of the employment relationship, has been worded in alternative ways resulting in slightly different meanings. It has been stated that, by putting an employee in the position to do a certain class of acts, the employer is liable for the manner in which the employee conducts himself in performing the business of the employer (see NSW v Lepore at [45] per Gleeson CJ). Alternatively, it has been said that a person who employs others in pursuit of their own economic interests should "in fairness" be held liable for losses incurred in the course of that economic pursuit (see Flemings at 438-439). Alternatively, it has been stated to the effect that, as economic activity carries a risk of harm, the person responsible for the risk created due to their economic enterprise should be liable for loss suffered in the course of that enterprise (Majrowski at [9] per Nicholls LJ). I have extracted about the High Court's construction in Hollis v Vabu at [42] (see also NSW v Lepore at [197] per Gummow and Hayne JJ). Thus, there are relevant characteristics of the modern employment relationship that continue to be recognised as serving as a basis for the imposition of vicarious liability.
38. Other rationales include the principle of loss distribution (see NSW v Lepore at [197], [303]; Majrowski at [9]; Flemings at 438); and the deterrent effect of the imposition of vicarious liability (NSW v Lepore at [198], [305]; Majrowski at [9]; Flemings at 438; cf, Gummow and Hayne JJ in NSW v Lepore at [199]).
39. As noted, one of the reasons raised in the authorities for the application of the principle of vicarious liability to equitable wrongdoing is the maxim "equity follows the law". In Re Diplock; Diplock v Wintle [1948] Ch 465; 2 All ER 318 at 482 per Lord Greene MR stated that: Nevertheless, if the claim in equity exists it must be shown to have an ancestry founded in history and in the practice and precedents of the courts administering equity jurisdiction. It is not sufficient that because we may think that the "justice" of the present case requires it, we should invent such a jurisdiction for the first time.
40. The decision of Brydges v Branfill, as pointed to by Millett LJ in Dubai Aluminium, is relevant to the history of the application of vicarious liability in courts exercising equitable jurisdiction. Moreover, the statement of the principle of vicarious liability by Willes J (although in 1867 the Court of Exchequer had lost its equitable jurisdiction) as applicable to "every such wrong of the servant or agent as is committed in the course of the service and for the master's benefit" indicates that the development of the principle was concerned more so with the imposition of vicarious liability due to the employment relationship than limiting the imposition of the principle to certain kinds of wrongs.
41. This accords with the reasoning of King CJ in Coulthard and Nicholls LJ in Dubai Aluminium, namely, that where an analogy may be drawn with a common law tort, it is difficult to reason that an employer should not be vicariously liable for the analogous equitable wrong. The reason for this, conceptually, is that the principle of vicarious liability is concerned with the nature of the employment relationship.
42. In Lifeplan Australia, Besanko J considered that vicarious liability was concerned (in the general run of cases) with loss to a third party, rather than gains made by breaches of fiduciary duty; and that this militated against the application of vicarious liability to equitable wrongs. However, the present case is one where the remedy of equitable compensation is sought (including for breaches of fiduciary duty and knowing assistance therein). The purpose of equitable compensation is to make good losses that were caused by the breach of an equitable obligation such that the defendant is put as nearly as possible in the position that he or she would have been in had there been no breach (see In the matters of Earth Civil Australia Pty Ltd, RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (all in liq) [2021] NSWSC 966 (Earth Civil) at [2235]; Canson Enterprises; Hill v Rose [1990] VR 129 at 143-144 per Tadgell J). The resort to equitable compensation indicates that an account may not always be available or appropriate in the circumstances to make good the fiduciary or trustee's breach. It may certainly be that a knowing assistant has not made any gains in assisting the fiduciary in a dishonest and fraudulent breach of duty but, regardless, the assistant is held liable as though that person was the fiduciary (Earth Civil at [984]; Farah Constructions at [160]; Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 (Hasler v Singtel Optus) at [75]; [109]; [123]; [129]-[139] per Leeming JA; Harstedt Pty Ltd v Tomanek (2018) 55 VR 158; [2018] VSCA 84 (Harstedt) at [80]; Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2005] NSWSC 482 at [33] per Hamilton J). In the circumstances, the loss distribution basis for the imposition of vicarious liability would serve a similar purpose in availing the beneficiary with a plaintiff that is more likely to be able to make good the loss (and more able to protect itself against such liabilities).
43. In Lifeplan Australia, Besanko J formed the view that the issue of the application of vicarious liability to equitable wrongs was not the subject of extensive consideration in Coulthard. However, the reasons of King CJ, while brief, were incisive (and in many ways presaged the later reasons of the House of Lords in Dubai Aluminium). In the broader history of the principle, including its application in Brydges v Branfill and the developments in Canada and the United Kingdom, Coulthard forms part of the thread of cases illuminating an ancestry and a practice of courts administering equitable jurisdiction applying the principle of vicarious liability.
44. Finally, Besanko J formed the view that the application of vicarious liability to equitable wrongs would make significant inroads on principles of third-party liability in Barnes v Addy. It is well-known that there are two limbs to such liability (knowing receipt and knowing assistance - see Lord Selborne LC at 251-252). Emphasis was there placed on the proposition that barring the requisite knowledge and involvement, a stranger should not be held liable as a constructive trustee merely because the stranger acts as the agent of a trustee in transactions within its legal powers. However, in this sense it may be said that an employer made liable on the principles of vicarious liability is not a stranger; rather, on this hypothesis the employer has put the employee in the position to perform the class of acts that enabled the employee to breach or assist in a breach of duty. The fact that conceptually the principles of third-party liability in Barnes v Addy and vicarious liability may serve distinct purposes (broadly speaking, the one being to protect and uphold fiduciary obligations the other being to hold the employer responsible for wrongful conduct sufficiently connected with the course of employment) does not to my mind provide a reason why liability under Barnes v Addy cannot co-exist with the application of vicarious liability to equitable wrongs. I do not accept that application of the principle of vicarious liability to equitable wrongs will necessarily derail the knowing assistance principles. This may be yet another area of the law where the same conduct may give rise to different causes of action (with different elements to be proved and potentially different remedies that could be available).
45. Ultimately, my review of the authorities and the reasons given in those authorities as to the application of vicarious liability to equitable wrongs leads me to conclude that I should follow Coulthard (with all due respect and conscious of the contrary view taken by Besanko J in Lifeplan Australia), noting that the High Court has left open the possibility of such an application of the principle of vicarious liability. Insofar as it is suggested that such a conclusion would involve an impermissible extension of common law principles to equitable wrongdoings at this level of the judicial hierarchy, I consider that I am bound to follow intermediate appellate authority unless persuaded that it is plainly wrong. Insofar as it is suggested that such an extension is unprincipled or would be based on an unsecure foundation or would lead to incoherence in the law, I disagree (but accept that is thus for others in due course no doubt to determine).
46. Thus, I have concluded that (assuming the basis for application of the principle of vicarious liability is here established on the facts) Patersons could be held vicariously liable for conduct of Mr Doherty and Mr Carolan amounting to an equitable wrong. However, as it transpires, I consider that no such liability arises in the present case, as a threshold matter because I am not persuaded that there were fiduciary duties owed as alleged, and even if there were and they were breached then: as to Mr Doherty, because it has not been established that he knowingly assisted in such breaches; and, as to Mr Carolan, because his knowledge and actions were outside the scope of and not sufficiently connected with his employment (he being clearly on a frolic of his own).

Claims

1. Turning then to the claims made against the various defendants, I propose to deal first with liability in respect of the claims for breach of fiduciary duty (and, where relevant, breach of contractual obligations to like effect), then the various knowing assistance before turning to the for claims for breach of contract or breach of confidence; and then issues as to causation and quantification of loss.

Fiduciary duties

1. The alleged fiduciaries to be considered are Ms Garrett and Mr Renauf, on the one hand, and Patersons, on the other. It is necessary to determine whether these defendants owed fiduciary obligations and, if so, whether those fiduciary obligations were breached.

Summary of the fiduciary duty claim against Ms Garrett

1. In summary, Ms Garrett is alleged to have owed fiduciary obligations by reason of: her responsibilities and authority at Ashington, and her title of Head of Funds Management (see [196]; [197(a)] of the third further amended statement of claim); her acting as Ashington's liaison for the Stonington Capital Raising; her knowledge that Ashington Capital had to refinance the Investec security quickly; that she was under minimal supervision; had the authority of Ashington Management; and had Ashington's trust and confidence (see [197(c)-(h)] of the pleading).
2. It is pleaded (at [197(g)]) that Ms Garrett had "both scope and opportunity to exercise the discretions and powers in her role at Ashington unilaterally in a way which could affect detrimentally the interests of the Ashington companies". (Ms Garrett and Mr Renauf say that this is a non sequitur and that none of the foundational facts supports the conclusion that Ms Garrett had any discretions or powers.)
3. Particulars were sought of the duties, responsibilities, and authority of Ms Garrett on which the plaintiff relied to support the existence of a fiduciary duty. In response, the plaintiff referred to specific paragraphs of Mr Anderson's 19 December 2017 affidavit, and the documents referred therein (namely, [130], [148], [153], [156], [172], [236], [249], [250], [253], [257], [263], [264]-[269], [276], [280]-[284], [372]). Ms Garrett and Mr Renauf say that a close analysis of the identified paragraphs is of no assistance (suggesting that this is nothing more than a recitation of the paragraphs of Mr Anderson's affidavit that contain the word "Garrett"). By way of example, reference in that regard is made to [153], which refers to a request for a resume.
4. Ms Garrett's case is that she possessed no authority capable of establishing a fiduciary duty.

Summary of the fiduciary duty claim against Mr Renauf

1. Mr Renauf is alleged to have owed fiduciary obligations by reason of: his duties, responsibility and authority at Ashington; his title of Head of Acquisitions and Planning; his access to confidential information; the trust and confidence placed in him by Ashington Management (see [223]; [224] of the pleading).
2. Particulars were sought of the duties, responsibilities and authority of Mr Renauf on which the plaintiff relied to support the existence of a fiduciary duty. The plaintiff's response referred to paragraphs of Mr Anderson's 19 December 2017 affidavit, and the documents referred to therein (namely, [157], [171], [257], [280]-[284], [325], [372]). Again, complaint is made by Ms Garrett and Mr Renauf that these particulars are essentially meaningless. It is noted that [171] is a reference to a fortnightly meeting; [257] is a reference to Mr Renauf attending meetings with superannuation fund investors; [280]-[284] refer to discussions and emails involving Ms Garrett. Ms Garrett and Mr Renauf say that (contrary to [224(f)] of the pleading) there is no evidence of Mr Renauf's actual duties, or evidence of him holding or exercising any relevant power or authority.
3. It is submitted that the allegations of breach are equally defective. For example, it is said that the allegation that Mr Renauf was present at meetings can hardly be a basis for establishing a fiduciary duty which was breached (see [219(b)] of the pleading); nor can receipt of an email be a breach of fiduciary obligation (referring to [219(c)] and [219(d)] of the pleading). As to the reference to "keeping [matters] secret" it is noted that the proscriptive nature of fiduciary duties does not impose an obligation to disclose matters.

Ms Garrett and Mr Renauf's employment status

1. As noted earlier, Ms Garrett and Mr Renauf were both employed by Valad prior to February 2009. Although there was no copy of their Valad employment contracts in evidence, it does not appear to be disputed (and I would infer from the contemporaneous documents) that those contracts contained (respectively) "gardening leave" clauses of six months (in the case of Ms Garrett) and three months (in the case of Mr Renauf). By way of contemporaneous evidence supporting such an inference I note that: Ms Garrett in her own documents referred to the Valad contracts imposing non-compete clauses of 6 months and 3 months and in an email (sent on 9 August 2009 containing an "Action Sheet" for Ashington projects) advised that "Valad has confirmed that my last day of gardening leave is Friday, 11 September. So my start date at Ashington will be Monday, 14 September".
2. While there is some lack of clarity as to Ms Garrett's precise start date at Ashington, the plaintiff suggests - and I would accept - that this appears to be a product of concerns regarding her contractual obligations to Valad. Certainly, while it is apparent that, by 21 September 2009, Ms Garrett was working from the Ashington offices, the documents suggest (see chronology of events above) that Ms Garrett actually started doing work for the Ashington group at an earlier stage. It appears that, from April 2009, Ms Garrett provided some assistance with AOF3 and attempted to find new business for Ashington Capital in the form of "club deals", including involvement in progressing "Project Spring" and "Project Mac", and dealing with overseas investors about potential investments (such as "Och Ziff"). These projects (which were never completed) appear to have still been continuing by 3 September 2009, although in the following week Ms Garrett's attention had been redirected to Stonington.
3. There is no dispute that Mr Renauf started work with Ashington in July 2009 (Ex C at Tab 1).
4. There is also no dispute that Ms Garrett and Mr Renauf never executed an employment agreement with any entity in the Ashington group (Mr Anderson accepts this in his 19 December 2017 affidavit at [158]).
5. Draft agreements for each of Ms Garrett and Mr Renauf were sent to Ms Garrett by email on 1 May 2009 but those agreements left unresolved what I would accept to be key issues, including the scope of employment and the entirety of the remuneration conditions (while detailing a salary of $350,000, 5% equity vested within a six month period (including one board seat), a sign on fee of 70% of the salary, and superannuation at 9% of the salary, the contract did not deal with executive bonus payments or deal with the equity arrangement in detail - Mr Minahan noting in the email that separate agreements would be made).
6. As at 1 July 2009, the terms of a sign on bonus were still being negotiated and there were still negotiations as at 8 August 2009 in relation to the bonus structure. (I interpose to note that, within Ms Garrett and Mr Renauf's "proposed bonus structure" sent on 8 August 2009, they propose that the carried interest allocation "is shared equally between the four key executives, namely, CA, CM, SR and NG" and state that "the concept of 'carried interest' is normally confined to Directors/Founders/ Nominated Key Personnel", therefore, at that stage, Ms Garrett and Mr Renauf sought to place themselves at the same level as Mr Anderson and Mr Minahan, at least with respect to entitlement to bonuses.) Ms Garrett and Mr Renauf emphasise that there are no contemporaneous documents that suggest these negotiations ever concluded. It is thus submitted by them that it should be found that no concluded contract was ever agreed.
7. It is not disputed that, while working within the Ashington group, each of Ms Garrett and Mr Renauf was paid a salary of $350,000, plus superannuation, and that each had Ashington business cards, an Ashington e-mail address, a work station at Ashington's offices, laptop, mobile phone, corporate credit card, after-hours building access and car parking.
8. Ashington Management's general ledger electronic clearing account (1-1420) records that Mr Renauf was paid $4,587 on 7 July 2009, in accordance with a request made of Ashington's in-house accountant (Mr Marsden) on that day, and that there were regular and periodic payments to Mr Renauf of $8,841 (Ex C at Tab 14). On 10 July 2009, Mr Renauf was asked to provide his tax file number to Ashington for tax purposes. His email signature identifying him as "Head of Acquisitions" was set up on 24 July 2009 (the email noting that Ms Garrett's would be created in September) (Ex C at Tab 4).
9. Reference is also made to the email sent on 13 October 2009 by Mr Carolan to Ms Garrett referring to a payment Ms Garrett had received of $4,080 described as "salary" from Ashington the previous week. It is noted that this payment corresponds with entries in Ashington Management's general ledger electronic clearing account (1-1420) recording a payment of $4,080 to Ms Garrett on 8 October 2009.
10. Within Ashington, Ms Garrett and Mr Renauf were given the titles of Head of Funds Management and Head of Development respectively (in which roles the plaintiff maintains that Ms Garrett and Mr Renauf were senior employees and owed fiduciary duties to Ashington not to use their positions for their own, or a third party's, advantage and to avoid any potential or actual conflict between their duties to Ashington and their personal or third-party interests).
11. The position of the plaintiff appears to be that there was an acceptance of the terms set out in the draft employment agreement issued to Ms Garrett and Mr Renauf (by reference to matters such as the payment of salary), even though a written contract of employment was never executed.
12. Ms Garrett and Mr Renauf say that it would not be inferred that a contract had been concluded, noting that there is no pleading of any material facts that would be necessary for an inference to be drawn about a concluded agreement. In particular, it is noted that there are no material facts of "acceptance" (a necessary component of contract formation). Rather, at [206]ff and [233]ff of the pleading, there are pleaded express and implied terms that assume the existence of a contract of employment. It is said that the plaintiff should be held to the pleading, and not permitted to advance unpleaded allegations.
13. Ms Garrett and Mr Renauf say that they never concluded the negotiations of their employment contract and were still negotiating at least one essential term of that contract by the time of their resignations. It is said that this is sufficient to dispose of the plaintiff's contention that there was a concluded contract. In that regard, it is submitted that the "course of communications" referred to in the plaintiff's oral closing submissions must be a reference to unpleaded material facts that could not support the 'unequivocal' assent required by the authorities; and that the plaintiff's submission (at [161]) that the terms of what was plainly a draft agreement provided to Ms Garrett and Mr Renauf were binding on them should be rejected.
14. Further, Ms Garrett and Mr Renauf say that if, contrary to their contentions, there was a concluded contract, then it is necessary to consider whether the terms pleaded can be implied. Ms Garrett and Mr Renauf say that there is no basis to imply any of the terms alleged by the plaintiff (i.e., terms of good faith, honesty, best interest) unless an employment contract was concluded. It is said that the Court would not find a concluded employment contract; and that none of the purported implied terms satisfies the BP Refinery test (referring to BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 286 where Viscount Dilhorne, Simon and Keith LJJ held that to imply a term into a contract, it must: be reasonable and equitable; necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; be so obvious that "it goes without saying"; be capable of clear expression; not contradict any express terms of the contract).
15. As a matter of legal principle, it is noted that a contract will fail where an essential term is not agreed (see Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26 at [31] per French CJ, Kiefel and Bell JJ); that price is an essential term (see JW Carter, Contract Law in Australia (7th ed, 2018, LexisNexis Butterworths) (Contract Law in Australia) at [4-01]; May and Butcher v R [1934] 2 KB 17; [1929] AII ER Rep 679, where price held to be an essential term of sale at 21 per Viscount Dunedin); that an agreement to agree on essential terms is not enforceable as a contract (Coal Cliff Collieries Pty Ltd v Sijehama (1991) 24 NSWLR 1 at 22 per Kirby P (with whom Waddell AJA agreed), 40 per Handley JA); that for conduct to amount to an acceptance of an offer it must be an unequivocal assent to the terms of the offer, and "the character and circumstances of the conduct" must indicate unambiguously the parties intended to contract and that "no explanation can be given of it unless it refers to the contract in question" (Brambles Holding Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 (Brambles) at [173] per Mason P, Heydon JA and Ipp AJA (which I extract below); Laidlaw v Hillier Hewitt Elsley Pty Ltd [2009] NSWCA 44 at [5]-[6] per Macfarlan JA (with whom Beazley JA, as Her Excellency then was, agreed)); and that the conduct must be capable of proving all the essential elements of an express contract (Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11, 117-11, 118 per McHugh JA (with whom Hope and Mahoney JJA agreed)).
16. In Brambles what was said at [173] was: In these circumstances, in my view, the fact that the appellant charged the higher fees is conclusive evidence that it agreed to all the conditions contained in the offer of 19 September 1991. When regard is had to the indivisible nature of the offer, the appellant's conduct, objectively viewed, was an unequivocal acceptance of the offer. The appellant accepted the benefits proposed, namely, the charging of the higher fees while using the Council's land. Those benefits could not be severed from the obligations proposed. Accordingly, by accepting those benefits the appellant accepted the Council's offer in accordance with its terms (cf Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd at 535).
17. I cannot accept that there was a binding contract of employment. There was no signed contract of employment; key terms of the draft contracts were still either being negotiated or perhaps had been left for future negotiation (in circumstances where there were pressing other matters to which to attend and at some point it appears that at least Ms Garrett was undecided as to whether to continue working at Ashington - irrespective of the outcome of the proposals for refinancing). The parties simply seem to have been proceeding on the basis that there was some informal agreement or understanding that the two would perform the roles indicated by their titles and be treated as employees of the organisation with a concluded contract still to be executed. I do not accept that the evidence establishes an unequivocal acceptance by conduct of the draft contract (and even if it did I doubt that it would be enforceable absent agreement on what were clearly key terms of remuneration).
18. That leaves to be determined the status of Ms Garrett and Mr Renauf within the Ashington group. The plaintiff says (and I agree) that there is no evidence to support the contention that Ms Garrett and Mr Renauf were independent contractors (such as the issuing of invoices to Ashington for their services); and the plaintiff says that it was not asserted by either of them during the course of their employment with Ashington that she or he was an independent contractor.
19. Relevantly, when Ms Garrett and Mr Renauf settled a dispute between them and the Ashington entities arising out of the termination of their employment on 16 April 2020, they did so by entering into a deed in which they acknowledged they had been employees of Ashington. The Deed of Acknowledgement to which reference is here made was between various Ashington entities, Parissen and another Parissen entity, and each of Ms Garrett and Mr Renauf. Clause 2.1 of the Deed provided that: 2.1 The parties agree that the Individuals had their employment with the Ashington Parties (Employment) terminated on: (a) 16 November 2009 in relation to Garrett; and (b) 23 December 2009 in relation to Renauf (each a Termination Date).
20. Pausing here, this is clearly an acknowledgment of an employment relationship (with the "Ashington Parties" plural) that had been terminated; it does not in terms acknowledge an employment contract as such.
21. In my opinion, the evidence comfortably leads to the conclusion that there was a common law employment relationship between the respective parties, not documented by any binding agreement. That gives rise to the pleading issue raised by Ms Garrett and Mr Renauf.
22. In closing submissions, the plaintiff relied in the alternative on a common law employment relationship. Ms Garrett and Mr Renauf say that this allegation is not pleaded and that the plaintiff should not be allowed to pursue a claim based on an unpleaded common law employment relationship. (It is further said that this appears to have been expressly abandoned in respect of Mr Renauf (at [223]) where the only reference to an "employment relationship" has been struck through - this appears to be a reference to [223] of the third further amended statement of claim, the equivalent paragraph of which in the third further amended statement of claim does not refer to Mr Renauf's "employment relationship".) It is noted that there is a difference between a cause of action based on a pleaded contract and one based on a common law relationship of employment. Ms Garrett and Mr Renauf say that each of the factors identified in the plaintiff's submissions at [147]ff is a material fact that ought to have been pleaded in support of this new cause of action (and there has been no application for amendment in that regard, notwithstanding the issue being raised during the opening submissions).
23. I consider this pleading issue in due course. Suffice it at this stage to note that the plaintiff says that the existence of fiduciary duties owed by Ms Garrett and Mr Renauf to Ashington Management and Ashington Capital does not depend on the characterisation of their relationship with Ashington Management as one of employment.

Did Ms Garrett and Mr Renauf owe fiduciary duties?

1. I have referred above to the particulars that were provided as to the basis on which it is said that each of Ms Garrett and Mr Renauf owed fiduciary duties to the Ashington entities.
2. Reliance is placed by the plaintiff on what said by Mason J, as his Honour then was, in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64 (Hospital Products) where his Honour included "employer and employee" among the list of "accepted fiduciary relationships)" and said (at 97, [68]), that: The critical feature of these relationships is that the fiduciary undertakes or agrees 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. 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.
3. The plaintiff says that the relationship between a company and its senior employees generally (if not invariably) satisfies that description. It is said that that fiduciary relationship has the result that a "senior employee who takes up a business opportunity within the scope of the company's actual or potential line of business, without the consent of the company upon full disclosure of the facts, may be required to account to the company for any profit made or to compensate it for any loss suffered" (Colour Control Centre Pty Ltd v Ty (1996) 39 AILR 5-058; [1995] NSWSC 96 (Colour Control Centre) at [46] per Santow J); and that the "unconscionability which attracts equitable remedies in such circumstances" may be seen to lie "in pursuit by the fiduciary of self-interest, or, more precisely, in pursuit of an interest other than the exclusive interest of the principal", such as the interests of a third party (Ancient Order of Foresters at [69] per Gageler J).
4. The plaintiff points out that fiduciary duties do not arise from a person holding a particular status but, rather, from what the person undertakes (or is deemed to have undertaken) to do in the particular circumstances. Reference is also here made to Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 (Grimaldi v Chameleon Mining), where the Full Court of the Federal Court (Finn, Stone and Perram JJ), while noting that there was "no generally agreed and unexceptional definition" of a fiduciary, said (at [177]) that: … a person will be in a fiduciary relationship with another when and insofar as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in that other's interest to the exclusion of his or her own or a third party's interest [citations omitted]
5. It is noted that features such as ascendancy, influence, vulnerability, trust, confidence or dependence (though not determinative) may indicate the actual circumstances in which such a reasonable expectation (that a party will act in another's interest to the exclusion of his or her own or a third party's interest) arises; and that the existence of such factors is equally capable of giving rise to fiduciary duties owed by an independent contractor or employee (referring to the observations of Wigney J in SBA Music Pty Ltd v Hall (No 3) [2015] FCA 1079 (SBA Music) at [14]).
6. The plaintiff says that the obligations of such an employee may readily extend to other companies in a corporate group who rely, in practical terms, on the employee (referring in that context to Oliver Hume where the Full Court found that the employee of a parent company in a corporate group owed fiduciary duties directly to a subsidiary company). It is noted that Greenwood J (with whom White J agreed) in Oliver Hume followed the approach of Finn J in Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504; [1995] FCA 1663 in focussing on the practical factual position rather than legal form of the relationship. The plaintiff says that such an approach is consistent with the recognition that even an independent contractor may owe fiduciary duties if "reliance is placed on [him or her] in relation to tasks of special responsibility critical to the financial and reputational well-being of the enterprise" (SBA Music at [14] per Wigney J).
7. The plaintiff points out that the circumstances giving rise to such duties in Oliver Hume included the functions actually performed by the fiduciary, the level of responsibility conceded to him, the capacity to shape and influence decision-making concerning the subsidiary, the vulnerability of the subsidiary to action taken by him and the awareness he must reasonably have been taken to have that he was performing functions that were in fact for the benefit of the subsidiary.
8. The plaintiff argues that Ms Garrett and Mr Renauf were engaged by the Ashington group in senior and important roles (both generally and specifically in relation to the Stonington Capital Raising) which empowered them to affect the interests of Ashington Capital and Ashington Management in a legal and practical sense, and made those companies vulnerable to the abuse by them of their position. Hence, it is said that both owed fiduciary duties to Ashington Management and to Ashington Capital.
9. In particular, the plaintiff says that in the period up until 30 September 2009 Ms Garrett and Mr Renauf were placed in charge of all of Ashington's dealings with Patersons, Investec, PPB, the superannuation fund investors, and any new investors. It is said that the evidence of Ms Garrett's activities during this phase (referring to her involvement in the development and entry into the Patersons Mandate, her dealings with Investec, and her communications with superannuation fund investors - see chronology above) shows that Ms Garrett (and Mr Renauf) were trusted by Ashington, and given considerable responsibility and independence; and that Ms Garrett, in particular, had good existing relationships with Mr de Rooy (of Investec) and some of the representatives of the superannuation fund investors, which it is said gave her the ability to influence those people. It is noted that Ms Garrett's opinion in contemporaneous emails was that the Patersons Mandate would likely succeed. The plaintiff submits that Ms Garrett and Mr Renauf were able to persuade the superannuation fund investors to place the sale of the Stonington Property on hold and to allow Ashington 14 days to advance the Patersons Mandate (with a view to replacing Investec, and proceeding with the development); and similarly persuaded Investec to allow six weeks for the mezzanine finance capital raising to be achieved.
10. In that regard, the plaintiff says that Ms Garrett and, to a lesser extent, Mr Renauf were central to the capital raising efforts; and that, recognising that his actions had tarnished Ashington's relationship with investors, Mr Anderson placed Ms Garrett and Mr Renauf at the centre of his strategy to deal with the Stonington Capital Raising and, in doing so, it is said that Mr Anderson placed Ashington's financial survival in their hands. It is noted that Mr Anderson had directed staff that communications were to occur through Ms Garrett and made her the primary point of contact for Investec, existing investors, PPB, Patersons and incoming potential investors (see chronology above).
11. The plaintiff points out that, after entry into the Patersons Mandate, Mr Anderson had only infrequent communications with Mr Shorrocks in relation to the fundraising activities being undertaken by Patersons, otherwise leaving it to Ms Garrett to engage with Patersons and keep him updated on progress; and that Patersons' role was to market the Patersons Mandate, assist with investor due diligence and assist with financial close (with Mr Carolan principally responsible within Patersons for undertaking those tasks).
12. The plaintiff emphasises the importance placed by Ashington on Ms Garrett and Mr Renauf in seeking to secure a successful outcome for the Stonington Capital Raising by reference to the proposal that was prepared on 28 September 2009 to be sent to the existing superannuation fund investors (see chronology above).
13. The plaintiff says that the existence of such fiduciary duties is also apparent from the terms of the employment agreement which was provided to each of Ms Garrett and Mr Renauf on 1 May 2009 (and it is said that this reflected the practical factual relationship with Ashington whether or not the agreements were contractually binding). In particular, reference is made to: cl 1.1.4 of the (unexecuted) employment agreements which prohibited each of them from engaging in any activity that conflicted or was likely to conflict with the interests of Ashington (defined to mean Ashington Management) or the Group (defined to mean Ashington Management and all of its related entities as defined in s 9 of the Corporations Act, which includes Ashington Capital); and cl 9.1 which required that each maintain the confidentiality of Confidential Information (defined broadly to include information related to Ashington Management or a related entity). (Pausing here, I have difficulty in reliance being placed on the terms of draft unexecuted employment agreements in determining whether fiduciary duties were here owed by Ms Garrett and Mr Renauf. The simple fact is that those agreements were not ever executed.)
14. Further, it is said that, as employees, Ms Garrett and Mr Renauf also owed a duty of honesty as an incident of their fiduciary relationship; and that the concealment of facts which they had a duty to disclose plainly constitutes breach of that duty. It is submitted that so much follows, a fortiori, from authority to the effect that each could have been obliged, in the circumstances, to disclose the other's misconduct to the company. I consider the good faith/honesty obligations arising out of the employment relationship in due course.

Ms Garrett and Mr Renauf's submissions

1. Ms Garrett and Mr Renauf say that they were not fiduciaries because they did not exercise any power or discretion on behalf of Ashington Capital or Ashington Management; and that, if they were fiduciaries, any duty would be limited to the exercise of a specific power or discretion (and they say that none has been identified).
2. In that regard, Ms Garrett and Mr Renauf note that a fiduciary undertakes to act in the interests of another in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense; this being the critical feature of fiduciary relationships (referring to Hospital Products at 96-97 per Mason J) and that it is necessary to identify with care the particular duties undertaken by the employee and to ask whether, in all the circumstances, the employee has placed himself or herself in a position where he or she must act solely in the interests of the employer (Woolworths Ltd v Olson (2004) 184 FLR 121; [2004] NSWSC 849 (Woolworths v Olson) at [212] per Einstein J). It is noted that the question is one of degree and involves looking at the vulnerability of the employer and whether the relationship requires a standard of loyalty exceeding that in the employment contract.
3. Ms Garrett and Mr Renauf accept that the "responsibilities and functions" of an employee may also support the existence of a fiduciary relationship (citing Gunasegaram v Blue Visions Management Pty Ltd; Same v Chidiac (2018) 129 ACSR 265; [2018] NSWCA 179 (Gunasegaram) at [55] per Meagher JA) but say that, in analysing this issue, the relevant questions to ask are as follows (referring to Oliver Hume at [247] per Greenwood J (with whom White J agreed at [413])).
4. First, whether there was a power or discretion to be exercised by Ms Garrett and Mr Renauf which would affect the interests of Ashington Management and/or Ashington Capital in a legal or practical sense and, if so, whether Ms Garrett and Mr Renauf agreed or undertook, expressly or impliedly, to act for or on behalf of or in the interests of Ashington Management and/or Ashington Capital in the exercise of that power or discretion (i.e., whether Ms Garrett and Mr Renauf were acting in a "representative character" in the exercise of "their responsibility").
5. Second, whether Ms Garrett and Mr Renauf were afforded a "special opportunity" by reason of their position as employees and fiduciaries of Ashington Management and/or Ashington Capital to exercise a relevant power or discretion to the "detriment" of Ashington Management and/or Ashington Capital thus rendering Ashington Management and/or Ashington Capital "vulnerable to abuse" by Ms Garrett and Mr Renauf of "their position".
6. Third, whether Ms Garrett and Mr Renauf came "under a duty" to exercise a power or discretion in the interests of Ashington Management and/or Ashington Capital partly by reason of the circumstance that the exercise of the power or discretion could "adversely affect" the interests of Ashington Management and/or Ashington Capital in a legal or practical sense and partly because Ashington Management and/or Ashington Capital was "at the mercy of" Ms Garrett and Mr Renauf in that sense.
7. It is noted that the scope of the fiduciary's duties must be accommodated to the particular circumstances of the underlying relationship that gives rise to the duties in the first place (reference being here made to Howard v Federal Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21 (Howard) at [34] per French CJ and Keane J; Hospital Products at 102 per Mason J.
8. Further, Ms Garrett and Mr Renauf contend that the scope of the fiduciary's duties owed to a trustee company is informed by the following propositions: (a) that the best interests of a trustee company are the best interests of its beneficiaries (citing Australasian Annuities Pty Ltd (in liq) (recs and mgrs apptd) v Rowley Super Fund Pty Ltd (2015) 318 ALR 302; [2015] VSCA 9 (Rowley Super) at [228] per Garde AJA, which I extract below); (b) that it has been recognised that "[i]t is not in the best interests of the company for it to act in breach of its duties of a trustee, for the company has assumed the responsibilities of that office and must see to it that they are fulfilled" (Rowley Super at [228]); and (c) that it would be a breach of fiduciary duty to fail to consider the legitimate interests of the beneficiaries of a trustee company (Ying Mui v Hoh (No 6) [2017] VSC 730 (Ying Mui) at [395] per Vickery J).
9. Ms Garrett and Mr Renauf contend that, where there is a conflict between the interests of a trustee company and the interests of its beneficiaries, an employee or director of the trustee company must act in the interests of beneficiaries; and hence they maintain that it must follow that, in acting in the interests of beneficiaries, the employee does not act in breach of duty. They say that, if they did owe duties to Ashington Capital, those duties could not have required them to act in a way that put the interests of Mr Anderson and Ashington Capital above the interests of beneficiaries (i.e., the interests of the superannuation fund investors for whom Ashington Capital was a corporate trustee).
10. Ms Garrett and Mr Renauf say that (contrary to the plaintiff's submissions at [153]), there is no evidence of Ms Garrett and Mr Renauf exercising power or discretion or being "empowered" in any way. It is noted that Ms Garrett and Mr Renauf were not directors of Ashington Capital or Ashington Management; that there was no formal delegation of any power to Ms Garrett and Mr Renauf; that there was no delegation by Mr Anderson to Ms Garrett or Mr Renauf; and that Mr Anderson accepted as much (see as to Ms Garrett, T 507.45-50; T 508.15; see as to Mr Renauf, T 524.43-50). It is said that Ms Garrett and Mr Renauf did not have the authorisation to approve an investment or execute a term sheet; that, ultimately, in every instance Mr Anderson would make the relevant decision; and that, even if Mr Minahan was a decision-maker, there is no evidence that Ms Garrett and Mr Renauf were also decision-makers.
11. It is thus contended that Ms Garrett and Mr Renauf did not owe a fiduciary obligation because they did not undertake to act in in the interests of Ashington in the exercise of a power or discretion. Ms Garrett and Mr Renauf say that, no matter their titles, they were "finders" not decision-makers. It is contended that Ms Garrett and Mr Renauf: occupied roles that did not involve the exercise of any powers or discretions; did not agree or undertake, expressly or impliedly, to act for or on behalf of or in the interests of Ashington Management and/or Ashington Capital in the exercise of any power or discretion; were not afforded a "special opportunity" by reason of their position as an employee and fiduciary of Ashington Management or Ashington Capital to exercise a relevant power or discretion to the "detriment" of Ashington Management or Ashington Capital; and did not have the ability to bind Ashington.

Nature of any fiduciary duties owed

1. It is not disputed that fiduciary duties are proscriptive, not prescriptive, as they are obligations not to do particular actions (Breen v Williams at 113 per Gaudron and McHugh JJ; Blackmagic Design Pty Ltd v Overliese (2011) 191 FCR 1; [2011] FCAFC 24 at [105] per Besanko J (with whom Finkelstein and Jacobson JJ agreed); Coope v LCM Litigation Fund Pty Ltd (2016) 333 ALR 524; [2016] NSWCA 37 at [121]-[122] per Payne JA (with whom Gleeson and Leeming JJA agreed)). It is noted that the duty is a duty not to use the fiduciary's position for the fiduciary's own advantage and to avoid any potential or actual conflict between the interests of the plaintiff and the fiduciary's own interests (Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36 at 198-199 per Deane J; Breen v Williams at 108; Hospital Products at 67 per Gibbs CJ, 107 per Mason J).
2. Ms Garrett and Mr Renauf say that if they owed any fiduciary obligation, the scope of the duty was to act in the interests of beneficiaries (i.e., the superannuation funds) to the extent of any conflict with the interests of Ashington. They say that the identification of an investment opportunity is in the best interests of a trustee company if it is in the best interests of the beneficiaries; even if the interests of the trustee (or Mr Anderson) was not best served by that opportunity. Thus, it is said that if, contrary to their submissions, the Consortium proposal was not in the interests of Ashington, that was because Ashington's interests conflicted with the interests of beneficiaries. Further, it is said that there was no breach of fiduciary obligation because the beneficiaries knew of, and approved, the Consortium proposal from its inception (and the Consortium proposal was in the interests of beneficiaries).
3. To the extent that the plaintiff seeks to impose or rely on a positive obligation on the part of Ms Garrett and Mr Renauf actively to disclose matters to Mr Anderson, Ms Garrett and Mr Renauf say that this should be rejected. In this regard, Ms Garret and Mr Renauf refer to the allegations about receiving and keeping secret the October 2009 emails about the opportunity for assets of Ashington to be transferred to a new manager (see [105]; [107]; [192(c)-(d)] of the third further amended statement of claim) and keeping the Arnold Bloch Leibler advice secret from Ashington (see [109]; [192(e)] of the third further amended statement of claim).

Determination

1. As noted above, I do not accept that there was a concluded employment contract as such, given that essential terms of the contract remained the subject of negotiation.
2. However, I do accept that there was an employment relationship between Ms Garrett and Mr Renauf and Ashington Management (the entity which paid their salaries) and that the employment relationship was one that encompassed a role of some kind more generally within the Ashington group (as evident by the presentations made by them on behalf of Ashington Capital and as acknowledged in the settlement deed following the termination of their employment).
3. In that regard, it is relevant to note that distinctions have been drawn between an employment relationship and a contract of employment, particularly with regard to termination (see the discussion in Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414; [2008] NSWSC 852 at [30] per Brereton J, as his Honour then was; Tullett Prebon (Australia) Pty Ltd v Purcell [2009] NSWSC 1079 at [40]-[41]: Melbourne Stadiums Ltd v Sautner (2015) 317 ALR 665; [2015] FCAFC 20 at [187] per White J).
4. As to whether Ms Garrett and Mr Renauf, as employees under a common law relationship agreement (since I accept that there was no concluded employment agreement as such), owed fiduciary duties to any of the Ashington companies, the starting point is the consideration in the authorities that the more senior an employee, the more likely that the employee's duties will be fiduciary in nature (see, for example, Colour Control Centre at [48] per Santow J).
5. In Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (2007) 69 NSWLR 198; [2007] NSWSC 104 at [129], Rothman J (referring to Concut Pty Ltd v Worrell (2000) 176 ALR 693; [2000] HCA 64 (Concut)) affirmed that the relationship of employer and employee was one "importing implied duties of loyalty, honesty, confidentiality and mutual trust" (citing Concut at [51] per Kirby J).
6. However, in Woolworths v Olson (at [214]), Einstein J noted that the mere existence of an employment relationship does not necessarily give rise to a fiduciary duty. It is to be "contrasted with a number of other relationships which can readily and universally be recognised as 'fiduciary relationships' because the very essence of the relationship is that one party must exercise his powers for the benefit of another" (see Nottingham University v Fishel [2000] IRLR 471 (Nottingham University) at 483 per Elias J). In Woolworths v Olson (at [214]), Einstein J relied on the following passages in Nottingham University (at 483ff): The employment relationship is obviously not a fiduciary relationship in the classic sense… Its purpose is not to place the employee in a position where he is obliged to pursue his employer's interests at the expense of his own… This is not to say that fiduciary duties cannot arise out of the employment relationship itself. But they arise not as a result of the mere fact that there is an employment relationship. Rather they result from the fact that within a particular contractual relationship there are specific contractual obligations which the employee has undertaken which have placed him in a situation where equity imposes these rigorous duties in addition to the contractual obligations. Where this occurs, the scope of the fiduciary obligations both arises out of, and is circumscribed by, the contractual terms; it is circumscribed because equity cannot alter the terms of the contract validly undertaken... Accordingly, in analysing the employment cases in this field, care must be taken not automatically to equate the duties of good faith and loyalty or trust and confidence, with fiduciary obligations. Very often in such cases the court has simply been concerned with the question whether the employee's conduct has been such as to justify summary dismissal, and there has been no need to decide whether the duties infringed, properly analysed, are contractual or fiduciary obligations. As a consequence, the two are sometimes wrongly treated as identical: see eg Neary v Dean of Westminster [1999] MLR 288 at 290, where the mutual duty of trust and confidence was described as constituting a "fiduciary relationship". Accordingly, in determining whether a fiduciary relationship arises in the context of an employment relationship, it is necessary to identify with care the particular duties undertaken by the employee, and to ask whether in all the circumstances he has placed himself in a position where he must act solely in the interests of his employer. It is only once those duties have been identified that it is possible to determine whether any fiduciary duty has been breached, as Lord Upjohn commented in Phipps v Boardman [1967] 2 AC 46 at 127: "Having defined the scope of [the] duties one must see whether he has committed some breach thereof and by placing himself within the scope and ambit of those duties in a position where his duty and interest may possibly conflict. It is only at this stage that any question of accountability arises." It follows that fiduciary duties may be engaged in respect of only part of the employment relationship, as was recognised by Lord Wilberforce, giving judgment for the Privy Council in New Zealand Netherlands Society "Oranje" Inc v Kuys [1973] 1 WLR 1126 at 1130: "A person … may be in a fiduciary position quoad a part of his activities but not quoad other parts: each transaction, or group of transactions, must be looked at." [Emphasis added]
7. Fiduciary duties may be derived from the existence of a contract of employment (see Spigelman CJ in Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298; [2003] NSWCA 10 at [43]-[44]). However, the lack of an employment contract is not a bar to the finding of fiduciary duties (see AMP Services Ltd v Manning [2006] FCA 256 (AMP Services v Manning) at [55] per Finkelstein J; Labelmakers Group Pty Ltd v LL Force Pty Ltd (No 3) [2013] FCA 1059 at [82] per Tracey J).
8. Relevantly in AMP Services v Manning Finkelstein J considered (at [55]) that fiduciary obligations arose by reason of the fact that the relevant person (Ms Manning) though not an employee of the entity in question (Arrive) had been retained by AMP Services to work for Arrive; had been appointed as the head of Arrive's Victorian office "and thus undertook to act in its interests"; had been given powers which would affect the interests of Arrive; and there was a relationship of trust and confidence between Ms Manning and Arrive. His Honour held that the absence of a contract of employment did not deny the fiduciary character of the relationship between Arrive and Ms Manning.
9. Thus, the absence of an executed contract is not a bar to a finding that fiduciary duties arose out of the employment relationship between Ms Garrett and Mr Renauf and Ashington Management (if not Ashington Capital).
10. As discussed by Foster J in Bayley and Associates Pty Ltd v DBR Australia Pty Ltd [2013] FCA 1341 (Bayley v DBR) at [230]-[232], while it is more often accepted that senior employees with managerial responsibilities owe fiduciary obligations, the question as to the existence of fiduciary duties on the part of the employee remains one of degree. The following factors are relevant to the existence of a fiduciary relationship: (i) the latitude afforded to the employee; (ii) the level of vulnerability arising from the potential misuse of power granted by the employer to the employee; (iii) whether the employment relationship demands a standard of loyalty exceeding the duty of fidelity prescribed by the employment contract (see Bayley v DBR at [232]). Further to this, I note the factors set out by Einstein J in Woolworths v Olson extracted above, particularly as to what is considered the "critical feature", that "the fiduciary undertakes or agrees 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 in a legal or practical sense the interests of that other person".
11. In the present case, the individuals in question clearly occupied senior positions (apart from their titles, it appears that they had the responsibility of liaising directly with potential investors and the superannuation fund investors and within Ashington there was a direction that all communications with the latter were to be through them). That said, I accept that the precise nature of their roles and duties was not clear (and I regard their resumes as of little use in enlightening me in this regard - not least because such documents may well be seen as self-serving).
12. However, it does not appear to be the case that powers or discretions as such were delegated to or exercisable by either of them. The high point of the nature of their employment relationship seems to be that there was trust and confidence reposed in them to negotiate commercial deals and to "package" proposed refinancing arrangements. True it is that they appear to have been effectively left unsupervised (although there was evidence that Mr Anderson sought to be involved from time to time and was dissuaded from so doing) but it is clear that they were expected to report on their activities and that they were not the ultimate decision-makers. I accept that they were in a position where the Ashington companies were vulnerable if they chose to abuse their position (but to a certain extent that might be said of many employees of professional services firms once they have a degree of autonomy). It is significant in my opinion that, unlike the position in AMP Services v Manning, there is no suggestion that they were given powers as such, the exercise of which would affect the interests of the Ashington group.
13. Ultimately, one might test it this way - say a senior associate in a transactional team at a law firm or accounting firm is given the responsibility of dealing with the firm's clients or prospective clients directly (and without immediate supervision, albeit with an expectation that there would be a report back to the relevant principal of the firm who would make the relevant decisions), this would leave the firm no doubt vulnerable to abuse or exploitation by the employee, but I am not persuaded that this amounts to a fiduciary relationship without more.
14. In particular, I am not satisfied that the relationship is one that requires a standard of loyalty beyond that of an ordinary employment relationship with a senior employee. Certainly, I consider that Ms Garrett and Mr Renauf were more than "finders", in the sense that Ashington (and Mr Anderson in particular) relied on them (or at least Ms Garrett) to negotiate with and make presentations to potential investors and the superannuation fund investors. However, neither was in the position to commit Ashington to any exercise of power or discretion.
15. I note that, while much has been said (and there is much in the contemporaneous documentation) about Ms Garrett's role in the scheme of things, Mr Renauf (with no disrespect to him) appears to have been something of a "sidekick" or subordinate to Ms Garrett (even though they were on equivalent remuneration packages). Perhaps I am doing a disservice to Mr Renauf in that regard (since he at least appears to have had the responsibility for progressing deals such as the sale of 10 Wylde Street). However, Mr Renauf was copied into most of the communications; was sufficiently involved in the matter to have been described as an essential part of the new management team; and in any event, Mr Renauf could have given evidence to explain that his role was materially different in scope or significance to that of Ms Garrett or to shed light on his position; and he did not do so.
16. I would therefore infer that the roles of both Ms Garrett and Mr Renauf were essentially equivalent in status (although Ms Garrett seems to have had the principal role in preparing for presentations to superannuation fund investors and potential investors) and I am reinforced in that conclusion by the documentary evidence that portrayed Mr Renauf's proposed involvement in the new entity as an essential part of the Parissen Proposal.
17. Ultimately, however, I am not persuaded that either Ms Garrett or Mr Renauf owed fiduciary duties (as opposed to duties of good faith, honesty and loyalty) to the Ashington companies.
18. It is also relevant here to address the submission that Ms Garrett and Mr Renauf ultimately owed duties to the beneficiaries or to the effect that their duties to the Ashington entities could not have been breached if they were acting in (what they perceived to be or what might in hindsight be said to be) the best interests of the beneficiaries (i.e., the superannuation fund investors).
19. In a discussion concerning the fiduciary duties of a director to a trustee company, Phillips J in Young v Murphy, stated (at 301-302) that "if the company be a trustee for others of certain property held by it or if the company carries on trading as a trustee for others, that matters not (at least ordinarily) to the definition of the duties owed by the directors to the company". In Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd (2004) 22 ACLC 724; [2003] QSC 402 at [35], Chesterman J considered that Young v Murphy indicated that employees and directors of a trustee company do not owe fiduciary obligations directly to beneficiaries.
20. In Rowley Super at [227]-[229] Garde AJA stated that: 228. … In circumstances where a company is a corporate trustee, a director acting in the best interests of the company as a whole must act in good faith to ensure that the company administers the trust in accordance with the trust deed having regard to the rights and interests of the beneficiaries of the trust. The best interests of the company as a corporate trustee are to act properly in accordance with the trust deed in managing the business of the trust and in dealing with the assets and liabilities of the trust. A director of a corporate trustee must act in good faith to ensure that the company complies with its obligations as a trustee, and properly discharges the duties imposed on it by the trust deed and by trust law generally. It is not in the best interests of the company for it to act in breach of its duties of a trustee, for the company has assumed the responsibilities of that office and must see to it that they are fulfilled. 229. The obligation of a director of a corporate trustee is the same whether the trust is a unit trust or a discretionary trust viz to act in good faith to ensure that the company acts properly in accordance with the trust deed in administering the business, assets and liabilities of the trust. Although in the case of a discretionary trust, a member does not have any present entitlement to the trust assets, the member does have standing to compel the proper administration by the corporate trustee of the trust. This is not disputed. The director should act in good faith to ensure that there is no cause for legitimate complaint by a beneficiary about the administration of a trust for which the company is responsible.
21. The difficulty here is whether an employee holds a duty to its employer that is equivalent to a director or officer's duty to act in the best interests of the company or, for present purposes, the trustee company.
22. It is well established that a duty to act in good faith towards the employer is implied into the employment contract (Robb v Green [1895] 2 QB 315 at 317 per Lord Mesher MR). This is commonly referred to as a duty of fidelity. However, that is not equivalent to the greater obligation of a fiduciary to act in the best interests of another. As already addressed, such a fiduciary duty does not automatically arise in every employment relationship (Investa Properties Pty Ltd v Nankervis (No 7) (2015) 333 ALR 193; [2015] FCA 1004 (Investa Properties) at [66]; Nottingham University v Fishel); and when a fiduciary duty does arise its scope must be considered in light of the employment contract and the particular circumstances of the employment relationship in question. As Foster J stated in Bayley v DBR: 236. Of course, the fiduciary relationship must accommodate itself to the terms of the employment contract so that it is consistent with and conforms to those terms. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction (per Mason J in Hospital Products at 96). 237. A finding that a particular relationship is fiduciary in character does not necessarily, set the metes and bounds of the content of the fiduciary obligation. It is always necessary to analyse the circumstances of the particular case in order to arrive at the specific ascertainment of the particular obligations owed and thus what acts or omissions would amount to a breach of those obligations.
23. I do not accept that it follows that the characterisation of a director's duty to act in the best interests of a trustee company means that an employee of the trustee company would owe fiduciary obligations or other obligations to the beneficiaries of the trustee company; even where a fiduciary duty arose (as its scope would depend on the particular facts and circumstances). Further, I do not consider that it is an appropriate answer to an allegation for breach of duties (of whatever kind) owed to the employer that the employee considered the conduct to be in the best interest of the beneficiaries (or that it might objectively be seen as being in the best interest of the beneficiaries). The duties owed by Ms Garrett and Mr Renauf (albeit that I consider they were not fiduciary) were owed to their employer - and if there was perceived to be a conflict between those duties and the interests of beneficiaries the answer would not lie in Ms Garrett and Mr Renauf simply choosing unilaterally to breach their duties of good faith and honesty to their employer.
24. That said, relevant to note at this point is that I have concluded that Ms Garrett and Mr Renauf did not owe fiduciary duties to the Ashington companies or group.

Patersons

1. As to the position of Patersons, the plaintiff points to the appointment of Patersons under the Patersons Mandate in September 2009 as lead manager to raise $11-15 million in mezzanine finance in order to restructure the existing debt facilities for the Stonington Property; emphasising that Patersons' function was that of an adviser, rather than a financial counterparty, to Ashington Capital.
2. The plaintiff says that the terms of the Patersons Mandate give rise to fiduciary duties owed by Patersons to both Ashington Capital and Ashington Management (the latter not itself a party to the contract albeit that it is said that it was included within the definition of the entities to which obligations were owed), irrespective of whether the Patersons Mandate, or any particular terms of it, came into effect. In particular, it is said that, in engaging Patersons for the purposes of the Stonington Capital Raising, both Ashington Capital's and Ashington Management's income streams were vulnerable to the abuse by Patersons of its position (in precisely the way which occurred when Patersons helped to advance a proposal to replace those entities as trustee and manager).
3. The plaintiff alleges that the fiduciary relationship between Patersons and Ashington Capital (as well as Ashington Management) arose from the particular features and circumstances of the Patersons Mandate (see at [237] of the pleading), it being alleged that Patersons was under a fiduciary obligation to Ashington Capital and Ashington Management: not to use its position for its own or a third party's advantage; and to avoid any potential or actual conflict between its duties as an advisor to the Ashington companies and its own personal interest or the interest of a third party.
4. In this regard, the plaintiff says that contractual and fiduciary relationships can co-exist and that there is nothing in the Patersons Mandate between Ashington Capital and Patersons that would operate to exclude or modify such fiduciary duties. The plaintiff submits that the relationship between financial adviser and client is one involving elements of trust, confidence and vulnerability requiring undivided loyalty and giving rise to fiduciary duties; and that, consistent with this, a broker seeking to raise capital for commission has been compared to a stockbroker who owes fiduciary duties to their client.
5. The plaintiff says that the existence of fiduciary duties owed by Patersons directly to Ashington Capital and Ashington Management is bolstered in circumstances where, through its further amended defence, Patersons no longer contends that Patersons was under no obligation to take further steps to progress the Patersons Mandate due to a failure to satisfy particular conditions precedent. (That concession is said to have been inevitable in the light of Mr Shorrocks' evidence that such conditions were only intended to be satisfied once capital had been successfully raised - T 754-760.)

Patersons' submissions

1. Patersons says that the allegation that it owed fiduciary obligations to Ashington Capital and Ashington Management is flawed on the basis that a fiduciary relationship cannot be superimposed upon a contract in order to alter the operation of that contract, on its proper construction. It is said that, in circumstances where the contractual relationship between Patersons and Ashington Capital (in its capacity as trustee of ADF2) was purely of a commercial kind between two sophisticated corporate parties, no fiduciary obligation arose. Reference is made to Schmidt v AHRKalimpa Pty Ltd [2020] VSCA 193 (Schmidt) at [89]-[90], where the Victorian Court of Appeal noted that there is no comprehensive statement of the criteria by reference to which the existence of a fiduciary relationship may be established; that the creation of a joint venture relationship is not, in itself, determinative of whether a fiduciary relationship exists; and that, once a fiduciary relationship is found to exist, the duties of the fiduciary will vary according to the circumstances which generate the relationship (i.e., the scope of the fiduciary duty will depend on the nature of the relationship and the facts of the case; and may be determined by reference to the terms of the agreement giving rise to those obligations and also by reference to the course of dealings actually pursued by the parties) (see at [89]ff).
2. Patersons says that the alleged fiduciary duty here does not fall within any established category of fiduciary duty, noting that Patersons was not engaged by Ashington as its stockbroker (as, for example, in Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371; [1986] HCA 25); rather, Patersons' corporate finance division was engaged as a "Lead Manager" to assist Ashington raise capital. It is said by Patersons that the role of a "Lead Manager" in a capital raising is analogous to other underwriting and capital raising activities performed by financial institutions and is fundamentally different in character to the role of stockbroker or investment adviser in advising a client (often an individual) whether or not to buy securities.
3. It is noted that the imposition of a fiduciary duty has been rejected in not dissimilar contexts, including where the arrangement is the result of arm's length negotiation between sophisticated parties which is inconsistent with the relationship of trust and dependency from which fiduciary duties arise (citing EBC, Inc v Goldman Sachs & Co, 91 AD.3d 211 (N.Y. App. Div 2011)). It is noted that one of the indicia of a fiduciary relationship (vulnerability) is invariably absent in that context. It is said that the absence of vulnerability is even clearer here because the sophisticated corporate client was led by Mr Anderson who professes to have extensive knowledge and experience in capital raising (including through ADF, AFD2 and the proposed AOF3) and the operation of financial markets.
4. Patersons points out that each sub-paragraph of [238] of the statement of claim (with the exception of (m), which is merely ancillary to the preceding sub-paragraphs) specifically refers to, and is premised upon the existence of, the Patersons Mandate. It is submitted that this conflation of Patersons' contractual obligations with a broader fiduciary duty allegedly owed to Ashington Capital and Ashington Management is conceptually flawed.
5. First, Patersons says that its contractual obligations were only owed to Ashington Capital as trustee for ADF2 (i.e., for the benefit of the unitholders in that trust); there was no other relationship (pleaded or otherwise) between Patersons and Ashington Management. Patersons says that a fiduciary relationship cannot be superimposed upon a contract in order to alter the operation that the contract was intended to have according to its proper construction (citing John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 at [91]-[92] per French CJ, Gummow, Hayne, Heydon and Kiefel JJ). In circumstances where Ashington Management was not a party to the Patersons Mandate in any capacity, it is said that the plaintiff has pleaded no justification for any fiduciary obligations that Patersons may have owed to Ashington Capital being extended such that identical obligations were also owed to Ashington Management. A related difficulty with the alleged fiduciary duty is said to be that it assumes that Patersons' contractual obligations were for the benefit of Ashington Capital in its own capacity; as distinct from in its capacity as trustee for the unitholders of ADF2.
6. Second, that where an arrangement between parties is of a purely commercial kind, and they deal at arms' length and on equal footing, no fiduciary duty generally arises. Patersons says that, in circumstances in which Ashington Capital and Ashington Management were plainly sophisticated commercial entities involved in property transactions of significant value, the relationship between those companies and Patersons cannot be characterised as one of a fiduciary nature. It is said that the fact that Ashington Capital and Ashington Management might have relied on Patersons to source potential investors in the Stonington Capital Raising, and conduct the transaction as Lead Manager should such an investor or investors be located, does not give rise to a fiduciary relationship.
7. Third, that a fiduciary obligation cannot modify the operation or effect of a statute (as to allow it to do so would be "to give equity supremacy over the sovereignty of Parliament" - see Cubillo v Commonwealth (2001) 112 FCR 455; [2001] FCA 1213 at [465] per Sackville, Weinberg and Hely JJ). Patersons points out that its business is heavily regulated (and was at the relevant time). It notes that under s 912A(aa) of the Corporations Act it was required to "have in place adequate arrangements for the management of conflicts of interest that may arise wholly, or partially, in relation to activities undertaken" by it. It is said to be clear from the text of s 912A(aa), that Patersons' statutory obligation with respect to conflicts of interest was to "manage" (not to eliminate or avoid) any such conflicts. It is said that the plaintiff's pleaded case does not acknowledge the distinction between this statutory obligation and the strict duty in equity of a fiduciary to eliminate or avoid conflicts that was recognised in Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35; [2007] FCA 963 at [311] per Jacobson J.
8. Finally, it is said that, even if Patersons did owe a fiduciary obligation to Ashington Capital and Ashington Management not to obtain a benefit from the its position and to avoid conflicts of interest, that obligation would not extend to requiring it expressly to disclose to Ashington Capital and Ashington Management the alleged activities of the Consortium (assuming Patersons had any such knowledge). Patersons emphasises that equity imposes on the fiduciary proscriptive (not prescriptive) obligations not to obtain any unauthorised benefit from the relations (the no profit rule) and not to be in a position of conflict (the conflict rule); and that if these obligations are breached, the fiduciary must account for any profits and make good any losses arising from the breach; but that the law in Australia does not otherwise impose positive (prescriptive) legal duties on the fiduciary to act in the interests of the person to whom the duty is owed.

Determination

1. In essence for the reasons put forward by Patersons, I have concluded that Patersons was not in a fiduciary relationship with the Ashington entities; and did not owe any of them fiduciary obligations. I see the relationship as a commercial one where Patersons was mandated to procure a financing outcome (though did not guarantee such an outcome) but was not a financial adviser as such. While Ashington may have had confidence in Patersons' ability to raise capital for Stonington, the relationship was not one of trust, arising out of vulnerability on the part of Ashington. The relationship between Ashington Capital (the contracting party) and the other Ashington entities (to the extent a relationship existed), on the one hand, and Patersons, on the other, was an arms' length relationship.

Breach of fiduciary duties

1. The above conclusions dispose of the claims for breach of fiduciary duty (and the related claims against the various defendants for knowing assistance in breach of fiduciary duty). Nevertheless, in the event that I be wrong in the conclusion that there was no fiduciary duty owed by Ms Garrett and Mr Renauf, on the one hand, and/or Patersons, on the other, I proceed to consider whether there was a breach of the alleged fiduciary duty (and then whether there was knowing assistance by any of the defendants in any such breach).

Ms Garrett and Mr Renauf - breach of fiduciary duty

1. The plaintiff contends that, from 2 October 2009 at the latest, consistently with Ms Garrett's 2 October 2009 email to Mr Doherty setting out their intentions, Ms Garrett and Mr Renauf pursued a "highly confidential" opportunity (being led by PPB and themselves) to replace Ashington Capital and Ashington Management with a new trustee and manager, with the intention that they would be employed by the new entity in which they would take an entity stake (pointing to the sign off by Ms Garrett: "… will be the New Fund Manager". It is said that, on 5 October 2009, Ms Garrett and Mr Renauf met with Mr Carolan, Mr Doherty and, sequentially, Mr Routley and Mr Ko to discuss the plan to replace Ashington as manager.
2. Complaint is made that, subsequently, while ostensibly advancing the Stonington Capital Raising for Ashington's benefit, Ms Garrett and Mr Renauf were working with the other defendants to execute their plan to replace Ashington; and that they also facilitated the provision of Ashington's confidential information to Albany and Acorn (knowing that those entities were not interested in the Stonington Capital Raising but were interested in an alternative strategy to replace Ashington). The plaintiff says that, throughout the relevant period, the conduct of Ms Garrett and Mr Renauf was characterised by concealing their activities from Mr Anderson and others at Ashington and actively misleading Mr Anderson as to what was occurring; and that this conduct was dishonest.
3. It is said that, in pursuing and executing the plan to replace Ashington, Ms Garrett and Mr Renauf were acting to advance their own interests and those of Albany, Acorn and PPB to the detriment of Ashington Management and Ashington Capital and, in so doing, they breached the no profit and no conflict rules allegedly owed to Ashington Management and Ashington Capital. (As noted above, I have found that they did not owe fiduciary duties, and so I proceed on a hypothetical basis.)
4. Further, the plaintiff contends that Ms Garrett and Mr Renauf breached their fiduciary duties to Ashington as part of a dishonest and fraudulent design, in that their conduct involved a transgression of ordinary standards of honest behaviour. It is said that that conclusion is sufficiently supported by the fact that Ms Garrett and Mr Renauf were pursuing a plan that involved replacing Ashington, for whom they worked, as trustee and manager of ADF and ADF2 with a new trustee and manager.
5. In the alternative, the plaintiff says that the following features of the conduct of Ms Garrett and Mr Renauf (either individually or collectively) also support a finding of dishonesty and fraud (and that the secondary parties had knowledge in the requisite sense of these circumstances - which I address in due course): that their plan involved Ms Garrett and Mr Renauf obtaining a remunerative position and potential equity interest in the new trustee and manager; that their plan was to be kept, and was kept, secret from the directors of Ashington including, where necessary, by lying to Mr Anderson as to Ms Garrett's dealings with the superannuation fund investors, Investec, PPB, Mr Ko, and Mr Routley; and that their plan involved advancing that plan directly to Ashington's banks and persuading the banks to maintain secrecy around the plan.
6. The plaintiff notes that the evidence of Patersons sending out the Patersons Stonington Term Sheet to its clients between 24 September 2009 and 2 October 2009 is limited to the following: on 24 September 2009, Mr Carolan sent a copy of the term sheet to Mr Campbell Smith; on 30 September 2009, Mr Carolan sent a copy of the term sheet to a Mr Johnathan Pearce; on 30 September 2009, Mr Doherty sent a copy of the term sheet to Mr Routley of Acorn; on or about 30 September 2009, Mr Doherty sent a copy of the term sheet to Thorney; on 2 October 2009, Mr Carolan sent a copy of the term sheet to Mr Stuart Foster; on 2 October 2009, Mr Carolan sent a copy of the term sheet to Mr Chris Ryan; and on 2 October 2009, Mr Shorrocks sent a copy of the term sheet to Mr Glen Whiddon. After 2 October 2009, there is no evidence of any term sheet being sent out by Patersons. (I note that Albany, at the very least, accepts that the evidence discloses that from 2 October 2009 the Paterson Mandate was effectively abandoned by Ms Garrett and Mr Renauf, and by Mr Carolan - and I agree with that conclusion.)
7. It is noted by the plaintiff that Mr Shorrocks in cross-examination gave evidence that Mr Routley's expression to Mr Doherty of a preference to invest in the manager was such a significant change that it should have been brought to his attention, and Mr Shorrocks accepted that Patersons would have informed Ashington to ensure that Ashington was comfortable with the proposal (T 767.13-28). That evidence was credible and I have no difficulty accepting that (even if the initial expression of interest in investment in the manager might not have needed to be disclosed - since it was not necessarily inconsistent with a refinancing along the lines of the Patersons Mandate) once the decision was made to present a proposal to potential investors that was contrary to the Patersons Mandate it would have been expected by Mr Shorrocks that it be disclosed to him - not least because the effect of such a proposal (without coming to a new arrangement) would be to deprive Patersons of a substantial fee under the Patersons Mandate; and this is no doubt why Mr Carolan exhorted Mr Doherty to keep it confidential lest they be shot.
8. The plaintiff believes that the genesis of the plan to divert the Stonington Capital Raising (for which Patersons had been mandated) into a scheme that involved the replacement of Ashington as trustee and manager occurred in two meetings between Ms Garrett, Mr Renauf and PPB on 30 September 2009 and 1 October 2009. The plaintiff says that, although there are no notes of what happened at those meetings (and the participants have not given evidence), the fact that they took place (and what happened at them) is apparent from other evidence (referring to the emails from 29 September 2009 to 2 October 2009; and the meetings that took place in the first week of October 2009; see chronology of events above).
9. By reference to the "Go Forward" Corporate Structure Slide prepared in advance of the 5 October 2009 meetings (which the plaintiff says it can be inferred was incorporated into the presentation), the plaintiff says that Ms Garrett lied to Acorn and Albany when suggesting that the superannuation fund investors had unanimously supported the recommendation that the manager should be replaced. The plaintiff says that this was untrue; that the plan was in fact being driven by PPB and was revealed to the superannuation fund investors for the first time on 9 October 2009. The plaintiff points to Ms Garrett's evidence in the liquidator's examination (see above) that she did not recall having canvassed the views of the superannuation fund investors about whether or not Ashington should be removed as trustee or manager.
10. The plaintiff says that at the 5 October 2009 meetings, Ms Garrett told Mr Routley and Mr Ko that Ms Garrett and Mr Renauf were going to be the new fund manager. The plaintiff says that it can be inferred that the "Go Forward" presentation was given at those meetings on the basis that: it was clearly prepared for that purpose; Ms Garrett noted that she had promised the "Go Forward" slide to Mr Routley; a version of the PowerPoint was produced by Mr Ko; and on 8 October 2009, Mr Routley requested a soft copy of her presentation (the plaintiff noting that Ms Garrett expressed some reluctance to do so, and the plaintiff says that no doubt Ms Garrett recognised the "risk" to her if Mr Anderson "got wind of her plan", by which I assume the plaintiff is contemplating the risk that Ms Garrett's employment with Ashington would be at risk; but arguably there would also have been the risk that Mr Anderson might be in a position to thwart the plan if he had learned of it at an earlier time).
11. Pausing here, I have some hesitation in drawing the inference for which the plaintiff here contends (at least insofar as it encompasses Ms Garrett telling Mr Routley and Mr Ko at these meetings that she and Mr Renauf would be the new fund manager or showing them the slide with Ms Garrett and Mr Renauf as the new fund manager). During the previous weekend, Ms Garrett had said that that particular slide was redundant and had removed it from the Stonington PowerPoint. The whole of the presentation is unlikely to have been made at the initial meeting with Mr Routley (as that was a very short meeting) and the subsequent request for the Stonington PowerPoint says nothing about their contents.
12. Nevertheless, it seems most likely that Ms Garrett took the slide with her to Melbourne and on the balance of probabilities I would accept that Ms Garrett is likely to have shown it to Mr Ko at the longer of the two 5 October 2009 meetings (bearing in mind that the outcome of those meetings was the development of a proposal to the effect of that contemplated by the slide and the communications after these meetings which record a proposal of that kind). In this regard, I also note Ms Garrett's email to Mr Renauf on 4 October at 2.41pm in which she says "I have removed the go-forward corporate structure section from the presentation. I will take it as a separate set of slides as this is probably more appropriate" (see chronology above).
13. Certainly, I have no difficulty inferring that at the meetings it was proposed that there be a replacement trustee and fund manager (which is consistent with the contemporaneous documents). It seems to me that little turns on whether Mr Ko or Mr Routley was told at those initial meetings of the proposal that Ms Garrett and Mr Renauf take on a role with the replacement trustee as that was certainly how the proposal was subsequently developed (it might simply mean that any knowing assistance claim might not be made out until a later time - if it is critical to such a claim that Mr Ko or Mr Routley knew that the proposal contemplated that Ms Garrett and Mr Renauf would have a remunerative role with the replacement trustee or manager).
14. The plaintiff points to the events that took place over the period 6-9 October 2009, identifying among the key developments in that period the following.
15. First, that PPB in its 7 October 2009 email gave the misleading impression to superannuation fund investors that the impetus for replacing the manager had emerged from the process of trying to pursue the proposal to which the superannuation fund investors had agreed on 30 September 2009 (that being something said to be critical to obtaining the support of superannuation fund investors since they were heavily reliant on PPB's advice) and that it was a funding market reaction rather than the plan of PPB and Ms Garrett.
16. Second, that Ms Garrett, Mr Carolan, and Mr Doherty all worked co-operatively to expedite access to the Stonington Data Room for Acorn and Albany so that they could begin the due diligence on their plan to replace Ashington.
17. Third, that, while Albany and Acorn were being prioritised, other potential investors (such as Apex Capital) were being ignored (because, the plaintiff says, interest did not suit the new scheme). However, Ms Garrett was giving Mr Anderson the impression that she was pursuing leads for the Stonington Capital Raising (by copying him in on her updates to Mr de Rooy which identified Apex, Acorn, Albany, Thorney, Wingate, McCabe, Mr Glen Whidden, Mr Campbell Smith and Icon Constructions as potential investors).
18. Fourth, that Mr Carolan, Mr Doherty, PPB, Acorn and Albany, all continued to email, call and meet to develop and advance the scheme.
19. Fifth, (by reference to the 8 October 2009 email from Mr Routley to Mr Swan) that Mr Routley had been misled into believing, at least initially, that the impetus for removing Ashington had come from the superannuation fund investors.
20. In relation to the first of those matters, the plaintiff says that the reference in the 6 October 2009 PPB email to concerns about Ashington's existing management team could only have been discussed with Mr Routley and Mr Ko by Ms Garrett, Mr Renauf, Mr Carolan or Mr Doherty (all of whom, the plaintiff says, owed fiduciary obligations to Ashington) and, of those, it is unlikely to have been Mr Carolan or Mr Doherty (neither of whom had yet met with the potential new investors). It is noted that neither Mr Ko nor Mr Routley had any prior experience of Ashington. The plaintiff further says that, when Mr Block (of PPB) wrote to the superannuation fund investors on 6 October 2009, he made no mention of a plan to replace Ashington, giving them the misleading impression that PPB was continuing to work with Ms Garrett on the authorised re-capitalisation proposal that they had agreed to on 30 September 2009.
21. As to the reliance by superannuation fund investors on PPB's advice, reference is made in this regard to Mr Hartley's evidence (at T 1000.11-28) in which he accepted that in late September or early October "[w]e would have been expecting some recommendation coming from PPB as to what they thought the best thing going forward was and if that was in the mix, then that would have been considered"; that he was heavily reliant at this time on PPB's advice and open to considering whatever recommendations PPB made (and that this was so whatever those recommendations implied in respect of the future involvement of Ashington).
22. As to the second of those matters, it is noted that, when Ms Garrett was questioned in the liquidator's examination as to her email to Mr Ko confirming that she and Mr Renauf were "excited about the opportunity and are keen to ensure that you are furnished with all the relevant information as soon as possible", Ms Garrett said that she was referring to the opportunity of the Pacific Group investing into "Newco", and that on at least one possible version of the investment, the opportunity was to remove Ashington as the manager and trustee of ADF and ADF2.
23. As noted above, the plaintiff says that the Garrett plan was revealed to the superannuation fund investors on 9 October 2009 (referring to the report prepared by Mr Dedes for Military Super as to the meeting and the handwritten note by Mr Flett of HESTA - see chronology above).
24. The plaintiff thus says that the desire to replace Ashington was presented to the superannuation fund investors as a requirement of incoming investors (Albany and Acorn), whereas it had been pitched to Acorn as the requirement of the superannuation fund investors. Instead, the plaintiff says that it was driven by PPB, Ms Garrett and Mr Renauf. It is noted that Mr Dedes accepted that the 9 October 2009 meeting started a process which extended over the following six to eight weeks involving the proposal from Acorn and Alter; and the plaintiff says that all that happened occurred pursuant to the initial initiative of Ms Garrett and Mr Renauf.
25. The plaintiff says that, over the ensuing weeks, while Mr Anderson was led to believe that Ms Garrett and Mr Renauf were working with Patersons on the Stonington Capital Raising, the defendants were in fact working together to undertake due diligence and formulate the Parissen Proposal to take over Ashington's business.
26. In this regard, the plaintiff says that the development of the Garrett plan required the disclosure of a significant amount of Ashington's confidential information to Albany and Acorn, in breach of fiduciary, contractual and equitable obligations owed to Ashington. It is said that this included Albany and Acorn accessing the Stonington Data Room, which access was facilitated by Patersons and Ms Garrett (despite it being clear from 5 October 2009 that Albany and Acorn were not interested in pursuing the mandated Stonington Capital Raising) (see chronology above). It is said that it also included the provision of a large volume of Ashington's confidential information to Acorn and Albany by PPB in the 33 emails sent on 16 October 2009 in response to the request from Mr Routley (in which he confirmed Albany and Acorn's interest in replacing Ashington as the manager of ADF and ADF2).
27. The plaintiff says that it is clear that access to Ashington's confidential information was critical to the ability to develop the Parissen Proposal, referring in this regard to the October 2009 emails in relation to the provision of information, concerns expressed by Mr Ko as to the lack of data, and the statement by Ms Garrett to the effect that data provision was the key thing to be done on that day (see chronology above).
28. In this regard, the plaintiff also refers to the 19 October 2009 email from Mr Ko requesting further information in relation to the Double Bay Property, and a detailed site visit; the site visits were arranged for Friday 23 October 2009; and the request on 17 November 2009 by Mr Ko for additional documents from Mr Block that they would like to review as a matter of urgency.
29. The plaintiff notes that the joint Albany (or Alter) and Acorn proposal presented in late November 2009 did not involve any commitment by those entities but, rather, was for Parissen to replace Ashington as trustee of ADF and ADF2 in order to obtain full access to records and complete their due diligence, with PPB simply noting that "[s]hould the due diligence … leave them in a position where they do not proceed with the transaction, other opportunities will need to be explored". (That rather suggests to me that the advantage that the plaintiff clearly perceives the Acorn and Albany defendants received from access to the Data Room may ultimately have been illusory.)
30. Reference is also made to the 20 October 2009 email from Ms Garrett (see chronology above) in relation to the provision of information addressing queries about Stonington sales contracts. The plaintiff notes that the attached document regarding the terms of Stonington sales contracts was on Ashington letterhead, and included reference to legal advice that Ashington had received from Mallesons. It is noted that in her liquidator's examination, Ms Garrett admitted that her purpose in providing this information to Mr Ko and Mr Routley was to assist them in undertaking due diligence on the proposal to replace Ashington.
31. The plaintiff says that, while pursuing her alternative agenda, Ms Garrett was evading Mr Anderson. It is said that Ms Garrett admitted as much in an email to Mr Renauf on 10 October 2009, at a time where she was preparing for the Stonington asset tour on 12 October, when she said she had "been ignoring [Anderson's] calls but he is leaving persistent messages" (see chronology).
32. Reference is also made to the meetings on 12 and 13 October and the site visits referred to in the chronology above, as evidence of Ms Garrett and Mr Renauf working collaboratively to progress the Garrett plan; and to the preparation of the proposed Albany/Acorn offer. The plaintiff refers to the 13 October 2009 email from Ms Garrett to Mr McCabe (see chronology above) as indicating that Ms Garrett was pursuing opportunities for her own financial benefit - noting that the email stated that "[w]e have been approached by NAB to complete a work-out on the Stamford Plaza in Double Bay. Again, this requires no capital from our group, instead we receive an advisory fee and a performance fee if we deliver the promised asset value uplift".
33. The plaintiff emphasises that the plan was kept hidden from Mr Anderson. It is noted that, in the liquidator's examination, Ms Garrett admitted that she did not communicate details of the options she was exploring to Mr Minahan or Mr Anderson, despite in her mind being contracted to Ashington. It is said that Ms Garrett also admitted that, by 6 November 2009, as far as she was aware no one, including herself, had advised Mr Anderson that there was a proposal afoot that involved the removal of Ashington as trustee and manager. (I do not understand it to be disputed that Mr Anderson was in the dark as to the proposal being considered by the potential investors and superannuation fund investors in respect of the removal of the trustee and manager; rather, I understand the contention to be that Mr Anderson had at the relevant times been aware of the possibility that the superannuation fund investors might move to replace the trustee and/or manager.)
34. The plaintiff contends that Ms Garrett actively tried to exclude Mr Anderson and others from meeting with KordaMentha and Investec, referring to the communications on 14 October 2009 and 16 October 2009. It is noted, as to the first, that Ms Garrett responded to a suggestion from Mr Anderson that he attend a meeting with Mr de Rooy to discuss legal action by Hamton, saying that "Michael is not favourably disposed towards any of the Ashington directors and has advised that the standstill arrangement has been put in place because of good past dealings he and I have had"; and, as to the second, in response to a suggestion that Mr Steel should attend a meeting with KordaMentha on 16 October, that Ms Garrett said that "KordaMentha have asked me to attend alone".
35. The plaintiff says that it was untrue that KordaMentha wished to meet with Ms Garrett alone (referring to an email sent by Mr Winterbottom at KordaMentha on 19 October 2009, noting that they had met with Ms Garrett and Mr Renauf on Friday (16 October), who had told them that "Nicki's and Sam's focus is very much on the new equity proposals and … any new equity injection would involve fundamental restructuring of ownership and management at the top level". The plaintiff points out that, on 27 October 2009, Mr Winterbottom of KordaMentha noted in an update to NAB and St George that, while they had initially relied on Ms Garrett and Mr Renauf for the provision of information, "despite repeated promises, they appeared too stretched running around on the 'equity solution' to satisfy our requirements… consequently, we got [Mr Anderson] involved late last week and we are now getting some decent information".
36. Pausing here, there is certainly evidence that supports the conclusion that Ms Garrett was seeking to exclude Mr Anderson from meetings purportedly relating to the Stonington Capital Raising but in reality relating to the proposal for the replacement of the trustee and manager (and it would make sense for her to do so in circumstances where she had not disclosed that to him). For example, see the email on 3 October 2009 in which Ms Garrett says it is awkward that Mr Anderson would be in Melbourne at the same time as meetings arranged with Acorn and Albany (in the chronology above). It is less clear that the attempt to dissuade Mr Steel from meeting with KordaMentha was part of such a process of deception.
37. The plaintiff says that, when Ms Briggs queried whether a request from Mr Block for a copy of the Ashington Capital constitution was within the scope of PPB's engagement, Ms Garrett disingenuously replied that "[t]he breadth of the PPB mandate seems to shift every day! We have a 9am meeting with them tomorrow and hope to be able to get resolution on the reason for the latest information request". It is said that Ms Garrett knew perfectly well the reason for the request. Similarly, it is said that Ms Garrett's response to Mr Anderson's question as to why PPB was participating in a meeting with Albany and Acorn on 21 October 2009 was false and designed to mislead Mr Anderson, by concealing the true intent of the meeting. Again, it is certainly conceivable that this is the case. It is noted that Mr Block stated that it would be necessary for PPB to provide Albany and Acorn with certain information to enable them to "gain a better and more detailed understanding of the assets", which would "allow them to present a conceptual plan, which will be subject to more detailed due diligence & approvals etc".
38. The plaintiff says that it is apparent that Mr Anderson was in the dark as to what was going on and had no update in relation to the prospect of an offer from Albany (or Alter) and/or Acorn. I accept this.

Submissions of Ms Garrett and Mr Renauf as to alleged breach

1. Ms Garrett and Mr Renauf note that the core allegations of misconduct against them concern the role that they played in the Stonington Capital Raising. Ms Garrett and Mr Renauf submit that, contrary to Mr Anderson's evidence, the Stonington Capital Raising was: occurring in a complex and challenging environment; subject to a constantly changing strategy; and progressed in circumstances where both Mr Anderson and Ms Garrett were looking to advance any deal that they could; progressed in circumstances where Ashington employees were authorised to, and were in fact, complying with requests to provide confidential information to investors where those investors had signed a confidentiality agreement; and was at all times subject to the effective approval of Investec and the superannuation fund investors (i.e., the beneficiaries).
2. As to the first of those matters, Ms Garrett and Mr Renauf say that it was not realistic to expect that any mezzanine financier would agree to provide finance on the terms contemplated in the Patersons Mandate, at least once the Double Bay development application was refused. It is said that, by that point, ADF2 was no longer capable of surviving until the mezzanine finance was repayable; and that any rational financier would have recognised the financial risks of lending in those circumstances. (I note that in the plaintiff's closing submissions it appears to be accepted that if the Stonington Capital Raising did not succeed the business could not have survived but the plaintiff is adamant that the Stonington Capital Raising would have succeeded had Ms Garrett and Mr Renauf complied with their obligations - see further below).
3. Ms Garrett and Mr Renauf say that the plaintiff's submission (at [174]) that interest in such a capital raising was "suppressed" by Ms Garrett or Mr Carolan should be rejected. It is submitted that the refusal of the Double Bay development application on 29 September 2009 (and the associated negative press) is what would have dampened any investor enthusiasm and that this is the logical and appropriate inference to draw from the contemporaneous documents. Ms Garrett and Mr Renauf further say that the enthusiasm of Ms Garrett and Patersons prior to the Double Bay development refusal is no basis to rebut the objective fact that the loss of the 'crown jewel' in Ashington's portfolio (and the consequential breach of $50 million of debt facilities) would have caused any reasonable investor seriously to doubt that there was any prospect of being repaid.
4. Reference is made to the announcement by Mr Anderson within the Ashington team that Ms Garrett was starting on 8 October 2009, in the context of the aftermath of the Double Bay development application refusal, in which reference is made to the development refusal as a "most disappointing" and in which Mr Anderson noted that solutions to this problem would require a new level of creativity and further thoughtful thinking as well as investor and banking support.
5. As to this, I consider that there is little doubt that Ms Garrett and Mr Renauf ceased to take active steps to progress the Patersons Mandate after early October 2009 when the replacement trustee and manager proposal took shape. To that extent, I would accept that they did not actively pursue the Stonington Capital Raising insofar as that contemplated mezzanine finance. Whether they actively "suppressed" any potential investor interest is perhaps a moot point (since there was not a great deal of evidence of such interest) but I accept that there was no real attempt by them to pursue the indication of interest received from at least Apex Capital or to actively pursue other potential investors that had not yet been informed of the opportunity, and to that extent I would agree that there was a "suppression" of interest (though I would describe it more as an abandonment of active steps to progress the Paterson Mandate than a suppression of interest as such).
6. Ms Garrett and Mr Renauf say that Mr Andersons's evidence (that Ms Garrett and Mr Renauf were engaged to perform the limited role of implementing the Stonington mezzanine refinance strictly in accordance with the Patersons Mandate, and that any actions outside of that role, including the "Consortium" proposal, were in breach of authority) (Mr Anderson's 9 December 2019 affidavit at [70]) effectively discloses a willingness to breach his obligations as trustee (because he would have fired his staff for pursuing a strategy even if it was in the interests of the superannuation fund investors) and should be rejected as a deliberate lie. It is noted that Mr Anderson knew and consented to Ms Garrett speaking with Mr McCabe about an equity investment (Mr Anderson's 19 December 2017 affidavit at [281] - although I note in that paragraph Mr Anderson states, "I was not interested in an equity investment in Ashington, whether by Kevin McCabe or anyone else"); and that Mr Anderson had told Investec that Ms Garrett will introduce "alternative options" to resolve the Investec Stonington Facility (although I interpose to note that nothing in that correspondence implies that those alternative options would not include Ashington); that on 28 October 2009, Ms Garrett reiterated to Mr Anderson that Mr McCabe was looking for a "strategic investment" (which Ms Garrett and Mr Renauf say would be found to be a reference to an equity investment in the manager) (although in the same email Ms Garrett says, "never fear am still pushing a Stonington/Wylde deal"). It is noted that Mr Anderson himself floated a possible preferential equity investment, and that Mallesons advised about the possible equity structure of the Stonington transaction as at 21 October 2009 (Ex 17 at 177-183).
7. I have some difficulty with the suggestion that Ms Garrett and Mr Renauf were engaged only to perform the limited role of implementing the Stonington Capital Raising because there is no indication in the contemporaneous documents that this was the case and it seems that at least Ms Garrett was initially pursuing other projects as well. However, I do accept that Mr Anderson did not authorise Ms Garrett to pursue the so-called Consortium proposal and the suggestion that he would have consented to this as an alternative option is inconsistent with Mr Anderson's actual reaction when he learnt of the proposal (which was to seek to persuade the superannuation fund investors not to pursue it and to push ahead with the Wingate Proposal). As to the suggestion in Mr Anderson's affidavit that he would have fired his staff for pursuing such a strategy, I do not accept that this should be rejected as a lie. Indeed, it seems to me to have the ring of truth (and at most might be said to be an overreaction to events). Mr Anderson obviously saw the Consortium proposal as a betrayal by Ms Garrett and Mr Renauf (which seems to me quite likely to be the explanation for the pursuit of the present claims against them). Further, it seems to me to be a moot point whether firing staff for disloyalty or perceived actions against the interests of the employer would amount to a breach of trust and it is not necessary to explore this.
8. Ms Garrett and Mr Renauf further say that Mr Anderson's evidence (his 19 December 2017 affidavit at [255]) that he did not instruct Ms Garrett and Mr Renauf to deal with PPB on behalf of Ashington and did not communicate to PPB that they should deal with Ms Garrett and Mr Renauf on behalf of Ashington should also be rejected as a lie (and they contend that the plaintiff's submissions at [67] indicates that this evidence would be rejected). Ms Garrett and Mr Renauf point to the following in this regard: the 25 September 2009 email from Mr Minahan as to Ms Garrett being the point of contact going forward and emphasising that all investor/PPB communication is to be vetted and approved by Ms Garrett (copying Mr Renauf on all such correspondence), which Mr Anderson accepted was Mr Minahan conveying Ashington's approval for Ms Garrett to be the point of contact (T 522.26-29); the email communication that day from Ms Briggs to Ms Garrett as to Ms Garrett being the point of contact and Mr Anderson's confirmation of this; the 7 October 2009 email from Mr Steel to St George designating Ms Garrett as "communicating with all parties" about workout strategies, and that Ms Garrett and Mr Renauf would be communicating the strategy with St George going forward; Mr Anderson's agreement that Ms Garrett attend a meeting with KordaMentha without other Ashington staff (in response to Ms Garrett's email that KordaMentha wanted her to attend alone) and Mr Anderson's acceptance that, while he was the "most senior person" at Ashington Capital, he had "little interest in having contact" with PPB and that "as far as I'm aware, they just went directly to our staff regularly seeking information" (T 633.33-50).
9. I do not accept that this evidence should be labelled as a lie (rather than simply Mr Anderson's characterisation of what amounts to authorisation) but I certainly accept that the evidence reveals that Ms Garrett and Mr Renauf were authorised to be the point of contact for investor/PPB communications and that carries with it the implication that they were authorised not simply to receive communications but also to send them.
10. It is further noted that on 26 September 2009, in the context of disclosing the "skeletons in [Ashington's] closet", Mr Steel proposed an alternative strategy to Ms Garrett and Mr Renauf (see chronology above). It is submitted by Ms Garrett and Mr Renauf say that Mr Steel's emails around this time disclosed to Ms Garrett and Mr Renauf serious breaches of duty by Mr Anderson. It is submitted that it may be inferred that those disclosures would have given Ms Garrett, Mr Renauf and PPB good reason not to disclose to Mr Anderson a plan by superannuation fund investors to removal his companies as trustee and manager. Nor does the fact that Mr Anderson had expressed or might be expected to have had a willingness to consider alternative options.
11. I have difficulty with the proposition that Mr Steel's assertions of breaches of duty (the truth of which - at least as to alteration of board minutes - has not been established) would have provided justification for a breach of fiduciary or other duties to Ashington (assuming non-disclosure amounted to such a breach). I do not consider that it was for Ms Garrett or Mr Renauf to decide for herself or himself not to comply with obligations (which on this hypothesis were owed to the company) because of a belief or suspicion that the managing director had committed breaches of duty. There were other courses open to them (let alone that they could have decided to resign and pursue their careers elsewhere). An obvious course would have been for them to raise concerns with Mr Minahan at least in the first instance - not to take it upon themselves actively to pursue a plan for the removal of Ashington entities as trustee and manager.
12. Ms Garrett and Mr Renauf also point to the communications with Acorn on 30 September 2009 in relation to the Stonington mezzanine finance offer (i.e., its response that it did not "do pure debt" and that its preference would be to invest in the manager); Ms Garrett's explanation on 2 October 2009 of the high interest rate on the mezzanine finance (by reference to the fact that Ashington had "fukt up" by giving Investec security over other fund assets and needed to move quickly), which Ms Garrett and Mr Renauf say was accurate; and the further email to the effect that the superannuation fund investors had concerns about the Stonington security arrangements and the Double Bay development approval and were exploring options to transfer assets to a new manager (which Ms Garrett and Mr Renauf say was also true). None of those matters to my mind explains or justifies the decision not to inform Mr Anderson (or at least Mr Minahan) of the alternative financing option that was being considered.
13. As to the access to the Stonington Data Room, Ms Garrett and Mr Renauf say that Ms Briggs' evidence that she would not have allowed anyone access to the data room without an executed confidentiality agreement (T 789.1-5) is fatal to any suggestion that Ms Garrett or Mr Renauf breached any obligations by allowing Acorn or Albany access to the Stonington Data Room. It is said that there can be no breach of confidence where the documents are protected by contract. I deal with those alleged breaches in due course. Suffice it here to note that I do not accept the proposition that there could be no breach of confidence where documents are protected by contract necessarily follows. Moreover, the understanding on which a confidentiality agreement is offered and accepted in order for access to be given to the Data Room is significant; it is unlikely that Ashington's directors would have offered access to the Data Room for a purpose other than the Stonington Capital Raising.
14. As to the 5 October 2009 Investment Opportunity document, Ms Garrett and Mr Renauf say that this was prepared as part of the assistance provided in relation to the recapitalisation proposal. It is noted that initially this was alleged by the plaintiff to have been a further breach by Ms Garrett but that this allegation was abandoned at the outset of the hearing (T 96.8-9). Ms Garrett and Mr Renauf point out that Mr Anderson's initial affidavit evidence (at [52]) was that he would have terminated the employment of Ms Garrett and Mr Renauf (and terminated the engagement of Patersons) for preparing this document but that Mr Anderson withdrew this evidence just before cross-examination (his 12 February 2021 affidavit at [10]). Ms Garrett and Mr Renauf say this was presumably after Mr Anderson realised that he had in fact received the document.
15. Ms Garrett and Mr Renauf say that the reality was that: rather than firing anyone for preparing the document, Mr Anderson himself adopted the document by editing it slightly and then sending it on to his preferred investors. It is said that the abandonment of these allegations is demonstrative of the artifice of Mr Anderson's claim. Ms Garrett and Mr Renauf invite a finding that, at the time, Mr Anderson was happy for Ms Garrett to progress any strategy that could possibly save Ashington (and him personally) from ruin and that he was perfectly happy for Ms Garrett to provide investors with any "confidential" documents that they sought, particularly if those investors had executed a confidentiality agreement. It is submitted that Mr Anderson's purported outrage is mere "ex post facto confection". For example, it is said that Ex17/ 20/ 91 is an example of Mr Anderson providing many of the so-called "confidential" documents to Investec, without even requiring a confidentiality agreement.
16. Pausing here, the fact that Mr Anderson made use of the 5 October Stonington PowerPoint (without the Go Forward slide, as I understand it) does not to my mind lead to a finding that Mr Anderson was happy for Ms Garrett to progress any strategy that could possibly save Ashington insofar as, by this, there is included the concept of a strategy that would involve the loss of the trustee/manager business. That seems to me not to be plausible (and not consistent with what in fact happened). As to access to confidential documents, I think it unlikely that Mr Anderson paid much attention to such matters but the real issue is whether the disclosure was for the approved purpose (which I discuss in due course).
17. Ms Garrett and Mr Renauf say that, by no later than 8 October 2009, the superannuation fund investors were provided with details of Ms Garrett and Mr Renauf's role on the capital raising, and the possibility of Ashington Capital being replaced as part of that process; and that this likely occurred through PPB's note to all investors (which they point out was discussed by Mr Dedes in his note - see chronology of events above). It is noted that the superannuation fund investors' response to this proposal was positive, pointing to Mr Dedes 12 October 2009 property sector update to SCM and noting that Military Super considered Ashington hiring Ms Garrett and Mr Renauf to be a "positive development" because it might lead to some recovery of capital and that Ms Garrett and Mr Renauf were "acting in a far more appropriate manner than existing management".
18. As to the issue whether the initial suggestion about Ashington's replacement came from PPB and Ms Garrett, or from the superannuation fund investors, Ms Garrett and Mr Renauf say the following. First, that the evidence on the issue does not provide a basis to make a determination, even with the aid of any adverse inferences. It is submitted that it is just as likely that the superannuation fund investors made the initial suggestion and that, noting that these events are now 11 years old, without a clear contemporaneous note there should not be speculation as to who said what first. Second, that the identity of the proposer is irrelevant to the pleaded causes of action. It is said that either the proposal was developed by PPB and Ms Garrett and endorsed by the superannuation fund investors, or it was developed by the superannuation fund investors and endorsed by PPB and Ms Garrett. Ms Garrett and Mr Renauf say that, on the defendants' case, the proposal did not involve a breach of duty no matter who was responsible for the initial idea.
19. I have already discussed what I consider to be the most likely genesis of the proposal to remove the Ashington companies as trustee and manager. I have no difficulty with the proposition that the superannuation fund investors had considered the need for a restructuring of the trusts and sub-trusts (and in that context replacement of the trustee) at a time much earlier than the impugned events (i.e., in around June/July 2009). However, there is nothing in the documents of the superannuation fund investors to support a conclusion that they came up with the proposal for a complete replacement or removal of the Ashington entities (and it is inconsistent with the decisions reached at the 29/30 September 2009 meetings that they would have done so at that time). I also consider that the 2 October 2009 email makes clear that: there was a discussion between Ms Garrett and someone at PPB (probably Mr Block, with whom it seems most of the discussions at that stage were taking place, and who was the author of the 6 October 2009 internal email referring to the proposal; and that discussion probably occurred on 1 October 2009 (when PPB accepts that a meeting likely took place); and that during that discussion the proposal to replace the manager was raised (and this is not put as being an idea that came from the superannuation fund investors).
20. Whether it was PPB or Ms Garrett who raised it is a moot point; and I would accept that it probably matters not whose idea it initially was (since it was an idea that seems to have been readily embraced by PPB on the one hand and Ms Garrett and Mr Renauf on the other). However, I have difficulty with the proposition that the proposal would not have involved a breach of duty at least on the part of Ms Garrett and Mr Renauf (in that at the very least it contemplated the removal of the trustee/management business from their employer and for them to be involved in the replacement manager), whether or not the proposal was in the interests of the superannuation fund investors (for reasons I explain in due course).
21. Ms Garrett and Mr Renauf make reference to the discussions on 21 and 22 October 2009 as to the Albany/Acorn proposal, including the transfer of management rights. Ms Garrett and Mr Renauf say that the proposal was in the interests of beneficiaries, compared to the Wingate Proposal; and say that completing the Wingate Proposal would have been highly value destructive to the superannuation fund investors (even if it was ever capable of completion). It is noted that the Consortium proposal was consented to by the superannuation fund investors, following a careful consideration of its potential benefits. Ms Garrett and Mr Renauf say that a significant part of the motivation to accept the proposal was the loss of confidence in Ashington Capital and Mr Anderson and the desire of the superannuation fund investors for anyone but Ashington to manage their investments (and the investments of the beneficiaries for which they were responsible). All of that may well be the case (and certainly I accept that there was a loss of trust and confidence in Ashington at least by the time the Consortium proposal was adopted). As to whether the superannuation fund investors desired "anyone" but Ashington to manage the business, I note Mr Hartley's evidence (see T 986.31-T987.04; T 987.6-7) that a new manager would need "the necessary standing and skills in both funds management and development". However, it does not to my mind address the position in which Ms Garrett and Mr Renauf were placed - insofar as they were actively seeking to undermine and work against the interests of their employer.
22. Ms Garrett and Mr Renauf say that (contrary to the plaintiff's submissions) the superannuation fund investors were not giving up anything of value in accepting the proposal. Rather, it is submitted that: the Consortium proposal provided the best possible chance of some upside for the superannuation fund investors; removed the risks of litigation from Investec, which they say was likely to sue on the power of attorney (as well as the associated reputational risk); and removed the reputational harm to the superannuation fund investors in their ongoing association with a fund manager who had breached their trust. Again, acceptance of those propositions does not seem to me to address the real issue here.
23. Insofar as the plaintiff contends that investors did not fully appreciate the effect of the Consortium proposal, Ms Garrett and Mr Renauf say this should be rejected. It is said that the superannuation fund investors were sophisticated trustees who took their role as trustee seriously; weighed the proposal; and considered its effect on their rights. It is said that, ultimately, the superannuation fund investors placed little weight on their existing equity entitlements because Ashington had destroyed the value of that equity. It is submitted that, on the basis of the evidence given by representatives of each of the superannuation fund investors and as the logical inference to draw from the documents, it should be found that each superannuation fund investor carefully and responsibly considered the proposal to be in its best interests. It is submitted that, even if there were minor inaccuracies in any material provided by PPB (see the plaintiff's submissions at [140]-[142]), the reasonable inference to draw is that any inaccuracies were the result of the urgency created by Mr Anderson's knowing and deliberate defiance of investor's demands, communicated through Norton Gledhill, when he executed the Wingate Proposal without investor approval. In any event, it is said that none of the inaccuracies was in any way material. (I address this issue in due course when considering PPB's submissions.)
24. Ms Garrett and Mr Renauf argue that the proposal was also in the interests of Ashington Management, Ashington Capital and Mr Anderson. It is said, in summary, that Mr Anderson considered that retirement was worth about $6 million to the Ashington group, and that it released Ashington and Mr Anderson personally from a $2.5 million obligation to Hampton. It is submitted that otherwise the financiers would have wound up the Ashington group and the superannuation fund investors would have sued Mr Anderson and the Ashington group for the alleged breaches of trust identified above. Ms Garrett and Mr Renauf (somewhat emotively) say that the position was that Mr Anderson could either retire voluntarily, with the potential for compensation and the removal of his exposure to litigation, or face the consequences of his contemptuous attitude to his beneficiaries.
25. It is noted that there is no allegation in the third further amended statement of claim that Mr Renauf breached his duties by failing to sell the 10 Wylde Street Property (cf, Mr Anderson's affidavit evidence at [568] to the effect that Mr Renauf failed to progress the sale during October 2009; and see his oral evidence at T 528.48-529.3; T 531.43-45). Ms Garrett and Mr Renauf say that any such suggestion ought be rejected (pointing to Mr Anderson's evidence that he expected the sale process to take two months - at [322]; and to the evidence as to the pursuit of an "off market" campaign from 21 September 2009 and as to the appointment of Knight Frank and progress in October 2009 as to the marketing of the property). Ms Garrett and Mr Renauf say that there was no contemporaneous complaint about Mr Renauf's conduct in relation to the sale process and that it should be inferred that the engagement of Colliers in October 2009 and formal sale process at that time was caused by the newspaper publicity as to the sale. Ms Garrett and Mr Renauf say that the failure to sell 10 Wylde Street was through no fault of Mr Renauf.
26. Finally, Ms Garrett and Mr Renauf say that it should not be inferred that either of them was motivated by a desire to "become the funds manager". It is said that the email relied upon by the plaintiff (in the plaintiff's submissions at [155]) to support that inference (the "will be the new Fund Manager" email) is unusually formatted and more likely a transcription or editing error. Ms Garrett and Mr Renauf say that, at its highest, it would be inferred that Ms Garrett and Mr Renauf were interested in maintaining their expected terms from Ashington if there was a change in manager; and it is submitted that this is not a relevant conflict. Further, it is noted that, ultimately, they did not receive an equity stake in the Parissen entities; rather, they moved from one company to another.

Determination

1. Had I concluded that Ms Garrett and Mr Renauf owed fiduciary obligations to the Ashington entities, then I would have concluded that they breached their fiduciary duties (in particular, the duty not to use the fiduciary's position for the fiduciary's own advantage and the duty to avoid any potential or actual conflict between the interests of the plaintiff and the fiduciary's own interests) by pursuing the proposal for the replacement of Ashington Capital and Ashington Management as trustee and manager, respectively, of the relevant ADF trusts and sub-trusts (when the proposal involved an entity in which they clearly hoped to gain an interest or derive an advantage). I accept that fiduciary obligations do not impose a positive duty to make disclosure of particular matters. However, the obvious way to have avoided a breach of the no profit and no conflict rules would have been to disclose to Mr Anderson or Mr Minahan the replacement proposal and their interest in pursuing an opportunity with the new fund manager if that eventuated.
2. Their conduct, in my opinion, would have amounted to a clear breach (if they had owed fiduciary obligations) of the duty not to place themselves in a position where their personal interests conflicted with their duty to their employer. It is impossible to see their conduct as other than a deliberate attempt to undermine the position of their employer for their potential personal advantage and that of third parties. In view of the concealment of those activities, I would also have concluded that it was a breach of obligations of good faith and honesty and that it amounted to a dishonest and fraudulent design in the sense that this is understood when considering Barnes v Addy liability (in that it as a "plain transgression of ordinary standards of honest behaviour" - see Hasler v Singtel Optus at [124] per Leeming JA). There are obvious similarities here with what occurred in the Lifeplan Australia case; and similarities with cases where business opportunities are improperly diverted from companies (see Canadian Aero Service Ltd v O'Malley (1973) 40 DLR (3d) 371; [1974] SCR 592); though I accept that the case was not pleaded in that way.

Patersons - breach of fiduciary duty

1. The breach of fiduciary duty alleged against Patersons is that it (through Mr Carolan and Mr Doherty) helped to advance the proposal to exclude Ashington thereby favouring the interests of third parties over those of Ashington Capital and Ashington Management.
2. It is submitted that Patersons' breach of fiduciary duty was dishonest and fraudulent, in that it transgressed ordinary standards of honest behaviour, given that Mr Doherty and Mr Carolan were aware that they were advancing a proposal entirely against the interests of their client, and failing to advance the proposal for which they had been mandated, but that neither took any steps to alert Mr Shorrocks or others at Ashington. (As noted above, reference is made to Mr Shorrocks' evidence that he would have expected disclosure to be made to him of such a proposal and that he would have informed Ashington of it.)
3. Patersons' response to the claims for breach of fiduciary duty largely rest on the proposition that the knowledge and actions of Mr Carolan cannot be attributed to it (and nor can the knowledge and actions of Mr Doherty).
4. I have set out above the submissions on the issue of attribution of knowledge/actions and my conclusions on that issue. In summary, as to Mr Doherty, the evidence does not permit me to conclude that he was part of the directing mind and will of Patersons; nor should the limited knowledge on his part be aggregated with that of Mr Carolan. As to Mr Carolan, I accept that although Mr Carolan was not otherwise in a position where he would be said to be the directing mind or will of Patersons, he was delegated responsibility in relation to the Patersons Mandate and in that context, his knowledge and actions in the course of his employment would be attributed to Patersons. He was clearly in a position where he had a duty to draw to Mr Shorrocks' attention matters such as the (competing) proposal which was being put forward by Ms Garrett and Mr Renauf; and the effective abandonment of the Patersons Mandate.
5. The real issue here, however, is that the conduct of Mr Carolan was clearly in breach of his duties to, and in this sense in fraud of, his employer (Patersons). Mr Carolan must have appreciated as much (because there is no other sensible reading of the "we will be shot" email). In those circumstances, I accept Patersons' submissions to the effect that Mr Carolan's knowledge and actions should not be attributed to Patersons.
6. If Mr Carolan's conduct were able to be attributed to Patersons, then I consider that it would amount to a breach of fiduciary duty on Patersons' part (by reason of the abandonment of the Patersons Mandate and the progression of the Parissen Proposal in breach of, at least, the no conflict rule - by reference to the interest Mr Carolan was pursuing for his wife's advantage). However, assuming, again contrary to my earlier conclusions, that such a duty was owed by Patersons, I do not accept that this is a case in which Mr Carolan's wrongdoing is to be attributed to Patersons because I consider that Mr Carolan was on a frolic of his own (and was acting in fraud of his employer, Patersons, and to its detriment). In one sense the clearest indication that Mr Carolan was acting outside the scope of his employment (and on a frolic of his own) is that fact that his conduct was wholly against the interests of his employer and would surely have amounted to misconduct for which he would have been liable to suffer adverse employment consequences. It was clearly in Patersons' interests (as it was in the plaintiff's interests) for the Patersons Mandate to be successful.
7. Therefore, had I found Patersons to have owed fiduciary duties to the Ashington entities (or more precisely to Ashington Capital with whom it had entered into the Patersons Mandate, in its capacity as trustee for ADF2), I would have concluded that there was nevertheless no breach of those duties on the basis that Mr Carolan's knowledge and conduct could not be attributed to it.

Claim for breach of alleged term of good faith/confidentiality - Ms Garrett and Mr Renauf

1. The plaintiff relies upon the same conduct said to amount to breach of fiduciary duty by Ms Garrett and Mr Renauf to found a breach of contract claim against them. The plaintiff says that this conduct was in breach of their contractual obligations to act in good faith and to act honestly in the best interests of Ashington Management (see [206]-[207] of the third further amended statement of claim), and to preserve and maintain the confidentiality of confidential information obtained in the course of their employment with Ashington Management (see [208A] of the pleading). The claims are put alternatively on the basis that the terms were implied into a contract of employment or otherwise the contract of engagement.
2. These are said to be express terms in the employment agreements provided to each of them on 1 May 2009 (which the plaintiff maintains were accepted by them and binding upon them through their conduct in commencing to work for Ashington - albeit that they were not executed), or were otherwise implied at law into their contract of employment. Further, it is said that, if Ms Garrett and Mr Renauf were independent contractors, such terms were implied in fact given the nature of their role within the Ashington group.
3. Ms Garrett and Mr Renauf maintain that they did not owe the contractual duties alleged against them (since, as noted above, at the time of the alleged conduct in October-November 2009 they had not executed an employment contract and were still in the process of negotiating the terms of their employment); and they contend that the terms that the plaintiff seeks to imply into any engagement by Ashington Capital and Ashington Management do not meet the test for so doing.
4. In particular, it is contended that there is no basis for those terms to be implied into a contract of engagement. It is noted that Ashington Management was a sophisticated organisation and aware of its legal rights; it is submitted that if it chose so to do it could have sought those terms as part of an express contract. It is submitted that the proposed terms do not satisfy the BP Refinery test detailed above. It is said that any implied term of good faith would be limited to good faith in the exercise of an express right or discretion (Ms Garrett and Mr Renauf here citing Contract Law in Australia at [2-15]; Digital Pulse Pty Ltd v Harris (2002) 166 FLR 421; [2002] NSWSC 33 at [17]-[22] per Palmer J; Virk Pty Ltd (in liq) v YUM! Restaurants Australia Pty Ltd [2017] FCAFC 190 at [149] per Gilmour, Nicholas and Moshinsky JJ).
5. It is noted that the allegation of breach of confidence is based on Ms Garrett "assisting Acorn and Albany in accessing the Stonington data room" and sending information to Mr Ko in an October email (192, (k), (q); [208B]-[208C] of the third further amended statement of claim). Ms Garrett and Mr Renauf say that the critical failure of the plaintiff's case for breach of confidence is that all Ms Garrett is alleged to have done is to provide information to a third party who had executed, and was bound by, a confidentiality agreement. It is said that this cannot have been a "misuse" of confidential information; nor can it have caused Ashington Capital any loss (as Ashington Capital had the benefit of the confidentiality agreement, the terms of which were dictated by Mr Anderson and not Ms Garrett).
6. In this context, Ms Garrett and Mr Renauf say that there are two scenarios: either the information was not used in breach of that confidentiality agreement, in which case, Ms Garrett has not engaged in misconduct; or the information was used in breach of that confidentiality agreement, in which case Ashington Capital is protected by the rights afforded to it under the agreement and has suffered no loss.
7. Ms Garrett and Mr Renauf say that Mr Anderson's evidence is the only foundation of the breach of confidence claim; noting that that evidence was subject to evidence rulings; and it is said that when Mr Anderson was cross-examined about the breach of confidence claim, his story changed to fit his shifting perceptions of the way his case was unfolding. It is said that his evidence on this issue in particular should be rejected.
8. Ms Garrett and Mr Renauf nevertheless accept that if they are found to be employees of Ashington Management then they would be found to owe a duty of good faith and honesty in relation to the exercise of the powers and discretions that arose from their employment and would also owe a duty of confidence.

Determination

1. I have already concluded that there was no binding contract of employment (and hence the issue of any term allegedly implied into such a contract does not arise). Nevertheless, I note that Palmer J in Harris v Digital Pulse at [20] stated in clear terms that an employee's duty to act in the interests of the employer with good faith and fidelity is implied into every employment contract if it is not already imposed by an express term.
2. I am, however, of the view that there was a common law employment relationship between each of Ms Garrett and Mr Renauf on the one hand and Ashington Management as part of the Ashington group on the other. For completeness, I reiterate that I do not accept that the evidence establishes that Ms Garrett and Mr Renauf were independent contractors (there is no evidence of any consultancy agreement or the like; nor did they render invoices for their services).
3. I understand the concern that the plaintiff should be held to the pleaded claim but it is clear that the third further amended statement of claim is alleging that there was a contract of employment or contract of engagement under which Ms Garrett and Mr Renauf were employees. There clearly was an "engagement" in a practical sense and there clearly was an employment relationship. The Deed of Acknowledgment signed when they resolved their post-termination disputes in terms acknowledges that there was an employment relationship insofar as it refers to its termination. It does not seem to me that there is any prejudice that Ms Garrett and Mr Renauf suffer by reason of the fact that the allegations contained at [147]ff of the plaintiff's submissions were not pleaded as material facts. The terms of good faith and honesty are well recognised as an incident of the employment relationship (and would readily be implied into any contract of employment) (see Harris v Digital Pulse at [20]-[26] per Palmer J). The concession that Ms Garrett and Mr Renauf would owe such obligations if found to be employees makes this clear.
4. It is not suggested that, had there been an express pleading of a common law employment relationship, any different forensic position would have been taken by Ms Garrett and Mr Renauf in relation to their decision not to give evidence in their respective cases. And it is difficult to see what could have been said to deny the existence of a common law employment relationship, having regard to the evidence before me.
5. Once the conclusion is reached that there was an employment relationship in existence, then as an incident of that relationship Ms Garrett and Mr Renauf must have owed the usual obligations of good faith and honesty of an employee (and they do not dispute this).
6. More difficult is the claimed obligation to maintain and preserve the confidentiality of confidential information obtained in the course of their employment. Ms Garrett and Mr Renauf accept that if found to be employees they would owe a duty of confidence in relation to confidential information but I consider that, in the absence of a concluded contract of employment, there may be a difficulty in identifying precisely the confidential information and it may thus be necessary for such a claim to be based on an equitable duty of confidence (which I address in due course below).
7. As to the content of an obligation to act in good faith, in Paciocco v ANZ Banking Group (2015) 236 FCR 199; [2015] FCAFC 50 (Paciocco), Allsop CJ stated (at [288]) that: The usual content of the obligation of good faith… is an obligation to act honestly and with a fidelity to the bargain; an obligation not to act dishonestly and not to act to undermine the bargain entered into or the substance of the contractual benefit bargained for; and an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained.
8. His Honour said (at [292]) that "good faith does not import an equitable notion of the fiduciary that is rooted in loyalty to another in the service of her or his interests … Rather it is rooted in honest and reasonable fair dealing".
9. I consider that the conduct referred to above (in addressing the breach of fiduciary duty claims) on the part of Ms Garrett and Mr Renauf amounts to a breach by them of the obligation to act honestly and in good faith (which imports a duty to act with fair dealing, as Allsop CJ explained, having regard to the interests of the parties, and in that sense a duty not to act to undermine the position of their employer or the group of companies in which they were employed). I do not accept that it was for Ms Garrett and Mr Renauf unilaterally to determine for themselves what they thought was in the best interests of superannuation fund investors and then act contrary to Ashington's interests to implement that (even if such an altruistic motive could be imputed to them, which I think is not the case in any event). I consider that the duty of good faith and honesty at the very least required that Ms Garrett and Mr Renauf disclose to Mr Anderson (or Mr Minahan if they truly considered there was a difficulty in disclosing it to Mr Anderson) any difficulties encountered in relation to the Stonington Capital Raising and, if it were truly the case that no re-capitalisation proposal could be found other than by the replacement of the Ashington entities, then to disclose that.
10. I do not consider the position of Ms Garrett and Mr Renauf to be akin to that of an employee who is approached in the course of employment with one employer and invited to express an interest in taking up a position elsewhere (which is the benign construction of events that various of the defendants urge upon me). Here, Ms Garrett and Mr Renauf (whether or not this was initially their idea) were actively engaged in a process to effect the removal of the Ashington parties from the funds management business in question and to seek a role for themselves going forward in that process.
11. Thus, I find a breach on their part of the obligations of good faith and honesty inherent in the employment relationship with the Ashington group.
12. Similarly, the fact that Acorn and Albany accessed the confidential information for a purpose other than the purpose in the confidentiality agreement and that Ms Garrett and Mr Renauf were aware of that other purpose when they arranged access would amount to a further breach of the good faith obligations (and their confidentiality obligations).

Claim for breach of Patersons Mandate - Patersons

1. The plaintiff contends that the conduct of Patersons through its involvement in the alleged Consortium (i.e., the conduct alleged to be in breach of fiduciary duty) also amounts to a breach by Patersons of contract (i.e., of the Patersons Mandate). Namely, the plaintiff claims a breach of: cl 3, which relevantly provided that Patersons "will at all times act in good faith and in a professional and timely manner"; cll 6.4 and 6.5, the non-disclosure terms extracted below; and a term, implied in fact, that Patersons would act in a manner to avoid conflicts of interest or, if a conflict of interest arose, would advise Ashington forthwith, make full disclosure and take instructions on whether to cease acting.
2. Although Patersons, in opening submissions, had emphasised the condition precedent contained in cl 4(b) of the Patersons Mandate (which required the conclusion of the PPB Mandate), arguing that as Ashington never resumed full control of the sell-down process underway for the Stonington Project, the PPB Mandate did not conclude, that contention does not appear to have been pressed following Mr Shorrocks' evidence and it does not need here to be considered.
3. I note that the alleged breach of cl 3 appears to be put by reference to the duty of good faith. Even though complaint is made that there was effectively an abandonment of the Stonington Capital Raising, this does not seem to be pleaded as a separate aspect of the breach of cl 3 (i.e., as a failure to act in a professional and timely manner); and I do not address any such contention here.
4. First, as to the express term of the Patersons Mandate obliging for Patersons to perform the services and carry out the functions contemplated by the Patersons Mandate in good faith, Patersons says that its limited involvement (which essentially involved sending out the term sheet for the Stonington Capital Raising to potential investors, as well as arranging an initial meeting with Acorn and others) did not constitute a breach of this contractual obligation. To the extent that Mr Carolan acted in "bad faith", it is said that those acts are not such that can result in the imposition of vicarious liability upon his employer (presumably, this argument is that he was thereby citing in fraud of Patersons or on a "frolic of his own"). Patersons says that it is apparent that the plaintiff's allegation of breach of good faith seeks to impute the equitable notion of a fiduciary to Patersons in another guise; but that there is a conceptual problem with this given (as I have found) that no fiduciary relationship existed as between Ashington and Patersons.
5. Patersons relies on the content of the duty of good faith as stated by Allsop CJ in Paciocco (see above). Further, Patersons says that breach of good faith usually requires the establishment of some dishonesty, capriciousness or unreasonableness (Speno Rail Maintenance Australia Pty Ltd v Metals & Minerals Insurance Pte Ltd (2009) 253 ALR 364; [2009] WASCA 31 at [152]-[154] per Beech AJA (with whom Martin CJ and McLure JA agreed) extracted below).
6. I note that Beech AJA said: 152. Honesty is a necessary but not sufficient element of compliance with the duty of the utmost good faith: CGU Insurance Ltd v AMP Financial Planning Pty Ltd (2007) 81 ALJR 1551 ; [2007] HCA 36 [15], [130]-[132], [257]; Kelly v New Zealand Insurance Co Ltd (1996) 130 FLR 97 at 111-12; Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (2005) 30 WAR 290 ; [2005] WASCA 106 [67]. 153. It has been said that the duty of the utmost good faith 'encompasses notions of fairness, reasonableness and community standards of decency and fair dealing': Sutton [3.7]; Kelly v New Zealand Insurance Co Ltd (111). 154. Generally at least, a breach of the duty of good faith will entail dishonesty, caprice or unreasonableness: Kelly v New Zealand Insurance Co LtdCGU v AMP [131].
7. Patersons submits that, at its highest, the limited involvement of Patersons in the active steps taken by the Consortium formed to assume Ashington Capital's role upon its retirement do not rise to this level. I agree, on the basis that Mr Carolan's knowledge and involvement is not attributable to Patersons.
8. It is said that the good faith term did not impose on Patersons some overarching obligation of loyalty to Ashington Capital (let alone to Ashington Management, which Patersons says was not a party to the contract); rather, that there was a short-term commercial relationship envisaged, during which Patersons had bound itself to act in good faith as "Lead Manager" to the Stonington Capital Raising. It is said that the conduct of Patersons (in sending out the term sheet for the Stonington Capital Raising to potential investors and organising an initial preliminary meeting with Acorn) is conduct consistent with pursuit of the bargain that Patersons struck with Ashington Capital "as trustee for ADF2". Again, I agree.
9. Insofar as the plaintiff alleges that Patersons' breach of the good faith term is manifested by its involvement in the "creation" of the alleged "Consortium" whose objective was to pursue "Garrett's plan", Patersons says that this is a mischaracterisation of the events which led to the replacement of Ashington Capital and Ashington Management as trustee and manager of ADF and ADF2 and overstates Patersons' involvement in those events.
10. As to the non-disclosure term breaches, it is said that Patersons facilitated the entry by Acorn and Albany into confidentiality agreements by which they were able to gain access to the Stonington Data Room for an unauthorised purpose, in breach of express non-disclosure and access to information terms. I consider the equitable breach of confidence allegations later in these reasons. Suffice it here to note that, Patersons says that the only information Patersons disclosed was in the performance of the Patersons Mandate; and that, insofar as Patersons was party to the correspondence involved in Acorn and Albany entering into confidentiality deeds to access to the data room, that did not amount to a breach of contract (especially where the terms of those deeds were consistent with the Patersons Mandate and were approved by Ashington Capital).
11. Further, the plaintiff contends that there is an implied term in the Patersons Mandate to the effect that Patersons would act in a manner to avoid conflicts of interest or, if a conflict of interest arose, would advise "Ashington" forthwith, make full disclosure and take instructions on whether or not to cease acting (Implied Conflict of Interest Term). The plaintiff says that, without the implication of such a term, cl 7.2 (which contained an acknowledgment that, as at the date of the Patersons Mandate, Patersons was not aware of any conflicts of interest which would impact Patersons' ability to fulfil the role outlined in the Paterson's Mandate) would become meaningless.
12. Patersons says that the plaintiff's attempt to rely upon the Implied Conflict of Interest Term is misconceived in principle. It is said that the criteria for implying such a term (see BP Refinery) are not satisfied, including because it seeks to enlarge Patersons' duties as to conflicts beyond (i) the express terms of cl 7.2 of the Patersons Mandate and (ii) Patersons' statutory obligations under s 912A(1)(aa) of the Corporations Act. Patersons says that the alleged implied term is another attempt to graft a fiduciary standard into the Patersons Mandate when no fiduciary relationship arose.
13. As to the first BP Refinery requirement, Patersons says that it is not reasonable and equitable to imply into the Patersons Mandate a term requiring Patersons to "avoid" conflicts of interest, particularly in circumstances where it is was the business of Patersons to act for numerous principals, several of whom might have been competing and whose interests would conflict (Patersons here referring to Kelly v Cooper [1993] AC 205; [1992] 3 WLR 936). Hence, it says that the implication of a term which cuts across this recognition, and expands upon the express obligations assumed by Patersons under the Patersons Mandate, is neither reasonable nor equitable.
14. As to the second BP Refinery requirement, Patersons says that the implied term is not necessary to give business efficacy to the Patersons Mandate. It maintains that there is nothing in the text of cl 7.2 which suggests that it was intended to have any operation during the term of the Patersons Mandate such that the implied term would be required. It is noted that Patersons was under a statutory obligation (under s 912A(1)(aa) of the Corporations Act) to "manage" conflicts of interest, not to "avoid" them as the implied term would require. Patersons says that regard may be had to a party's statutory obligations when determining whether to imply a term into a contract; and in those circumstances, the implied term is not necessary for "business efficacy", nor is it "reasonable and equitable"; rather, it would be inconsistent with the extent of its statutory obligations (citing Heptonstall v Gaskin (No 2) (2005) 138 IR 103; [2005] NSWSC 30 at [19] per Hoeben J, as his Honour then was). There, his Honour said: [19] Because of the provisions of the Employment Rights Act 1996 (UK) with its remedies for unfair dismissal, a distinction has been drawn by the House of Lords between psychiatric injury brought about by an employer's actions during the actual course of employment and psychiatric injury brought about by dismissal from employment or by circumstances directly related to that dismissal. That is the essential distinction between Malik and Mahmud, Gogay and McCabe on the one hand and Johnson v Unisys on the other. As was explained by Lord Nicholls in McCabe (paras 4-6; 27-32) the particular statutory context which exists in the United Kingdom brought about the development of the "trust and confidence" implied term in a contract of employment. Without such a term, deserving plaintiffs would have no legal right to claim against employers in respect of conduct which occurred before they were dismissed and which was not directly related to that dismissal.
15. As to the third BP Refinery requirement (as to whether the implied term is so obvious as to go without saying) Patersons says that, in circumstances in which the parties clearly turned their minds to, and included in the Patersons Mandate, a clause which outlined Patersons' obligations with respect to conflicts of interest at a particular time (i.e. the date of the Patersons Mandate), the "obviousness" criterion is not satisfied.
16. As to the fourth BP Refinery requirement (as to whether the implied term is capable of clear expression), Patersons says that it not clear whether the implied term would require Patersons to avoid, or disclose the existence of, any other mandate with any third party simply because the offers made by each company might be competing for investment from the same pool of investors.
17. Finally, as to whether the term sought to be implied contradicts any express term of the contract, Patersons says that, while the clause does not on its face contradict cl 7.2, that clause outlines the full extent of Patersons' obligations with respect to conflicts of interest and it would be inconsistent with cl 7.2 for a term to be implied which adds to this express obligation with respect to conflicts of interest.
18. For the above reasons, it is submitted that the criteria necessary to imply the implied term into the Patersons Mandate are not satisfied; and that, even if it were to be implied into the contract, Patersons says it did not breach it for the reasons already considered with respect to the alleged fiduciary obligation owed by Patersons in the same terms.
19. Insofar as the plaintiff makes various allegations as to the knowledge, conduct and behaviour of Mr Carolan in this context, Patersons says that the plaintiff's pleading tends to conflate Mr Carolan's knowledge and conduct as at a single point in time (2 October 2009). Patersons says (having regard to the principles as to attribution of knowledge and conduct discussed earlier) that, if it is suggested by the plaintiff that Mr Carolan was aware of "Garrett's plan" (assuming it to have been improper) and secretly assisted that plan in preference to the Patersons Mandate (totally contrary to the interests of Patersons), then Mr Carolan's knowledge and conduct would not be attributable to Patersons on basic principles of attribution and vicarious liability. It is submitted that this would be conduct squarely outside the scope of his employment for the benefit of his wife at the expense of Patersons. I agree.

Determination

1. Had the knowledge and conduct of Mr Carolan been attributed to Patersons, then I would have concluded that there was a breach of the express contractual term of good faith (as also would there likely have been a breach of the obligation to act in a professional and timely manner) because Mr Carolan clearly was not acting in good faith to pursue the Patersons Mandate at a time when he was acting with Ms Garrett (and Mr Renauf) actively to undermine the proposed Stonington Capital Raising.
2. As to the alleged breach of the non-disclosure terms on the part of Patersons, I do not find that made good (for the reasons put forward by Patersons and the reasons that I consider in due course in relation to the breach of confidential obligations claim).
3. As to the Implied Conflict of Interest Term, I agree that the requirement for implication of terms in fact into contracts is not here satisfied for the reasons put forward by Patersons. I do not accept that the implication of such a term would have rendered cl 7.2 meaningless. Moreover, I do not see it as something so obvious that an officious bystander would have considered went without saying, given the express inclusion in cl 7.2 of a period of time at which conflicts of interest were to be assessed. In any event, such a breach would be unlikely to take the matter beyond the breach of good faith that, on this hypothesis, I would have found based on Mr Carolan's conduct.

Knowing assistance claims

1. As to the plaintiff's various knowing assistance claims, at the outset it is relevant to note the statement of principles in Harstedt at [70] per Santamaria, McLeish and Niall JJA as to liability under the second limb of Barnes v Addy (there citing from Farah Constructions at [160]; Grimaldi v Chameleon Mining at [259]), namely, that the plaintiff must prove: the existence of a fiduciary duty owed by the fiduciary (as trustee or otherwise); a "dishonest and fraudulent design" on the part of the fiduciary; assistance by the third party in that design; and knowledge on the part of the third party of the circumstances constituting that design.
2. The standard of proof of each of these elements is the Briginshaw standard reflected in s 140(2) of the Evidence Act, given the seriousness of the allegations (liability under the second limb of Barnes v Addy being a species of equitable fraud).
3. The requirement that there be a "dishonest and fraudulent design" on the part of the fiduciary) is understood as requiring the establishment of a transgression of the ordinary standards of honest behaviour (see Hasler v Singtel Optus at [123]-[124] per Leeming JA; his Honour there confirming that it is not necessary to demonstrate that the alleged accessory thought about what those standards were).
4. As to the requirement of assistance (a question of fact as to which in Harstedt it was noted at [116] that "in practical terms, the ways in which a third party may provide assistance are myriad") two principles have been recognised (see Harstedt at [117]-[118]): first, that "there will be assistance where, but for the action or inaction of the third party, the breach of fiduciary duty would not have occurred" and, second, that there may also be assistance where the third party has facilitated a breach of fiduciary duty that would have occurred in any event or was a foregone conclusion (the Victorian Court of Appeal there noting equity's broad concern with preventing unconscionability). It is not necessary to show that the third party acted dishonestly (Harstedt at [84]; see also Turner v O'Bryan-Turner [2021] NSWSC 5 at [544]).
5. As to the requisite knowledge, what is necessary is knowledge within any of the first four categories of knowledge in the Baden Delvaux taxonomy (see Farah Constructions at [177]-[178]; Lewis Securities Ltd (in liq) v Carter (2018) 355 ALR 703; [2018] NSWCA 118 at [186] per Emmett AJA), namely: (i) actual knowledge; (ii) wilfully shutting one's eyes to the obvious (so-called Nelsonian knowledge); (iii) wilfully and recklessly failing to make such enquiries as an honest and reasonable person would make; (iv) or knowledge of circumstances which would indicate the facts to an honest and reasonable person. (The fifth of the Baden Delvaux categories, namely, knowledge of circumstances which would put an honest and reasonable man on enquiry is not sufficient.) Where the alleged accessory is a corporation (here, Patersons), the alleged knowledge must be attributable to the corporation. The knowledge required is of circumstances that would "tell of fraud or breach of trust" (Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; [1975] HCA 8 (Consul Development) at 412 per Stephen J). The plaintiff made clear in submissions that the knowledge here relied upon is knowledge in the fourth category of Baden Delvaux.

Knowing assistance claims against Ms Garrett and Mr Renauf

1. The plaintiff contends that, through their conduct in advancing the plan to replace the Ashington entities, Ms Garrett and Mr Renauf knowingly assisted each other, and Patersons, to breach fiduciary duties owed to Ashington Management and Ashington Capital. Again, I have not found that there were fiduciary duties owed by the relevant defendants, but in the event that this be wrong, I address the knowing assistance claims as follows.
2. The plaintiff contends that the knowledge and assistance of Ms Garrett and Mr Renauf in each other's, and Patersons', breaches arises from their knowledge of each other's roles and the scope of the Patersons Mandate (which they were involved in preparing), and their conduct from 2 October 2009 onwards in assisting Patersons and each other to progress the plan to remove the Ashington entities from their trustee/management roles (and concealing that from Mr Anderson).
3. Ms Garrett and Mr Renauf say that the particulars of knowledge provided during the course of the hearing are inadequate to put an honest and reasonable person on notice that each other, or Patersons, was in serious breach of fiduciary duty and engaged in a dishonest and fraudulent design. It is said that none of the matters alleged by the plaintiff provides a proper basis to infer knowledge of circumstances telling of fraud or breach of trust and that this is particularly so for Mr Renauf (who it is said does not face any serious allegations of actually performing acts in breach of duty).

Determination

1. As between Ms Garrett and Mr Renauf, had I found that the respective defendants owed fiduciary duties then I would have found that Ms Garrett and Mr Renauf had assisted in each of the defendants' breaches by reference to the email communications throughout (which were largely copied to both Ms Garrett and Mr Renauf). Clearly, Ms Garrett and Mr Renauf were well aware of the facts and circumstances that on this hypothesis gave rise to the relevant breaches of fiduciary duty. There can be no sensible conclusion otherwise since they were the ones progressing the plan to remove the Ashington entities. As to the fact that Mr Renauf was not himself alleged actually to have committed serious breaches of duty, he is involved throughout in the progress of the proposal for the removal of the Ashington entities.

Knowing assistance claim against Patersons

1. The knowing assistance claim against Patersons is predicated on the conduct of Mr Carolan and/or Mr Doherty in relation to the alleged breaches of fiduciary duty by Ms Garrett and Mr Renauf.

The pleaded case

1. As to the pleading against Patersons, the allegation of knowing assistance is set out at [260]-[261] of the third further amended statement of claim. It is noted that those paragraphs say nothing about which officers of Patersons had knowledge of "Garrett's plan", when that knowledge was acquired, or from what source the knowledge was acquired (that being rolled-up within the definition of "Patersons Conduct" as defined in [239]-[244]). It is said that [239], [240] and [241] plead a number of matters about which Mr Carolan and Mr Doherty were "aware" as at 2 October 2009 but leave unexplained the relevance to the knowledge of Patersons of allegations made in the balance of the pleading after 2 October 2009. Complaint is made that the obscurity of the pleading is compounded by the allegation in [23] that Mr Carolan, as the husband of Ms Garrett, had the same knowledge as her in respect of the matters pleaded about her knowledge and conduct.
2. Patersons says that its requests for further particulars of knowledge were effectively ignored, although (by letter dated 25 August 2016), the solicitors for the plaintiff provided detailed particulars as to the "formation of the consortium" which confirmed that the plaintiff's case as concerns Mr Carolan was that he did not raise Mr Doherty's email from 30 September 2009 forwarding Mr Routley's email to either Mr Shorrocks or the management of Ashington but instead forwarded it to his wife. Paragraph 11 of those particulars emphasised the formation of the consortium as between husband and wife as follows: Carolan and Garrett kept the contents of the email…from Shorrocks and Ashington deliberately, because it became suborned to the Consortium purpose. As between Carolan and Garrett, the Consortium was formed in the period between 30 September and 2 October 2009.
3. Accordingly, Patersons says that, as matters stood up until trial, Patersons was entitled to proceed on the basis that the case against it had, at its core, the allegation that Mr Carolan was impressed with the knowledge of Ms Garrett (as her husband) and that it was the wife and husband, acting together, that had formed the improper "Consortium" between 30 September to 2 October 2009 for their own personal benefit.
4. It is noted that, during the trial, following orders requiring the furnishing of particulars of knowledge, a schedule of particulars of knowledge was provided by the plaintiff (Knowledge Particulars - Ex L). Patersons says that the critical paragraph of that document, as concerns it, appears at [11]: 11. Paragraph 260(a) and (e) and 261 of the 2FASOC: a. By reason of the matters set out at (b) below, Carolan knew, or had knowledge of circumstances which would indicate to an honest and reasonable person, that: i. Garrett and Renauf occupied senior roles at Ashington and owed fiduciary duties to Ashington; and ii. Garrett and Renauf were acting in breach of their fiduciary duties to Ashington as part of a dishonest and fraudulent design by advancing Garrett's plan and the Consortium Objective which: A. involved removing Ashington, for whom Garrett and Renauf worked, as trustee and manager of ADF and ADF2 with a new trustee and manager; B. involved Garrett and Renauf obtaining a remunerative position and potential equity interest in the new trustee and manager; and/or C. was to be kept, and was kept, secret from the directors of Ashington. a. i. During 2009, Carolan was engaged in regular professional and personal communication with Garrett, from which it can be inferred that she had told him by 2 October 2009 that she and Renauf were engaged by Ashington as Head of Funds Management and Head of Acquisitions respectively. ii. On 25 February 2009 Carolan sent an email to Anderson and Minahan setting out a proposal "from Nicki and Sam" as to the terms on which Garett and Renauf would be employed by Ashington. iii. Carolan knew that Routley was not interested in the Stonington Capital Raising but was potentially interested to "invest in the manager", was aware of Garrett's plan and that a meeting had been arranged with Routley to discuss Garrett's plan as he was in regular communication with Garrett and was party to the emails referred to at paragraphs 95, 96, 96, 98, 99 and 99A of the 2FASOC. iv. Carolan emailed Garrett on 2 October 2009, shortly after Garrett sent Doherty an email setting out Garrett's plan, saying "you can trust Paul" which demonstrates Carolan's knowledge that Garrett's plan needed to be kept secret from Ashington as it was contrary to Ashington's interests. v. Carolan and Garrett exchanged emails on 3 and 4 October 2009 preparing a "Stonington Project Investment Opportunity" presentation which referred to Ashington's "new recruits, Nicki Garrett and Sam Renauf" and also included a proposed slide setting out the substance of Garrett's plan. vi. Carolan attended meetings with Doherty, Garrett, Renauf, Routley and Ko on 5 October 2009 at which Garrett's plan was discussed. vii. Between 5 October 2009 and 19 November 2009, Carolan was aware that Garrett and Renauf were pursuing Garrett's plan and the Consortium Objective due to his regular personal and professional communication with Garrett, his communications with Ko and Routley, and from the conduct set out at i to u below. viii. On 6 October 2009 Garrett sent Carolan the email referred to at paragraph 106 of the 2FASOC, forwarding Block's 6 October email. ix. On 6 October 2009 Carolan arranged a conference call for the following day, which he participated in, referred to at paragraph 108 of the 2FASOC at which Garrett's plan was discussed. x. On 6 October 2009 Carolan engaged in email exchanges ,with Ko to obtain information about Albany "to provide PPB and the banks with the sense of size/scale of potential investment partner", which was to advance Garrett's plan and the Consortium Objective and irrelevant to the Stonington Capital Raising. xi. On 9 October 2009 Carolan spoke to Ko about Garrett's plan and the Consortium Objective. xii. Carolan took the steps, or was copied on the emails set out, at particulars (i), (ii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xv), (xviii) to paragraph 116(a) of the 2FASOC arranging for Acorn and Albany to gain access to the Stonington Data Room xiii. Carolan arranged a tour of the Sydney-based Ashington assets for Ko as set out at paragraph 117 and 122 of the 2FASOC xiv. Carolan was copied on a request for further information from Ko as set out at paragraph 119 of the 2FASOC xv. On 11 October 2009 Carolan was copied on an email from Garret to Ko responding to a request for additional information from Ko, and confirming that a tour of Ashington's Sydney assets was being arranged. xvi. On 19 October 2009 Carolan was sent an email by Garrett forwarding a remuneration package proposal for Garrett and Renauf in "Newco" that had been sent to Ko, and referred to Garrett and Sam having been offered equity in Ashington when they made the decision to join the company. xvii. On 20 October 2009, Garrett forwarded Carolan an email from Routley which confirmed the interest of Albany and Acorn in replacing Ashington as manager of ADF and ADF 2 and requested information regarding Ashington's business as referred to at paragraph 135A of the 2FASOC. xviii. On 27 October 2009, Carolan emailed Garrett setting out his thoughts on establishing a "boutique incubator" which was a reference to a funds management business that would replace Ashington's business with the support of an investor as referred to at paragraph 145 of the 2FASOC. xix. On 9 November 2009, Garrett emailed Carolan telling him to "jump on [her] gmail" to check Ko's emails regarding a proposed remuneration package at a new manager, as referred to at paragraph 152 the 2FASOC xx. On 15 November 2009, Carolan emailed Doherty telling him to keep anything regarding the Alter investment 100% confidential or "we will be shot" as referred to at paragraph 154 of the 2FASOC c. By reason of the matters set out at (d) below, Doherty knew, or had knowledge of circumstances which would indicate to an honest and reasonable person, that: i. Garrett and Renauf occupied senior roles at Ashington and owed fiduciary duties to Ashington; and ii. Garrett and Renauf were acting in breach of their fiduciary duties to Ashington as part of a dishonest and fraudulent design by advancing Garrett's plan and the Consortium Objective which: A. involved removing Ashington, for whom Garrett and Renauf worked, as trustee and manager of ADF and ADF2 with a new trustee and manager; B. involved Garrett and Renauf obtaining a remunerative position and potential equity interest in the new trustee and manager; and/or C. was to be kept, and was kept, secret from the directors of Ashington. d. i. On 24 September 2009 Doherty was sent an email by Carolan setting out the details of the Stonington Capital Raising, as a result of which he was aware that Patersons were soon to be engaged to raise capital on behalf of Ashington, and that Garrett was due to start working at Ashington. i. During September 2009, Doherty became aware that Patersons had been mandated to raise mezzanine finance for Ashington. iii. On 30 September 2009, Doherty exchanged emails with Routley in which Routley indicated that Acorn was not interested in the Stonington Capital Raising but may be interested to "invest in the manager", as referred to at paragraph 95 of the 2FASOC. iv. On 2 October 2009, Garrett spoke to Doherty and informed him of Garrett's plan. v. On 2 October 2009, Doherty received an email from Garrett setting out Garrett's plan. vi. As a result of the ,above malters, by 2 October 2009 Doherty was aware that Garrett and Renauf were working for Ashington and were engaged to raise funds for it as part of the Stonington Capital Raising but were pursuing a plan that involved the replacement of Ashington as manager of its funds in a process being managed by PPB, Garrett and Renauf. vii. Doherty attended meetings with Carolan, Garrett, Renauf, Routley and Ko on 5 October 2009 at which Garrett's plan was discussed. viii. After 5 October 2009, Doherty knew that Garrett and Renauf were pursuing Garrett's plan and the Consortium Objective because: A. of the matters set out above B. he sent an email to Carolan attaching Ko's profile on 6 October C. he took the steps and was copied on the emails, set out at particulars (i), (ii), (iv), (v), to paragraph 116(a) of the 2FASOC arranging for Acorn and Albany to gain access to the Stonington Data Room D. on 15 November 2009, Carolan emailed him telling him to keep anything regarding the Alter investment 100% confidential or "we will be shot" as referred to at paragraph 154 of the 2FASOC e. Carolan's, Doherty's and Shorrocks' knowledge was the knowledge of Patersons.
5. Patersons says the following as to those particulars.
6. First, that [11(a)] and [11(c)] do not state with any precision the date upon which it is alleged that Mr Carolan and Mr Doherty, respectively, acquired knowledge of the matters stated therein. It is said to be insufficient to state that they had such knowledge by reference to a long list of correspondence and events which took place over a period of time.
7. Second, that [11(a) and (b)] do not state with sufficient particularity the source of Mr Carolan's knowledge. It is said that at [11(b)(vi)], the Knowledge Particulars conflate Mr Carolan's "regular personal and professional communication with Garrett" to 12 separate events identified in the following sub-paragraphs spanning the period from 5 October to 19 November 2009.
8. Patersons submits that, in circumstances where the source of Mr Carolan's knowledge is critical in assessing whether that knowledge is to be imputed to Patersons, the Knowledge Particulars leave the plaintiff's case expressed in hopelessly vague terms. It is said that Mr Carolan's knowledge is left to rest upon a "forest of different permutations and combinations" of his "personal and professional communication" with his wife. This is said to raise the very vice of which the High Court was critical in Forrest v Australian Securities and Investments Commission (ASIC) (2012) 247 CLR 486; [2012] HCA 39 at [25]-[27] and cannot now be remedied.
9. Third, that with respect to [11(e)], it is unclear whether the plaintiff contends that the knowledge of each of Mr Shorrocks, Mr Carolan and Mr Doherty is to be aggregated and considered, collectively, to be the knowledge of Patersons.
10. Fourth, that the Knowledge Particulars appear to put the plaintiff's case in a way that is quite different from the pleading and its particulars of 2016. It is said that, for the first time, knowledge of Patersons after 2 October 2009 is emphasised; and the association between Ms Garrett and Mr Carolan is put less distinctly.
11. Patersons' solicitors wrote to the plaintiff's solicitors on 1 March 2021 as to this and seeking clarification by way of further and better particulars. Patersons complains that the response it received was patently unsatisfactory. That being so, Patersons says that the plaintiff is left with the burden of proving, to the relevant standard, the "confusing and insufficiently particularised" case on the knowledge of Patersons that has been advanced and must be held to the pleaded case.

Plaintiff's submissions

1. The plaintiff contends that: the first element for the knowing assistance cause of action is satisfied by the existence of fiduciary duties owed to Ashington Management and Ashington Capital by Ms Garrett and Mr Renauf (an element I have already concluded has not been established). The plaintiff says that the second element (a dishonest and fraudulent design on the part of fiduciary) is satisfied because Ms Garrett's and Mr Renauf's breaches of those fiduciary duties were dishonest in the requisite sense. As to the remaining requirements for knowledge of the circumstances telling of the fraud or breach of trust and assistance in the dishonest and fraudulent design, the plaintiff relies on the following matters as to each of Mr Carolan and Mr Doherty, respectively (there being a degree of overlap in this regard).

Mr Carolan's knowledge and assistance

1. First, as to Mr Carolan's knowledge and assistance, the plaintiff points to the admission by Patersons that Mr Carolan had the same knowledge as Ms Garrett (Patersons' further amended defence filed on 17 March 2021 at [23]). The plaintiff says that Mr Carolan's knowledge of Ms Garrett's and Mr Renauf's dishonest and fraudulent plan is apparent from his email exchange with Ms Garrett on 2 October 2009, and the subsequent email exchange between Ms Garrett and Mr Doherty to which he was copied. The plaintiff points to the assistance given by Mr Carolan over the weekend of 3-4 October 2009 in the preparation of Ms Garrett's proposed presentation to Mr Routley (which included the "Go Forward" slide that set out the "plan" to replace Ashington) and that Mr Carolan attended the 5 October 2009 meetings in Melbourne.
2. As to events after 5 October 2009, the plaintiff says that Mr Carolan assisted Acorn and Albany to enter into confidentiality agreements so that they could access the Stonington Data Room (in pursuit of the unauthorised purpose of pursuing the plan to replace Ashington). It is noted that Mr Carolan liaised with Mr Ko to obtain information about Acorn's "financial metrics" (to provide PPB and the banks with a sense of the size and scale of their "potential investment partner"); that on 7 October 2009, Mr Carolan participated in a telephone conference with Ms Garrett, Mr Ko and Mr Routley; and that on 8 and 9 October 2009, Mr Carolan participated in further email correspondence and discussions with Mr Ko, including to help arrange a Sydney asset tour. The plaintiff also points to the fact that on 19 October 2009, Mr Carolan printed off an email for Ms Garrett which outlined a lengthy list of information that Mr Routley had requested to progress their due diligence on the plan to replace Ashington; that on 6 November 2009, Mr Carolan forwarded a copy of the Parissen investor presentation to Mr Routley, asking that it be printed; and that on 10 November 2009, Mr Carolan printed off flight tickets for Ms Garrett and Mr Renauf to allow them to visit Melbourne. The plaintiff says that through October and November 2009, Ms Garrett shared with Mr Carolan her "evolving" plan to replace Ashington, including details of Ms Garrett's and Mr Renauf's proposed salary and equity package with the new fund manager.
3. It is said that Mr Carolan also assisted Ms Garrett and Mr Renauf by failing to seek alternative sources of mezzanine financing while they pursued their alternative plan.
4. The plaintiff says (and I interpose to note that Albany, at least, expressly accepts this) that, after 2 October 2009, Mr Carolan and Mr Doherty took no further steps to progress the Stonington Capital Raising, effectively abandoning the Patersons Mandate. Complaint is made that Mr Carolan and Mr Doherty failed to alert Mr Shorrocks, or anyone in authority at Ashington, that the Stonington Capital Raising had been "diverted to an ulterior purpose". Reference is made in this context to the 16 November 2009 ("we will be shot") email from Mr Carolan to Mr Doherty. The plaintiff points out that whether or not Patersons obtained any benefit from its conduct has no bearing on its liability for knowing assistance.
5. Insofar as Patersons contends that Mr Carolan's acts, omissions and knowledge were "totally contrary to [its] interests" and thus beyond "his authority under the Patersons Mandate" and "the scope of [his] employment" (Patersons' contention being that such conduct and knowledge cannot be attributed or give rise to vicarious liability) the plaintiff relies on the submissions made as to attribution of knowledge and vicarious liability that I have considered above but, in any event, says that Mr Doherty's knowledge and assistance is sufficient to render Patersons liable for knowingly assisting Ms Garrett and Mr Renauf's breaches of fiduciary duty. (Patersons says that this indicates in effect a change in emphasis by the plaintiff from the conduct of Mr Carolan to that of Mr Doherty.)

Mr Doherty's knowledge and assistance

1. As to Mr Doherty's knowledge and assistance, the plaintiff notes that on 24 September 2009 Mr Carolan informed Mr Doherty that, while Ms Garrett was yet to start at Ashington, Patersons was "soon to be mandated" to undertake the Stonington Capital Raising; and that, by 30 September 2009, Mr Doherty knew of the existence of the Patersons Mandate. (Those matters can go only to knowledge of relevant circumstances since there is no suggestion that there was a "plan", as such, at that stage.) Reliance is placed on the reference in the 2 October 2009 email from Ms Garrett to Mr Doherty to the "highly confidential" plan that needed to be "managed carefully" (which was there said to be managed by Ms Garrett, PPB and Mr Renauf), involving the replacement of Ashington with a new entity that would receive the fund management fees (and signed off by Ms Garrett as "will be the new Fund Manager"). It is said that it was with full knowledge of that plan (obtained either through the discussion with Ms Garrett referred to in the 2 October 2009 email or the email itself) that Mr Doherty assisted by arranging the "crucial" introduction with Acorn, and replied to confirm that he had "locked in" Mr Routley for a meeting at 3.30pm on Monday 5 October 2009.
2. The plaintiff relies on Mr Doherty's attendance at the meetings with Mr Routley and Mr Ko (at which the plaintiff says the plan to replace Ashington was discussed and at which, according to Mr Doherty, Ms Garrett indicated that she and Mr Renauf would be the new managers); and similar steps taken by Mr Doherty after those meetings to those relied upon in relation to Mr Carolan. The plaintiff says that Mr Doherty facilitated the entry by Acorn into confidentiality agreements so that it could access the Stonington Data Room, by providing Mr Carolan with Mr Routley's contact details and speaking with Mr Routley to tell him that it would be forthcoming; and that he provided Mr Carolan with a profile of Mr Ko (the plaintiff says that it can be inferred that he did so at Mr Carolan's request, for the same purpose that Mr Carolan sought information from Mr Ko that day, namely to "provide PPB and the banks with a sense of size/scale of potential investment partner" - which was irrelevant to any mezzanine fundraising).
3. It is said that Mr Doherty also assisted by keeping quiet about the proposal, and not alerting Mr Shorrocks or anybody at Ashington about it. It is said that Mr Doherty did so in circumstances where, according to Mr Shorrocks' evidence in cross-examination, Mr Doherty (and Mr Carolan) should have informed him of the suggestion contained in Ms Garrett's email immediately, which he understood involved a proposal to transfer a significant part of Ashington's business to a new entity, and which would have ensured this information was passed back to someone at Ashington other than Ms Garrett.
4. The plaintiff says that, while Mr Doherty's positive acts of assistance were limited in time, they were critical in that he made the crucial introduction to Acorn (one of his clients), which enabled Ms Garrett and Mr Renauf's plan to proceed. It is said that Mr Doherty's silence, in circumstances where he should have reported these matters to Mr Shorrocks, was also crucial.

Patersons' submissions

1. Patersons emphasises (as indeed do all the defendants accused of knowing assistance) that knowing assistance claims must meet the Briginshaw standard (as noted above). Patersons points out that it is a burden that cannot be discharged by "inexact proofs, indefinite testimony, or indirect inferences" (Briginshaw at 362); and that something more than guesswork and conjecture would be required to give rise to a "reasonable and definite inference" so as to discharge the plaintiff's evidentiary burden (Ashby v Slipper (2014) 219 FCR 322; [2014] FCAFC 15 at [71]-[72]). Patersons says that this is of significance as regards the allegations made against it, especially Mr Doherty.
2. It is said that Mr Doherty's knowledge for the purposes of making out equitable fraud cannot be assessed with the benefit of hindsight but must be assessed in light of: Mr Doherty's role within Patersons and his limited background knowledge of the Patersons Mandate, Ms Garrett's ostensible authority on behalf of Ashington, and the business of Ashington. It is said (and the plaintiff does not suggest otherwise) that no Jones v Dunkel inferences are available from Mr Doherty's absence from the witness box (reasonable explanations for his absence having been given by Patersons and having been accepted by the plaintiff). Patersons says that at the highest, Mr Doherty's knowledge satisfies the fifth category of Baden Delvaux, and notes that that is insufficient.
3. Patersons also says that the circumstances of the change in name of the Ashington contracting entity on the Patersons Mandate is of some significance in how others, without complete information, perceived Ms Garrett's actions and to the suggestion that Patersons owed the Ashington Group in its personal capacity a fiduciary duty.

Mr Shorrocks' knowledge and assistance

1. While the plaintiff does not contend that Patersons, through Mr Shorrocks alone, assisted Ms Garrett and Mr Renauf to breach their fiduciary duties to Ashington with the requisite degree of knowledge, Patersons says it is necessary to address Mr Shorrocks' involvement (noting that paragraph 11(e) of the Knowledge Particulars contends that Mr Carolan's, Mr Doherty's and Mr Shorrocks' knowledge was the knowledge of Patersons). It is noted that Mr Shorrocks was the most senior employee of Patersons involved with the Patersons Mandate and the relevant events and (unlike others) he made himself available to assist in the resolution of the relevant issues by giving evidence. It is said (and I accept) that Mr Shorrocks was a credible and honest witness.
2. Patersons says that Mr Shorrocks' conduct in the events which are the subject of the statement of claim was wholly unexceptional. It is noted that, as the Head of Corporate Finance - Sydney for Patersons, Mr Shorrocks had an oversight role with respect to the Patersons Mandate. In his affidavit, Mr Shorrocks gave evidence that it was his practice that, given that the Patersons Mandate would be based on Patersons' standard form mandate, he would typically only review the changes to that form that had been agreed with the client. Mr Shorrocks' evidence was that he would rely on his subordinate team member (in this case, Mr Carolan) to bring changes to his attention and his focus would be on the first two pages of the mandate (which set out the main commercial terms of the transaction and Patersons' role) and the fees section.
3. Mr Shorrocks also said, that when there was at least an expectation that a mandate would be signed, the relevant team member would prepare a term sheet for distribution to potential investors, and, once that term sheet was finalised and approved by the client, it was sent: (a) by the relevant team member to potential investors; (b) by himself and other members of the team to potential investors known to them; and (c) to those of Patersons' other employees in other divisions who Mr Shorrocks (and his team member) considered may be in a position to provide introductions to potential investors to whom the transaction would appeal.
4. Patersons says that this is precisely what occurred in respect of the Patersons Mandate, insofar as Mr Shorrocks was involved and had knowledge of its progress, pointing to the evidence that: in September 2009, Mr Shorrocks was told (perhaps at lunch on 9 September 2009 with Ms Garrett and Mr Hinsley and, in any event, subsequently by Mr Carolan) that one of the funds managed by Ashington needed to raise some capital and that this was a potential transaction for Patersons; and that, on 22 September 2009, Mr Shorrocks emailed Mr Minahan and Mr Renauf (copied to Mr Carolan and Ms Watts) a draft of the Patersons Mandate for their review. While in his oral evidence Mr Shorrocks said he had no input into drafting the Patersons Mandate, it is noted that Mr Shorrocks accepted that he would have seen it (as seems evident from the fact that he was the sender of the email to Mr Minahan and Mr Renauf).
5. As to the timetable proposed by the Patersons Mandate, Mr Shorrocks confirmed in his oral evidence what he said in that email, namely that he thought it was achievable, although Patersons argues that that evidence should be viewed in the context that Mr Shorrocks had limited information available to him about the purpose of the capital raising or the situation that led to it. Patersons says that this was confirmed in Mr Shorrocks' oral evidence where he confirmed he had a very high-level understanding of the Ashington funds management business at the time, and also only understood at a very general level that the intent of the Patersons' Mandate was to pay out the Investec Stonington Facility. It is noted, for example, that Mr Shorrocks was not aware that the Investec Stonington Facility was already in default at that time (T 754.47-755.31).
6. Patersons says (and I agree) that the subsequent steps that Mr Shorrocks took with respect to the progress of the Patersons Mandate illustrate only a genuine advancement of it. It is noted that, consistent with the usual progress of a mandate at the time as described by Mr Shorrocks in his affidavit at [15]: Mr Carolan pitched the Patersons Mandate internally at Patersons to Mr Doherty and Mr Pike; Mr Shorrocks was generally aware, on 2 October 2009, that Mr Carolan was sending out emails (like that sent to Foster, to which Mr Shorrocks was copied) to various of Patersons' contacts; and that similarly, at around that time, Mr Shorrocks sent a "pro forma" email (drafted by Mr Carolan) to Mr Shorrocks' own investor contact, Mr Glenn Whiddon.
7. Mr Shorrocks' evidence was that he was aware that the pool of potential investors being targeted was being kept narrow, to Sydney and Melbourne institutional investors involved in property on the Patersons contact list. It is noted that, while Mr Shorrocks might have had an expectation that if none of those investors expressed interest, the circle of potential investors to whom the term sheet was sent would grow and some of the 100,000 people on Patersons' contact list might have been contacted, Mr Shorrocks' evidence was that, because Ashington was unlisted, the pool of clients from within that list was "much, much smaller"; that the minimum investment was $2 million and that the investor would need to be sophisticated. It is thus said that this is not an investment that would have had wide appeal beyond those in the industry.
8. In any event, Patersons points out that it was not suggested to Mr Shorrocks that he had personally failed to progress the Patersons' Mandate; nor was Mr Shorrocks' evidence at [40] of his affidavit challenged (which was to the effect that after 2 October 2009, he did recall thinking, during October and November 2009, there having been no positive responses to the emails to which he was a party, that the deal was not going to proceed; and that it was not uncommon for mandates to "fade away" in that manner).
9. Patersons says (and I accept) that Mr Shorrocks did not have any knowledge of "Garrett's plan", the alleged Consortium or the alleged Consortium Objective; that he was not privy to the 2 October 2009 email (on which the plaintiff places much reliance); and that he was not privy to the fact that Acorn or Albany had invested until he had lunch with Mr Minahan in February 2010. Patersons points out that the plaintiff has always emphasised the suppression of relevant information as to the diversion of the Patersons Mandate to an illegitimate purpose as a centrepiece of the case. It is said that Mr Shorrocks' belief, upon learning about the Acorn/Alter investment in February 2010 from Mr Minahan, that Patersons might be entitled to a fee under the Patersons Mandate serves to demonstrate how oblivious he was to what in fact occurred; and that he regarded any entitlement of Patersons to a substantial fee under the Patersons Mandate as significant.
10. Patersons says that what Mr Shorrocks did not know and was not told is revealing as to the proper characterisation of Mr Carolan's knowledge and actions which the plaintiff seeks to impute to Patersons. It is submitted that the fact that the most senior Patersons' representative responsible for the Patersons Mandate had no knowledge of the facts and circumstances suggesting a dishonest and fraudulent design is crippling to the plaintiff's attempt to impute such a state of mind to Patersons so as to hold it liable for equitable fraud.

Mr Doherty's knowledge and assistance

1. As to Mr Doherty, Patersons maintains that the plaintiff has not established that Mr Doherty knew, or had knowledge of circumstances which would indicate to an honest or reasonable person that Ms Garrett and Mr Renauf were acting in breach of their fiduciary duties to Ashington as part of a dishonest and fraudulent design by advancing "Garrett's plan" and the alleged "Consortium Objective" (see [11(c)] of the Knowledge Particulars above).
2. First, Patersons says (and I accept) that Mr Doherty did not have any role in the development of the Patersons Mandate; and did not ever receive a copy of the Patersons Mandate (this not being unusual, as Mr Doherty generally did not receive a copy of the mandate between Patersons and a client for which it was raising capital - Mr Doherty's 10 September 2018 affidavit at [8], Ex 1). Further, Patersons says that there is no evidence that, prior to his receipt of the email from Mr Carolan attaching the term sheet for the capital raising on 24 September 2009, Mr Doherty had any knowledge of the Ashington group of companies. It is said that, upon receipt of that email, Mr Doherty understood Mr Carolan's role in relation to the transaction contemplated by the term sheet to be as the person in Patersons' corporate department with conduct of the transaction.
3. In that regard, Patersons emphasises the distinction between the Patersons' corporate department (headed by Mr Shorrocks and which included Mr Carolan) and Patersons' institutional dealing trading desk (of which Mr Doherty was a member); noting that it was the corporate department which was responsible for the conduct of the transaction and that the institutional dealing department only became involved where the corporate department considered that the institutional dealing department might be able to utilise their contacts to identify potential institutional investors who might wish to consider participating in the transaction.
4. Mr Doherty described in his affidavit that his general practice when receiving a term sheet from the corporate department was that: he would make a telephone call to some of his institutional clients (who he considered might be interested in the transaction); and, if the timeframe for the capital raising was urgent, then the term sheet might be sent to the institutional clients in advance of any telephone discussion; he would attend at a "roadshow" (i.e., a series of meetings in which the corporate department and the corporate client would travel and present to various potential investors) to the extent that any presentation was being given to one of Mr Doherty's institutional clients that he had contacted (and that his attendance was essentially as an "introducer"), after which the corporate client would make a presentation; and, to the extent the institutional client followed up after such a "roadshow" meeting, Mr Doherty would generally refer such queries to the corporate department (as the department with conduct of the transaction).
5. Patersons says that the limited (and benign) nature of Mr Doherty's role is revealed in his transcript of examination where he emphasised his role as an "introducer" only, saying that "I was purely there to introduce all the parties, and organise the meetings" and "I was just organising, and if there was a change in the mandate that's not my area at all" (Ex M at 16377, 16381). It is said that this is consistent with Mr Doherty's affidavit where he characterised his role as one of "making introductions at those meetings" (at [42]). Patersons says that Mr Doherty's general practice and his limited role in relation to the Patersons Mandate, is important in contextualising Mr Doherty's knowledge and conduct in the present case.
6. Second, Patersons says (and again I accept) that, when viewed in that context, there is nothing in the communications between Mr Doherty, Mr Routley and Mr Carolan on 30 September 2009, as summarised above, which would indicate to an honest or reasonable person in Mr Doherty's position anything sinister or untoward. In particular, it is said that Mr Doherty's sending of the term sheet to Mr Routley at 10.44am on that day (as referred to above) was consistent with the orderly progress of the Patersons Mandate, as well as Mr Doherty's general practice at the time with respect to capital raisings; and that Mr Doherty's forwarding of Mr Routley's response to Mr Carolan at 11.22am on that day was also consistent with his general practice at the time and consistent with his understanding that Mr Carolan was the person in Patersons' corporate department with conduct of the transaction. I agree.
7. It is said that Mr Doherty's raising with Mr Routley, at 11.34am, the idea that had come from Mr Carolan (namely whether the deal would be of interest of Acorn if "this converted equity into an unlisted property fund") was also wholly consistent with the genuine progress of the Patersons Mandate. It is said that, as Mr Anderson himself acknowledged in his oral evidence (albeit in another context), a preferred equity investment is very similar to the mezzanine finance proposal as set out in the term sheet Mr Doherty had sent to Mr Routley and was an alternative he was content to pursue (T 511.39). Similarly, Mr Doherty said in his affidavit that, in his experience, "it was not unusual for a deal or transaction to be 'recut' as a result of negative feedback from potential investors, both in relation to the financial terms, and the structure, of the deal. It was also not unusual for potential investors to indicate what changes would need to be made for them to be interested in investing or for potential changes to be raised with them to test their level of interest in the event that such changes were made" (at [31]).
8. Patersons says that Mr Doherty's forwarding to Mr Carolan of Mr Routley's response (to the effect that "Acorn would be of a low probability to invest into the deal… however they might look at a direct investment into the manager") was also consistent with Mr Doherty progressing the Patersons Mandate and his general practice at the time (namely, not to participate in the processes associated with making any change to the deal but to pass on the feedback to the corporate department). It is said that, by this email, Mr Doherty was simply raising, for consideration by Mr Carolan, Mr Routley's "preference" to invest in the manager (being, relevantly, Ashington). Patersons argues, that upon receipt of this email by Mr Routley, Mr Doherty cannot have been obliged to raise this directly with Ashington (rather than simply the person who he understood to be the person in Patersons' corporate department with conduct of the transaction); nor can it be suggested that, upon receipt of this email from Mr Routley, Mr Doherty should have not pursued Acorn any further. In any event, it is said that Mr Doherty simply asked Mr Carolan for his "thoughts" and continued to pursue Thorney (see above), which Patersons says was again entirely consistent with the Patersons' Mandate.
9. Third, that Mr Doherty's receipt of the 2 October 2009 email does not infect him with the knowledge contended for by the plaintiff at [239] and [260] of the third further amended statement of claim and [11(c)] of the Knowledge Particulars. Patersons says that, while Mr Doherty certainly knew from his receipt of this email that the "Existing investors" (i.e., the superannuation fund investors who were the beneficiaries of ADF2, the fund for which Patersons was attempting to raise funds) were "investigating options" to transfer key assets to a new manager which included the "early stages" "opportunity" outlined in that email, those matters do not mean that he knew that the Patersons Mandate had become suborned to Garrett's plan. Moreover, it is noted that Mr Doherty said in the liquidator's examination that "often the deals we show to clients change regularly" (Ex M at 16379).
10. Patersons points out that, while the 2 October 2009 email told Mr Doherty that the information contained in the email was "highly confidential" and that it should be managed "carefully", it did not expressly say that Mr Doherty should keep it a secret from the Ashington directors. Moreover, Patersons contends that the details of capital raisings are, by their nature, confidential (as is reflected in the terms of the Patersons Mandate). It is said that there would be nothing unusual about a request that such details be treated as highly confidential; and in any event, it was not part of Mr Doherty's role to report back to Ashington on the progress of the transaction (it is said that this was Mr Carolan's job as far as Mr Doherty was concerned). Patersons says that, for the plaintiff to speculate further as to the import in Mr Doherty's mind of the request to keep the details of a proposed transaction confidential, would be for the plaintiff to engage in "inexact proofs, indefinite testimony, or indirect inferences".
11. It is noted that, as at 2 October 2009, a meeting with Acorn had not yet even occurred; rather that Mr Doherty had simply rearranged the meeting he had earlier scheduled for 2 October 2009. Patersons says that, in those circumstances, as a matter of logic, it cannot be said that, by the time he received the 2 October 2009 email, Mr Doherty knew that the Patersons Mandate had effectively been abandoned or re-directed to Garrett's plan or the "Consortium Objective" as is pleaded. I agree.
12. Patersons maintains that, given there is no evidence that Mr Doherty knew anything other than what was disclosed in the Patersons term sheet about the structure of the Ashington business, it cannot plausibly be said that he knew, as at 2 October 2009, that the Patersons Mandate had been "suborned" to a deal which could not "operate in any practical or genuine way for the benefit of Ashington". Further, Patersons says that it cannot be said that Mr Doherty appreciated the significance or otherwise of the fact that Ms Garrett said in the 2 October 2009 email that the process was "being managed by PPB and myself and Sam Renauf", noting that Mr Doherty was not aware at the time that PPB had any involvement in the business of Ashington, and that, as far as Mr Doherty was concerned, Ms Garrett was running the capital raising for Ashington. Patersons argues that there are several plausible explanations consistent with Mr Doherty holding an innocent belief (for example, that the 2 October 2009 email could have been referring to a larger corporate restructuring). Again, I agree.
13. Patersons says that how an honest and reasonable person in Mr Doherty's position would have perceived things is also to be assessed in light of his understanding of Ms Garrett's role and Mr Doherty's basic understanding of the Ashington funds management business. As to Ms Garrett, it is said that Mr Doherty was reasonably entitled to assume that she was acting within her authority from Ashington, since she was evidently holding herself out as the senior Ashington representative in respect of the Stonington Capital Raising.
14. Next, insofar as Mr Doherty was told by Ms Garrett that she was progressing something emanating from the superannuation fund investors themselves Patersons says that this would hardly suggest impropriety, especially given that the whole purpose of the Patersons Mandate was for the benefit of the superannuation fund investors (not for Ashington in its personal capacity). It is said that Mr Doherty stood in similar position to incoming investors in that respect insofar as he explicitly was told it was the wishes of the "existing investors" themselves. Patersons says that in these respects Mr Doherty's position is also not relevantly different to the position of Acorn and Albany, in that he was reasonably entitled to think that Ms Garrett was acting within authority given to her by Ashington. Patersons also points out that Mr Doherty knew that Ms Garrett had worked for Patersons previously and was Mr Carolan's wife; and therefore it is submitted that Mr Doherty had every reason to trust Ms Garrett (or, in other words, that Mr Doherty had every reason not to be suspicious of her motivations). (As to this last submission, it seems to assume matters arising from Ms Garrett's previous employment with Patersons about which I know nothing - and hence I consider it to be mere speculation that Mr Doherty had every reason to trust Ms Garrett; however, I accept that there is nothing to indicate that he had reason to suspect her motives - and mere suspicion in any event would not suffice.)
15. Patersons says (and I agree) that the most that could fairly be made about Mr Doherty's receipt of the 2 October 2009 email is that it may have impressed upon him knowledge of circumstances which would put an honest and reasonable man on inquiry about Ms Garrett's motivations (i.e. Baden Delvaux category five knowledge, which is not sufficient). It is noted that this is the way Mr Shorrocks characterised the email in his oral evidence, stating that, had he seen the 2 October 2009 email at the time, he "would have asked questions. What's going on here?" (T 769.48). Insofar as Mr Shorrocks also agreed that it would have been a matter of concern to him that the information contained in the 2 October 2009 email was passed back to someone at Ashington other than Ms Garrett, Patersons says that those are perspectives made by Mr Shorrocks with his greater level of experience and familiarity with capital raisings and the terms of the Patersons Mandate. It is said that those concessions, if applied to Mr Doherty, do not, in any event, establish more than perhaps that the 2 October 2009 email should have put Mr Doherty on an inquiry (noting that Mr Doherty was not apprised of the Patersons Mandate or its precise terms and knew less about the contract between Patersons and Ashington, and the Ashington business more generally, than Mr Shorrocks did at the time). Patersons says (and I agree) that this is insufficient evidence to conclude that Mr Doherty had the requisite knowledge so as to affect his conscience in respect of the second limb Barnes v Addy allegation made against Patersons.
16. Fourth, Patersons says that Mr Doherty's presence at the 5 October 2009 meetings does not impute to him the knowledge alleged by the plaintiff. It is said that this is particularly so where it appears the final version of the presentation made at that meeting was largely consistent with the advancement of the transaction contemplated by the Patersons Mandate; i.e., the presentation dealt with the Stonington Capital Raising - outlining two options: mezzanine finance or a preferred equity investment.
17. Patersons points out that Mr Doherty was not privy to the drafting of that presentation that went on over the weekend of 3-4 October 2009 between Mr Carolan, Ms Garrett and Mr Renauf; nor is there any evidence that he was privy to the "Go forward Corporate Structure" slide which appears to have been removed from the final version of the presentation. It is said that, while there was a suggestion from Ms Garrett in a private email to Mr Renauf that she would take that slide "separately" to the 5 October 2009 meetings, the plaintiff has not established to the requisite standard that that slide was in fact presented at the 5 October 2009 meetings or that Mr Doherty was ever aware of its contents. (I think it likely that the slide was presented at least at the longer of the two meetings, as already noted above, but I accept that the evidence does not establish clearly what if anything Mr Doherty knew of its contents).
18. It is said that Mr Doherty was not privy to any of the communications between Ms Garrett and Mr Carolan, and Ms Garrett and Mr Renauf, over the weekend prior to the meeting; that Mr Doherty had not spoken to Ms Garrett or Mr Carolan since the 2 October 2009 email and did not speak to them before the meeting with Acorn, as they were running late. In that sense, it is said that, save for what he had been told in the 2 October 2009 email, Mr Doherty was effectively in the same position at the 5 October 2009 meetings as were Mr Routley and Mr Ko in terms of what was presented at those meetings. Patersons says that, to infer that Mr Doherty became aware of a more sinister purpose from his presence at the 5 October meetings, would again be to engage in "inexact proofs, indefinite testimony, or indirect inferences".
19. Patersons acknowledges that Mr Doherty admitted during the liquidator's examination of him that, during the 5 October 2009 meetings, Ms Garrett had said that "it was early days and she may be - I think it was she and another guy, Sam Renouf [sic], were potentially to become the new fund managers" (Ex M at 16380). However, Patersons says that this acknowledgment alone does not establish that Mr Doherty knew of a dishonest and fraudulent design on the part of Ms Garrett and Mr Renauf; rather, Patersons says that all it establishes is that he knew that a possible alternative deal was being explored (apparently being driven, it is said by the desires of the superannuation fund investors and managed by Ms Garrett and Mr Renauf, who it is said Mr Doherty was reasonably entitled to assume were managing the transaction on the part of and with the authority of Ashington); and that Acorn and Albany potentially might look to invest "but they obviously needed to do their due diligence… and that they would be in touch" (Ex M at 16380).
20. Fifth, Patersons says that there is very little to which the plaintiff can point after 5 October 2009 which assists to meet the high burden of establishing that Mr Doherty knew of the alleged Consortium and the "Consortium Objective" after 5 October 2009. It is said that while, on 6 October 2009, Mr Doherty was copied on an email from Mr Carolan to Mr Ko which attached a confidentiality agreement and, upon being requested by Mr Carolan, made arrangements for Mr Routley to participate in a call on 6 October 2009, Mr Doherty did not have any involvement in relation to the transaction contemplated by the Patersons Mandate or any transaction being explored with Acorn and Albany. Patersons maintains that the suggestion to the contrary by the plaintiff (at [91] of the plaintiff's closing submissions) namely, that "Carolan, Doherty, PPB, Acorn and Albany, all continued to email, call and meet to develop and advance the scheme" is incorrect as far as Mr Doherty is concerned. Insofar as 15 emails are referred to in the footnote to [91] of the submissions, it is noted that only one of them involved Mr Doherty (that being the email on 6 October 2009 providing to Mr Carolan a brief profile of Mr Ko). It is said that this demonstrates just how far removed Mr Doherty was from the advancement of the scheme.
21. Sixth, Patersons says that, consistent with his non-involvement post 6 October 2009, Mr Doherty did not receive any personal benefit from the transaction with Acorn and Albany. It is said that there is no evidentiary foundation for the (belated) suggestion in the plaintiff's closing submissions that Mr Doherty received a non-pecuniary benefit from the ultimate transaction. It is noted that, although (under the Patersons Mandate, the fee to Patersons was 4% of which Mr Doherty would receive a third if he introduced an investor that participated in the deal and which, as Mr Carolan pointed out in his email to Mr Doherty of 24 September 2009 "could be a nice ticket"), such a "ticket" was never received by Mr Doherty because Patersons received no fee (the Patersons Mandate having been subverted).
22. Patersons points out that Mr Shorrocks explained in his oral evidence that, to the extent someone in Mr Doherty's position in the institutional dealing department at Patersons introduced a financier in respect of a transaction being conducted by the corporate department, that person would be entitled to a commission (payable from the employer, Patersons) (T 760.40-50). Patersons says that, in the present case, while it might be said that Mr Doherty introduced Acorn to Ashington (although noting that there is some suggestion that Ms Garrett called Mr Routley directly in advance of the 5 October 2009 meeting - see plaintiff's closing submissions at [80]), it is not controversial that Patersons did not receive its fee under the Patersons Mandate and therefore Mr Doherty did not receive any commission from such a fee. Patersons accepts that the fact that neither Patersons nor Mr Doherty received a benefit is not determinative, but it says that the fact that these fees were not received (or, perhaps more relevantly, that the fact that pursing the impugned conduct would preclude such fees being received) is telling against Mr Doherty's knowing involvement in the alleged wrongful conduct the focus of this proceeding.
23. Seventh, Patersons emphasises that Mr Doherty: was not privy to Mr Carolan's personal communications with Ms Garrett; did not assist with the draft Stonington PowerPoint presentations; was not present or involved in the meeting and discussions between Garrett and PPB on 30 September and 1 October 2009 when the plan was allegedly "hatched"; and had no involvement after the 5 October 2009 meetings in the formation of the "Consortium" (as described in the letter of offer of 14 October 2009) and the progression of the ultimate transaction presented to PPB and superannuation fund investors to replace Ashington as trustee and development manager of ADF and ADF2.
24. Finally, Patersons says that it is in the above context that the 16 November 2009 "we will be shot" email from Mr Carolan to Mr Doherty must be viewed. Patersons says that there is no evidence that Mr Doherty had any involvement in anything to do with Ashington after he received the email from Mr Carolan on 6 October 2009. Further, it is noted that, in his affidavit at [43], Mr Doherty gave evidence that he did not understand the purpose of Mr Carolan's email of 16 November 2009 or what Mr Carolan was attempting to convey; did not know what prompted Mr Carolan to send this email; and did not recall responding to that email.
25. Patersons says that Mr Doherty's evidence that he did not understand the purpose of this email is consistent with his subsequent email to Mr Carolan on 27 November 2009 to Mr Carolan asking if there was "any Stonington news??" in circumstances where Mr Doherty had not heard anything since 6 October 2009. It is noted that this was despite Mr Doherty attempting to make contact with Mr Routley to check the status of the transaction and him not receiving a response to his telephone messages.
26. Thus, in all of the circumstances, Patersons says that the plaintiff has not established to the requisite standard that Mr Doherty knew that Ms Garrett and Mr Renauf were acting in breach of their fiduciary duties to Ashington as part of a dishonest and fraudulent design by advancing Garrett's plan and the Consortium objective. I agree.
27. Patersons says that it follows from this, as well as the conclusions in respect of Mr Shorrocks' knowledge and actions, that the incomplete knowledge of Mr Doherty cannot be aggregated with the innocent knowledge of Mr Shorrocks. It is said (invoking Allsop CJ's observation in Kojic at [67]) that as it cannot be put that either Mr Doherty or Mr Shorrocks behaved in such a way to establish either one of them individually knowingly assisted Ms Garrett and Mr Renauf in their dishonest and fraudulent design, it would be a "startling proposition" that Patersons itself would be found liable for such knowing assistance. Again, I agree.
28. Patersons says that it also follows from this conclusion that Mr Doherty did not "assist" Ms Garrett and Mr Renauf in the alleged dishonest and fraudulent design. It is said that this is largely because Mr Doherty's step in merely organising a meeting on 5 October 2009 (which he had already previously arranged on a prior occasion) with one of his existing contacts is properly to be regarded as immaterial in circumstances where the details of the proposed transaction ultimately said to comprise the dishonest and fraudulent scheme were barely even embryonic at that time. Patersons says that it cannot be said that, but for the action of Mr Doherty - which involved merely booking in a meeting with Acorn for 5 October 2009 and attending that meeting where he remained largely passive, Ms Garrett and Mr Renauf would not have breached their fiduciary duties.
29. Patersons says that it cannot be said that, as at the time that Mr Doherty booked in the meeting with Acorn or attended that meeting, the commission of the alleged primary breach by Ms Garrett and Mr Renauf was a foregone conclusion. It is said that this is particularly so in circumstances where, as at 5 October 2009, on no evidence could it be suggested that Acorn and/or Albany were committed to Garrett's plan. It is said that Mr Doherty's evidence during his liquidator's examination was to the effect that Mr Routley and Mr Ko indicated interest but needed to do due diligence. Thus, it is submitted that even if Mr Doherty did have the requisite degree of knowledge (which he did not), there is a temporal and conceptual disconnect between that knowledge and his alleged assistance with the essential features of the dishonest and fraudulent scheme.
30. Pausing here, I agree that it is difficult to see that assistance in arranging the initial meeting with Mr Routley would be sufficient to amount to knowing assistance in the alleged dishonest and fraudulent plan, particularly where such conduct was consistent with pursuit of the Patersons Mandate. However, the fact that Acorn/Albany had not yet committed to the refinance proposal does not necessarily preclude a finding of knowing assistance had it otherwise been available.
31. Finally, in this context, Patersons says that the suggestion by the plaintiff in closing submissions (at [167]) that Mr Doherty's silence is evidence of wrongdoing is unsustainable. Patersons says that what Mr Doherty did or should have done must be assessed by reference to his position within Patersons, not that of Mr Shorrocks. It is noted that, when asked in his liquidator's examination whether it crossed his mind to raise the matter with Mr Shorrocks, Mr Doherty said that he thought "Ray and Martin would be in constant discussion about it" (Ex M at 16387). Patersons points out that Mr Shorrocks and Mr Carolan worked together in the office and in the same division of Patersons. It is submitted that, although with the full benefit of hindsight, it might have been better had Mr Doherty raised it with Mr Shorrocks or someone else, it is not credible to suggest that, upon receiving an email from the client's senior employee and representative (herself a former Patersons' employee and the wife of Mr Carolan), Mr Doherty would raise with Mr Shorrocks the contents of that because the form of a transaction Ms Garrett was proposing might be open to question (even though he had not received the Patersons Mandate). There is force to this submission.

Mr Carolan's knowledge and assistance

1. Patersons accepts that the position is very different with respect to Mr Carolan.
2. At the outset, in terms of the chronology of events, Patersons notes that, aside from some communication in July 2009 between Mr Carolan and Ms Garrett (where Patersons says Mr Carolan was clearly not acting qua Patersons but qua Ms Garrett's husband), the next communication involving Patersons in evidence was not until 11 September 2009; and that, following the 5 October 2009 meetings, the involvement of its employees in the matters the subject of the present proceeding was limited. Patersons says that the communications between Ms Garrett and Mr Carolan as to the Patersons Mandate are relevant in terms of the assessment of Mr Carolan's involvement and whether he was acting within the scope of his employment at Patersons throughout the time period relevant to this proceeding.
3. It is accepted by Patersons that Mr Carolan knew that Ms Garrett and Mr Renauf occupied senior roles within Ashington and that both were holding themselves out as senior representatives of Ashington.
4. Further, Patersons says that it may be assumed that as at 2 October 2009 and onwards, Mr Carolan had actual knowledge of, or had knowledge of circumstances which would indicate to an honest and reasonable person, the matters particularised in [11(a)] of the Knowledge Particulars. As already noted, Patersons has admitted that Mr Carolan had the knowledge of Ms Garrett by reason of being her husband and the fact that the two of them evidently allowed their personal and professional lives to become commingled.
5. Patersons says that, while Mr Carolan (and Ms Garrett) did progress the Patersons Mandate from 22 September 2009 to 2 October 2009, from 2 October 2009 (when he received the email from Ms Garrett), Mr Carolan's personal communications with his wife reveal that he was assisting her in pursuing a clandestine purpose of removing Ashington as trustee and manager of ADF and ADF2 with a view to obtaining a personal benefit for Ms Garrett and Mr Renauf (and by logical extension, himself). Patersons also accepts that, because of his ongoing contact with his wife, there is no real doubt that Mr Carolan knew that Acorn and Albany were interested in replacing Ashington as the manager and investing their capital to replace/refinance the Investec Stonington Facility.
6. Nevertheless it is said that various of the communications (such as Mr Carolan immediately printing out for Ms Garrett the attachment to the 19 October 2009 email forwarded to him by Ms Garrett; and the presentation and travel itinerary for the November 2009 meetings in Melbourne) show that Mr Carolan was not there acting in his capacity as an employee of Patersons (working on a transaction in furtherance of the Patersons Mandate) but, rather, printing out documents as a favour to his wife.
7. Patersons also notes that Mr Carolan was privy to the negotiations for Ms Garrett and Mr Renauf's proposed remuneration arrangements with "Newco" but again says that this could only have been in his capacity as Ms Garrett's husband.
8. Patersons accepts that it may be inferred on the evidence that Mr Carolan deliberately concealed the details of this from his employer and the person to whom he directly reported (Mr Shorrocks) because, to use his words, he would be "shot" if Mr Shorrocks, or Patersons, found out about it. Patersons says that it was with all of the knowledge derived, or substantially derived, from personal communications with his wife that Mr Carolan sent the 16 November 2009 "we will be shot" email. It is noted that this was the last communication involving Patersons' employees in the events the focus of this proceeding, save for a communication from Mr Doherty to Mr Carolan on 27 November 2009 with the subject "Any Stonington news?"; and that none of what relevantly occurred in the period from mid-October 2009 concerned or involved Patersons. In particular, it is noted that none of the tasks in PPB's "key issues paper" was assigned to any Patersons employee.
9. Patersons contends that Mr Carolan's knowledge and actions do not make it liable for knowing assistance of Ms Garrett and Mr Renauf in breach of their fiduciary duties in a dishonest and fraudulent design for the following reasons.
10. First, it is noted that the plaintiff places reliance on several and regular personal communications between Ms Garrett and Mr Carolan as the sources of Mr Carolan's knowledge (see the reference in Knowledge Particulars at [11(b)(i)] to personal communications). To the extent that these communications found Mr Carolan's knowledge referred to in [11(a)] of the Knowledge Particulars, Patersons says that that was not knowledge obtained by him within the scope of his authority and in the course of the transaction in which he was involved on Patersons' behalf (i.e., the Patersons Mandate). I agree.
11. Second, Patersons says that Mr Carolan gained awareness of his wife's purpose from superior knowledge he derived in a personal capacity, pointing to the communications between the two over the course of 3 and 4 October 2009 in developing the Stonington PowerPoint, in particular the slide setting out the substance of Garrett's plan (the "'Go Forward' Corporate Structure" slide) which was left out of the final version of the presentation. Mr Carolan's awareness of, and contribution to, that additional slide is said to be illustrative of him co-opting into Ms Garrett's agenda and providing assistance to her in progressing that agenda, as opposed to progressing the deal for which Patersons was mandated. Again, I agree.
12. Third, Patersons submit that even if that knowledge was gained (and that assistance was provided) by reason of Mr Carolan's position as the key contact in respect of the Patersons' Mandate, there is no doubt that Mr Carolan was under a duty to communicate the knowledge he had gained (i.e., that Ms Garrett was pursuing a deal outside the bounds of the Patersons' Mandate) to Mr Shorrocks (Mr Carolan's superior) and did not do so. It is noted that the plaintiff' case is put on this basis and that Mr Shorrocks confirmed as much in his oral evidence. Patersons accepts that the evidence suggests that Mr Carolan concocted a strategy with his wife to communicate to Mr Doherty (who Mr Carolan said to Ms Garrett she could "trust") only that information they considered necessary to ensure that Mr Doherty would reschedule the meeting with Acorn.
13. Fourth, Patersons emphasises that the narrative relied on by the plaintiff as founding Mr Carolan's knowledge and assistance in the development and execution of Ms Garrett's plan illustrates that Mr Carolan was in fact acting in total fraud of Patersons' interests and thereby, Mr Carolan's knowledge may not be attributed to Patersons. Patersons reiterates that it lost the opportunity to earn a substantial fee under the Mandate.
14. Finally, Patersons says that Mr Carolan's conduct (undertaken with the knowledge he had derived outside the course of his employment) was also outside the scope of, and directly inconsistent with, his obligations under his contract of employment. It is noted that under that contract of employment, Mr Carolan was employed as "Associate Director, Corporate Finance" reporting to Mr Shorrocks. Clauses 25 and 26 of Mr Carolan's contract of employment relevantly provided: 25 You will not at any time during your employment without the prior written consent of the Company (being Patersons): (a) be engaged, employed, concerned or interested directly or indirectly in any proposal, project, assignment or development: (i) situated within Australia; and (ii) which is in or in connection with the industry in which the Company is concerned; or (b) be engaged directly, or interested directly or indirectly in any other employment, business of occupation… … 26 You will not at any time during or after your employment with the Company use to your own advantage, or to the detriment of the Company, or disclose to any person any confidential information, which includes but is not limited to trade secrets, business development plans, financial information, client information (including any information provided by a client and client lists), prices, sales or marketing programs research materials which come to your attention during the course of your employment or which is generated by you in performing the duties for your position.
15. Patersons says that, on the plaintiff's own case, and the material on which the plaintiff relies, Mr Carolan was clearly concerned or interested (at least indirectly, by reason of his relationship with Ms Garrett) in a proposal situated within Australia and which was in connection with the industry in which Patersons was concerned (namely, the proposal that Ms Garrett was pursuing outside the bounds of the Patersons Mandate). Further, to the extent the plaintiff alleges that Mr Carolan became aware of confidential information through Ms Garrett and used it as alleged, Patersons says that Mr Carolan was in breach of cl 26 of his contract of employment as he used client information to his own (or Ms Garrett's) advantage and to the detriment of Patersons. Further, it is said that Mr Carolan's contract of employment required him to act in furtherance of the interests of his employer (and that, from 2 October 2009 he did not do so).
16. Patersons contends that, had Mr Carolan's conduct come to the attention of Patersons (before his dismissal for unrelated misconduct in November 2009), Patersons would have been entitled to terminate his employment for "serious misconduct" under cl 22(a)(ii) of his contract of employment for "conduct that causes imminent and serious risk to the reputation, viability or profitability of Patersons business or assets". It is said that the fact the conduct relied on by the plaintiff constitutes "serious misconduct" by Mr Carolan under the scope of his employment with Patersons justifying his dismissal is a powerful indicator against the imposition of vicarious liability.
17. Insofar as there is any substance to the suggestion (in oral closing submissions by the plaintiff) that Mr Carolan may himself have "cleared the file" as to his dealings and communications relating to the Patersons' Mandate, Patersons says that this would only serve to make even clearer both his misconduct and the non-attribution of his knowledge and conduct to Patersons.
18. Patersons thus contends that Mr Carolan's knowledge and actions take the matter well outside the fair and just imposition of liability on Patersons through the theory of vicarious liability; and that, from 2 October 2009 onwards, Mr Carolan was not acting in furtherance of Patersons' interests - rather, he was acting totally contrary to its interests in advancing the personal interests of his wife.
19. Patersons further says that it is no answer to say that Patersons is liable for having "placed" Mr Carolan in that position. It is said that Mr Shorrocks could not have reasonably foreseen that Mr Carolan or Ms Garrett would behave in the manner they did. It is said that there was not a sufficient connection between his authorised conduct and the scope of his employment and the tasks entrusted to him. Patersons says that, as emphasised in Prince Alfred College and Wm Morrison, the fact that employment affords an "opportunity" for the commission of a wrongful act is not of itself a sufficient reason to attract vicarious liability.
20. As to the question of imposition of vicarious liability (which Patersons says should not apply as dealt with above), Patersons submits that the decisive factors against the imposition of vicarious liability for Mr Carolan's conduct in advancing his wife's agenda are that: he was acting squarely outside the scope of his employment and would have been entitled to be terminated for "serious misconduct" under this contract of employment; he acted directly inconsistent with what he had been entrusted by Mr Shorrocks to do under the Patersons Mandate; his actions were totally contrary to the interests of his employer and in fact deprived it of the prospect of any benefit under the Patersons Mandate; he acted for his own personal benefit in furthering the interests of his wife; his actions were undertaken without any disclosure to his superior (Mr Shorrocks); his conduct enabled from knowledge derived substantially from personal communications with his wife outside the scope of his professional employment with Patersons; and not only were his actions, objectively speaking, outside the scope of his employment and the Patersons Mandate that he had been tasked with, he knew so much himself.
21. Patersons says that it may also be inferred (and I do infer, from the "will be shot" email) that Mr Carolan knew that Patersons (i.e., Mr Shorrocks) would be very dissatisfied with his performance had Patersons found out about it. Patersons says that it is thus tolerably clear that Mr Carolan was on a "frolic of his own" (referring to Zakka v Elias at [142] in this context). I agree.
22. Patersons says that at the level of policy, it would not be fair or appropriate to hold Patersons legally responsible for potentially very significant monetary compensation (on the plaintiff's case) for, in effect, the subterfuge of one of its lower-level employees; and that to do so would be to impose an irreparably high burden on the conduct of businesses such as Paterson's business. (Ultimately, in light of the findings I have made, it is not necessary to determine this by reference to policy issues and I do not propose here to debate them.)

Determination

1. I have concluded that, even assuming (contrary to the above conclusions) that Ms Garrett and Mr Renauf owed the Ashington companies a fiduciary duty, it has not been established to the requisite degree of satisfaction that Patersons knowingly assisted Ms Garrett and Mr Renauf in a serious breach of their fiduciary duties constituting a dishonest and fraudulent design.
2. I accept that Mr Shorrocks, the most senior employee at Patersons responsible for the Patersons Mandate, was unaware of any of the facts or circumstances comprising the alleged dishonest and fraudulent design (indeed, as Patersons points out, on the plaintiff's case, keeping that information from him was an element of the plan).
3. I find that Mr Doherty had limited knowledge as to the proposals for raising capital and only fleeting involvement in the matter. In particular, Mr Doherty had not been provided the Patersons Mandate; was not responsible for the preparation of the term sheet; was not involved in the preparation of the draft presentations; and had no involvement in the events and communications between Ms Garrett, Mr Carolan, Mr Ko, Mr Routley and PPB in advancing the proposed transaction after the 5 October 2009 meetings. His role was correctly described as an introducer. I find Mr Doherty's knowledge, seen in context, is insufficient to permit a conclusion that he knew (in the requisite sense) the facts, matters and circumstances of a dishonest fraudulent design.
4. I find (and Patersons here accepts) that from around 2 October 2009, Mr Carolan was aware (from personal communications with his wife) that Ms Garrett was advancing with Mr Renauf a transaction that was outside the Patersons Mandate (and which was, at least in part, for her own personal benefit). I find that Mr Carolan was aware that this transaction was not in the interests of Patersons under the Patersons Mandate (and I find that it is probable that he understood that it was not in the interests of the Ashington entities insofar as it involved their removal from their roles in relation to the funds), and that it was in the interests at least in part of Ms Garrett (and others). However, I am satisfied that Mr Carolan was here engaged on a frolic of his own, outside the scope of his employment and hence his knowledge and conduct cannot be sheeted home to Patersons.
5. As addressed above, I agree that the knowledge of Mr Shorrocks, Mr Doherty and Mr Carolan cannot permissibly be combined or aggregated in any way to impute to Patersons the degree of knowledge necessary to sustain the serious allegation of equitable fraud made against it. I consider that there is force in the submission that Patersons was itself also victim of Mr Carolan's alleged conduct and the impugned conduct of Ms Garrett and Mr Renauf.
6. Further, as to the element of assistance, I accept that this must be assessed in light of the fact that there is no suggestion Patersons was to be part of any Consortium; nor any suggestion that Patersons was involved in any decision to make or prepare the letters of offer by Acorn or Albany to the superannuation fund investors. I consider that the plaintiff has not established that Patersons "assisted" in achieving the alleged Consortium Objective (i.e., that it has not been established that, but for the action or inaction of Patersons, Ms Garrett and/or Mr Renauf's alleged breaches of fiduciary duty would not have occurred; or, alternatively, that Patersons facilitated a breach of fiduciary duty by Ms Garrett and Mr Renauf that would not have occurred in any event).
7. Thus, the claim against Patersons for knowing assistance is not made good.

Knowing assistance claim against PPB - Ms Garrett and Mr Renauf's breaches of fiduciary duties

1. As to the plaintiff's claim against PPB for knowing assistance from early October 2009 in respect of Ms Garrett and Mr Renauf's alleged breach of fiduciary duties owed to Ashington Capital and Ashington Management, it is alleged at [279] of the third further amended statement of claim that PPB engaged in the "PPB Conduct", which is defined at [265] of the pleading to include allegations that PPB: (e) introduced to ADF2 investors the concept of replacing ACPL and AMPL as trustee and manager which was central to Garrett's plan, and supplied the Consortium term sheet to ADF2 investors and to relevant banks; … (g) advised the ADF2 investors to reject any refinancing proposal in terms of which ACPL would remain as trustee and AMPL would remain as manager, that was opposed to the Consortium Objective; [and] … (i) damaged Ashington's reputation with ADF2 investors by alleging breaches of trust against ACPL without advising Anderson or giving him any opportunity to refute the allegations.

Plaintiff's submissions

1. The plaintiff says that the elements of knowledge and assistance are made out through the knowledge and assistance of Mr Lord (a partner of PPB) and Mr Block (a director of PPB), in working with Ms Garrett and Mr Renauf to replace Ashington Management and Ashington Capital as the manager and trustee of ADF and ADF2, knowing (to the requisite degree) that Ms Garrett and Mr Renauf were engaged to work for Ashington.
2. The plaintiff submits that the evidence demonstrates that, not only did PPB knowingly assist Ms Garrett and Mr Renauf to breach their fiduciary duties to Ashington, but that PPB also played a key role in recruiting them, and in instigating and driving the plan to replace Ashington.
3. As to PPB's knowledge and assistance, reliance is placed on the following: the meetings that took place between PPB and Mr Renauf on 30 September 2009 and with PPB, Ms Garrett and Mr Renauf on 1 October 2009 (at which it is said the plan to replace Ashington was hatched); the reference in the 2 October 2009 from Ms Garrett to the "plan we discussed with PPB" and the Apex Capital offer there detailed not working "for us"; the reference in Ms Garrett's "to-do" list, copied to Mr Renauf, to Ms Garrett's "thoughts on PPB suggested plan"; Ms Garrett's 2 October 2009 email to Mr Doherty noting that the process (to replace Ashington) was in its early stages and was being managed by PPB, herself and Mr Renauf; the internal 6 October 2009 PPB email referring to the Newco opportunity; Mr Block's "CV's" email; the 6 October 2009 email from Mr Block to superannuation fund investors referring to the "Go Forward" structure and the email the following day to the effect that any proposal would require the removal of Ashington (it being noted that this is consistent with the message provided to the superannuation fund investors by Mr Block, Ms Garrett and Mr Renauf in meetings on 9 October 2009); the 7 October 2009 email from Mr Block referring to advice received by PPB from Arnold Bloch Leibler about the removal of Ashington as trustee and manager; that PPB worked with Ms Garrett and Mr Renauf to provide information about Ashington to Acorn and Albany, after Mr Block knew that Ms Garrett, Albany and Acorn had a proposal to replace Ashington as the trustee and/or manager of the funds; the reference in the 21 October 2009 joint letter of intent to the "continuing discussions" between Ms Garrett and Mr Renauf with Albany and Acorn concerning the proposed investment; and the attendance of Ms Garrett at the 6 November 2009 presentations to PPB and the superannuation fund investors.
4. The plaintiff says that this evidence establishes that PPB, through Mr Block and Mr Lord, knew or had knowledge of circumstances which would indicate to an honest and reasonable person, that Ms Garrett and Mr Renauf occupied senior roles at Ashington and owed fiduciary duties to Ashington, and were acting in breach of those fiduciary duties as part of a dishonest and fraudulent design by advancing a proposal that: (a) involved replacing Ashington, for whom Ms Garrett and Mr Renauf worked, as trustee and manager of ADF and ADF2 with a new trustee and manager; (b) involved Ms Garrett and Mr Renauf obtaining a remunerative position and potential equity interest in the new trustee and manager; and (c) was to be kept, and was kept, secret from the directors of Ashington.
5. It is submitted that PPB assisted Ms Garrett and Mr Renauf to advance that plan, including by: prompting Ms Garrett and Mr Renauf to put together CVs; providing Ms Garrett and Mr Renauf with legal advice from Arnold Bloch Leibler on the removal of Ashington as trustee and manager; and endorsing and recommending Ms Garrett and Mr Renauf, and the final Parissen Proposal, to the superannuation fund investors.
6. The plaintiff says that, while obtaining a personal advantage or benefit is not a requirement for third party liability for "knowing assistance", the evidence supports a finding that PPB's conduct was motivated, at least in part, by its own personal benefit. In particular, the plaintiff refers to: the reference in Mr Block's internal PPB email of 6 October 2009 as to the "opportunity" there for the new company; the statement in the joint letter of intent of 21 October 2009 as to the proposal that PPB should manage ADF, with the "Consortium" sub-managing the Wylde Street development project and the 25% interest that ADF had in the Double Bay Property; the series of emails on 29 and 30 October 2009, in which Mr Ko suggested to Mr Routley (in response to a question from PPB) that PPB should manage the Wylde Street Project; and the 23 March 2010 email from Mr Lord to Mr James Cameron at the Bank of Scotland (referring to the "PPB/Parissen Joint Venture") which attached a "short presentation outlining the service offering and capabilities of the PPB/Parissen joint venture and details of its principals and shareholders".
7. It is noted that the presentation attached to the 23 March 2010 Bank of Scotland email included statements to the effect that: PPB and Parissen had worked "hand in hand" to restructure and recapitalise the former ADF funds; that during the course of that engagement, it became clear that there was the opportunity for PPB and Parissen to form a joint venture to fill a void in the market (to provide expert work out/restructuring advice combined with genuine real estate expertise and demonstrated access to capital); and that Parissen and PPB had worked closely together to conclude the Ashington transaction and recognised that the combined group could deliver a compelling offering; noting that Parissen and PPB had formed a joint venture to capitalise on real estate work out opportunities and to raise capital for a real estate work out fund as well as individual mandates on a case by case basis.
8. Therefore, the plaintiff says that PPB was knowingly involved in the dishonest and fraudulent design by Ms Garrett and Mr Renauf in breach of their fiduciary duties.

PPB's submissions

1. PPB adopts the submissions of Ms Garrett and Mr Renauf to the effect that Ms Garrett and Mr Renauf were not fiduciaries and did not breach any fiduciary duties to Ashington; and says that, in any event, their conduct (even if it were a breach of fiduciary duty), did not amount to a dishonest and fraudulent design. Further, PPB says that, even if Ms Garrett and Mr Renauf had engaged in such breaches, there is no basis for concluding that PPB had the requisite knowledge of any dishonest and fraudulent design on the part of Ms Garrett and Mr Renauf.
2. PPB says that it is insufficient for the plaintiff simply to submit that PPB knew that Ms Garrett and Mr Renauf were employees of Ashington at the relevant time (although it does not appear to dispute that it knew this).
3. PPB says that, as at early October 2009 (when "Garrett's plan" is said first to have been formulated), PPB had become aware that: Ashington Capital had given conflicting undertakings with respect to uncalled capital to NAB and St George on the one hand, and Investec on the other; Ashington Capital had departed from its commitment not to borrow at the level of ADF2; Mr Steel had made serious allegations of misconduct concerning Mr Anderson's management of Ashington Capital to Ms Garrett, including an allegation that impugned Mr Anderson's honesty and integrity with respect to corporate governance; Investec was threatening enforcement action, in circumstances where its securities extended to the entire assets and undertaking of ADF2, including significant loans advanced to ADF; and the superannuation fund investors had expressed a general desire to replace Ashington Capital as trustee of ADF and ADF2. It is said that there was therefore a genuine risk that the superannuation fund investors might lose their whole investment in both funds and a well-founded apprehension (whether correct or not) based on the disclosures of Mr Steel, that Mr Anderson had engaged in serious wrongdoing.
4. PPB says that any person in the position of PPB, knowing the matters outlined above, and knowing of Ms Garrett and Mr Renauf's conduct in attempting to facilitate the replacement of the Ashington Group by Albany and Acorn, would reasonably have understood that Ms Garrett and Mr Renauf were acting to protect and to advance the interests of the superannuation fund investors. It is said that the plaintiff cannot point to knowledge on the part of PPB of facts suggesting any other motive (let alone a motive infected by nefariousness) on the part of Ms Garrett and Mr Renauf. PPB says that the evidence suggests that, from the perspective of PPB, Ms Garrett and Mr Renauf were not attempting to steal from Ashington Capital and Ashington Management a business that those entities had a realistic prospect of being permitted to continue operating; instead, Ms Garrett and Mr Renauf were seeking to identify, and hoping to be employed by, a suitable replacement for a trustee which, on their understanding, the superannuation fund investors were in favour of instituting. It is submitted that such knowledge falls far short of knowledge of a dishonest and fraudulent design; and therefore that there is nothing sinister in the fact that Mr Block, on 6 October 2009, may have encouraged Ms Garrett and Mr Renauf to give some thought to their CVs.
5. PPB submits that, commencing in early October 2009, PPB understood (correctly or incorrectly) that each of the potential investors with whom Ms Garrett and Mr Renauf were dealing had insisted that, as a condition of recapitalising ADF2, the Ashington entities be removed from their roles as trustee and manager. Hence, it is said that from PPB's perspective, there was no realistic possibility of recapitalising ADF2 without the removal of the Ashington entities, and the impetus for such removal was not any design concocted by Ms Garrett and Mr Renauf but, rather, the conditions insisted upon by potential investors for considering any proposal to contribute capital. Further, PPB says it understood at this stage that Mr Steel had made serious allegations of improper conduct against Mr Anderson, providing further justification for taking action against Ashington.
6. As to the plaintiff's allegation that in early October 2009 Ms Garrett and Mr Renauf had lied to the superannuation fund investors (by telling them that potential investors were insisting upon the removal of Ashington) and at the same time had lied to potential investors (by telling them that the superannuation fund investors had resolved to remove Ashington), PPB says that there is no basis for thinking that PPB was aware, let alone assisted in the dissemination, of these alleged lies.
7. Further, it is said that PPB was not aware of any interest from parties prepared to offer mezzanine finance in respect of the Stonington Capital Raising pursued by Patersons and Ashington Capital, other than the Wingate Proposal in November 2009, and was not aware of any alleged misconduct of Mr Carolan or Mr Doherty.
8. PPB refers to the discussions between PPB and the superannuation fund investors as early as late July 2009 concerning the removal of Ashington Capital as trustee, pointing in that regard to: the documents relating to the 29 July 2009 investors' meeting; the 6 August 2009 email from Mr Flett to Mr Lord, copied to Mr Dedes, referring to the key issue being whether change of the trustee would required the approval of financiers to each of the underlying special purpose vehicles; and the agenda for the 11 August 2009 teleconference between PPB and the superannuation fund investors (which included as an item, "[i]mplementation of revised structure to eliminate [Ashington Capital] as Trustee" and "Review of management"). PPB submits that the phrase "eliminate [Ashington Capital] as Trustee" bespeaks quite a different subject than a restructure for the limited purpose of establishing separate borrowing entities for each of the sub-trusts; and that the agenda suggests that a decision had already been taken to eliminate Ashington Capital as trustee and that the only matter left for discussion was the implementation of that decision. (While I accept that this is a possible construction of the agenda item, in the context of the chronology of events referred to earlier, I would read this agenda item as addressing the structural problem that had been raised in relation to the sub-trust borrowings being secured at head trust level.)
9. PPB says that it sought to bring about a result (the replacement of Ashington) which it must be taken as understanding: to have been in the best interests of superannuation fund investors, having regard to what it knew of the previous conduct of the Ashington group, particularly with respect to the financing arrangements for ADF2; as being generally favoured by the superannuation fund investors; and as being necessary to achieve the recapitalisation of ADF2 or the Stonington Trust, having regard to what it perceived to be the attitude of all potential new investors in early October 2009.
10. It is noted that, as part of the plaintiff's case against PPB, reliance is placed: on four emails sent between 1 and 4 October 2009 by Ms Garrett to Mr Renauf and Mr Doherty (but not addressed or copied to any members of PPB staff), in which Ms Garrett refers to a "PPB suggested plan" or the like (those being the 7.32am and 7.25am emails on 2 October 2009 from Ms Garrett to Mr Renauf, the latter referring to the Apex Capital offer; the 3.45pm email that day from Ms Garrett to Mr Doherty; and the 4 October 2009 email from Ms Garrett to Mr Carolan sending the "Go Forward" slide); the internal PPB email on 6 October 2009 from Mr Block to Mr Carson; and an email from PPB to representatives of the superannuation fund investors dated 7 October 2009. PPB says the documents do not support the plaintiff's submission that PPB played a key role in recruiting Ms Garrett and Mr Renauf and were "driving the plan to replace Ashington".
11. Insofar as the plaintiff draws from the first four emails referred to above a conclusion that PPB was driving the plan and submits that, at the meeting on 1 October 2009, "PPB put to existing Ashington employees, a proposal to incorporate a Newco, and have it replace Ashington, as the manager of some of the key assets, so as to earn the management fee" (T 67.37-39), PPB says that the plaintiff overlooks the fact Mr Routley first suggested Acorn investing in the manager to Patersons, and Mr Carolan then communicated that to Ms Garrett before her meetings with PPB.
12. PPB refers to Mr Routley's stated focus (in the 30 September 2009 email exchanges with Mr Routley - see chronology above) as to the "competency of the management team", which it says must have indicated to Ms Garrett (given what was known to Ms Garrett concerning the affairs of Ashington, including the difficulties arising from its financing arrangements) that Acorn would not invest if Ashington remained as trustee and development manager; and PPB says that it was in this context that meetings took place on 1 and 2 October 2009 between Ms Garrett and representatives of PPB.
13. PPB says that what was discussed at the meeting on 1 October 2009 may be inferred from the internal 6 October 2009 email from Mr Block to Mr Carson (copied to Mr Lord and Mr Parbery), following which Mr Block proceeded to identify potential investors, with whom discussions had been held, and who it is said had "expressed comfort in seeing ABL [Arnold Bloch Leibler] & PPB involved and all would like to secure equity in the new management company". PPB points out that this was an internal PPB communication and emphasises that there is no reason for thinking that Mr Block had sought to convey to Mr Carson anything other than his genuine understanding of the situation, even if Mr Block was incorrect in observing that the potential incoming investors "would only consider a re-cap proposal within a new structure".
14. Thus, it is submitted that it should be found (and I agree) that PPB's genuine understanding as at that date, whether correct or not, was that each of the potential incoming investors with whom Ms Garrett was dealing would only consider investing capital in ADF2 if the Ashington companies were not involved as trustee and manager. PPB says that this understanding is unsurprising given PPB's awareness of the superannuation fund investors' discussions involving the replacement of Ashington and of Ashington's conduct in relation to the Investec Stonington Facility. An incoming investor taking this stance is also said to be unsurprising from a commercial perspective.
15. PPB says that the terms of the 6 October 2009 email from Mr Block to Mr Carson suggest that his understanding resulted from discussions with Ms Garrett and Mr Renauf concerning "a proposal ... to replace Investec and re-cap the Stonington subtrust"; and that the most reasonable reading of this is that Mr Block was referring to the meeting between Mr Lord, Mr Block, Ms Garrett and Mr Renauf on 1 October 2009. I agree.
16. PPB maintains that subsequent references to a "PPB suggested plan" or a "plan discussed with PPB", in emails from Ms Garrett to Mr Renauf (but not sent to anyone at PPB), do not establish that any plan was "driven" by PPB. PPB accepts that any process for installing a "Newco" in Ashington's place would have required some involvement on the part of PPB, as PPB was advising the superannuation fund investors. However, it is said that Ms Garrett's reference to such involvement, even in terms of "management", in an email to Mr Doherty does not prove that PPB "instigated" any plan. Again, I would agree.
17. In any event, PPB submits that, even if PPB can be said, at the meeting with Ms Garrett on 1 October 2009, to have suggested a plan for replacing the Ashington entities as trustee and manager respectively, it should be inferred (having regard to Mr Block's 6 October 2009 email to Mr Carson), that this was in the context of PPB being told that potential investors required such replacement as a condition for considering any proposal to recapitalise ADF2. It is said that it was also in the context of an understanding, reflected in the documents, that the superannuation fund investors sought to replace Ashington as trustee and manager.
18. I interpose here to note that Mr Routley's email simply expresses a preference to invest in the manager (not for Acorn itself to replace the manager) and the superannuation fund investors had met on 29/30 September without any decision to replace the manager.
19. To the extent that this was conveyed by PPB to Ms Garrett at the meeting on 1 October 2009 (and PPB accepts that there is some evidence that it was), PPB says that it is possible that she might have understood the notion of removing Ashington as something suggested by PPB, when in truth it reflected the views of the superannuation fund investors.
20. PPB says that it appears to have remained PPB's understanding that the potential investors with whom Ms Garrett was dealing were insisting upon the replacement of the Ashington entities as trustee and manager, not least because that was the message conveyed to Mr Block by representatives of those investors (referring to the 14 October 2009 letter jointly sent from Acorn and Albany to PPB and addressed to the superannuation fund investors, which, amongst other things, made clear that their commercial objectives included "[a]ssumption of the management rights for Ashington Development Fund 1 & 2"); the email from Mr Block on 15 October 2009 to superannuation fund investors reporting that "senior representatives of the Alter family & Acorn family" saw "no value in retaining Ashington and any 'deal' would incorporate the effective and cost efficient removal of existing management"; and the subsequent 21 October 2009 joint letter from Albany and Acorn repeating that their commercial objectives included "[t]he assumption of the fund and property management rights for ADF2". Reference is also made to the 21 October 2009 meeting between Mr Block and Ms Chan of Sunsuper in which it was conveyed to her that the "Alters and Acorn Capital" were "[i]interested in [the Ashington] platform and assets" and wanted "a transfer of management".
21. As adverted to above, PPB emphasises that there is no evidence that PPB knew, at this time, of any credible offer, other than the proposal which eventually became the Parissen Proposal, to recapitalise the Stonington Trust, whether by way of mezzanine finance or by way of equity; nor is there any evidence that PPB knew of any of the conduct of Mr Carolan and Mr Doherty of Patersons of which the plaintiff complains (by which they allegedly diverted opportunities to complete the Stonington Capital Raising in the terms set out in the Patersons Mandate).
22. It is noted that, during this same period, Investec was seeking confirmation of a plan for ensuring that the Investec Stonington Facility would be repaid within a fixed and certain timeframe (PPB referring to the 9 September 2009 email from Investec indicating an intention to appoint receivers to Ashington Capital as trustee for ADF2 that afternoon; and the offer put by PPB on behalf of the superannuation fund investors to Investec on 11 September 2009 of a $1 million fee, payable in priority to the investors out of the equity returned from the Project X Trust, as consideration for a standstill by Investec). PPB says that, even if the 11 September 2009 offer caused Investec to proceed more slowly in its decision-making, that was far from an act of altruistic forbearance. Reference is also made to the communications in late September 2009 and early October 2009 between Mr de Rooy and Ms Garrett as to Investec's anxiety about the progress of the refinancing from which PPB says that it is plain that Investec was, throughout October 2009, exerting considerable pressure on the Ashington entities to produce a concrete plan for repayment of the Investec Stonington Facility. PPB notes that Investec's own internal documents, particularly the email dated 19 October 2009 from Mr de Rooy to his superiors, suggest that Investec's Credit Group was seeking to have a decision on enforcement made by mid-October 2009.
23. PPB says that there is no reason to think that Mr Lord and Mr Block were not acutely aware of the pressure thus being exerted by Investec. Thus, it is said that PPB should be taken as understanding that, in circumstances where Investec was pressing for a repayment plan within a compressed timeframe, the superannuation fund investors with whom Ms Garrett and Mr Renauf were dealing were all insisting upon the removal and replacement of the Ashington entities as the trustee and manager of, at the very least, ADF2. Reference is made to the Third PPB Report which indicates PPB's knowledge of the position of new investors (issued on 18 November 2009), namely that "investor appetite was initially strong, although the majority of that interest was in the form of preferred equity, rather than subordinated debt; and the parties (with the exception of Wingate…) approached were aware of the management and solvency difficulties at Ashington and in order to contribute capital, would require a formal divorce of the trustee and manager".
24. PPB says that, insofar as it was concerned, as at 6 October 2009 and thereafter, there were only two options available to its clients (the superannuation fund investors): either to acquiesce in the taking of enforcement action by Investec or to pursue a transaction with incoming investors which would necessarily involve the cessation of the Ashington companies' role in the management of ADF2. It is said that, in PPB's eyes, based on the understanding recorded in Mr Block's 6 October 2009 email, there was no possibility of recapitalising ADF2 or the Stonington Trust without the replacement of Ashington Capital and Ashington Management as trustee and manager respectively; and, as far as PPB knew, this was consistent with the wishes of the superannuation fund investors.
25. It is in this context that PPB says that the 6 October 2009 ("need to start thinking about CVs") email to Mr Renauf, copied to Ms Garrett and Mr Lord, must be understood (see above). It is said that, far from exhorting Ms Garrett to "steal" her employer's business, Mr Block was plainly here encouraging her to consider ways in which she might continue to have a role in the management of ADF and ADF2 after the incoming investors (whom he understood as requiring the removal of the Ashington entities as trustee and manager) had committed their capital to the funds.
26. As to the 8 October 2009 email from Mr Routley to Mr Swan, referring to a decision to terminate Ashington as manager and responsible entity, PPB says that, in circumstances where PPB and representatives had discussed the replacement of the Ashington entities as trustee and manager of ADF and ADF2, and one of those discussions had been recorded as focusing on the "need to change trustee", it is by no means obvious that the contents of the draft slide and of the 8 October 2009 email reflected lies told by Ms Garrett and Mr Renauf. PPB argues that, if they did not, then that is almost certainly fatal to the plaintiff's case because, on that hypothesis, Ms Garrett and Mr Renauf were not attempting to steal from Ashington Capital and Ashington Management a business that those entities had a realistic prospect of being permitted to continue operating; instead, Ms Garrett and Mr Renauf were seeking to identify, and hoping to be employed by, a suitable replacement for a trustee which, on their understanding, the investors were already in favour of replacing. In any event, PPB says that even if those documents did reflect lies told by Ms Garrett and Mr Renauf, there is no evidence that anyone within PPB: played a part, or even knew of, the preparation or contents of the draft slide; or had engaged in direct communications with Mr Routley on or before 8 October 2009. Thus, it is said that, if lies had indeed been told to Mr Routley, the evidence does not establish that PPB knew of this.
27. Further, PPB says that if Mr Block genuinely understood that the potential investors had insisted upon the removal of the Ashington entities from their roles in the management of ADF and ADF2 (as per the 6 October 2009 email), then that is inconsistent with any suggestion that PPB had knowledge of lies being told to those potential investors concerning the attitude of the superannuation fund investors.
28. Thus, PPB says that, to the extent that the lies allegedly told by Ms Garrett and Mr Renauf to the existing and potential investors are said to constitute an element of the dishonest and fraudulent design that they pursued in breach of their fiduciary obligations, the evidence does not support the conclusion that PPB had any knowledge of that element.
29. PPB says that there is no basis for concluding that Mr Block's understanding changed after the 9 October 2009 meeting between Ms Garrett, Mr Renauf, representatives of PPB and the superannuation fund investors. Insofar as the written update dated 12 October 2009 provided by Mr Dedes to the Board of Military Super, included the statement that "… if they [Ms Garrett and Mr Renauf] were successful [in raising equity to recapitalise Double Bay] they would require the restructuring of the Fund and the replacement of Ashington as trustee and manager", PPB says that this was consistent with PPB's understanding that the potential investors required the removal of Ashington.
30. Furthermore, it is said that it is unsurprising, in the circumstances, that Ms Garrett and Mr Renauf would have conveyed to the superannuation fund investors that, as a requirement for new capital to be injected, the Ashington entities would have to be replaced, and that Ms Garrett and Mr Renauf would be given some management role in relation to real property assets of the funds.
31. Therefore, PPB contends that it did not have knowledge, to the requisite degree, of facts suggesting the pursuit of a dishonest and fraudulent design by Ms Garrett and Mr Renauf. Rather, PPB submits that it understood Ms Garrett and Mr Renauf to be acting in response to the attitude towards the management of Ashington taken by potential investors, in circumstances where those potential investors represented the only realistic option for recapitalising ADF2. It is said that, in PPB's eyes, Ms Garrett and Mr Renauf were acting in the interests of the superannuation fund investors.
32. PPB also submits that there is a firm basis for inferring that the contents of Mr Steel's 3 October 2009 (skeletons in the closet) email (although not apparently forwarded to anyone at PPB) were shared by Ms Garrett with either Mr Block or Mr Lord. In particular, PPB points to the fact that the First and Second PPB Reports issued on 14 and 21 August 2009 respectively, contained an overview of the ADF2 sub-trust assets, including the Noosa Property, but did not include any mention of the $20 million Valad fee; whereas, by 16 October 2009 (in answer to requests for information from Mr Routley), Mr Block circulated to Acorn and Albany a document outlining what PPB understood to be the key issues affecting ADF and ADF2, which included reference to the Valad fee (and its quantum) and to "other serious breaches of the Trustee's obligations and responsibilities". Reference is also made to the handwritten note dated 23 October 2009 made by Mr Hastings of HESTA in which he records that "Ashington behaviour is a concern. PPB have been made aware of some questionable activities (liabilities etc …)".
33. PPB submits that it should be inferred from this that: PPB first became aware of the Valad fee sometime between 21 August 2009 and 16 October 2009; it became aware of that fee in the course of discussions between representatives of PPB and Ms Garrett; and Ms Garrett further disclosed Mr Steel's allegations of wrongdoing against Mr Anderson. The first of those inferences is to my mind inescapable (unless there is some basis for thinking that the First and Second PPB Reports were incomplete and there is no reason to think that this is an equally available inference) and it seems most likely that PPB learnt of the fee through Ms Garrett (since there is no suggestion that there was discussion by Mr Steel of that issue with PPB and his email communication to Ms Garrett appears to be a confidential one addressed privately to her). How much Ms Garrett conveyed at the time is, however, a matter of speculation.
34. As to the reliance placed by the plaintiff on PPB's omission to disclose to Mr Anderson, during the course of October and November 2009, that steps were being taken to effect the replacement of Ashington Capital and Ashington Management as trustee and manager, respectively, PPB says that mere failure to disclose a course of conduct to the principal of the allegedly errant fiduciary does not establish knowledge of a dishonest and fraudulent design (referring, by way of example, to Consul Development where the alleged accessory's failure to disclose matters to the errant fiduciary's principal was not taken as suggesting knowledge of guilt, in the sense of dishonesty).
35. PPB contends that if it had come to know, through Ms Garrett, of the allegations of wrongdoing levelled against Mr Anderson by Mr Steel (suggesting that Mr Anderson went to some lengths to advance his interests over those of the superannuation fund investors), then there is an ample basis to infer that, if there was a failure to disclose matters to Mr Anderson, this was motivated by a desire to protect against further wrongdoing at the expense of the superannuation fund investors. It is said that in hindsight this would have proved to be well-founded given that, after being told of Albany and Acorn's Proposal, Mr Anderson proceeded to sign the Wingate Proposal without consulting the superannuation fund investors - in circumstances where PPB says that that proposal was likely to lead to the investors suffering a loss of $7.4 million. (As with the similar submission made by Ms Garrett and Mr Renauf, I have some difficulty with the proposition that if there was a wrongful failure to disclose it was somehow justifiable by reference to a perception or belief of misconduct on Mr Anderson's part, but ultimately nothing turns on this.)
36. PPB says that, contrary to the plaintiff's assertions of PPB having some concealed interest in the Parissen Proposal, PPB did not acquire an equity or other interest in Parissen; nor did it assume any of the trustee or management functions surrendered by the Ashington companies. PPB accepts that there are documents where it was contemplated that PPB might have a role in the transaction beyond merely advising the superannuation fund investors (referring to the 6 October 2009 email to Mr Carson where Mr Block envisaged that any Newco that replaced Ashington might "have a range of equity investors including the new mgt team, PPB, the major investor and perhaps existing investors"). However, PPB argues that the fact that Mr Block proposed to more senior PPB personnel an equity interest for PPB in any replacement trustee or manager is of no relevance (particularly because there is no evidence that PPB ever took such an equity interest in Parissen; nor is there any evidence to suggest some direct or indirect interest in ADF or ADF2). Similarly, while in the draft "Go Forward" slide that Ms Garrett prepared on 4 October 2009 reference was made to the notion that Ms Garrett and Mr Renauf should be "the replacement key personnel in the new Corporate Trustee with back office support from PPB", it is noted that there was no suggestion in the proposal that was eventually put by Albany and Acorn that PPB would provide any such back office support. PPB also accepts that, on 14 November 2009, Mr Ko did raise for discussion with Mr Block and Mr Lord the possibility that PPB might assume the role of trustee and manager in respect of ADF. However, it notes that, as events transpired, PPB did not take on either role. In any event, it is said that the idea that PPB assume those roles did not originate within PPB.
37. PPB says that it follows that these instances do not detract from the proposition that, at all times, PPB relevantly acted with the best interests of the superannuation fund investors in mind. As adverted to above, it is said that this is amply borne out by the fact that in the course of negotiating with Albany and Acorn, PPB was "so vigilant" in protecting and advancing the interests of the superannuation fund investors (or "sufficiently unco-operative") that the proposed recapitalisation of the fund almost did not proceed, pointing to the 21-23 October 2009 communications (see above) to the effect that the superannuation fund investors not be required to contribute more than the uncalled capital in ADF2 (following which Acorn and Albany were required to revise their initial proposals and considered abandoning the transaction altogether).
38. As to the suggestion by the plaintiff that PPB misled the superannuation fund investors in its Amended Third PPB Report dated 25 November 2009 (see the plaintiff's closing submissions at [142]-[143]) by incorrectly referring to an earlier version of the Wingate Proposal and failing sufficiently to draw attention to the fact that the Parissen Proposal contemplated that the value of their existing unitholdings in the fund be written down to nil, PPB says that such an allegation is not pleaded. It is noted that none of the subparagraphs of [279] purports to plead an allegation that PPB misled the superannuation fund investors (and PPB notes that, had they done so, r 15.3 of the UCPR would have required that any such allegation be properly particularised).
39. As to the criticism by the plaintiff that PPB failed to analyse the "improved" Wingate Proposal (referring to inter alia the increase in funding from $9 million to $11 million and the deferral of the establishment fee of $300,0000) that would have enabled Ashington to fully repay the Investec Stonington Facility, PPB notes that it was provided with this offer on 23 November 2009, two days before it issued the Amended Third PPB Report. PPB says that its error in this respect is immaterial.
40. First, it is noted that PPB's report was issued with some urgency, referring to the statement in the report as to the "clear and imminent risk" of a further deterioration in the solvency position of ADF and ADF2 as a consequence of potentially capricious behaviour of the manager (i.e., by the signing of the Wingate Proposal). PPB says that there is no basis to think that PPB was anything other than genuine when it wrote this statement; and that it was accurate. PPB says that, despite its plainly unattractive terms, Mr Anderson signed the Wingate Proposal in an attempt to maintain control of ADF and ADF2 and to "shut out" any alternative proposal sought to be pursued by Ms Garrett. Thus, PPB says that there can be no suggestion of PPB manufacturing a false sense of urgency.
41. In any event, PPB says that the meagre "improvements" in Wingate's offer were unlikely to make it more attractive to investors than the Parissen Proposal, such as to cause them to reverse their position on the decision they were on the cusp of making (after much discontent), to remove Ashington Capital as trustee and Ashington Management as manager. PPB says that the Wingate Proposal was incapable of completion (see below) but in any event the "improvements" did not materially address the "significant issues" identified by PPB with the first Wingate offer, namely: the conditions precedent (of the sale of Lot 3 and the restructure of the Stables sale); that the provision of a senior debt and construction facility was highly doubtful; the penal return (42% compounding); and the assumed land value ($47 million) at commencement of the deal.
42. PPB says that an interest rate of 38% is still a penal interest rate; and that the reference to the assumed land value is to a point made earlier in the report that a more recent valuation of the Stonington Property had been obtained of $34 million, noting that Ashington was in the process of obtaining a valuation of $43 million. PPB says that each of these figures would have increased the loan-to-valuation ratio and affected the prospects of obtaining bank finance. PPB accepts that an advance of $11 million would have enabled the Investec Stonington Facility to be paid off, but says that it remained the case that Wingate would receive an astonishing return on its investment even on its revised term sheet, resulting in a $7.4 million loss to investors.
43. As to the suggestion that the writing off of the investment was not sufficiently disclosed, PPB says, first, that even if PPB had misled the superannuation fund investors any such misleading conduct would not prove knowledge of a dishonest and fraudulent design on the part of Ms Garrett and Mr Renauf unless it were accompanied by evidence that it was part of a coordinated scheme, to which each of Ms Garrett, Mr Renauf and PPB were party, to "steal" the business of the Ashington entities by deceiving the superannuation fund investors; and PPB notes that the plaintiff has neither pleaded nor proved such a scheme. Second, PPB says that the allegation is false. Insofar as it is suggested that, even though the indicative term sheet annexed to the Amended Third PPB Report dated 25 November 2009 identified at Item 7 that the "[a]ggregate pre-money valuation for ADF2 is assumed to be zero", the executive summary at the front of PPB's report did not adequately make this clear, PPB says that proposition does not support a conclusion that PPB misled the superannuation fund investors. It is noted that Mr Warden's covering email invited the recipients of his email to attend a conference call later that day to discuss the report. PPB says that it can be expected that Mr Warden would have gone through the indicative term sheet for the proposal which PPB was endorsing. In any event, it is noted that the body of Amended Third PPB Report, at part 4.2, said the following of the Parissen Proposal: Equity will be contributed on the basis of $14 mln (Parissen) / $6 mln (existing). Parissen have agreed that any profit share will be made on the same economic basis - i.e. 70%/30%, respectively. Should further funds be required or significant contingents be discovered, then this would most likely dilute existing equity holders, should Parissen contribute their additional capital. We understand that existing investors would be able to participate in any additional capital raising.
44. It is said that PPB thus put the superannuation fund investors on notice, both in the body of the report and in the indicative term sheet annexed to it, that any profit share as between Parissen and those investors would be determined by reference to their future contributions of capital, and by implication that previous contributions of capital would not count towards determining the proportions in which possible profits might be shared. PPB says that any reasonable person in the position of the superannuation fund investors would have understood that there would have been no return on their existing equity holdings, and therefore that those holdings were being assumed to be, or would be rendered, devoid of value. (It is noted that this was in circumstances where the superannuation fund investors themselves regarded those existing interests as having lost much, if not almost all, of their initial value as a consequence of mismanagement by the Ashington entities.)
45. Thus, PPB submits that the (unpleaded) assertion that PPB misled the superannuation fund investors (an allegation of serious wrongdoing) should not now be entertained, and if entertained, should not be accepted.
46. Pausing here, I agree that there is no pleaded allegation of the misleading by PPB of superannuation fund investors and that a serious allegation of this kind should have been pleaded and properly particularised. In any event, for the reasons put forward by PPB, it is not made good.
47. PPB says that the only relevant knowledge the plaintiff alleges (in the plaintiff's closing submissions at [186]) that PPB had was: that Ms Garrett and Mr Renauf were employees of, and fiduciaries owing duties to, Ashington; that they stood to obtain employment with the replacement trustee and manager; and that the Parissen Proposal was to be kept secret from the directors of Ashington. PPB says that, if proven, such knowledge would at most indicate to an honest and reasonable person that Ms Garrett and Mr Renauf might have been in breach of their fiduciary duties to Ashington. It is said that a closer examination of the facts and circumstances known to PPB, reveals that PPB did not know of circumstances which would indicate to an honest and reasonable person that Ms Garrett and Mr Renauf were engaged in a dishonest and fraudulent design (which is what is required for PPB to be liable for knowing assistance in their alleged breach of duty).

Determination

1. Again, this claim does not arise on the conclusions that I have already made as to fiduciary obligations. However, had it arisen, the question whether PPB had the requisite knowledge (within at least the fourth of the Baden Delvaux categories) is somewhat problematic.
2. PPB certainly knew that Ms Garrett and Mr Renauf were employees within the Ashington group. However, the difficulty with the proposition that PPB was on notice of the facts and circumstances that would indicate to an honest and reasonable person a breach of fiduciary duty (even assuming that the facts and circumstances known to it were sufficient to indicate that fiduciary duties were owing - noting that all employees owe fiduciary duties and PPB can have little more than job descriptions to base any such conclusion) is that, looking at the matter from PPB's perspective based on what was known to it at the time, the facts and circumstances are to my mind equally consistent with Ms Garrett and Mr Renauf seeking to assist Ashington (with its knowledge) to arrange finance on whatever basis was available, ecognizing that that might result in the replacement of the trustee or manager and that Ms Garrett and Mr Renauf might be interested in subsequent employment in that context.
3. Category three knowledge is wilfully and recklessly failing to make such enquiries as an honest and reasonable person would make
4. Has PPB recklessly failed to enquire with Mr Minahan/Mr Anderson that they are content with their senior employees pursuing a plan to remove Ashington from the trustee and management businesses given the facts PPB had?
5. There is some difficulty with the proposition that PPB might have had the perspective that Ms Garrett and Mr Renauf were pursuing the Parissen Proposal with Ashington's authority. The overall chronology of events suggests that PPB understood that Mr Anderson/Mr Minahan were not informed and were not to be informed of the proposal for removal.
6. It is telling that it is not until 27 November that Mr Lord (of PPB) speaks to Anderson about removing Ashington as trustee and manager and the Parissen Proposal, when PPB have known about this plan for almost two months, in circumstances where Mr Block and Mr Lord have lines of communication open with Mr Anderson on different topics (i.e., Hamton, creditors, seeking updates).
7. The putative knowing assistant needs not to know is a fiduciary in the legal sense. It would be sufficient to know that the person owes obligations to the principal (as many lay people would not know what a fiduciary is; but can feasibly be a knowing assistant).
8. Mr Gavin noted in an email to HESTA on 16 October 2009: Jonathan & I spoke to Peter Block late this morning. We don't have a problem with PPB supplying the information to the Alter family and Acorn Capital to allow them to make a decision, on the basis that HESTA aren't pre-agreeing to whatever Alters & Acorn have in mind. Peter said PPB already have the majority of the information, and we just need to get the rest of the info. off Ashington, which shouldn't be a problem, as Craig Anderson is still delusional and still thinks this is a plan to keep his fund (and his business) going.
9. Pausing here, what the plaintiff asserts is category for knowledge but I accept that Ms Garrett and Mr Renauf were involved in a dishonest design. The question is whether PPB had the requisite knowledge of facts and circumstances that would indicate this to an honest and reasonable person (or for category three the knowledge willfully and recklessly failed to make enquiries that an honet and reasonable person would make).
10. I have had no little hesitation on this issue but ultimately, having regard to the state of PPB's knowledge illuminated by the 6 October 2009 email I would have concluded that the knowing assistance claim was not made good.

Knowing assistance claim against Acorn - Ms Garrett and Mr Renauf's/Patersons' breaches of fiduciary duties

1. The knowing assistance claim against Acorn is pleaded at [291]-[298], and in particular [297], of the third further amended statement of claim. It is alleged that Acorn knowingly assisted serious breaches of fiduciary duties by Ms Garrett, Mr Renauf and Patersons which amounted to a dishonest and fraudulent design to take the business of Ashington Capital and Ashington Management for the benefit of Ms Garrett, Mr Renauf, Patersons, PPB, Acorn and Albany.
2. Acorn denies the allegations against it and has pleaded, in answer to the whole of the plaintiff's claim, that: (a) various circumstances demonstrate that by 30 September 2009 Ashington did not own and operate a valuable business ([64] repeating the defences of Patersons at [64], PPB at [34] and [35] and Albany at [64]); (b) Ashington Capital and Ashington Management were verging on (if not) insolvent by mid-to-late 2009 ([64] repeating the defence of Albany at [64]); (c) by no later than 30 September 2009, the superannuation fund investors had lost trust and confidence in Ashington Capital as trustee and Ashington Management as manager of ADF and ADF2 and were open to the removal of Ashington Capital as trustee ([180]); (d) Ashington Capital and Ashington Management have not suffered any loss, having elected voluntarily to retire as trustee and cease acting as manager respectively ([304]); and (e) Ashington Capital, Ashington Management and the plaintiff do not have clean hands ([305]).
3. The plaintiff denies the allegation of unclean hands and asserts that there is no immediate and necessary connection between the matters contained in the allegations of unclean hands and the equity claimed by the plaintiff. (I agree that there is a disconnect between the allegations of unclean hands and the equitable claim made by the plaintiff and would not find for Acorn on this ground.)
4. Acorn also pleads that: it would not have stood to benefit had the alleged Consortium's objective been achieved; and that in all of its dealings with the various parties it was entitled to make the assumptions contained in ss 128 and 129 of the Corporations Act (see Acorn's defence at [291(d)], [291A(c)], [297AA]). Acorn maintains that it did not have any of the requisite knowledge of the alleged dishonest and fraudulent design; and that there was nothing unconscionable about Acorn's involvement in pursuing an entirely legitimate business transaction together with Albany, which principally occurred through their dealings with PPB acting for the superannuation fund investors.
5. Acorn's knowledge is pleaded at [291]-[298] of the third further amended statement of claim and particularised in the Knowledge Particulars. Acorn holds the plaintiff to the pleading of knowing assistance (as pleaded and particularised), particularly given the very serious allegations made against Acorn (referring to Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70 at 664). It is said that this is of particular importance, given the plaintiff's apparent departure from some aspects of the pleaded case in the plaintiff's closing submissions (see below). (However, for completeness, I note that where there is no departure during the trial from the pleaded cause of action. a disconformity between the evidence and particulars earlier furnished will not disentitle a party to a verdict based upon the evidence. Particulars may be amended after the evidence in a trial has closed (Mummery v Irvings Pty Ltd (20)), though a failure to amend particulars to accord precisely with the facts which have emerged in the course of evidence does not necessarily preclude a plaintiff from seeking a verdict on the cause of action alleged in reliance upon the facts actually established by the evidence (Leotta v Public Transport Commission (NSW) (21)).

Plaintiff's submissions

1. The plaintiff says that the liability of Acorn arises through the knowledge and actions of Mr Routley, noting that, on Acorn's own documents, Acorn and Albany together made up the "Consortium" and that Parissen was a joint venture between the two entities. (Pausing here, it should be noted that there is a disparity in nomenclature between the Consortium alleged in the pleading and that as defined in the joint Acorn/Albany offer.)
2. The plaintiff says that Mr Ko and Mr Routley were working closely together (with Ms Garrett and Mr Renauf) on their plan to replace Ashington, from which it is said that it should be inferred that Mr Ko and Mr Routley shared the same knowledge in respect of Ms Garrett and Mr Renauf's breaches of fiduciary duty. Not surprisingly, Acorn cavils with the drawing of such an inference and it does appear to me to be problematic to assume that simply because Mr Ko and Mr Routley were jointly working on the proposal, the knowledge of one would automatically be imputed to the other.
3. The plaintiff contends that Mr Routley's knowledge (that Ms Garrett and Mr Renauf owed fiduciary duties to Ashington but were acting in breach of those duties) is said to be demonstrated to the requisite standard by the following: the inference that is said to be available that Mr Routley had a discussion with Ms Garrett prior to the 5 October 2009 meeting (where Ms Garrett discussed the "Go Forward" proposal); Mr Routley's attendance at the 5 October 2009 meeting (where it is said that Ms Garrett presented the Stonington PowerPoint on Ashington letterhead which referred to "new recruits, Nicki Garrett and Sam Renauf" and "key personnel recently recruited and endorsed by PPB"); the 12 October 2009 email from Mr Routley to Mr Ko attaching a draft joint "Letter of Intent", which stated that the intention of the "Consortium" was to retain Ms Garrett and Mr Renauf's services "together with other selected Ashington personnel" (which the plaintiff says shows that Mr Routley knew that Ms Garrett and Mr Renauf were "Ashington personnel"); the 19 October 2009 email from Ms Garrett to Mr Ko (copied to Mr Renauf) with proposed employment terms which noted the current Ashington terms for Ms Garrett and Renauf and that they were offered 5% equity in Ashington "when they made the decision to join the company"; and the 20 October 2009 email from Ms Garrett to Mr Ko, Mr Routley and Mr Tremaine responding to "three queries [they] had with respect to the Stonington sales contracts", attaching a six-page document on Ashington letterhead.
4. As noted above, the plaintiff points out that Mr Routley did not give evidence (although an affidavit of his had been served) and that no explanation was offered as to why he did not. The plaintiff submits that it should be inferred that Mr Routley could not have given evidence that would have assisted Acorn's case (that is, that he could not have denied knowing that Ms Garrett and Mr Renauf were employed by Ashington). (If that be the limit of the Jones v Dunkel inference sought then it would take the matter no further, since it is evident on the documents that Mr Routley understood that Ms Garrett and Mr Renauf were employed within the Ashington group.)
5. As to Acorn's "assistance", it is said that Mr Routley was involved in planning and executing the proposed transaction with Mr Ko to a significant degree. In this regard, the plaintiff refers to communications in the period from 16 October 2009 (when Mr Routley confirmed to Mr Block an intention to replace Ashington as manager, requesting a large volume of due diligence material, and PPB's response thereto); the process on 20 and 21 October 2009 of jointly drafting and updating the 21 October 2009 Letter of Intent to PPB; the further update of this letter on 22 October 2009; and the apparent attendance of Mr Routley on a conference call on 4 November 2009 (together with Mr Ko and Ms Garrett) to discuss the preconditions for the deal proceeding and how to present matters to, and manage, PPB.
6. The plaintiff says that, although it appears that it was Mr Ko (of Albany) who largely drafted the presentation to PPB and the superannuation funds investors to be given on 6 November 2009, Mr Ko sent each draft to Mr Routley for comment; and it is noted that in the period from 10 November 2009, Mr Ko and Mr Routley sent each other various documents they were preparing in relation to the deal, including a terms sheet (from Mr Ko to Mr Routley), a due diligence questionnaire (from Mr Routley to Mr Ko) and an organisation structure for Parissen (from Mr Ko to Mr Routley).
7. The plaintiff says that, by the above, Acorn assisted Ms Garrett and Mr Renauf to breach their fiduciary duties owed to Ashington, assisting them to realise the plan to replace Ashington by taking them up on their proposal to pursue a plan to replace Ashington, making the formal offer to do so, and agreeing to have the replacement entities engage both Ms Garrett and Mr Renauf.

Acorn's submissions

1. Acorn adopts the closing submissions of Ms Garrett, Mr Renauf and Patersons to the effect that they were not fiduciaries and that, even if they were, they did not breach any fiduciary duties and did not engage in a dishonest and fraudulent design.
2. At the outset, as already noted, Acorn emphasises that the plaintiff must be held to the pleaded case. Acorn points out that in the plaintiff's closing submissions the plaintiff did not address the elements of "Garrett's plan", the formation of the alleged Consortium, or the elements of the alleged Consortium Objective (as pleaded). Rather, Acorn says that, in the plaintiff's closing submissions, the plaintiff has reduced the knowing assistance case against Acorn to one involving only three elements (at least, by 19 October 2009, when the "proposed package" email was sent by Ms Garrett to Mr Ko at 2pm), namely: knowledge that Ms Garrett and Mr Renauf were employees of Ashington; knowledge that Acorn and Albany were putting together a proposal to replace Ms Garrett's employment; and knowledge that the removal of Ashington as trustee and manager was contrary to the interests of Ashington. To the extent that the plaintiff has moved away from the pleaded case and now seeks to rely upon this new formulation of the fraudulent and dishonest plan, Acorn says that should not be permitted.
3. Acorn further submits that the plaintiff has not established any case of knowing assistance on the part of Acorn to the Briginshaw standard of proof.
4. Acorn notes that in closing submissions the plaintiff has relied on knowledge in the fourth Baden Delvaux category. Acorn says that the plaintiff has not established on the evidence that an honest and reasonable person in Mr Routley's position, with his knowledge of the circumstances, would have known that Acorn was part of a Consortium that had the Consortium Objective to enact Garrett's plan. It is said that, not only are these matters not established from the pleaded documents (either individually or cumulatively), as outlined below, but that the claim is misconceived at a more fundamental level.
5. Acorn emphasises that it only had very brief interactions with Ms Garrett and Mr Renauf before Acorn commenced dealing directly and primarily with PPB, and says that both PPB and Ms Garrett represented to Acorn that PPB was acting on behalf of the superannuation fund investors. It is said that, in dealing with PPB to design and implement an investment proposal suitable to the superannuation fund investors, Acorn was entitled to assume (pursuant to s 128 of the Corporations Act) that the officers of PPB with whom it interacted had authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer of a similar company (s 129(3)); and, more significantly, were properly performing those duties to the company (s 129(4)).
6. It is noted that, at all relevant times, Acorn and Albany's proposed investment in ADF and ADF2, communicated to both PPB and the superannuation fund investors, included an objective to assume the management rights for those funds. Acorn says that it is uncontroversial (and indeed part of the plaintiff's case), that Acorn was not disabused of that understanding by PPB or by the superannuation fund investors.
7. Furthermore, it is said that all relevant information about the proposed investment in the Ashington funds came to Acorn directly through PPB. Acorn says that, by providing that information to Acorn, PPB represented to Acorn that it had the relevant authority to do so. It is noted that the plaintiff has not pleaded (nor has it been outlined in the plaintiff's closing submissions) that Acorn relied in any material way on information which was provided to it directly from either Ms Garrett or Mr Renauf. Acorn says that it is not relevant to Acorn's case on this point whether PPB in fact had the relevant authority to provide information to Acorn (noting that it is not pleaded that Acorn knew or should have known the terms and scope of the PPB Mandate or the PPB Confidentiality Agreement). In any event, Acorn relies upon PPB's submissions to the effect that PPB did not breach either the PPB Mandate or the PPB Confidentiality Agreement.
8. Acorn says that there is no evidence that Acorn is not entitled to rely upon the statutory assumptions about PPB because Acorn knew or suspected the assumptions under s 129 were incorrect; and that, if it be accepted that Acorn was entitled to rely upon the statutory assumptions, then it is axiomatic that Acorn cannot be found, at the same time, to have been knowingly working with PPB (and others) to form a Consortium with the express purpose of effecting a fraudulent design or plan.
9. Further to the above submission (and as also identified in Albany's closing submissions - see below), Acorn says that the plaintiff's case is premised on the contention that PPB was in a legal relationship with Ashington; and Acorn relies on PPB's submissions that there is no basis for that contention.
10. Acorn also maintains that (distinct from any reliance upon assumptions under ss 128 and 129) it is significant that Acorn's primary dealings with PPB in pursuing the proposed investment in the Ashington funds had the "characteristics of a conventional commercial transaction" (pointing primarily to the role PPB played in those dealings). It is said that PPB, as an independent entity acting on behalf of the superannuation fund investors (with attendant obligations to the superannuation fund investors), dealing with Acorn and Albany in relation to the proposed investment necessarily ensured an independent and professional dimension to the parties' otherwise unremarkable commercial interactions.
11. Insofar as the plaintiff contends that Acorn knew that it was dealing with employees at Ashington "who were hoping to participate in the new management vehicle if the transaction occurred, and who were breaching obligations to their current employer to advance that prospect", Acorn says, first, that this description of what Acorn allegedly knew departs from the alleged fraudulent scheme (defined as Garrett's plan in the pleading) (and again insists that the plaintiff must be held to the pleaded case). Second, Acorn says that (as explained in Albany's closing submissions), the role that either Ms Garrett or Mr Renauf had in the proposed investment by Acorn and Albany was peripheral and non-determinative. Third, it is said that Acorn's dealings with PPB (and the primacy of them) about the proposed investment in the Ashington funds are logically inconsistent with Acorn actually working "with" Ms Garrett and Mr Renauf to pursue and enact the fraudulent and dishonest "Garrett's plan".
12. As to the second of those matters, it is said that execution of the proposed investment via the Parissen entity (coupled with the decision by both Albany and, in April 2010, Acorn to invest millions into that vehicle), was determined by commercial metrics; and was unconnected and uninfluenced by any of Ms Garrett, Mr Renauf or Patersons.
13. It is noted that the plaintiff's argument (in oral and written closing submissions) is that (before Acorn had even formulated its proposed investment with Albany and prepared the joint 14 October Letter), PPB and Ms Garrett had concocted a plan to communicate to Acorn and Albany that the superannuation fund investors had determined to remove Ashington as trustee and manager, and to tell the superannuation fund investors in turn that this was a condition of any recapitalisation proposal. Acorn emphasises that, whether or not that reflected the superannuation fund investors' actual intention at the time (which Acorn submits it does), this was the position presented to Acorn (and it notes that this understanding was reflected in the Swan Email of 8 October 2009 - see chronology). Acorn maintains that this is a salient contextual matter relevant to whether a reasonable and honest person in Acorn's position would have known that its otherwise unremarkable commercial dealings with PPB to pursue a proposal which included the removal of Ashington as trustee and manager actually (and known to Acorn) involved pursuing a fraudulent and dishonest scheme.
14. Acorn says that Ms Garrett had already announced an intention to "bluff Acorn" in advance of the 5 October 2009 meeting (see Ms Garrett's 4 October 2009 email at 8.54pm in the chronology); and submits that, if it was hoodwinked by Ms Garrett on this issue, then this is fatal to the plaintiff's knowing assistance case against Acorn.
15. Acorn also says that it is directly inconsistent with Acorn knowingly working with the Consortium to enact the Consortium Objective that key members of this alleged Consortium (namely Patersons, Ms Garrett and Mr Renauf) had no involvement in the development and structure of any "Newco". It is noted that there are no communications by those participants seeking to progress the structure of the Newco so that the Newco satisfied the elements of Garrett's plan. Acorn points out that work on the potential investment structure by Mr Ko and Mr Routley was done independently of Ms Garrett and Mr Renauf. It is said that there is no suggestion in the contemporaneous documents involving either Mr Ko or Mr Routley that they considered Ms Garrett was to be "the new fund manager" of the "Newco" (let alone any suggestion by Ms Garrett to them to that effect). (That said the structure originally prepared in the 14 October 2009 joint offer described the Management Team is described as "principally Nicola Garrett and Sam Renouf" with the Consortium, noting that "terms of employment" were to be approximately completed by 21 October 2009 and on 10 November 2009 at 10.04am, Mr Routley sent an email to Mr Ko, attaching an initial due diligence questionnaire "that ideally needs to be completed by [Ashington] and PPB". Mr Ko responded at 12.09pm attaching a proposed organisation chart for the new Parissen entity listing Ms Garrett under "Funds Management" and Mr Renauf and Mr Tremaine under "Development", all reporting to the Managing Director. Ms Garrett was also listed under "Finance Administration - Client Service/Reporting".
16. Acorn nevertheless submits that, if it were indeed Ms Garrett's plan to set up a Newco so that she could be the fund manager, Ms Garrett might be expected to have had some central role in that process or to be pursuing it with some vigour. In that regard, Acorn submits that it is very significant that, on around 22 and 23 October 2009 (when Mr Ko emailed PPB, Ms Garrett and Mr Renauf about concerns including whether they would be able to agree any investment structure suitable to the superannuation fund investors), neither Ms Garrett nor Mr Renauf put any pressure on Mr Ko or Mr Routley at any stage to change their minds. Acorn points to the 22 October 2009 10.41am email from Ms Garrett to Mr Ko (copying Mr Routley and Mr Renauf) in which Ms Garrett stated that "it may just feel all "too hard" … and with PPB and four separate asset consultants involved in this transaction it would be like herding cats from start to finish!". Acorn says that that is hardly the type of communication expected from the mastermind of the alleged fraudulent plan or design she was seeking to implement. (I accept the force of this submission, although of course the existence of a dishonest and fraudulent design does not depend on how well or how vigorously it is pursued - rather like conspiracies which may be successful or otherwise.)
17. Further, Acorn says that the elements of the so-called "Garrett's plan" are misconceived, the first element of the scheme being predicated on it being a false premise that the superannuation fund investors were investigating options to transfer key assets to a manager. Acorn emphasises that, by the end of August/early September 2009, the superannuation fund investors had lost such trust and confidence in Ashington as the trustee and manager of the Ashington funds as to have reached the view that they wanted them removed; further, it is said to be clear that the superannuation fund investors had retained PPB, amongst other things, to investigate all options including the removal of Ashington. It is said that if it be accepted that there is no false representation in the first element of Garrett's plan, then a key element of the alleged fraudulent and dishonest design falls away.
18. As to the second element of the Garrett's plan (that the "existing investors" would themselves "establish" a Newco), Acorn points out that there is no evidence that the superannuation fund investors themselves ever intended to establish a Newco.
19. Finally, as adverted to above, Acorn says that, if Ms Garrett and Mr Renauf were, during the period from October to November 2009, officers of either Ashington Management or Ashington Capital, then Acorn is entitled pursuant to s 128 of the Corporations Act to rely upon the assumptions in s 129 in its dealings with Ms Garrett and Mr Renauf in relation to Albany and Acorn's contemplated transaction. In this regard Acorn says that it is unnecessary whether a person dealing with a company under s 128 and who seeks to rely upon one or more of the assumptions in s 129, actually made the relevant assumption or assumptions; it is sufficient to accept that there was a relevant "dealing" with Ashington, through its officers, and that Acorn did not know or suspect that the assumptions in s 129(3) or (4) were incorrect. Acorn notes that s 128 has been held to extend to conduct of a person who purports to have, but does not have, authority to represent a company in a particular transaction (Australia and New Zealand Banking Group Ltd v Frenmast Pty Ltd (2013) 282 FLR 351; [2013] NSWCA 459 at [41]ff per Meagher JA (with whom Macfarlan and Barrett JJA). Acorn says that when Ms Garrett "dealt" with Acorn in early October 2009, it followed circumstances where on 25 September 2009 at 2.42pm Mr Minahan had emailed Mr Anderson, Ms Garrett, Mr Renauf and Mr Steel stating that Ms Garrett was to be the point of contact going forward and that "ALL investor/PPB communication is to be vetted by her and approved by her. Sam Renauf must be copied in on all correspondence"; and where Mr Anderson had sent a similar on 28 September 2009 at 8.44am. Acorn accepts that internal communications of that type were unknown to Acorn at the time but says that there can be no doubt that Ms Garrett had authority to take some step such that the "dealings" Acorn had with Ms Garrett and Mr Renauf are properly to be treated as one with the company. That said, the question is whether Acorn was on notice of Garrett's lack of authority; such that Acorn cannot rely on the assumptions in s 129 Macfarlan JA in Frenmast said at [1]: … the nature of the transaction was not such as to excite a reasonable apprehension [on the part of the bank] that the transaction [was] entered into for purposes apparently unrelated to the Company's business" (Northside Developments Pty Ltd v Registrar-General [1990] HCA 32 ; 170 CLR 146 at 160-161; Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd [2001] NSWSC 448 ; 38 ACSR 404 at [447]-[449]). As a result, the evidence here did not indicate that ANZ was on notice of Robert's lack of authority.

The pleaded case as to knowledge

1. The first matter pleaded (at [291(a)] of the third further amended statement of claim) is that Acorn at all material times knew that Ms Garrett and Mr Renauf were employees of Ashington Management in senior roles. The particulars of this allegation are addressed by Acorn as follows.
2. As to particular (i) (that many emails from Ms Garrett to Mr Routley were from the email address 'nicola.garrett@ashington.com'), Acorn says that in opening submissions, the plaintiff appears to have resiled from reliance on that fact. In any event, Acorn says that the use of an Ashington email address says nothing about whether Ms Garrett was an Ashington Management employee. (I agree except to note that such an email would surely indicate some kind of position within the organisation for there to be an Ashington email address.) Acorn says that even use of a Gmail address may mean nothing more than that a person is working from home. (I agree. Moreover, it is difficult to see much of a pattern or consistency in the source from which different emails were sent by Ms Garrett.) Acorn further says that there is no evidence that a reasonable person in Mr Routley's position would focus on, or take particular note of, a person's email address upon receipt of an email, noting that there are no emails where Mr Routley comments on the use of any email address by anyone. (Whether or not Mr Routley was a person who paid attention to email addresses is a moot point, since he gave no evidence in the proceeding; but I accept that there is nothing to indicate that he commented on the use of particular email addresses.)
3. As to particular (ii) (that Ms Garrett was contacted on Ashington's main telephone number and worked from an office at Ashington's premises), Acorn says that there is no evidence that Mr Routley contacted Ms Garrett using her Ashington number or visited Ms Garrett at Ashington's premises. It says that this particular is speculative and has no basis in fact.
4. As to particular (iii) (that Ms Garrett controlled the process on behalf of Ashington of amending the confidentiality undertaking as requested by Acorn and authorising access to the Stonington Data Room), Acorn appears to accept that this matter indicates that Ms Garrett had authorisation from Ashington to approve amendments to the confidentiality undertaking on Ashington's behalf and facilitate for Acorn to access the data room. However, it says that any such indication of authorisation is not inconsistent with Acorn's understanding of Ms Garrett's employment (as illustrated in the Swan Email) namely that "[t]he recapitalisation/rescue effort is being le[d] by Nicola Garrett who is ex Valad. She was due to start Wed/Thur last after 6 months of 'gardening' leave from Valad. PPB contacted her and let her know that Ashington was not going to retain [I assume] management rights for the funds and that she should work with them [PPB] to solve current funding issues and work out how to move forward. We believe that she is …known and endorsed by investors", along with the representations made in the Stonington PowerPoint on 5 October 2009 that Ms Garrett and Mr Renauf were "recently recruited and endorsed by PPB" and that "PPB are working with new recruits" (Ms Garrett and Mr Renauf). Acorn says that there is no basis to find that a reasonable person in Mr Routley's circumstances would adopt a different understanding of the matters he stated in the Swan Email and or understood from certain content in the Stonington PowerPoint.
5. As to particular (iv) (that Ms Garrett on behalf of Ashington arranged a site visit to Stonington on 12 October 2009) and Knowledge Particular [23(a)] (that on 14 October 2009 Ms Garrett arranged on behalf of Ashington a tour of the "Sydney assets"), it is noted that both an employee at Mallesons (Ms Morgan) and an employee at Ashington (Ms Briggs) were copied into the email of 11 October 2009 at 6.34pm which Garrett sent about that Sydney asset tour. Acorn says that there is no evidence that this knowledge caused Ms Briggs any concern, and in fact Ms Briggs' evidence is that it was "possible" that it did not. In those circumstances, Acorn says that organising a site visit of Ashington assets was consistent with both the Swan Email and certain content in the Stonington PowerPoint, along with simply pursuing a legitimate commercial investment.
6. As to particular (v) (Ms Garrett's email of 11 October 2009 at 6.34pm to Mr Ko and Mr Carolan, Ms Briggs, Mr Routley, Mr Renauf and Ms Morgan confirming she would be able to deliver to Mr Ko copies of Ashington documents that Mr Ko requested in his email of 10 October 2009 at 7.52am to Ms Garrett, Mr Carolan and Ms Briggs (copying Mr Routley) and that she could deliver access to the Ashington properties in Sydney), Acorn says that, without more, this communication is also consistent with both the Swan Email and certain content in the Stonington PowerPoint.
7. As to particular (vi) (Ms Garrett's email of 19 October 2009 at 2pm to Mr Ko, copied to Mr Renauf and forwarded to Mr Routley at 3.12pm which refers to Ms Garrett and Mr Renauf having been offered 5% each of equity in Ashington when they made the decision to join the company), Acorn says that, again, this is consistent with both the Swan Email and the Stonington PowerPoint. Acorn says that it is uncontroversial, from the matters outlined in the Swan Email and the Stonington PowerPoint, that the facts communicated to Acorn presupposed that some formal employment relationship with Ashington was going to, but did not, proceed. Acorn says that the content of this email is easily explicable as being a reference to the salary Ms Garrett and Mr Renauf had been promised by Ashington but never received because they did not take up their positions. That said, the business email address indicates some form of employment relationship and the email also states: "Nicki and Sam currently have a base salary of $350k per annum and would anticipate that this wold continue under the Alter/Acorn structure".
8. As to particular (vi) (Ms Garrett's email of 20 October 2009 at 2.57pm to Mr Routley and others which attached a document on Ashington's letterhead), Acorn says that this is not inconsistent with the facts outlined in the Swan Email and certain content in the Stonington PowerPoint. That said, arguably it is inconsistent with a belief that Ms Garrett was involved only as an assistant to PPB rather than an employee of Ashington to receive an email from an Ashington email address with a document on Ashington letterhead.
9. As to Knowledge Particular [23(b)] (Mr Routley's email on 12 October 2009 at 11.08pm to Mr Ko attaching a draft letter to the superannuation fund investors referring to the "intention of the Consortium to enter into negotiations with Nicola and Sam with a view to retaining their services going forward together with other selected Ashington personnel"), on which the plaintiff places reliance as evidencing Mr Routley's knowledge of Ms Garrett and Mr Renauf's employment position because of the use of the word "other" which it is said informs the characterisation of Ms Garrett and Mr Renauf as "Ashington personnel", Acorn responds as follows (broadly speaking approaching each particular as a standalone item but, as I understand it contending that individually or collectively the requiste knowledge element is not made good).
10. Acorn says, first, that Mr Routley was not a lawyer and should not be held to the exacting drafting standards of a lawyer in a draft letter pitching an initial approach for an investment proposal. Reference is made in this context to what was said in Phillipson v Indus Realty Pty Ltd (2004) 8 VR 446; [2004] VSCA 61 at [16], by Chernov JA, when considering the meaning of a term used by a layman, to the effect that more weight might have been given to a submission based on the wording of a document "if the additional words were selected by a lawyer, particularly one experienced in conveyancing" but that there the words were chosen by a layman, and his Honour doubted that much thought was given by the parties to the sort of matters to which counsel had referred in submissions. Similarly, reference is made to Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673, where Kirby P, as his Honour then was, said (at 678) that "it is a mistake, in a letter apparently drawn by a layman, to adopt an approach of a close analysis of the terms of every word".
11. Second, Acorn says that it is of some relevance that this wording was used in a draft document and was not used in the final version of the letter. Acorn points out that the disappearance of the expression "other Ashington personnel" in the final version of the 14 October Letter is consistent with Mr Routley ensuring that it aligned with what he had been told about Ms Garrett and Mr Renauf as recorded in the Swan Email and certain content in the Stonington PowerPoint (which is that they had been due to commence at Ashington but had not).
12. Third, and in any event, Acorn says that if one were to resort to dictionary definitions, an ordinary meaning of the word "other" (there referring to the definition in the Shorter Oxford English Dictionary) is to distinguish between things. It is said that the reference to "other selected Ashington personnel" might be to distinguish Ms Garrett and Mr Renauf in the sense that they are not Ashington personnel (a meaning said to be consistent with the Swan Email, which presupposed some formal employment relationship with Ashington which did not proceed as intended). Pausing here, in context, I have difficulty reading this phrase as meaning other than that Ms Garrett and Mr Renauf were there being referred to as Ashington personnel (since if that were not the case, I consider that the word "other" would be redundant).
13. As to Knowledge Particular [23(c)] (Mr Ko's email of 8 November 2009 at 9:34pm to Ms Garrett and Mr Renauf by which he attached a memorandum proposing a consultancy arrangement and requested Ms Garrett and Mr Renauf to give consideration to resigning from Ashington as soon as practicable), from which the plaintiff says that it can be inferred that Mr Routley was aware of and approved the proposal, Acorn says that there is no evidence that Acorn received this document or otherwise provided approval to Mr Ko.
14. By way of conclusion on the pleading of knowledge at [291(a)] of the third further amended statement of claim, Acorn says that, in assessing what an honest and reasonable person in Mr Routley's position would have understood about Ms Garrett and Mr Renauf's employment situation, primary regard should be given to the characterisation represented to Acorn about Ms Garrett and Mr Renauf's employment relationship with Ashington and PPB by Garrett and PPB in the Stonington PowerPoint (as outlined above). Of equal significance, it is said, is Acorn's understanding of the information presented to it as articulated in the Swan Email. Both documents, when read together, do not establish facts that would be understood by an honest and reasonable person as demonstrating that Ms Garrett and Mr Renauf held senior roles at Ashington Management. Furthermore, it is noted that none of the matters particularised by the plaintiff indicates anything about whether Ms Garrett and Mr Renauf were employed by Ashington Capital or Ashington Management.
15. The second matter pleaded (at [291(b)]) is that Acorn at all material times knew that Patersons had entered into the Patersons Mandate with the Ashington Group with respect to the Stonington Capital Raising; and the third matter pleaded (at [291(c)]) is that Acorn at all material times knew that the Patersons Mandate was concerned only with the Stonington Capital Raising. The plaintiff relies on two particulars: particular (i), Mr Doherty's email of 30 September 2009 at 10.44am to Mr Routley to which he attached the Patersons Stonington Term Sheet; and particular (ii), Mr Sheehan's email dated 7 October 2009 at 10.01am to Mr Carolan, Mr Routley and Mr Ko attaching a marked-up version of the confidentiality undertaking.
16. Acorn says that the Patersons Stonington Term Sheet indicates to an honest and reasonable person in Mr Routley's position that Patersons may have some form of mandate to raise funds for the Stonington Project on behalf of Ashington. However, it says that while that might invite a reasonable person in Mr Routley's position to speculate about the scope of the Patersons Mandate, it provides no basis for a finding of knowledge about the content and extent of any mandate for the purposes of the claim for knowing assistance under Barnes v Addy. Moreover, Acorn says that it is uncontroversial that immediately after being provided with the Patersons Stonington Term Sheet, Mr Routley advised Mr Doherty that Acorn would not be interested in investing in Stonington on the terms sought in the Patersons Stonington Term Sheet (i.e., a mezzanine debt investment). Acorn says that the subsequent communications on 30 September 2009 from Mr Doherty gave no indication that any Patersons Mandate with Ashington did not extend to negotiating other ways of raising finance for ADF and ADF2 or the Stonington Project. It is said that the scope of the "Purpose" in the confidentiality undertaking does not change that position.
17. As to Knowledge Particular [24(a)] (that the Stonington PowerPoint was entitled "Stonington Project Investment Opportunity" and stated that "[t]his presentation sets out an investment opportunity pertaining to the Stonington Project in ADF2"), Acorn says that nothing in this particular alters the above conclusion in relation to knowledge of the Patersons Mandate and its scope.
18. The fourth matter pleaded (at [291(d)] of the third further amended statement of claim) is that Acorn at all material times knew of Garrett's plan and knew that Garrett's plan was to transfer the assets of Ashington to a new manager, that Ms Garrett and Mr Renauf would be the new fund managers and that Acorn and the Pacific Group of companies would likely be incoming investors.
19. As to particular (i) (that Mr Routley's emails on 30 September 2009 to Mr Doherty made it clear that Acorn would only invest in the manager or not at all, so that Mr Routley knew when meeting with Ms Garrett and Mr Doherty on 5 October 2009 that the meeting would address Acorn's requirement of investing into the manager), Acorn says that this particular says nothing whatsoever about Acorn's knowledge of Garrett's plan. It is said that, even if it be assumed that Acorn was presented with any of the contents of the Stonington PowerPoint at this meeting, the Stonington PowerPoint stated that Ms Garrett and Mr Renauf were "recruited and endorsed by PPB", indicating (it is said) that Ms Garrett and Mr Renauf were, or were shortly to commence, working with PPB. Acorn maintains that the Swan Email confirms this. It is said that, either way, nothing in the Stonington PowerPoint (if it had been communicated to Mr Routley) would enable an honest and reasonable person in Mr Routley's position to know of Garrett's plan.
20. As to particular (ii) (that Ms Garrett's email of 2 October 2009 at 12.48pm to Mr Carolan and her email of 2 October 2009 at 3.45pm to Mr Doherty and Mr Carolan made it clear that the purpose of the meeting with Mr Routley was to discuss the opportunity for an incoming investor to replace Ashington as manager using a Newco), Acorn says that there is no basis in the evidence for imputing knowledge of the contents of these emails to Mr Routley. It is said that Mr Routley's meeting with Ms Garrett was very short. Acorn notes that Mr Doherty's evidence of this meeting was that "Nicky spoke about the deal" (which Acorn says is so ambiguous that it is purely speculative as to what this means) but, significantly, that "Nicky ran through the deal" after leaving Mr Routley and meeting with Mr Ko. It is noted that Mr Doherty does not give evidence that any specifics about the deal were communicated at this meeting by Ms Garrett to Mr Routley. Acorn says that the best evidence as to what was Mr Routley's understanding of "the deal" following the meeting on 5 October 2009 is the Swan Email.
21. As to particular (iii) (that Mr Ko's email of 7 October 2009 at 9.12am to Ms Garrett, Mr Carolan and that Mr Routley said that he (Mr Ko) and Mr Routley were working together), again, Acorn says that this email indicates nothing about knowledge of Garrett's plan.
22. As to particular (iv) (that the 14 October 2009 letter stated one of the commercial objectives to be the assumption of management rights for ADF and ADF2 and the proposed management team included Ms Garrett and Mr Renauf), again, Acorn says that this document does not provide a proper basis to support a finding of actual knowledge or knowledge of circumstances which would indicate Garrett's plan to a reasonable person in Mr Routley's position. To the contrary, it is said that the document indicates that Albany and Acorn were together dealing with PPB to present an investment proposal of their own.
23. As to particular (v) (that Mr Routley's email of 16 October 2009 at 11.45am to PPB confirmed the interest of Mr Ko, Mr Routley and Mr Tremaine to replace Ashington as the manager of ADF and ADF2 and to invest their capital to replace/refinance the Investec Stonington Facility), again, Acorn says this document does not establish any knowledge of Garrett's plan.
24. As to particular (vi) (which refers to Mr Block's email of 21 October 2009 at 6.22pm to Mr Ko and Mr Routley without pointing to any particular feature of it), Acorn says that this document does not establish any knowledge of Garrett's plan.
25. As to particular (vii) (that the 21 October 2009 letter proposed: the assumption of management rights of ADF and ADF2 in favour of the Consortium, as defined in the 21 October 2009 letter, to the detriment of Ashington; the management team would include Ms Garrett and Mr Renauf; and the equity interest of ADFIT and Ashington as unitholders in ADF2 would be taken by the Consortium), Acorn says that, whether the 21 October 2009 letter does convey those representations says nothing about whether Mr Routley, or a reasonable person in Mr Routley's position, knew of Garrett's plan. Further, it is said that the premise that this investment proposal was necessarily "to the detriment of Ashington" is misconceived. Acorn says that Ashington's financial position was dire and that a retirement on reasonable terms may well have been Ashington's best option at that time.
26. As to particular (viii) (that the 22 October 2009 letter proposed a "staged solution" involving the injection of new preferred equity from the Consortium and the superannuation fund investors (i.e., the unitholders excluding Ashington and ADFIT), implicitly assumed that the Consortium would replace Ashington as manager and implicitly involved a write off of the investment of Ashington and ADFIT in the funds), Acorn says that this letter indicates nothing other than a conventional step in an ordinary commercial business negotiation on a proposal that Acorn was pursuing.
27. As to particular (ix) (that Mr Ko's email of 5 November 2009 at 6.50pm to Mr Routley and others attaching a presentation to the superannuation fund investors proposed the removal of Ashington from trustee and management roles across ADF and ADF2 trusts, the introduction of Parissen, being a joint venture between the Alter family and Acorn as new trustee and manager, and that Parissen invite Ms Garrett and Mr Renauf to join the team), Acorn accepts that this is correct but says that it does not provide a proper basis to support a finding of knowledge of circumstances which would indicate Garrett's plan to a reasonable person in Mr Routley's position. Again, it is submitted that this presentation represents a conventional step in an ordinary commercial business negotiation. Acorn says that it is unremarkable that Acorn and Albany had no interest in working with Ashington given the superannuation fund investors' decision to remove Ashington (as confirmed in the Swan Email) and their due diligence into the Ashington funds.
28. As to Knowledge Particular [25(a)] (that Ms Garrett's email of 2 October 2009 at 12.48pm to Mr Carolan, and her email of 2 October 2009 at 3.45pm to Mr Doherty and Mr Carolan, make it clear that the purpose of the meeting with Mr Routley on 5 October 2009 was to discuss the opportunity for an incoming investor to replace Ashington as manager using a Newco), Acorn says that there is no basis for imputing knowledge of these emails to Mr Routley and so contends that this particular should be rejected. (Pausing here the evidence appears to be relied on as evidence of what was discussed in the meeting, not as evidence of an email sent to Mr Routley or somehow capable of being imputed to him though I consider it not very strong evidence of what was discussed.
29. As to Knowledge Particular [25(b)] (the Swan Email, and Mr Routley's reference in that email to a component of the investment opportunity being a "proportionate interest in newco manager"), Acorn says that there is no basis to infer that an honest and reasonable person would have knowledge of Garrett's plan based on the contents of that email.
30. As to Knowledge Particular [25(c)] (the attendance of Mr Routley at the meeting of superannuation fund investors on 6 November 2009 and the content of the presentation) and Knowledge Particular [25(d)] (the provision of a term sheet by Albany and Acorn to PPB which stated as one of its objectives the removal of Ashington from the Ashington funds), Acorn says that the provision of a term sheet is a necessary incident in most commercial ventures. Acorn submits that neither of those documents establishes knowledge of the elements of Garrett's plan or otherwise alter the complexion of the above particulars.
31. In conclusion as to the knowledge alleged at [291(d)] of the third further amended statement of claim, Acorn says that the plaintiff's pleaded case (that Acorn at all material times knew of Garrett's plan) involves no more than piecemeal speculation. It is said that none of the matters particularised, either individually or cumulatively, establishes that Acorn had knowledge of each of the key elements of Garrett's plan, as pleaded by the plaintiff. (In this regard, it is said that it is not sufficient for the plaintiff to establish one or two elements of the five pleaded elements of "Garrett's plan".) Acorn says that, to accept otherwise, would be impermissibly to convert what were otherwise unremarkable commercial negotiations into knowledge of a dishonest and fraudulent design.
32. The fifth matter pleaded (at [291(e)] of the third further amended statement of claim) is that Acorn at all material times knew that Garrett's plan was not directed to the Stonington Capital Raising and therefore outside the Patersons Mandate.
33. As to particular (i) (Mr Routley's emails dated 30 September 2009 to Mr Doherty, Ms Garrett's email of 2 October 2009 to Mr Carolan, and Ms Garrett's email of 2 October 2009 to Mr Doherty and Mr Carolan - see particulars (i) and (ii) of [291(d)] above), Acorn repeats its submissions in respect of [291(d)] (i) and (ii) and says that they do not, separately or together, provide a proper basis to support a finding that a reasonable person in Mr Routley's position would have known of Garrett's plan and therefore cannot be a proper basis for a finding that Garrett's plan was not directed to the Stonington Capital Raising and therefore outside the Patersons Mandate.
34. As to particular (ii) (the 14 October 2009 letter, which is the same as particular (iv) to [291(d)] above), Acorn makes the same submission. As to Knowledge Particulars [26(f) and (g)] (the 21 October 2009 letter and the 22 October 2009 letter), again, for the reasons earlier identified, Acorn says that those documents also do not assist the plaintiff.
35. As to particulars (iii) and (iv) (being references to Mr Routley's public examination on 12 November 2013), Acorn says that the plaintiff cannot rely upon those particulars as this transcript is not in evidence.
36. As to Knowledge Particular [26(a)] (that Mr Routley met with Mr Renauf, Ms Garrett and Mr Doherty on 5 October and did so to discuss "Garrett's plan"), Knowledge Particular [26(b)] (Mr Ko's email on 7 October 2009 in which Mr Ko says that Acorn and Albany are "working together"), Knowedge Particular (c) (the Swan Email), Knowedge Particular (d) (a duplicate of Particular (ii), above); Knowedge Particular (e) (Mr Block's email dated 21 October 2009 at 6.22pm in which he seeks a revised proposal from Mr Ko and Mr Routley); Knowedge Particular (h) (Mr Ko's email on 5 November 2009 at 6.50pm which attached the superannuation fund investors' presentation, and the fact of Mr Routley's attendance at that presentation on 6 November 2009); and Knowedge Particular (i) (the provision of the Acorn and Albany term sheet), Acorn says that none of those matters establishes that a reasonable person in Mr Routley's position would have known of Garrett's plan, or that Garrett's plan was not directed to the Stonington Capital Raising and therefore outside the Patersons Mandate.
37. In conclusion as to the knowledge pleaded at [291(e)] of the third further amended statement of claim, Acorn says that the deficiency with this pleading is that it presupposes that the plaintiff has established that Acorn had knowledge of both Garrett's plan and the Patersons Mandate, along with their relationship with each other. Acorn says that the plaintiff has not established these matters and that none of the documents particularised in support of this element of knowledge alters, or improves, that position.
38. The sixth matter pleaded (at [291(f)] of the third further amended statement of claim) is that Acorn at all material times knew that Garrett's plan was contrary to the interests of the Ashington companies as a group, but would benefit Acorn and Ms Garrett and Mr Renauf personally to the detriment of the Ashington companies if the Consortium Objective was achieved.
39. As to particulars (i), (ii), (iii), (iv), (v) (the 14 October 2009 letter, Mr Block's email of 21 October 2009 at 6.22pm to Mr Ko and Mr Routley, the 21 October 2009 letter, the 22 October 2009 letter, and Mr Ko's email of 5 November 2009 at 6.50pm to Mr Routley and the presentation that was delivered to the superannuation fund investors on 6 November 2009); and Knowedge Particular [27(b)] (which refers to Mr Routley's attendance at that presentation on 6 November 2009), Acorn repeats its above submissions on these documents and says that they do not provide a proper basis to support a finding of knowledge of circumstances which would indicate Garrett's plan to a reasonable person in Mr Routley's position. Nor, it says, do these documents establish knowledge of being a participant in a Consortium which included Ms Garrett, Mr Renauf, PPB, Patersons, Albany and Acorn. Further, it is said that these documents do not establish knowledge that Acorn was acting with that Consortium for the purpose of obtaining access to confidential information of Ashington in order to pursue and implement Garrett's plan. In addition, as submitted above, Acorn does not accept that Acorn's work with Albany to pursue an investment proposal suitable to the superannuation fund investors was detrimental to Ashington in the manner pleaded.
40. As to particular (vi) (Mr Ko's email of 10 November 2009 at 9.35am to Mr Sheehan, copying Ms Garrett, Mr Routley and others, raising questions regarding the removal of Ashington as manager and as a unitholder), Acorn says that this document does not establish knowledge of Garrett's plan (let alone of participating in a Consortium in order to pursue the Consortium Objective).
41. As to particular (vii) (Mr Ko's email of 14 November 2009 at 9.53am to Mr Routley and others which proposed that PPB should take responsibility as trustee and manager of ADF), Acorn says that this email does not prove knowledge of circumstances to a reasonable person in the position of Mr Routley that Garrett's plan was detrimental to Ashington and beneficial to Acorn, Ms Garrett and Mr Renauf.
42. As to Knowedge Particular [27(a)] (the Swan Email), Acorn says that this email represents Acorn's understanding of the potential investment as at 8 October 2009 (and indeed Acorn places some weight on this document). Knowedge Particular [27(c)] is the provision of a term sheet by Albany and Acorn to PPB which had as one of its objectives the removal of Ashington from the Ashington Funds. Acorn says that neither of these documents establishes knowledge of the matters pleaded in [291(f)].
43. In conclusion as to the knowledge pleaded in [291(f)] of the third further amended statement of claim, Acorn says that this pleading is again premised on assumptions that have not been proved. Acorn says that there is no basis for finding that a reasonable person in Mr Routley's position would have known of Garrett's plan, but, even if that person did, that such a person would have known that Garrett's plan was detrimental to the interests of the Ashington companies.
44. It is submitted that, given the dire financial straits in which Ashington found itself and the fiduciary obligations Ashington had towards the superannuation fund investors, including the duty to act in the superannuation fund investors' best interests, it should not lightly be found that anyone in Acorn's position with Acorn's knowledge would have appreciated that the investment proposals it was preparing for the superannuation fund investors' consideration, at the behest of PPB, were "detrimental" to Ashington. Further, Acorn says that the superannuation fund investors had, before the time Acorn was approached by Patersons and commenced working with PPB, lost such trust and confidence in Ashington as a trustee and manager of the Ashington Funds to have effectively decided to remove them.
45. The seventh matter pleaded (at [291(g)] of the third further amended statement of claim) is that Acorn at all material times knew of the formation of the Consortium, of which it was a member. The plaintiff defines the Consortium as comprising Ms Garrett, Mr Renauf, PPB (Mr Lord and Mr Block), Patersons (Mr Doherty and Mr Carolan), Albany (Mr Ko) and Acorn (Mr Routley).
46. Acorn emphasises that the Consortium is alleged to have been formed by 7 October 2009 but that the Swan Email (8 October 2009) was forwarded by Mr Routley to Mr Ko only on 9 October 2009. It is said to be telling that it was not sent to Ms Garrett at all (which Acorn says indicates that Mr Routley considered Ms Garrett's key role at that time to be on the other side of the proposed transaction - working with PPB in advising the superannuation fund investors on it).
47. As to particular (i) (that Mr Ko's email of 7 October 2009 at 9.12am to Ms Garrett, Mr Carolan and Mr Routley said that Mr Ko and Mr Routley were working together), Acorn says that this self-evidently shows that Acorn and Albany were working together, but it does not provide any knowledge of circumstances to a reasonable person in Mr Routley's position that any other party was also working together with Mr Ko and Mr Routley.
48. As to particular (ii) (the 14 October 2009 letter which refers to Acorn and Albany as the "Consortium", there defined as "'Acorn Capital' and together with ACI [Albany], the 'Consortium'"), Acorn says that that definition of Consortium does not refer to or include any of the other alleged persons pleaded as part of the Consortium. Acorn says that this document does not establish knowledge of the formation of the pleaded Consortium. It is said that reference to Ms Garrett and Mr Renauf as part of a proposed management team does not in this letter elevate them to become members of a wider alleged Consortium (let alone "the Fund Manager" of the proposed Newco as per Garrett's plan). Further, it is said that the fact that the letter was addressed to the superannuation fund investors care of PPB, indicates that PPB was in fact on the other side of the proposed transaction rather than part of some Consortium. Finally, Acorn points out that there is no reference at all to Patersons.
49. As to particular (iii) (Mr Routley's email of 16 October 2009 at 11.45am to Mr Block, Mr Lord and Mr Warden, copied to Mr Ko and Mr Sheehan, which referred to their meeting on 14 October 2009 regarding replacing Ashington as the manager of ADF and ADF2 and investing their capital to replace/refinance the Investec Stonington Facility), Acorn notes that this email does not refer to working with Ms Garrett or Mr Renauf, and the reference to "we" in this document plainly refers to Acorn and Albany. Further, it is said that the document also demonstrates PPB was on the other side of the negotiation of the proposal.
50. As to particular (iv) (the 21 October 2009 letter which refers to Albany and Acorn as the "Consortium", which again, as with the 14 October Letter, only extends to Acorn and Albany and not beyond them), it is noted that PPB is the recipient acting for the superannuation fund investors and Patersons is not mentioned.
51. As to particular (v) (Ms Garrett's email of 22 October 2009 at 10.41am to Mr Ko, copying Mr Routley and Mr Renauf, responding to Mr Ko's email of 22 October 2009 at 9.02am with the draft response to PPB stating, amongst other things, that Ms Garrett was not sure if the deal works for Acorn or Albany with the superannuation fund investors providing half the required capital and the "Consortium" providing the other half and "it may just feel all "too hard" … and with PPB and four separate asset consultants involved in this transaction it would be like herding cats from start to finish!"), Acorn says that it is self-evident that the "Consortium" reference in this email is to Acorn and Albany only because no other party was proposed to provide capital. Moreover, it is submitted that this email is the antithesis of a Consortium that included Ms Garrett, operating with the "express purpose" of obtaining confidential information from Ashington in order to pursue and implement Garrett's plan; instead, Acorn says that it is tantamount to an encouragement by Ms Garrett for Mr Ko and Mr Routley not to proceed. (This correspondence is more indicative of PPB being on the "other side' of the Consortium than the 14 october 2009 letter (see particular ii) as it implies the Consortium also needs to persuade PPB.)
52. As to particular (vi) (the 22 October 2009 letter which also refers to Albany and Acorn as the "Consortium" but contains no reference to Ms Garrett or Mr Renauf), Acorn says that this letter does not establish knowledge of the alleged Consortium. It notes that, again, PPB is on the other side of the proposed transaction and there is no mention of Patersons.
53. As to particular (vii) (Mr Ko's email of 5 November 2009 at 6.50pm to Mr Routley and others attaching a presentation to the superannuation fund investors), Acorn accepts that this does refer to Parissen as being a joint venture between the Alter family and Acorn and a proposal to ask Ms Garrett and Mr Renauf to join the team. However, Acorn says that does not establish those parties were part of the alleged Consortium, and notes that not all members of the alleged Consortium were included.
54. In conclusion as to the knowledge pleaded at [291(g)] of the third further amended statement of claim, Acorn says that there is no factual basis to find that Acorn at all material times knew of the alleged Consortium.
55. The eighth matter pleaded (at [291(h)] of the third further amended statement of claim) is that Acorn at all material times knew the Consortium Objective. The plaintiff defines the Consortium Objective as the formation of a Consortium with the express purpose of obtaining access to confidential information of Ashington Capital and Ashington Management in respect of all of its projects in order to pursue and implement Garrett's plan with the ultimate objective of taking Ashington's business away from Ashington for the benefit of the Consortium.
56. Acorn notes that all of the particulars alleged to support the eighth matter comprise documents already used in support of Acorn's alleged knowledge of other matters: particular (i) is Mr Ko's email of 7 October 2009 at 9.12am to Ms Garrett, Mr Carolan and Mr Routley; particular (ii) is Mr Routley's email of 16 October 2009 at 11.45am to Mr Block, Mr Lord and Mr Warden (copied to Mr Ko and Mr Sheehan); particular (iii) is the 21 October 2009 letter; particular (iv) is the 22 October 2009 letter; and particular (v) is Mr Ko's email of 5 November 2009 at 6.50pm to Mr Routley and others attaching a presentation to the superannuation fund investors.
57. Acorn says that none of these matters taken separately or cumulatively establishes knowledge that an alleged Consortium existed (and less still that a Consortium Objective had been formed and promulgated).
58. Acorn notes that the plaintiff has not pleaded that the superannuation fund investors could not authorise PPB to provide information to Acorn in relation to its proposed investment. It is said that obtaining information from PPB, the representative of the superannuation fund investors, as part of an investigation into a proposed investment is unremarkable.
59. The ninth matter pleaded (at [291(i)] of the third further amended statement of claim) is that Acorn at all material times knew that Acorn had no interest in the Stonington Capital Raising but was only interested in investing in the manager or assuming ownership and control of the trustee and management roles of ADFand ADF2.
60. Acorn notes that most of the documents which are referred to in these particulars form particulars in support of allegations concerning Acorn's knowledge of other matters.
61. As to the knowledge pleaded at [291(i)] of the third further amended statement of claim, Acorn says that Acorn had no interest in the Stonington Capital Raising. It is said to be uncontroversial that Acorn was not interested in a mezzanine debt investment, and Mr Routley communicated this to Mr Doherty when he was first contacted about Stonington on 30 September 2009. Acorn says that the terms of the Swan Email indicate that Acorn was initially investigating an investment opportunity in relation to the Stonington Project. The Swan Email identified the "Investment Proposition" as having "two components", the first of which was "Stonington Trust Mezzanine" debt refinancing, involving a potential capital commitment of around $5 million for Acorn. Acorn says that that potential investment was consistent with Acorn accessing the Stonington Data Room, pursuant to the confidentiality undertaking, which provided that the purpose of the data room was to "enable [Acorn] to evaluate, consider and negotiate a transaction in relation to the Property". Acorn emphasises that providing funds for Stonington was always part of the investment proposals put forward by Acorn and Albany as evidenced in the 14 October 2009 letter, the 21 October 2009 letter, the 22 October 2009 letter and the 6 November 2009 presentation.
62. In relation to whether Acorn was only interested in investing in the manager or assuming ownership and control of the trustee and management roles of ADF and ADF2, Acorn says that whilst it is also uncontroversial that the nature of the investment that Acorn was exploring with Albany from the outset involved these options, it is clear from the Swan Email that the initial investment proposition was broader than the plaintiff's pleading.
63. The tenth matter pleaded (at [291(j)] of the third further amended statement of claim) is that Acorn at all material times knew that when it accessed the Stonington Data Room it did so for the advancement of the Consortium Objective and that Ms Garrett, Mr Renauf and Patersons were aware of this.
64. As to particular (i) this refers to Mr Routley's emails dated 30 September 2009 to Mr Doherty such that it is said that when Acorn accessed the Stonington Data Room it did so pursuant to its interest in investing in the manager and not in respect of the transaction within the meaning of the confidentiality undertaking and it did so on this basis to the knowledge of Ms Garrett, Mr Renauf and Patersons. Knowledge Particular [29(a)] refers to Mr Garrett's emails on 2 October 2009 at 12.48pm to Mr Carolan, and at 3.45pm to Mr Carolan and Mr Doherty that make it clear that the purpose of the meeting with Mr Routley was to discuss the opportunity for an incoming investor to replace Ashington as manager using a Newco. Knowledge Particular [29(b)] is that Mr Routley met with Ms Garrett, Mr Renauf and Mr Doherty on 5 October 2009 with the purpose set out in Knowledge Particular [29(a)]. Knowledge Particular [29(c)] is Mr Ko's email to Ms Garrett, Mr Carolan and Mr Routley dated 7 October 2009 at 9.12am in which Mr Ko said that he and Mr Routley were working together. Knowedge Particular [29(d)] is the Swan Email.
65. In conclusion Acorn says that these particulars do not establish that Acorn at all material times knew when it accessed the Stonington Data Room that it did so for the advancement of the Consortium Objective and that Ms Garrett, Mr Renauf and Patersons were aware of this. Acorn says its access to the Stonington Data Room was consistent with Acorn's understanding of the potential investment in early October 2009. Further, Acorn says that only one substantive document was accessed by Acorn in the Stonington Data Room on 10 October 2009 (and that the plaintiff has not led any evidence, or even articulated in the plaintiff's closing submissions what this document was).
66. The eleventh matter pleaded (at [291(k)] of the third further amended statement of claim) is that Acorn at all material times knew that Garrett's plan and the Consortium Objective needed to be kept confidential and secret from the Ashington companies.
67. Particular (i) refers to Mr Block's email of 16 October 2009 at 5.51pm attaching the Key Issues paper. The plaintiff says it was implicit that the content of this document needed to be kept secret and confidential. Acorn notes that this document provides an overview of PPB's investigations thus far into Ashington. Acorn says that it identifies a number of breaches of Ashington Capital's obligations at both the head trust and sub-trust levels. Acorn says that the fact that PPB was reporting to potential investors in the ADF and ADF2 about the matters discovered about the management of those funds is unremarkable and consistent with ordinary commercial practice; and that this document does not establish the furtherance of any dishonest and fraudulent plan. Moreover, it is said that there is nothing in this document or the evidence that shows any positive steps taken by Acorn to keep this document secret.
68. Particular (ii) refers to the 21 October 2009 letter. Acorn says that this document was not sent with any indicia of secrecy, noting that: the letter was delivered to PPB on behalf of the superannuation fund investors; it proposed working co-operatively with the superannuation fund investors' "advisors", which is said to be plainly inconsistent with any intention of secrecy; there is no obvious indicia of confidentiality, such as a confidential stamp or proviso; and the fact the document is prepared and sent is itself an indication that Acorn did not consider the contents confidential and secret.
69. Particular (iii) refers to the 22 October 2009 letter. Acorn says that many of the submissions above apply equally to the 22 October 2009 letter. Further, it says that the fact that this letter is sent to the same recipients the day after the 21 October 2009 letter indicates that the invitation to discuss the 21 October 2009 letter with the various advisers extended to the 22 October 2009 letter.
70. Particular (iv) refers to Mr Ko's email of 5 November 2009 at 6.50pm to Mr Routley and others attaching a presentation to the superannuation fund investors, excluding Ashington, that was delivered on 6 November 2009, and Mr Routley's attendance at that presentation. It is noted that the presentation was made to a wide group of the superannuation fund investors and their advisers. Acorn submits that this presentation does not establish knowledge of Garrett's plan and the Consortium Objective. Moreover, it is said that these particulars do not establish any positive steps taken by Acorn to keep information secret from Ashington.
71. Particular (v) refers to Mr Ko's email of 10 November 2009 at 9.35am to Mr Sheehan, copying Ms Garrett, Mr Routley and others, raising questions regarding the removal of Ashington as manager which it is suggested was implicitly intended to be kept secret and confidential between the Consortium members. Acorn notes that this document deals with the consideration of the necessary steps to implement any investment proposal ultimately approved by the superannuation fund investors. It says that such consideration was in the circumstances unremarkable; and that it does not provide any evidence of knowledge about pursuing the Consortium Objective to enact Garrett's plan. Acorn says that again this particular does not establish any positive steps taken by Acorn to keep information secret from Ashington.
72. Particular (vi) refers to Mr Routley's email dated 10 November 2009 at 5.37pm to Mr Ko, Ms Garrett, Mr Renauf, Mr Sheehan and Mr Tremaine which advised everyone that he had just "organised a dataroom" and would "upload data and send invites", implicitly to Consortium members only. Again, Acorn says that this document does not provide any evidence of knowledge about pursuing the Consortium Objective to enact Garrett's plan. Acorn says that it does not establish working with the Consortium - key members of that alleged Consortium were not included in the email; and that this email represents nothing more than preparatory steps taken in relation to a proposed investment. Significantly, Acorn says this document does not establish any positive steps taken by Acorn to keep information secret from Ashington.
73. Particular (vii) refers to Mr Ko's email dated 14 November 2009 at 9.53am to Mr Routley, Mr Sheehan, Mr Renauf, Ms Garrett and Mr Tremaine forwarding an email he sent to Mr Block and Mr Lord which proposed that PPB should take responsibility as trustee and manager of ADF which by its content was implicitly intended to be kept secret and confidential between the Consortium members. Acorn says, again, that this does not demonstrate knowledge of the Consortium, knowledge of being a member of that Consortium, or knowledge of pursuing the Consortium Objective to enact Garrett's plan. In any event, Acorn says that this particular does not establish any positive steps taken by Acorn to keep information secret from Ashington.
74. Knowledge Particular [30(a)] refers to the Swan Email, and Knowledge Particular [30(b)] refers to Mr Ko's email dated 15 October 2009 sent at 10.16pm to Mr Routley, which included a one page document with a list of bullet points, including "termination of management agreement", under which it was further noted "commercial negotiation, Court dissolution, receivership", which by its content was implicitly intended to be kept secret and confidential to the Consortium members.
75. Acorn says that both documents identified issues with a potential investment into Ashington and constitute unremarkable commercial documents. It is said that there is no basis to infer from these documents the knowing participation by a reasonable person in Acorn's position in a fraudulent and dishonest plan or any step taken by Acorn to keep such a plan secret from Ashington.
76. Knowledge Particular [30(d)] is the provision of a term sheet by Albany and Acorn to PPB. Acorn makes similar submissions in relation to this document.
77. In conclusion as to the knowledge pleaded at [291(k)] of the third further amended statement of claim, Acorn says that the pleading relies upon the plaintiff having established knowledge of Garrett's plan and the Consortium Objective and hence cannot be established; but that, even if that were not the case, none of the matters as particularised shows any positive step taken by Acorn to keep any dishonest and fraudulent plan secret from Ashington.

Imputed knowledge

1. Acorn notes that, in the plaintiff's closing submissions, there is an assertion that Albany and Acorn were working together as joint venturers; and the plaintiff invites the inference that, since Mr Ko and Mr Routley were "working closely together", they shared the same knowledge in respect of Ms Garrett and Mr Renauf's breaches of fiduciary duty. It is noted that the plaintiff does not attempt to explain why any purported joint venture relationship between Acorn and Albany should be treated akin to an agency relationship (Acorn pointing out that the plaintiff has not sought to argue that anything less than an agency agreement gives rise to a basis to impute knowledge as between the parties). Acorn's complaint in this regard is that no agency relationship between Acorn and Albany has been pleaded against Acorn.
2. Acorn says that a joint venture relationship is legally and factually distinct from an agency relationship for the following two reasons.
3. First, it says that a joint venture relationship is not, without more, an agency relationship; and that whether joint venturers are found to be agents for one another will turn on an objective analysis of the facts. It is noted that there is not a fixed meaning to the notion of a "joint venture" relationship at common law, although it is conventionally used to refer to an association between persons for the purpose of a single undertaking for mutual commercial gain. Acorn emphasises that a joint venture does not necessarily require its participants to assume fiduciary obligations to one another.
4. Second, Acorn says that an agency relationship is a fiduciary one that arises where the parties mutually consent for the agent to act on behalf of, and under the control and direction of, the principal in respect of a defined matter; and that the agent also has the authority to affect the principal's legal relations with third parties. Acorn notes that the onus lies on the party submitting agency to demonstrate the existence and terms of that agency. Moreover, Acorn says that even if it were to be accepted that an agency relationship existed between Acorn and Albany (which is denied), the law only imputes to a principal knowledge gained by its agent in the course of, and which is material to, a transaction in which the agent is employed on behalf of the principal under such circumstances that it is the duty of the agent to communicate it to the principal. It is noted that a matter is material if a reasonable agent would consider it material in the ordinary course of business.
5. Acorn notes that in its opening submissions Acorn specifically raised that a claim of imputed knowledge had not been pleaded. Following this, in the Knowledge Particulars the plaintiff alleged that "through regular discussions with Ko concerning the proposed replacement of Ashington as manager and trustee of ADF and ADF2, Routley had the same knowledge as Ko in respect of matters set out at paragraphs 283(a)-(d), (f)-(h)". Acorn says that this Knowledge Particular is in different terms to how the position is now put by the plaintiff in her closing submissions.
6. Having regard to the said Knowledge Particular, Acorn says it has assumed that no agency relationship was actually pleaded by the plaintiff because the plaintiff accepts that no such allegation could be maintained but in any event, Acorn says that the case as put in the Knowledge Particulars is deficient.
7. Acorn says that the plaintiff does not establish the factual basis upon which it can be inferred that the facts, matters or circumstances in the particulars to each of paragraphs 283-(d), (f)-(h) were "discussed" with Mr Routley, and Acorn maintains that nothing in the plaintiff's closing submissions establishes this. Complaint is made that the plaintiff does not identify with any particularity the specific emails or communications it says in 283-(d), (f)-(h) were discussed; and Acorn says that there is no factual basis for this pleading. For example, Acorn says that there is no evidence about regular phone calls between Mr Ko and Mr Routley. Acorn points to the communication of information about the potential investment as evidenced by the forwarding of emails. Acorn says that there is no factual basis upon which it can be inferred that any emails into which Mr Routley was not copied, and which were not ultimately sent to Mr Routley by Mr Ko, were otherwise "discussed" with Mr Routley.
8. Finally, Acorn says that there is a real question whether imputed knowledge in the manner pleaded by the plaintiff is sufficient for the purposes of the second limb of Barnes v Addy because the underlying purpose of the legal principles for attaching liability to those who knowingly assist in a dishonest and fraudulent design is because their behaviour is unconscionable. Acorn submits that there must be something that affects Acorn's conscience directly, not vicariously through some notion of imputed knowledge.

Assistance

1. As to the element of "assistance", Acorn submits that a significant and distinguishing matter in the present case is that at all times the superannuation fund investors had a right to remove and replace Ashington as trustee of the Ashington funds, and that the superannuation fund investors had appointed PPB to assist the superannuation fund investors critically to review and assess the Ashington funds, which encompassed the consideration of options including the effective restructuring of the current trustee arrangements and the removal of the trustee. It is said that this could and did occur independently of any actions by Ms Garrett, Mr Renauf or Patersons.
2. As such, Acorn says that (as recognised in Albany's submissions), neither Ms Garrett and Mr Renauf's alleged breaches nor Patersons' alleged breaches of fiduciary duty (if there were any) were necessary conditions to the superannuation fund investors' desire to remove the Ashington companies. It is emphasised that the superannuation fund investors' loss of trust and confidence in Ashington arose from Ashington's conduct and mismanagement of the funds, which occurred well before Ms Garrett, Mr Renauf and Patersons became involved with Acorn.
3. Further, it is noted that the plaintiff does not suggest that PPB was involved in any "dishonest and fraudulent design". Acorn says that there was nothing dishonest or fraudulent in Acorn's dealings with PPB in respect of the Parissen Proposal; and nothing unconscionable by Acorn in taking advantage of the commercial opportunity proffered by PPB and the superannuation fund investors. Acorn says that the involvement of Ms Garrett, Mr Renauf and/or Patersons in Acorn's dealings with PPB and the superannuation fund investors was peripheral.
4. Finally, it is noted that the Consortium in which it is alleged Acorn was a member was formed "by 7 October" but that, by this time, Acorn had not yet dealt with PPB (an alleged key member of the Consortium). Further, it is said that there is no evidence that Acorn pursued Garrett's plan in contradistinction to it pursuing its own interests in an arms-length negotiation with the superannuation fund investors through PPB in circumstances where those investors had expressly appointed PPB to investigate and advise on the concept of replacing Ashington Capital and Ashington Management as trustee and manager.
5. In the above circumstances, Acorn says that the assistance case against Acorn is artificial and misconceived.
6. Further (to anticipate the causation arguments) Acorn says that another reason why Acorn's conduct did not cause any loss is that Acorn made no commitment until it formally decided to make an investment by becoming a shareholder of Parissen in April 2010. It is noted that before that time, in December 2009, Ashington Capital had retired as trustee of the Ashington funds and suffered the alleged loss.

Determination

1. Again, this claim fails at the threshold level given the conclusions reached above. Broadly for the reasons explained when dealing with the particulars of knowledge, had it arisen I would have concluded that the requisite degree of knowledge was not made out against Acorn and hence, the knowing assistance claim fails. I find that Mr Routley had knowledge of circumstances which would put an honest and reasonable person on enquiry as to whether Ms Garrett was employed by Ashington at the time, given Ms Garrett's use of an Ashington email combined with some of the other particulars of knowledge on this point, including use of Ashington's letterhead. However, I accept that that knowledge (under the fifth category of Baden Delvaux) is insufficient to ground a finding of knowing assistance. Regardless, I consider that Mr Routley did not have the requisite knowledge of Garrett's plan as pleaded, the Consortium or the Consortium Objective. Moreover knowledge that Ms Garrett was employed by Ashington does not necessarily lead to a conclusion that Ms Garrett was operating outside authority.
2. I consider that Mr Routley cannot be said to have the same knowledge as Mr Ko in respect of [283(a)-(d), (g), (h)] of the pleading. The plaintiff bases that particular of knowledge on "regular discussions" between Mr Ko and Mr Routley, a fact that I consider is not established as there is no evidence of regular telephone conversations between the two. Mr Ko and Mr Routley working together on the Parissen Proposal is insufficient from a factual and legal perspective to infer they shared the same knowledge of Ms Garrett and Mr Renauf's breaches of fiduciary duty (as sought in the plaintiff's closing submissions at [198]). As the plaintiff has not put forward further submissions or pleaded any agency relationship in support of that proposition, it is not necessary to consider that point further.
3. As to assistance (again, on the hypothesis that fiduciary duties were owed), but for Acorn's action, Ms Garrett and Mr Renauf may still have breached their alleged fiduciary duties to Ashington, by pursuing alternative investors to establish a new company to take over ADF and ADF2; however, Acorn's actions in pursuing a proposal with Albany to take over Ashington, as trustee and manager of ADF and ADF2, and to employ Ms Garrett and Mr Renauf in the new fund management business facilitated Ms Garrett and Mr Renauf's breaches of fiduciary duties (i.e., no conflict and no profit rules). Nevertheless, assistance without knowledge is insufficient (Harstedt v Tomanek at [120]-[121]).
4. Therefore, the knowing assistance claim against Acorn is not made good.

Knowing assistance claim against Albany - Ms Garrett's and Mr Renauf's/Patersons' alleged breaches of fiduciary duties

1. The final of the knowing assistance claims is that pleaded against Albany, it being contended that Albany knowingly gave assistance to Ms Garrett, Mr Renauf and Patersons in their respective breaches of fiduciary obligations which they allegedly owed to Ashington Capital and Ashington Management (see [283]-[289] of the third further amended statement of claim). Albany emphasises that no relief for knowing assistance is claimed against Albany in respect of PPB's role; nor is it pleaded or otherwise suggested that the superannuation fund investors were not entitled to take steps to remove the Ashington companies.

Plaintiff's submissions

1. The plaintiff says that Albany's liability arises through the knowledge and actions of Mr Ko. It is noted that Albany admits that it knew that Ms Garrett and Mr Renauf were employees of Ashington Management. The plaintiff says that the following communications establish that Mr Ko knew that they were senior employees owing fiduciary duties: the 12 October 2009 email from Mr Routley to Mr Ko of the draft "Letter of Intent" (referring, it is said, in context, to Ms Garrett and Mr Renauf as "Ashington personnel"); the 19 October 2009 email to Mr Ko concerning the terms on which Ms Garrett and Mr Renauf would be retained by the "Consortium" (see above); and the 8 November 2009 memorandum from Mr Ko to Ms Garrett and Mr Renauf asking them to "give consideration to resigning from Ashington as soon as practicable after we complete a terms sheet and taking up a consultancy contract with us".
2. The plaintiff maintains that the evidence establishes that Mr Ko worked with Ms Garrett and Mr Renauf in the development of the proposals that Albany and Acorn were presenting to PPB, which included the replacement of Ashington as trustee and manager of ADF and ADF2. Reference is made, by way of example, to the 21 October 2009 email that Mr Routley and Mr Ko received from PPB, effectively rejecting their initial proposal and asking them to revise the proposal so that additional funding for the ADF2 projects would come only from third parties and not the superannuation funds, which Mr Ko forwarded to Ms Garrett shortly after receipt; and the fact that Mr Ko included Ms Garrett in his emails to Mr Routley in which they formulated a response to this request; and then confirmed when it was sent. The plaintiff also refers to the 5 November 2009 email from Mr Ko to Ms Garrett of the final form of the presentation to PPB, outlining the then current version of the proposed deal; and the 10 November 2009 email from Mr Ko to Ms Garrett, Mr Renauf, Mr Routley and others, attaching the terms sheet he was putting together for presentation to PPB.
3. The plaintiff says that, in so acting, Albany assisted Ms Garrett and Mr Renauf to breach their fiduciary duties owed to Ashington. Again, it is said that the assistance was in relation to them realising the plan to replace Ashington by taking them up on their proposal to pursue a plan to replace Ashington, making the formal offer to do so, and agreeing to have the replacement entities engage both Ms Garrett and Mr Renauf.

Albany's submissions

1. Albany says that the case brought against it for equitable remedies relies on there being some unconscionability or unconscientiousness in relation to Ashington Capital and Ashington Management, in Albany taking advantage of a commercial opportunity proffered to it by the superannuation fund investors. Albany submits that there was nothing unconscionable or unconscientious in Albany doing so in the circumstances of this case, notwithstanding that the opportunity was first communicated to Albany by Ms Garrett and Mr Renauf and notwithstanding that Ms Garrett and Mr Renauf were ultimately employed by and became directors (though not shareholders) of Parissen.
2. Further, Albany says that the circumstance that Mr Ko communicated with Ms Garrett and Mr Renauf concerning their employment is not of itself unconscionable or unconscientious in relation to the removal of Ashington Capital and Ashington Management. It is said that there is a fundamental distinction between Albany knowingly participating in Ms Garrett and Mr Renauf improperly seeking an advantage for themselves as employees of the new management companies and Albany participating in the superannuation fund investors' desire to remove the Ashington companies. It says that the former may potentially have involved the Ashington companies suffering loss by losing two employees, but that Ms Garrett and Mr Renauf neither instigated the concept of the superannuation fund investors removing the Ashington companies (a proposition with which the plaintiff seemingly does not cavil in that the plaintiff's case is that it was PPB that initiated the plan), nor were they necessary to the implementation of that concept by the superannuation fund investors.
3. Albany notes that it is the plaintiff's case (and Albany accepts this) that the Stonington Capital Raising "was abandoned entirely" after 2 October 2009. It is noted that this was three days before Mr Ko was first contacted by Acorn on 5 October 2009. Accordingly, Albany says that it is now common ground that the entirety of Albany's involvement was after the Stonington Capital Raising, on the terms promulgated by Patersons, had been abandoned; and that Albany was informed of that when first approached.
4. Albany says that the decision to abandon the capital raising is a fundamental plank in the plaintiff's counterfactual submission (referring to the plaintiff's closing submissions at [14], [217]); yet it was a decision made by others three days before Albany became involved. Albany emphasises that it did not have (and could not have had) any role in that conduct; and that it knew nothing of the detail of the pleaded Patersons Mandate.
5. Further, it is noted that, from Albany's first involvement, Mr Ko was told by Ms Garrett, Mr Renauf or Mr Routley that the superannuation fund investors had already decided to remove Ashington Capital as trustee and Ashington Management as project manager of ADF and ADF2. Albany says that this is supported by the contemporaneous documentary evidence. Albany says that the decision had already been made and the proposal already formulated before Mr Ko was first approached; and that it was the culmination of at least four months of consideration by the investors and closely followed the catastrophic rejection of the Double Bay development application.
6. Albany says that the fundamental flaw in the plaintiff's pleaded case against it is that it is based on the contention that PPB was in a legal relationship with the Ashington group companies, such that PPB was: first, precluded from doing anything to facilitate the removal of Ashington Capital as trustee or of Ashington Management as project manager of ADF and ADF2; and, second, under a legal obligation to inform the Ashington companies of PPB's dealings with Albany. Albany says that this contention necessarily underpins the pleaded case against it because (irrespective of the conduct of Patersons, Ms Garrett or Mr Renauf, and without recourse to the data which was the subject of the confidentiality agreement executed by Albany or provided by Ms Garrett and Mr Renauf), Albany obtained sufficient information for its purposes from PPB (and other sources such as banks and publicly available information).
7. Albany says that PPB was, from the outset of its involvement with the Ashington companies and trusts, engaged by the superannuation fund investors inter alia to advise them in relation to the replacement of Ashington as trustee and manager. Thus, Albany says that (contrary to [265(e)] of the third further amended statement of claim) it was not PPB who "introduced" to the superannuation fund investors the concept of replacing Ashington Capital and Ashington Management as trustee and manager but instead it was the superannuation fund investors who appointed PPB expressly to investigate and advise on that concept. (Pausing here, there is no doubt that the removal of the trustee or manager was an option to be considered under the PPB Mandate - as explained earlier - but again there is a dispute as to whether that was simply in a restructuring context.) Albany says that, even if PPB did introduce the concept to the superannuation fund investors, PPB was quite entitled to do so (being under no constraint in that regard because of any relationship with Ashington Capital and Ashington Management).
8. It is noted that it is not pleaded that the superannuation fund investors were under any legal obligation themselves which precluded them from investigating or facilitating the replacement of Ashington Capital and Ashington Management as trustee and manager. Hence, Albany says that the claims against both PPB and Albany must be determined on the basis and in the context that the superannuation fund investors were entitled to appoint PPB to do so, including by providing information to Albany and otherwise engaging with Albany to facilitate the replacement of Ashington Capital and Ashington Management.
9. Albany says that (contrary to [84] and [87] of the third further amended statement of claim), there was no contractual or other relationship between Ashington Capital (or Ashington Management) and PPB involving any concept of a "mandate" from Ashington Capital (or Ashington Management) to PPB which in any way precluded PPB from taking any steps directly or indirectly to remove Ashington as trustee and manager. Nor, it is said (contrary to [265(f)] of the pleading), was PPB precluded from "supporting the Parissen proposal" or (contrary to [267]) was PPB under any obligation to "advise the Ashington companies that it had abandoned the PPB Mandate" or that it "was operating under a new and different mandate to remove the funds management business from the Ashington companies".
10. Further, Albany says that (contrary to [274] of the third further amended statement of claim), PPB obtained information (to the extent that such information was not in the public domain or otherwise available to Albany) and provided it to Albany on the express basis, as pleaded at [84(b)], that PPB had been engaged by the ADF2 investors to, inter alia, "achieve a legally effective restructure of the current trustee arrangements".
11. Accordingly, Albany says that (contrary to [287(c)] of the pleading) it was under no legal obligation, contractual or otherwise, to disclose to the Ashington companies either "Garrett's plan" or "the activities of the Consortium"; and that (contrary to [288] of the pleading), Albany, like PPB, was not precluded by any relationship with the Ashington companies from pursuing the concept of replacing the Ashington entities as trustee and manager and, accordingly, was not precluded from giving assistance to Ms Garrett, Mr Renauf or Patersons in relation to that concept.
12. As to the allegation of knowing assistance, Albany adopts generally the submissions made on behalf of Ms Garrett, Mr Renauf and Patersons in respect of the alleged existence (and breach) of fiduciary duties.
13. Albany says that the plaintiff has not established that Mr Ko knowingly assisted Ms Garrett, Mr Renauf and Patersons in the pleaded breaches of their fiduciary duties (if there were any such breaches).
14. It is relevant to note that Albany only became involved in the events the subject of the present proceeding after the first of the 5 October 2009 meetings (i.e., after the Patersons Mandate; after PPB had been retained by the superannuation fund investors; after the plaintiff contends the so-called "Garrett's plan" had been formulated; and, significantly, after the Consortium, of which it is alleged to be a member, had allegedly already been formed).
15. Albany says that it knew nothing of the Patersons Mandate; that there is nothing in the evidence which suggests that Albany knew of the so-called "PPB Mandate" or otherwise had any reason to think that PPB owed any fiduciary duties to Ashington Capital and/or Ashington Management or that PPB had any contractual obligation of confidence to those companies. Albany says that the evidence establishes only that Albany was told from the outset (and would have had no reason to doubt) that PPB was representing only the superannuation fund investors (not Ashington Capital and/or Ashington Management).
16. Albany identifies two fundamental points of contention between it and the plaintiff concerning the factual findings to be made from the evidence. First, that the plaintiff contends that the superannuation fund investors did not make their decision to remove Ashington Capital and Ashington Management until November 2009 (whereas, Albany contends that the investors made that decision, at least in principle, on 30 September 2009, following the rejection of the Double Bay development application). Second, that the plaintiff contends that Ms Garrett and Mr Renauf invented the concept of removing Ashington Capital and Ashington Management, promoted that concept to the investors and were instrumental in implementing that concept in October/November 2009 (whereas Albany contends that the concept of removing Ashington Capital and Ashington Management originated with the superannuation fund investors, was promoted by PPB, came to the attention of Ms Garrett and Mr Renauf only at the end of September 2009 after a decision had been made by superannuation fund investors and thereafter was implemented principally by PPB with Acorn and Albany - albeit that Ms Garrett and Mr Renauf had some involvement mainly in seeking to obtain an advantage for themselves as participants in, not drivers of, the Acorn/Albany proposal). It is said as the superannuation fund investors made the decision to implement that proposal, then, at most, Ms Garrett and Mr Renauf were facilitating that decision, not propounding their own scheme, except in attempting to obtain for themselves a role in the replacements for Ashington Capital and Ashington Management. Consequently, Albany says that the only potential breach of fiduciary duty in which Albany participated was any breach by Ms Garrett and Mr Renauf in seeking better employment as a result of, and using, the information they obtained from the superannuation fund investors (not Ashington), while they were employees of Ashington. I consider this in due course below.
17. Albany emphasises that what it knew, relevantly for the purposes of the equitable principles relating to knowing assistance, was: first, that it was the superannuation fund investors who had decided (as they were entitled to do) before Albany became involved, to remove Ashington Capital and Ashington Management; and, second, that Ms Garrett and Mr Renauf were attempting to take advantage of their knowledge of that decision to become involved with those who might become replacements for Ashington Capital and Ashington Management.
18. Apart from having no knowedge of the Patersons Mandate, Albany says that there is no evidence that Albany knew that there had been no interest in the Stonington Capital Raising (save perhaps from Acorn's negative response on 30 September 2009).
19. As to the events on 30 September 2009, Albany submits that it can comfortably be inferred (from the contemporaneous documents and the evidence from the liquidator's examinations) that the superannuation fund investors communicated that they had solidified their earlier desire to remove Ashington as trustee and manager of ADF and ADF2 (referring to the undated file note of Mr Hastings; that "investors can remove trustee, there are more issues with the management agreements …"; and Ex A at 14.11) - i.e., it is said that the superannuation fund investors had effectively made an 'in principle' decision to remove Ashington Capital and Ashington Management if replacements for their roles could be found. Albany says it is understandable that the superannuation fund investors were keeping their options open thereafter (referring to the plaintiff's oral submissions at T 1490.50) given the uncertainty that replacements could be found, either at all or on acceptable terms, but Albany submits that this does not derogate from the inference that in practical terms the decision was made on 30 September 2009 and was communicated to Ms Garrett and Mr Renauf.
20. I have some doubts in this regard because in part it seems to be based on the undated note of Mr Hastings, that in context was probably made after the 5 October 2009 meetings (and said to be out of chronological order in the court book - T 1473.15ff), referring to the proposal to remove the trustee/manager (see chronology above); and which states that "[a]ll incoming investors want a position where Ashington is neither Trustee or Manager", suggesting that a push to replace Ashington had come from incoming investors, or at the very least, that this is what the superannuation fund investors had been told. Moreover, the excerpt of Ex A referred to indicates that PPB and Ms Garrett were marketing the option of replacing Ashington as trustee and manager to incoming investors following the Double Bay development application refusal, but says nothing of whether that option was pursued due to a decision on the part of the superannuation fund investors: Q. By those discussions you mean discussions about replacing Ashington as trustee and manager? A. No, the option of replacing Ashington as manager was something that was floated to all of the investors that had been approached post the Double Bay DA being refused Q. Who floated that? A. Privilege. It was part of the marketing material that we put together after we had had discussions with PPB. Q. In that answer who does the "we" refer to? A. Myself and the PPB team.
21. Albany says that while the proposal actually to proceed to implement that decision may have come from PPB to the superannuation fund investors at this point in time (noting to the reference by Ms Garrett to the "PPB suggested plan" on 2 October 2009), it was nevertheless not the implementation of a brand new idea proposed by Ms Garrett and Mr Renauf. Albany says that there is no persuasive evidence that Ms Garrett and Mr Renauf instigated the proposal (and in any event it emphasises that there is certainly no evidence that Albany did so).
22. Accordingly, Albany says that the circumstance in which Ms Garrett and Mr Renauf participated in the 30 September 2009 meeting is irrelevant to Albany's position, as is the circumstance in which Ms Garrett and Mr Renauf may have taken advantage of their knowledge of the investors' decision for their own personal benefit. Albany says that they are matters which are peripheral to Albany's involvement in the process of removing Ashington Capital and Ashington Management (noting that Mr Hartley and Mr Dedes did not view the involvement of Ms Garrett and Mr Renauf as significant - see at T 974.18-35, T 998.23-25, T 1087.15-27).
23. Albany says that the relevant circumstance is that the superannuation fund investors had decided in practical terms to remove Ashington, notwithstanding that the decision could not be implemented until replacements were found; and Albany says that that was the substance of what was communicated to Albany. (Pausing here, as I have noted, I think it unlikely that a decision had been made by the superannuation fund investors prior to 1 October 2009 to remove the Ashington entities; and I consider it much more likely that this proposal came after Mr Routley's 30 September 2009 email expressing a preference to invest in the manager - most probably in a discussion between Mr Block, Ms Garrett and Mr Renauf; but I do not think whoever, as between them, came up with the proposal matters in the end.)
24. As to the chronology of events thereafter, Albany points to the 2 October 2009 Apex Capital proposal (Ex C at Tab 6), which included a term that Apex and a "co-investor" would "take over the management of the Stonington development". Albany says that (contrary to the plaintiff's closing submissions at [71]; T 1439.11), this proposal was consistent with the superannuation fund investors' desire, solidified on 30 September 2009, to remove Ashington - at least in respect of the Stonington sub-trust; and Albany says that it is also consistent with the proposition that there was no interest in fact, despite Patersons' professed expectations, in the debt/preferred equity funding for Stonington (i.e., the Stonington Capital Raising). In that regard, Albany says that there is no evidence and no reason to think that the Paterson's Mandate terms for Stonington would be attractive to any potential financier/investor after the Double Bay development application rejection became public knowledge at the end of September 2009. The plaintiff draws from Ms Garrett's response to this offer, "[i]t is unlikely to be appealing to the existing investors as that would involve them having to undertake due diligence on a new delivery team", that as at 2 October 2009, the superannuation fund investors had not expressed a desire for a new management team.
25. Consistently with its view as to the inception of the plan, Albany reads Ms Garrett's reference in the 2 October 2009 email to Mr Doherty of the "PPB suggested plan" as being in substance a reference to the superannuation fund investors' plan on the basis that the superannuation fund investors had long been expressing an interest in removing Ashington Capital and Ashington Management; and Albany says that it was not a concept which had recently been invented by PPB. Albany notes in this regard that Ms Garrett's email to Mr Doherty indicates that it was the "Existing Equity Investors" who had taken steps after the "Double Bay decision… to investigate options to transfer key assets to a new Manager"; and who would establish a Newco to "replace Ashington as the Manager" of the ADF and ADF2. Albany says that this is consistent with the superannuation fund investors, albeit in conjunction with PPB, formulating the removal proposal, not Ms Garrett and Mr Renauf. (Albany says that it is also compelling evidence that the removal proposal had been decided before any contact with Albany.)
26. Albany says that the words "investigation" and "process" in the 2 October 2009 email were directed to the implementation of the decision, not to the decision itself, in the sense that the removal of Ashington Capital and Ashington Management could only rationally be eventually formalised if there were replacements available prepared to take on those roles. Albany says that the fact that Ms Garrett arrogated to herself the title "new fund manager" was nothing more than wishful thinking; noting that, once approached, Acorn/Albany did not confer that role on Ms Garrett and Mr Renauf but instead proposed to superannuation fund investors that "the joint venture will be led by Byron Ko and Neil Tremaine" (albeit with Ms Garrett and Mr Renauf "to join the team" as directors/employees of some, but not all, Parissen companies).
27. Albany points to the following evidence in the liquidator's examination of Mr Doherty that it says is contrary to the plaintiff's submission that the superannuation fund investors had not in fact made any decision prior to 2 October 2009 to remove Ashington Capital and Ashington Management if replacements could be found (see T 1440.46; T 1451.31).
28. First, the evidence that (see Mr Doherty's transcript at 53.27) in relation to the 5 October 2009 meetings that Ms Garrett "also spoke about potentially some of the assets [in Ashington] being transferred to a new manager". Second, in relation to Ms Garrett's email to Mr Doherty shortly prior to the 5 October 2009 meetings, Mr Doherty's evidence that it explained "[t]hat the existing shareholders were potentially looking at putting a new manager in place of some of the assets and that there was potential to invest in that new manager" (at T 55.48). Albany says that the word "potentially", consistently with the overall evidence on this issue, is a reference to the potential difficulties in finding a new manager, not to any equivocation in the investors' desire to remove Ashington Capital and Ashington Management. In any event, Albany says that it is plain from this evidence that it was not, as the plaintiff submits, a proposal which had not yet been put to superannuation fund investors.
29. Third, the evidence of Mr Doherty at T 56.22, that at the 5 October 2009 meeting "Nicky was saying there was a chance that the deal was changing in that the existing or some existing investors were potentially looking to put a new manager in place and that it was very early days, but this was ongoing at the time"; in response to which Mr Doherty's evidence is that Acorn/Alter "said there was potential that they would look to invest but they obviously needed to do their due diligence". Albany says that this again confirms that removal of Ashington Capital and Ashington Management had certainly been considered favourably by investors and that "potentially" is a qualification concerning finding a new manager, not about making a decision to remove Ashington Capital and Ashington Management if that could be achieved.
30. Fourth, Albany notes that at T 57.1, Mr Doherty said that when he asked for an explanation "as to why she was becoming the funds manager", Ms Garrett informed him "that it was through the existing shareholders that were pushing for the change or potential change in the manager"; that at T 60.35, Mr Doherty said that Ms Garrett also explained to him that "there was potential for on the back of existing investors potentially looking for someone else to manage some of the funds"; and at T 61.34, that Ms Garrett "had been talking with existing investors who were behind her doing this". Again, Albany says this confirms not only that the proposal had already been the subject of discussion with superannuation fund investors but that they had decided to pursue it.
31. Pausing here, I place some caution on Mr Doherty's evidence in the liquidator's examinations, it being rather vague and it being not inconsistent with Ms Garrett having an understanding as to superannuation fund investors' dissatisfaction with Ashington and simply pitching the transaction to the potential investors as more of a "done deal" for Ashington's removal than in fact it was.
32. As to Ms Garrett's liquidator's examination, Albany notes the evidence at T 14.09, that "the option of replacing Ashington as a manager was something that was floated to all of the investors that had been approached post the Double Bay DA being refused" and that Ms Garrett and PPB "floated that" option. Albany says (and I accept) that there can be no doubt that the refusal of the Double Bay development application was both a catastrophic and watershed event for superannuation fund investors, because the prospect that the 'jewel in the crown' might have significantly less value than forecast, which would adversely affect both ADF and ADF2, must have been a matter of great concern. Albany says that the natural inference is that superannuation fund investors' attitude to Ashington Capital and Ashington Management would have hardened significantly following that announcement and prompted a decision actually to put into action the concept which they had been contemplating for months. I can accept that would be logical; however, it does not square with the decision made on 29/30 September 2009 by the superannuation fund investors and the evidence that the option was floated to all the investors approached after the refusal of the development application simply places discussions with potential investors after 29 September 2009.
33. Ms Garrett's evidence at T 38.27 was that "when the discussions first commenced with Acorn and with Pacific [i.e., Albany] there were two streams being investigated, one was a direct investment into the Stonington sub-trust either as a two part investment, so replacement mez with a preferred equity piece, or you could invest into Stonington and also into Newco, and that the form of Newco would involve the replacement of Ashington as trustee and manager". That is clear from the presentation made at the 5 October 2009 meetings and I accept Albany's submission that what was being put to Acorn/Albany from the outset was at least the option of replacement of Ashington Capital and Ashington Management (albeit whether it actually followed a decision by superannuation fund investors to that effect is more problematic). At T 42.17, Ms Garrett also said that the "opportunity" referred to Albany was "on at least one possible version of the investment, to remove Ashington as the manager and trustee of these funds".
34. As to the evidence emphasised by the plaintiff (T 1452.50, T 1458.28) that Ms Garrett did not "recall canvassing them" (i.e., the superannuation fund investors), Albany says that this is not, in light of all the other evidence on this topic, conclusive against a finding that, following the Double Bay development application rejection and prior to 2 October 2009, Ms Garrett had discussed with the superannuation fund investors and PPB a proposal, emanating from investors, to remove Ashington Capital and Ashington Management if replacements could be found and that superannuation fund investors had conveyed their approval for that proposal. I accept that this is possible but I do not see any contemporaneous evidence of any such discussion with superannuation fund investors other than the 29/30 September 2009 meetings and I do not consider that the evidence shows such a proposal being unanimously approved by the superannuation fund investors during those meetings (and it might be expected that there would have been notes of any other such consultation or decision that had taken place).
35. Albany nevertheless says that (contrary to the plaintiff's oral submissions at T 1443.01-20; T 1452.50; T 1458.28 that the superannuation fund investors had not been consulted and had not yet made a decision to remove Ashington by 5 October 2009), the evidence of the liquidator's examinations tendered by the plaintiff (as identified above) demonstrates that: that the rejection of the Double Bay development application brought matters to a head at the end of September; that on 30 September 2009 Ms Garrett and Mr Renauf met and consulted with investors and PPB; that at that meeting the superannuation fund investors communicated their decision to remove Ashington as trustee and manager of the funds and that they wanted to find replacements; that the superannuation fund investors made that decision before 5 October 2009 when Mr Ko became involved; and that, at the meeting on 5 October 2009, Ms Garrett informed Mr Ko that the superannuation fund investors had already made a decision to remove Ashington and were looking for replacements for Ashington Capital and Ashington Management.
36. It is noted that, on 4 October 2009, when preparing the slideshow to be presented to Acorn on 5 October 2009, Ms Garrett informed Mr Carolan in an email titled "'Go Forward' Corporate Structure Slide" that "[t]he new Corporate Trustee will replace Ashington as the manager of those key projects" and "Existing Equity Investors have unanimously supported this recommendation". Albany says that although that was later removed, it was not because it was said to be untrue (Ex C at Tab 8). Albany says that it is a compelling inference that the investors had already made that decision and that Ms Garrett told Mr Ko this on 5 October 2009. (An equally available inference would be that Ms Garrett was here simply stretching the truth or overstating the case. There is certainly nothing to corroborate that the superannuation fund investors had by then unanimously supported that recommendation, and it is inconsistent with the steps later taken when the superannuation fund investors did in fact clearly approve such action.)
37. It is also noted that Ms Garrett's presentation (the Stonington PowerPoint) provided to Mr Ko on 5 October 2009 informed Mr Ko that PPB, a well-known insolvency accountant, had been "appointed as Advisor to Existing Equity Investors".
38. Albany notes that the Stonington PowerPoint presented on 5 October 2009 indicated two potential investment options: a direct investment in the Stonington sub-trust and a new opportunity that involved replacing Ashington as trustee and manager on the basis that it was the investors who had decided to pursue that alternative. Albany says the presentation of two streams is consistent with keeping the superannuation fund investors' options open (whilst the process of finding replacements for Ashington Capital and Ashington Management was implemented), notwithstanding that the new opportunity was the more likely outcome.
39. Albany says that given the circumstance in which Albany was informed of the superannuation fund investors' decision by Ms Garrett and Mr Renauf, its conduct in acting on that information cannot relevantly be characterised as unconscionable or unconscientious. It says this because it maintains that such information was not confidential to Ashington (rather, that, if it was confidential at all, it was confidential information of the investors). Further, Albany says that an employee communicating something to a third party about another third party which is adverse to the employer is insufficient to attract equitable remedies. It is noted that Acorn and Albany were not the only potential replacements for Ashington. Further, Albany notes that the proposal was subsequently confirmed and developed directly by PPB (a representative, to Albany's knowledge and in fact, of the superannuation fund investors, not Ashington). Thus, Albany maintains that it was not unconscionable or unconscientious for it to pursue the opportunity offered by the investors simply because it was initially proffered through Ms Garrett and Mr Renauf.
40. As to the profiles sent on 6 October 2009 by Mr Ko to Mr Carolan, confirming that Albany was focussed on investing in real assets and alternative investments, such as "distress investing", Albany says that distressed assets were Mr Ko's specialty. Reference is also made to the confidentiality agreement (negotiated and subsequently signed by Mr Ko) which was provided by Mr Carolan to Mr Ko with reference to this being to "enable the exchange [of] detailed project feasibility information". Albany notes that there is no evidence that Mr Ko knew that Patersons' role was anything other than what he had been told by Mr Garrett in his 5 October 2009 meeting.
41. Albany said that, consistent with the timeline of events revealed by the contemporaneous documents, the "opportunity" that Albany ultimately pursued, through Parissen, with PPB was that outlined in the internal PPB email of 6 October 2009 from Mr Block to Mr Carson and others. Albany says that the compelling inference from Mr Block's comments in that email is that Albany was informed on 5 October 2009 that the superannuation fund investors, with the assistance of PPB, were already looking for replacements for Ashington Capital and Ashington Management as trustee and manager of ADF and ADF2. I agree. Further, it is noted that when Mr Block sent an email on 6 October 2009 to the superannuation fund investors, foreshadowing a "go forward structure … in the next few days", Mr Fowler correctly understood this was a proposal in respect of the whole of ADF2, not just Stonington (T 1032.46).
42. As to the reference in Mr Block's subsequent email of 7 October 2009 to PPB continuing to work co-operatively with Ms Garrett and Mr Renauf in relation to the recapitalisation proposal but that "what is clear is that any proposal would see the management & trustee arrangements changed so that Ashington are no longer involved", Albany says that none of the superannuation fund investors or the asset consultants would have been surprised by this statement; since they were already looking for a replacement for Ashington.
43. Albany places emphasis on the summary of the "very fluid" investment opportunity that Mr Routley said had been proposed to him and Mr Ko on 5 October 2009 in the Swan Email (see chronology above). Albany says the Swan Email further confirms the inference that Albany was informed on 5 October 2009 that the superannuation fund investors had already decided to replace the Ashington companies and were looking for a credible syndicate to assume the management rights. It is accepted by Albany that Mr Ko and Mr Routley were "working together". Albany notes that the Swan Email was forwarded to Mr Ko on 9 October 2009; and Albany says that it can comfortably be inferred that they both received the same information on 5 October 2009, consistent with Mr Routley's summary.
44. Accordingly, Albany says that, even if the plaintiff's submission (that no decision was made by superannuation fund investors until after 9 October 2009 - see at T 1472.21ff) is accepted, the evidence tendered by the plaintiff demonstrates that Albany was told that the decision had been made by the superannuation fund investors prior to 5 October 2009 and Albany says that there is no evidence which suggests that there was any reason for Albany to suspect (let alone to know), that the superannuation fund investors had not made that decision, notwithstanding that the process of implementing the decision was only just commencing. I agree. Significantly, in my opinion, the contemporaneous documents establish that what Albany was being told (correctly or otherwise as a matter of fact) was that the superannuation fund investors had decided to terminate the roles of the Ashington companies.
45. Albany says that the circumstance that Ms Garrett may herself have been in breach of her employment relationship (although it says Mr Routley's email suggests she was not) is irrelevant to Albany's position. Albany says (and I agree) that the relevant circumstance is that Albany and Acorn were informed that superannuation fund investors had already decided to terminate Ashington and were looking for replacements. It is said that this was not confidential information of Ashington which Ms Garrett and Mr Renauf were providing to Albany; rather, that if it was confidential at all, it was confidential information of the superannuation fund investors. It says that Ms Garrett and Mr Renauf providing that information does not render Albany's conduct in pursuing the opportunity unconscionable or unconscientious, even if it is accepted that it was improper of Albany to offer employment to Ms Garrett and Mr Renauf.
46. As to the data room access, Albany accepts that on 9 October 2009, Mr Ko was provided with access to the Stonington Data Room. Albany says that on 9 and 10 October 2009, Mr Ko accessed the marketing "project animation" and the project model for Stonington. It is noted that, concerned about the lack of data in the Stonington Data Room, Mr Ko sent an email to Ms Garrett, Mr Carolan, Ms Briggs and Ms Clare Morgan (a solicitor employed by Mallesons) noting that "we understand the situation is relatively fluid" and asking for further specified documents to be included in the "next release of data room information". Albany says that it is plain that the reference to "relatively fluid" meant that Mr Ko understood that a number of options were available to potential investors, not only specifically funding Stonington.
47. Albany says that, other than the recollection that Ms Briggs now says she held at the time she swore her first affidavit (T 850.17; Ms Briggs' affidavit of 27 February 2021), Albany says that there is no evidence that the information requested by Mr Ko was ever provided to him by her (T 850.28-34). Moreover, Albany emphasises that the email request makes clear that Mr Ko was not hiding his requests for additional information from Ashington nor was he restricting them solely to Ms Garrett. It is said that the email demonstrates that Mr Ko was not dealing with Ms Garrett on the basis that he knew that she was in breach of any fiduciary relationship and that communications with her had to be kept secret. It is said that, if Mr Ko had been, then it would be inconceivable that he would be including not only other employees of Ashington in his communications but also external lawyers acting for Ashington. (That said, the subject line of the email is "Stonington Project - Additional due diligence information request", and all of the information sought relates to the Stonington Project; yet Mr Ko seeks information otherwise about Ashington from Ms Garrett/Mr Renauf and PPB. Hence, it is possible that Mr Ko knew the data room was for a limited Stonington investment opportunity and simply framed the request that way.
48. Albany says that the response from Ms Garrett confirms the absence of secretiveness about Albany's involvement beyond the Stonington debt/preferred equity fund raising. Albany says that the suggestion that Ms Garrett would respond to both Ms Briggs and Ms Morgan advising that Mr Ko would be visiting "Sydney assets" is inconceivable if anyone had thought that Albany's involvement was strictly limited to the Stonington debt/preferred equity funding and that anything beyond that would involve unconscionable or unconscientious conduct by either Ms Garrett and Mr Renauf or Albany. It is said that this is an important matter in relation to the allegations that Albany obtained information beyond that contemplated by the Stonington Data Room confidentiality deed (see below).
49. Albany points out that, by 12 October 2009, Ms Briggs knew that Mr Ko had some interest in the Sydney properties of Ashington (T 843.31) and that a Sydney asset tour was being arranged for Mr Ko that week; and that there is no evidence that this knowledge caused Ms Briggs any concern (Ms Briggs accepting that it was "possible" that it did not) (T 844.32); and that on 12 October 2009, Mr Ko and Mr Routley were preparing a proposal to the investors, on behalf of Albany and Acorn, to take over the management of the funds. Albany says that this is consistent with what Albany and Acorn had been told at the 5 October 2009 meetings, particularly, that there was an opportunity to take over as trustee and manager as the superannuation fund investors had already made a decision to remove Ashington and that investors were searching for replacements.
50. It is noted that, by this time, Ashington was also experiencing negative press. Albany points out that the market was being told that Ashington was not a long-term prospect and that Ashington was in financial difficulties, following the refusal of the development application for Double Bay.
51. As to the events after this, it is noted that on 16 October 2009, Acorn and Albany confirmed to PPB their interest in replacing Ashington as the manager of ADF and ADF2 and requested information from PPB in order to decide whether or not to proceed with that proposal; and that the superannuation fund investors expressly instructed PPB to provide that information; that on 16 and 19 October 2009, in response to Acorn and Albany's request, PPB emailed a large amount of information to them about ADF and ADF2, after which Mr Ko sought further information from PPB on 19 October 2009, which was also provided by PPB on 19 October 2009 (see chronology). (One might query why this additional information request was not simply sent to the recipients of the previous information request email that related only to Stonington but again that is speculative.)
52. As to Ms Garrett's 19 October 2009 email to Mr Ko (setting out the terms of a "proposed package" for Ms Garrett and Mr Renauf as consultants to the new management entity), Albany points out that, on the evidence, this was not further discussed until 8 November 2009. Albany maintains that there is nothing inherently improper in that correspondence by itself. It says (seemingly as a matter of which judicial note might be taken) that employees in the funds management industry regularly change employers. In any event, in the broader context of this litigation, Albany says that the correspondence concerning the employment of Ms Garrett and Mr Renauf is not determinative. Albany says that the circumstance that Ms Garrett and Mr Renauf were themselves seeking to take advantage of the information they had received from superannuation fund investors /PPB is irrelevant to Albany responding to an investment opportunity which was instigated by the superannuation fund investors, not Ms Garrett and Mr Renauf.
53. As to the information provided by Ms Garrett on 20 October 2009 by email to Mr Ko addressing his "three queries", Albany notes that that document contains essentially a summary of legal information concerning certain clauses in the pro forma contracts. It is said that, other than the presentation, this is the only document provided by Ms Garrett to Mr Ko. Albany says that it was inconsequential in that it relates to the terms of presales contracts, which were pro forma contracts (T 852.47); had already been provided to a number of agents for the purpose of selling lots off the plan (T 852.20); and the content of which was readily available to Albany from other sources (i.e., any conveyancing solicitor in Melbourne). It is said that none of it was inherently confidential to Ashington, nor is there any information in it that materially assisted Albany's proposal to investors. It is noted that later on 20 October 2009, Mr Renauf sent documents in relation to the Double Bay Project to Mr Tremaine (an individual associated with Albany). The documents provided are not in evidence. Albany says that there is no evidence they were provided to Mr Ko. In any event, Albany says that, on the evidence, they too are inconsequential to Albany's decision to make a proposal to investors.
54. As to the negotiations on 21-23 October 2009, concerning the joint Albany and Acorn proposal to the superannuation fund investors (see the chronology above), Albany notes that none of the negotiations on and after 21 October 2009 involved Ms Garrett or Mr Renauf.
55. Albany says that it may be inferred, from the fact that on 18 November 2009 Parissen proposed that it take over as trustee of ADF and ADF2 in order to complete its due diligence (to which the superannuation fund investors agreed on the following day), that the Stonington Data Room material was insufficient for a final decision to be made.
56. Albany says that the substance of its involvement was that the superannuation fund investors engaged with Albany, mostly through PPB, during October and November 2009 to implement their decision to remove Ashington Capital as trustee and Ashington Management as project manager of ADF and ADF2. Ms Garrett and Mr Renauf's desire to participate is said to have been peripheral to that process and to the ultimate result.
57. Therefore, Albany contends that, contrary to the pleaded case against it, none of Ms Garrett, Mr Renauf, Patersons or PPB originated the concept of removing Ashington Capital as trustee or Ashington Management as project manager of ADF or ADF2; and that the concept originated with the superannuation fund investors as a result of (and was then driven by) the investors' loss of confidence and trust in (and outright annoyance with) Mr Anderson (and therefore Ashington). It is noted that it was not put to any of the witnesses representing the superannuation fund investors (and there is no contemporaneous document which suggests this) that, without the involvement of Ms Garrett, Mr Renauf or Patersons, the decision by the superannuation fund investors to remove Ashington Capital as trustee and Ashington Management as project manager and to look for replacements to implement that decision would not have been made or, having been made, would not then have been implemented. Albany says that to do so in the absence of Acorn/Albany may well have been difficult (a factor which reflects that the Ashington business was not a going concern by at least September 2009 and thus unattractive to potential replacements) but that it was not impossible. Albany argues that the removal of Ashington Capital and Ashington Management could and would have been achieved by the investors without the involvement of any of the defendants, particularly given the parlous financial position of the Ashington group of entities as a whole (and Ashington Management in particular).
58. Thus, Albany says that the claim against it turns on the proposition (which it says must be rejected) that the mere involvement of Ms Garrett and Mr Renauf and/or Patersons in a peripheral, non-determinative manner, in the implementation of the independent decision already made by superannuation fund investors; coupled with Albany's knowledge that Ms Garrett and Mr Renauf were senior employees of Ashington, is sufficient to impose on Albany a liability to pay equitable compensation to Ashington Capital and Ashington Management for the loss of an entire business.
59. It is said that the only possible breach of fiduciary duty (if any) by Ms Garrett and Mr Renauf was in taking advantage of information from the superannuation fund investors (either directly or through PPB) concerning the superannuation fund investors' own decision to remove Ashington Capital and Ashington Management, by then encouraging and participating in the implementation by the investors of that decision to attempt to gain an advantage for themselves in terms of employment and equity in the "Newco". However, Albany says that the first aspect of this (their encouragement and involvement) was not determinative of events (i.e., that this was not a necessary component to the replacement of the Ashington companies which would have occurred irrespective of any involvement by Ms Garrett, Mr Renauf and Patersons); such that Albany only participated in that breach of fiduciary duty (if it was a breach) by facilitating their employment.
60. In that regard, it is noted that Ms Garrett and Mr Renauf, despite their requests, did not become shareholders in any of the Parissen equities and there is no evidence that they otherwise shared in any profit made by the Parissen entities. Indeed, Albany points out that there is no evidence that any of the Parissen entities made any profit. Accordingly, Albany says that the loss (if any) suffered by the Ashington companies as a result of Ms Garrett and Mr Renauf leaving Ashington Management's employment is measured by their value to the business of Ashington (which is not pleaded and about which there is no evidence), not by the value of the entire Ashington business.
61. Albany says that the fundamental factual distinction between this case and the facts in the cases relied on by the plaintiff is that Ms Garrett, Mr Renauf and Patersons: first, did not invent the concept of removing Ashington Capital and Ashington Management (but instead were informed of it by the superannuation fund investors); second, did not create the entity which allegedly obtained the Ashington business (it was Acorn/Albany who did that at the invitation of the superannuation fund investors); third, did not direct or control the implementation of the decision to remove Ashington Capital and Ashington Management (that was done by PPB); and, fourth, were not a necessary condition of either the decision to remove Ashington Capital and Ashington Management or of the implementation of that decision. For those reasons, it is said that the involvement of Ms Garrett, Mr Renauf and Patersons can properly be characterised as irrelevant to the claimed loss of the whole of the Ashington business.
62. Albany says that, in many ways, the present situation is analogous to that considered in Gunasegaram, where it was held that a senior employee of the respondent company had not acted in breach of his fiduciary duties by taking up the invitation of a client of that company to indicate that he would be interested in continuing to provide services on one of the company's projects after he resigned and by subsequently incorporating a company and causing it to enter into the partial novation of the project for that purpose. It was held that the employee had not preferred his personal interests over those of his employer in breach of any fiduciary duty by his conduct and was entitled to make or pursue the gain when it had been raised with him ([73]-[75], [201]-[202]).
63. Albany submits that it is not necessarily a breach of fiduciary duty for an employee to pursue a gain or opportunity of which the employee becomes aware while an employee; rather, the content and scope of fiduciary obligations must always be assessed in the particular context in which they are claimed to arise, and notes that the content of the particular fiduciary duties will be moulded to the character of the particular relationship (Hospital Products at 102).
64. Albany says that a similar analysis applies to the present case, where Ms Garrett and Mr Renauf may have taken advantage of their knowledge that the "Existing Equity Investors" had decided to "replace Ashington as the Manager" to gain alternative employment for themselves. However, Albany notes that, as recorded in the Swan Email, PPB contacted Ms Garrett to let her know that Ashington was not going to retain management rights and invited her to work with them to work out a way forward. It is said that Ms Garrett was entitled to pursue a potential gain (i.e., future employment with a Newco) from the information provided to her. Albany emphasises its submission that the evidence does not establish that Ms Garrett and Mr Renauf first thought of the concept of removing Ashington Capital and Ashington Management or were instrumental (as distinct from merely being involved) in implementing that concept. (I interpose to note that there is a clear difference between an employee expressing interest in a future opportunity when the employment with the current employer has come to an end, as in Gunasegaram, and an employee/employees pursuing a proposal to takeover key parts of the current employer's business while still in employment - regardless of who originally conceived of that proposal.)
65. Turning then to Albany's involvement: as already noted, Albany says that assisting Ms Garrett and Mr Renauf to leave their employment by offering new employment is a different concept to the issue of whether Ms Garrett and Mr Renauf were instrumental in the investors' implementation of their plan to remove the Ashington companies. Albany says that the plaintiff's attempts to characterise Ms Garrett and Mr Renauf as the originators of the decision to remove the Ashington companies and as being a necessary component of the implementation of that decision is not supported by the evidence. Albany says that the circumstance that Ms Garrett and Mr Renauf saw the "writing on the wall" and personally sought to take advantage of the decisions made by the superannuation fund investors is not sufficient to make Albany accessorily liable for the consequences of the investors' decision to remove the Ashington companies. Albany says that it is obvious that the rejection of the Double Bay development application, on top of all the other problems which had caused the superannuation fund investors significant concern during 2009, brought matters to a head at the end of September 2009 and Ms Garrett and Mr Renauf's involvement was incidental to the investors' implementation, principally through PPB, of the long-considered proposal to remove Ashington Capital and Ashington Management.
66. Accordingly, Albany says that the plaintiff's submission that Albany (and Acorn) are accessorily liable on the basis that they "were dealing with employees of Ashington who were hoping to participate in the new management vehicle if the transaction occurred" (plaintiff's closing submissions at [7]) is insufficient.
67. Albany says that, contrary to the plaintiff's oral submissions (T 1498.45), the liability of Albany for knowing assistance does not turn on whether Ashington gave "fully informed consent" to the conduct of Ms Garrett and Mr Renauf, because that conduct only goes to the loss of their employment. Instead, it is said that the liability of Albany for knowing assistance turns on the correct analysis and characterisation of what was the conduct in which Albany was participating that was materially causative of the removal of Ashington Capital and Ashington Management. Albany says that conduct was the decision of the superannuation fund investors to remove Ashington and the implementation by PPB of that decision.
68. As to the plaintiff's submissions on the issue of knowledge, Albany says that it comes down to the proposition that, because Albany knew that Ms Garrett and Mr Renauf were employees of Ashington and were seeking employment/profit sharing in the Acorn/Albany entity, then Albany knowingly participated in all of Ms Garrett and Mr Renauf's conduct and that conduct was determinative of the removal of Ashington Capital and Ashington Management (T 1443.22, T 1500.13, T 1502.50). Albany says that Ms Garrett and Mr Renauf's conduct was not determinative of that event and any knowledge by Albany of their conduct is limited to any breach involving them seeking new employment, so that any equitable relief must be formulated having regard to any loss suffered due to the loss of two employees.
69. Albany says that its knowledge must be considered in the context of the information provided to it and whether that information gave Albany a reason to believe that Ms Garrett, Mr Renauf and Patersons were acting in breach of fiduciary obligations in relation to the investors' decision to remove Ashington Capital and Ashington Management so as to make Albany's participation in the implementation of that decision unconscionable or unconscientious (Albany emphasising this last requirement). In this context, Albany refers to the clerk in Consul Development who had been told by the fiduciary and believed that the fiduciary's employer could not afford to take the opportunities which the clerk ultimately took. Albany submits that it had no reason to believe there was any such breach.
70. Albany's alleged knowledge is pleaded at [283]-[288] of the third further amended statement of claim and in the Knowledge Particulars. In its submissions, Albany addresses each pleading of knowledge in turn as follows.
71. In relation to [283(a)], Albany admits that it knew Ms Garrett and Mr Renauf were employees of Ashington Management and (to the extent that the expression is meaningful) in "senior roles", but says that this is not sufficient.
72. In relation to [283(b)], Albany says that there is no evidence that Albany was aware of the terms of the "Patersons Mandate".
73. Insofar as (at [14] of the Knowledge Particulars), the plaintiff relies on the Stonington PowerPoint, Mr Carolan's 6 October 2009 email, the definition of "Purpose" in the confidentiality undertaking and the contents of the Stonington Data Room, to assert that Albany "knew" the terms of the pleaded "Patersons Mandate", Albany says that this is misconceived for the reasons that: (a) those documents do not set out the terms of, or even refer to, the "Patersons Mandate" and, while they refer in parts to "Stonington", it is said that this is insufficient to prove actual knowledge of the scope of Patersons' role or, relevantly, the limitations on that role (if there were any such limitations); (b) Mr Ko's only contact with Patersons was between 6 and 8 October 2009 in email correspondence with Mr Carolan when he provided Mr Carolan with a company and personal profile and negotiated the terms of the confidentiality undertaking (and Albany says that nowhere in that correspondence are the terms of the "Patersons Mandate" or the Stonington Capital Raising disclosed to Albany); (c) the Stonington PowerPoint did not refer to the terms of the "Patersons Mandate" (Albany noting that it was on Ashington header, presented by Ms Garrett (of Ashington), and made no reference to Patersons); and that at that meeting, Mr Ko was presented with "two streams" of investment - a direct investment in the Stonington sub-trust and a different, wider opportunity to replace Ashington as trustee and manager (contrary, Albany says to the suggestion that Mr Ko knew the "Patersons Mandate" was limited to Stonington).
74. Albany thus says (and I agree) that that there is no basis on which it can be asserted that Albany knew that the "Patersons Mandate", as pleaded, was concerned only with the Stonington Capital Raising.
75. In relation to [283(c)], Albany says that there is similarly no evidence that Mr Ko knew that the wider opportunity presented to him on 5 October 2009 was "outside the Patersons Mandate". Albany says that there is no evidence that Mr Ko knew the terms of the "Patersons Mandate"; and that Mr Ko was presented at that meeting with a "new opportunity" to replace Ashington that purportedly had the superannuation fund investors' approval. Albany says that the plaintiff's reliance (at [15] of the Knowledge Particulars) on communications between Patersons and Acorn on 30 September 2009 is also misconceived.
76. In relation to [283(d)], Albany does not accept that the retirement of Ashington was "contrary to the interests of the Ashington companies". Albany maintains that, by this time, Ashington was in dire straits. It says that a retirement on reasonable terms may well have been its best option at that time.
77. As to subparagraph [283(e)] that, broadly, Albany was only interested in investing in the manager, Albany says that it does not plead knowledge, despite the Knowledge Particulars.
78. In relation to [283(f)], Albany points to the evidence that, at the time Mr Ko accessed the Stonington Data Room, Mr Ko understood the "situation [was] relatively fluid". It is noted that Mr Carolan had told Mr Ko that the data room was to "enable the exchange [of] detailed project feasibility information". It is said that, given the "two streams" presented to him on 5 October 2009, it is said that Mr Ko accessed the data room for the purpose of conducting due diligence on the proposals with which he had been presented. Albany says that this is consistent with the evidence that Mr Ko was concerned by the lack of information provided in the data room and that he sought more documents relating solely to Stonington in the "next release of data room information" in the email copied to Ms Briggs, Ms Morgan (Mallesons) and Mr Carolan. Albany says (and I accept) that it thus cannot be suggested that Mr Ko was concealing his investigations from Ashington or Patersons.
79. Further, Albany says that the evidence shows that Ashington's own recapitalisation strategy was not limited to the Stonington Capital Raising. It is said that (despite Mr Anderson's denials at T 695.37-696.07), the contemporaneous documents show that Ashington continued negotiating with Albany (allowing Albany access to the data room and other information) even after it knew that Albany was interested in a much wider proposal. In that regard, Albany notes that, by late October 2009, Mr Anderson had informed KordaMentha that "a number of interested parties expressed broader interest in Ashington's assets and business". Albany says that Mr Anderson's oral evidence (that that statement referred only to Mr McCabe) cannot be correct as the statement refers to "a number of parties" (plural) (see T 688.08). In any event, Albany says that it was plain that Ashington knew and did not have any concerns about Ms Garrett investigating a broader deal with potential investors; and that Mr Anderson himself condoned such conduct.
80. Albany notes that, on 30 October 2009, Ashington informed the superannuation fund investors that the manager had adopted a "strategy of seeking new project equity, on an asset specific basis" (see T 690.6-692.16). Thus, Albany says that, by then, that strategy was no longer (if it ever was) limited to the Stonington Capital Raising.
81. Albany refers to Mr Anderson's 2 November 2009 report to Investec that the Albany proposal was focussed on increasing its equity commitment by also becoming involved in Wylde Street (T 694.24; T 695.18). Albany notes that, with that knowledge, Mr Anderson continued negotiations with the Alter Family (i.e., Albany) as a "fall back" (T 695.32). It is said that Mr Anderson must have known and condoned the investigation of a much wider investment proposal.
82. Further, Albany points to the 17 November 2009 email from Ms Garrett to Mr Anderson indicating to him that, in addition to Stonington, Alter "also very much like[d] Double Bay" and that Alter had "lost faith in Ashington as a Manager" (T 688.33). Albany says that there can be no doubt that Mr Anderson knew that a different deal was being investigated and took no steps to stop that conduct. It is said that Mr Anderson also knew that Mr Ko was speaking to both PPB (T 694.9) and to Investec (T 694.36); and that he took no steps to terminate those communications.
83. Insofar as the plaintiff's case now is that there was something unconscionable or unconscientious in Albany accessing the Stonington Data Room or the other information provided to it by people lawfully in possession of such information to conduct due diligence in respect of a broader proposal, Albany says that this does not sit with Mr Anderson's own efforts to keep Albany "on the hook" as a "fall back" in the event that Ashington could not come up with the mezzanine finance (which Albany says, as matters turned out, is exactly what occurred), nor Albany says, does it sit with PPB's role as representative of the superannuation fund investors.
84. In relation to [283(g) and (i)], Albany says that there is no evidence that Mr Ko actively took steps to keep Albany's proposal "confidential and secret" from Ashington. As to the assertion at [19] of the Knowledge Particulars that the content of certain documents "was implicitly intended to be kept secret and confidential", Albany says that none of those documents showed any positive steps taken by Albany to achieve that purpose. Albany points, by way of example, to the fact that, after Mr Ko accessed the Stonington Data Room on 9 and 10 October 2009, he made no secret of his request for further information - sending his request to each of Mr Carolan, Ms Morgan and Ms Briggs. Further, Albany says that, if it was the case (as submitted at [160(b)] of the plaintiff's closing submissions) that Ms Garrett and Mr Renauf and/or PPB were misleading Mr Anderson or the superannuation fund investors, there is no evidence that Albany was aware of such conduct. Albany says that there is nothing "implicit" in the communications which could give rise to that inference.
85. In relation to [283(h)] (which pleads that Albany used information from Ms Garrett, Mr Renauf, PPB and Patersons that was to its knowledge the proprietary and confidential information of the Ashington companies), Albany says that, apart from one inconsequential email from Ms Garrett and what appears to have been a further email from Mr Renauf (though the contents of the attachments to that email are not in evidence), all information came from PPB (referring to Mr Ko's liquidator's examination transcript, tendered by the plaintiff, Ex B at 40.50). It is noted that there was no material information provided by Patersons. Albany says that the documents provided by Ms Garrett and Mr Renauf were not confidential, were inconsequential, and could not have materially contributed to Albany's decision to make a proposal to the superannuation fund investors.
86. As noted above, insofar as Ms Garrett and Mr Renauf informed Albany that the superannuation fund investors had decided to remove the Ashington companies, Albany says that Ms Garrett was not providing Albany with Ashington's confidential information; if it was confidential, then it was the investors' confidential information; and Albany says that the same can be said of the information communicated by Ms Garrett to Mr Ko on 5 October 2009 as recorded in paragraphs 1(d), (e), (f), (g), (i), (j), (k) and (l) of the Swan Email (see chronology).
87. Albany points out that the Knowledge Particulars, when dealing with the documents said to have been provided to and used by Mr Ko, do not include reference to Ms Garrett's email of 20 October 2009 addressing his "three queries" (but was referred to in the plaintiff's closing submissions at [101]). To the extent that it is relied upon by the plaintiff, Albany says that it related to the effect of some of the terms of the Stonington presales contracts (Ex A at 63.17); that those presales contracts were not confidential; that they were pro forma contracts (T 852.47), which had already been provided to a number of agents for the purpose of selling lots off the plan (T 852.20) and which could be requested by any potential purchaser. It is argued that the legal information which was the substance of the memorandum was readily available from any conveyancing lawyer in Melbourne.
88. Similarly, it is said that Mr Renauf's email of 20 October 2009 (which is referred to in the Knowledge Particulars and the plaintiff's closing submissions at [199(d)], despite there being no evidence of the information it provided nor that it was provided to Mr Ko), was also inconsequential to Albany's decision to make a proposal.
89. Finally, it is said that the Stonington PowerPoint presented to Mr Ko on 5 October 2009 did not contain proprietary and confidential information as alleged and, to the extent that it did, Mr Ko had no reason to believe it was "proprietary and confidential" in circumstances where it was provided by an Ashington employee as part of an investment pitch. In particular, Albany points to the following.
90. First, that Mr Anderson sent a similar presentation to the Victor Smorgon Group and Wingate. It is noted that the version that Anderson sent to those parties also revealed the fact of PPB's engagement. It is said that Mr Anderson could not have been concerned at the time that such information was being provided to investors - himself providing the same information.
91. Second, that although Mr Anderson removed the debt information from the version he sent to the Victor Smorgon Group and to Wingate and says he had "a lot of difficulty" with that information having been shared (T 519.43), there is no evidence that he ever raised that difficulty with Ms Garrett, nor did he investigate, cease further distribution of the presentation or take any disciplinary action in relation to this (T 520.1-15). Albany says that it was not of sufficient concern to Mr Anderson that the information now relied upon by the plaintiff as "proprietary and confidential" was being provided to the superannuation fund investors. Also, it is noted that the debt information had already been provided to the superannuation fund investors and PPB. (Although it is likely quite a different situation for that information to have been provided to existing investors and PPB, who was bound by the PPB Confidentiality Agreement, as opposed to incoming investors.)
92. Third, it is said that Mr Anderson knew that Albany and others were interested in a broader investment deal and cannot now claim such broader information was confidential or, more importantly, that it was unconscionable or unconscientious for such information to be used by those to whom it was provided for that broader purpose.
93. Finally, in relation to [283(h)], Albany emphasises that the claim extends to the use of information from PPB "that was to its knowledge the proprietary and confidential information of the Ashington companies". Albany points out that the plaintiff thus asserts that the use of information provided by PPB (which is not alleged to have been involved in the alleged "dishonest and fraudulent design" - see the pleading at [288]), was also conduct which knowingly assisted Ms Garrett, Mr Renauf and Patersons in their breaches of their fiduciary duties.
94. Albany emphasises that PPB acted for the superannuation fund investors; as it says was made abundantly clear by PPB on 20 August 2009 in the PPB Mandate. It is said that, although Albany did not know the terms of the PPB Mandate, Albany had been informed (and it was the fact) that PPB had been "appointed as Advisor to Existing Equity Investors"; and it is said that the information was provided by PPB on express instructions from the superannuation fund investors. Albany points to PPB's submissions at [4]-[9] in relation to the superannuation fund investors' right to access Ashington's documents. Accordingly, Albany says that there was nothing dishonest or fraudulent in Albany's negotiations with, and requests for information from, PPB (as the representative of the superannuation fund investors) in respect of the implementation of the decision which Albany was informed, from the outset, had already been made by the superannuation fund investors.
95. Albany says that there is no evidence that Albany knowingly used information provided by PPB as the representative of the investors to somehow advance breaches of fiduciary duties by Ms Garrett, Mr Renauf and Patersons. Rather, it is said, it used that information to formulate a proposal and negotiate a deal with investors in response to an opportunity the investors had purportedly approved. It is said that Ms Garrett, Mr Renauf and Patersons were peripheral and causatively irrelevant to those steps.
96. Finally, in relation to [283(j)], Albany says that there was nothing to prevent Parissen making an offer of employment to employees or former employees of Ashington. It is emphasised that such a circumstance has to be considered in context; noting that, as recorded by Mr Routley, Albany and Acorn had been told that PPB had contacted Ms Garrett and let her know that Ashington was not going to retain management rights for the funds and that she should work with PPB to solve current funding issues and work out how to move forward (Swan Email).
97. Accordingly, Albany says that, whether Ms Garrett first suggested it, or it came from Mr Ko, the offer of employment by Parissen to Ms Garrett and Mr Renauf is inconsequential. Further, it is said that, even if it does constitute knowing assistance of Ms Garrett and Mr Renauf's breach of their fiduciary duties (if any), that goes only to Ashington potentially suffering a loss because two employees left Ashington's employment, not to the alleged loss of the entire funds management business.

Assistance

1. Finally, as to the requirement for "assistance" in the alleged dishonest and fraudulent design, Albany says that, on the facts of the present case, if there was a breach of fiduciary duty, it had occurred or would have occurred irrespective of Albany's conduct. Further, it is said that neither Ms Garrett and Mr Renauf's nor Patersons' breaches of fiduciary duty (if any) were necessary conditions of the implementation of the superannuation fund investors' decision (which it maintains was instigated by the superannuation fund investors themselves, not by Ms Garrett, Mr Renauf and Patersons) to remove the Ashington companies.

Determination

1. The claim as ultimately put by the plaintiff (as noted above) is based on Mr Ko's knowledge that Ms Garrett and Mr Renauf were senior employees of Ashington Management (which is conceded by Albany); that Mr Ko knew they owed fiduciary duties to Ashington Management (which may or may not be implicit in the above but is not established to my satisfaction on the evidence); and that with that knowledge, Albany assisted Ms Garrett and Mr Renauf in the development of the proposal to replace Ashington by agreeing to have the replacement entity employ them.
2. I accept that there would not necessarily be a breach of fiduciary duty if an existing employee was contacted to obtain an expression of interest from the employee as to a new employment venture or for future employment elsewhere (although of course there might be issues with a non-compete clause or obligations of that kind). However, that is not the case here - where the existing employee(s) is (are) actively pursuing a proposed replacement of the employer from its roles and a position in the replacement company; and Mr Ko understood that Ms Garrett and Mr Renauf continued in their employment with Ashington (evidenced by his request for them to resign "as soon as practicable" to "[m]inimise the conflict issues").
3. However, I have a number of difficulties with the extent of Mr Ko's knowledge. I do not consider that Mr Ko had the requisite knowledge that Ms Garrett and Mr Renauf owed fiduciary obligations to the Ashington entities (and I do not consider that knowledge of an employee holding a senior position in a company necessarily is sufficient knowledge of circumstances which would indicate those facts to an honest and reasonable person). Further, Mr Ko did not, on the evidence, have knowledge of the Paterson's Mandate and the limits of the Stonington Capital Raising.
4. What was clearly presented to Albany (after the Stonington Capital Raising was effectively abandoned and after the alleged Consortium was formed and the Consortium Objective formulated) was that the superannuation fund investors had agreed to terminate Ashington. There is nothing to indicate that an honest and reasonable person in Mr Ko's position would have known that the proposal to replace Ashington was presented by Ms Garrett outside the scope of her employment; and Ms Garrett's continued assistance of Mr Ko (in relation to the confidentiality agreement and access to documents in the Stonington Data Room) as an employee of Ashington is likely to have indicated that she was assisting with a proposal that Ashington was aware of and/or with Ashington's authority. This is reinforced by Mr Ko's requests for additional data being sent to Ms Briggs and a representative of Mallesons (Ashington's solicitors).
5. It is clear that Albany's understanding was that PPB, working for the superannuation fund investors, had contacted Ms Garrett and suggested that they work to find a way forward (including the potential involvement in the replacement entity). Therefore, I cannot infer on the evidence before me that Mr Ko had knowledge of that circumstances that would indicate to an honest and reasonable person that Ms Garrett and Mr Renauf were breaching fiduciary obligations owed to Ashington.
6. Moreover, I am not persuaded that Mr Ko had the requisite knowledge of any dishonest and fraudulent design, particularly in the terms pleaded (and I do not read the email as to minimising of conflict as indicating that he did - there may be a number of innocent explanations for that).
7. As to assistance, I accept Albany's submission that if there was a breach of fiduciary duty, it would have occurred regardless of Albany's conduct. However, as with Acorn, I find that Albany's actions in taking up the opportunity to replace Ashington as trustee and manager, developing a proposal to establish an entity to takeover the funds management business, and offering to employ Ms Garrett and Mr Renauf in that business facilitated Ms Garrett and Mr Renauf's breaches of fiduciary duties (Harstedt v Tomanek at [116]-[118]). I reiterate, however, that assistance alone is insufficient to ground a knowing assistance claim (for it is certainly possible to unwittingly assist another's breach of fiduciary duty).
8. Therefore, had it arisen I would have held that the claim for knowing assistance against Albany was not made good.

Breach of contract and duty of confidence claims

1. The next category of claims are for breach of contract or breach of an equitable obligation of confidence in relation to access to or disclosure of confidential information in the Stonington Data Room. I have concluded already, albeit with one exception, that the breach of contract claims (being the claims under contracts entered into with Ashington Capital as trustee for ADF2) were not assignable by the liquidator as they had vested in Parissen as the incoming trustee, so the following is in the event that that conclusion is wrong. (The exception to this are the claims made pursuant to the PPB Confidentiality Agreement which I have concluded was entered into with Ashington Capital in its own right.)
2. I have already dealt with the claims made against Ms Garrett and Mr Renauf and claims under the Patersons Mandate (with respect to good faith and conflicts). Claims are made against each of the remaining defendants.
3. It is convenient first to set out the principles in relation to equitable obligations of confidence. It is necessary for a claim for breach of such an obligation that four elements be satisfied: the information in question must be identified with specificity; it must have the necessary quality of confidence; it must have been received by the respondent in circumstances importing an obligation of confidence; and there must be an actual or threatened misuse of the information without the applicant's consent (see Optus Networks Pty Ltd v Telstra Corporation Ltd (2010) 265 ALR 281; [2010] FCAFC 21 at [39] per Finn, Sundberg and Jacobson JJ).
4. As to the first of the above elements, it is necessary to identify, with specificity, the information disclosed to each of the defendants which it is said was confidential (see O'Brien v Komesaroff (1982) 150 CLR 310; [1982] HCA 33 at 326 per Mason J (with whom Murphy, Aickin, Wilson and Brennan JJ agreed).
5. As to the second, reference is made to Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 where Kirby P, as his Honour then was, said (at 334) that determining what is confidential involves a decision on a question of fact in each case; and that the following considerations are relevant to that exercise: (a) The fact that skill and effort was expended to acquire the information … (b) The fact that the information is jealously guarded by the employer, is not readily made available to employees and could not, without considerable effort and/or risk, be acquired by others … (c) The fact that it was plainly made known to the employee that the material was regarded by the employer as confidential … (d) The fact that the usages and practices of the industry support the assertion of confidentiality … and (e) The fact that the employee in question has been permitted to share the information only by reason of his or her seniority or high responsibility within the employer's organisation …
6. As to the third of those elements (that the information must have been received by the respondent in circumstances importing an obligation of confidence), reference may be made to Del Casale v Artedomus (Aust) Pty Ltd (2007) 165 IR 148; [2007] NSWCA 172 where Campbell JA (with whom McColl JA agreed) said (at [134]) that the circumstances "have to be such that the court can conclude it would have been clear to a reasonable person, on reasonable grounds, that he or she was not free to deal with the information as his or her own, or could only deal with it subject to certain limitations".

Claim for breach of contract against Patersons

1. The plaintiff alleges that Patersons was in breach of the Patersons Confidentiality Term (cl 6.4) and the Patersons Access to Information Term (cl 6.5) of the Patersons Mandate (extracted earlier - see chronology at 23 September 2009) by reason of the matters pleaded in various paragraphs of the third further amended statement of claim (see at [253]). Alternatively, the plaintiff pleads that Patersons was in breach of equitable duties of confidence allegedly owed to the Ashington companies by facilitating access by Acorn and Albany to confidential information in the Stonington Data Room in order to further the objective of the Consortium (see [253A] of the pleading).
2. Patersons says that the plaintiff has not identified with specificity the information that it says was confidential. Further, it is said that, even leaving aside whether the "Data Room Information" (as defined in the statement of claim at [116(b)]) has the requisite degree of confidentiality, the plaintiff's case for breach of confidence (and for breach of the non-disclosure term) fails because the Data Room Information was not received by Patersons (as confirmed by the access logs to the Stonington Data Room). Patersons points to the documentary and lay evidence showing that the data room was: (i) established by Ashington Capital's solicitors on the instructions of Ashington Capital; (ii) administered by Ashington Capital; (iii) comprised of documents uploaded by representatives of Ashington Capital; and (iv) never accessed by anyone from Patersons.
3. Insofar as Patersons is alleged to have facilitated Acorn's and Albany's access to the Stonington Data Room because Mr Carolan and Mr Doherty were party to the correspondence that involved Acorn and Albany entering into confidentiality deeds, Patersons says that this was on the basis that those confidentiality agreements were approved by Ashington Capital and its lawyers and were signed by Mr Ko (on behalf of Albany) and Mr Routley and Mr Sheehan (on behalf of Acorn). Hence, Patersons says that it did not facilitate access to the Stonington Data Room on terms inconsistent with the Patersons Confidentiality Term.
4. If, however, a contrary conclusion is reached because of the actions of Mr Carolan, then Patersons says that Mr Carolan's knowledge was acquired outside the scope of his employment and authority under the Patersons Mandate, and so it cannot be attributed to Patersons.

Determination

1. The claims against Patersons would fail for the reasons put forward by Patersons. As to the alleged breaches of cll 6.4 and 6.5, I have reviewed the matters in [95], [96], [98], [99], [99A], [99AA], [102], [103], [106], [108], [111], [117], [119], [123], [127], [128], [135A], [145], [152], and [154] pleaded to amount to breaches of the Patersons Confidentiality Term and the Patersons Access to Information Term (see pleading at [253]). Broadly, those paragraphs relate to: the initial communication between Patersons and Acorn with respect to the Stonington Capital Raising; Ms Garrett's 2 October 2009 email to Mr Doherty and Mr Carolan about an opportunity to invest in a Newco; Mr Doherty arranging a meeting with Mr Routley on 5 October 2009; the meeting on 5 October 2009 at which it is pleaded that Ms Garrett told Mr Doherty of the opportunity to invest in the manager, and the later meeting with Mr Ko at which Ms Garrett and Mr Renauf present the Stonington PowerPoint; the 6 October 2009 email from Ms Garrett to Mr Carolan; the 7 October 2009 conference call between Ms Garrett, Mr Carolan, Mr Ko and Mr Routley; the pleaded Consortium members; the 9 October 2009 email from Mr Carolan to Mr Renauf, copied to Ms Garrett, stating that Mr Ko wanted to tour the Sydney projects; the 10 October 2009 email from Mr Ko to Ms Garrett, Mr Carolan and others requesting further information; Mr Carolan sending Ms Garrett the Updated Patersons Mandate on 14 October 2009 to provide to Investec; discussion between Ms Garrett, Mr Renauf, Mr Carolan and Mr Hannon in October 2009 in respect of a new funds management business; the 15 October 2009 email from Ms Garrett to Mr Carolan informing him that she was flying to London to meet with Mr McCabe; Ms Garrett's request of Mr Carolan and Mr Hinsley (another Patersons employee) to print an attachment on 19 October 2009; Mr Carolan's email to Ms Garrett on 27 October 2009 about a "boutique incubator"; Ms Garrett's email to Mr Carolan on 9 November 2009 in which she said "jump on my gmail and check out Byron's latest two emails. The ratchet and consultancy look good to me, esp the ratchet."; and the 16 November 2009 "we will be shot" email from Mr Carolan to Mr Doherty.
2. From a contractual perspective, it is difficult to discern what information the plaintiff alleges that Patersons improperly disclosed for the purposes of cll 6.4 and 6.5 from the above paragraphs. Most of the above paragraphs do not refer to the provision of information; and in many of them, it is not a Patersons employee communicating the pleaded information. As to the initial provision of the Patersons Stonington Term Sheet on 30 September 2009 to Mr Routley, that information was able to be disclosed to potential investors under cl 6.4(c). As to the provision by Mr Carolan of the Updated Patersons Mandate to Ms Garrett on 14 October 2009 "to share with Investec", there is a difficulty in that Mr Carolan provided this document to an Ashington employee. However, I would accept that if Mr Carolan's knowledge was attributable to Patersons, then this would amount to a breach of cl 6.4, as Mr Carolan knew that Ms Garrett was not acting within the scope of her employment, and he knew the document was being provided to be further distributed to Investec. Nevertheless, for the reasons discussed earlier, Mr Carolan's knowledge is not attributable to Patersons.
3. As to breach of the alleged duty of confidence, the confidential information has not been identified with specificity but in any event it is not established that Patersons had access to any documents in the Stonington Data Room and insofar as it facilitated access by other defendants that was pursuant to agreements approved by Ashington.

Claim for breach of contract against PPB

1. The plaintiff similarly contends that PPB breached equitable and contractual duties of confidence owed to Ashington Capital in providing information to Albany and Acorn for the unauthorised purpose of enabling them to conduct due diligence on their proposal to replace Ashington Capital and Ashington Management as trustee and manager of ADF and ADF2. Reliance is placed in this context by the plaintiff on the PPB Confidentiality Agreement, PPB Mandate and equitable duties of confidence.
2. The PPB Confidentiality Agreement (as referred to above) entered into with Ashington Capital related to "Confidential Information" (broadly defined) made available to PPB for the "Approved Purpose" of "assisting [PPB] to conduct a review and prepare a report of [ADF2] as instructed by investors in [ADF2]". It relevantly required PPB to maintain the confidential nature of the Confidential Information (cl 4), and (subject to inapplicable exceptions) prohibited PPB from disclosing the Confidential Information to any person (cl 5) or from using, disclosing or reproducing any of the Confidential Information for any purpose other than the Approved Purpose (cl 6).
3. The plaintiff alleges that PPB breached its obligations of confidence, whether contractual or otherwise, by: (a) assisting Acorn and Albany to conduct the due diligence on the ADF and ADF2 projects ([113]-[146] of the third further amended statement of claim); (b) disclosing the "16 October Information", the "Key Issues Information", the "Cross Project Information" and the "Further Confidential Information" (as each of those terms are defined in the third further amended statement of claim); and (c) facilitating the disclosure by Ms Garrett and/or Mr Renauf to Albany and Acorn of the Ashington Capital constitution and the "20 October Stonington Information".
4. The plaintiff says that the information requested by Mr Routley on 16 October 2009 relating to Ashington was made in the context of his confirmation to PPB that Albany and Acorn were interested in replacing Ashington as the manager of ADF and ADF 2; and was forwarded on by PPB to Ms Garrett and Mr Renauf. The plaintiff says that the bulk of the information sent by Mr Block on 16 October 2009 in response to that request was not available to the superannuation fund investors; and that it can be inferred from this that PPB obtained that information from Ashington Capital either for the Approved Purpose under the PPB Confidentiality Agreement (such that its disclosure to Albany and Acorn to assist them in their plan to replace Ashington was a breach of the promise in that agreement to keep that material confidential) or from Ms Garrett or Mr Renauf outside the rubric of that agreement.
5. In any event, it is said that disclosure of at least some of that information to Albany and Acorn, without Ashington's authorisation, for the purpose of advancing a plan to replace Ashington satisfies the elements for an equitable breach of confidence. It is noted that the information included copies of Ashington's finance facilities, property valuation reports, detailed internal financial modelling and accounts, and Ashington board papers.
6. The plaintiff alleges (at [132] of the pleading) that on 19 October 2009, Mr Block emailed Ms Briggs of Ashington requesting a copy of the Ashington Capital constitution, and that Ms Briggs provided this document to Mr Block. It is also alleges that, on 20 October 2009, Ms Garrett and Mr Renauf sent an email to Mr Ko and Mr Routley, copied to Mr Lord and Mr Block, providing certain documents in response to "three queries" raised with respect to the Stonington sales contracts (defined in the third further amended statement of claim as the "20 October Stonington Information"). These emails are said to constitute PPB "facilitat[ing] the disclosure of the Ashington Capital constitution and the 20 October Stonington Information" in breach of the PPB Confidentiality Agreement.
7. The plaintiff says that the provision of such confidential information was critical to Acorn and Albany's ability to undertake due diligence on Ashington's business, without which the plan could not have succeeded. (That proposition seems to me to be doubtful in circumstances where the ultimate appointment of Parissen as replacement trustee was still subject to a due diligence process - suggesting that the ability to undertake due diligence prior to the appointment was not a matter without which the replacement of Ashington could not have been effected.)
8. As to the argument that the PPB Confidentiality Agreement was also entered into for the benefit of Ashington Management, and enforceable by it (see [281C]-[281L] of the third further amended statement of claim), the plaintiff points to the agreement by PPB pursuant to cl 19 of the PPB Confidentiality Agreement that "the undertakings in this agreement are given for the benefit of, and are enforceable by, each of us and any of our current or future Representatives even though the Representative is not a party to this Agreement". The term "Representative" of a party is defined to include a "Related Entity" of that party (see cl 2); Ashington Capital was identified as a party to the PPB Confidentiality as "Ashington Capital Limited (ACN 117 115 063) ('us' or 'we' and includes any of our Related Entities)"; and the expression "Related Entity" was then defined to have the meaning given in the Corporations Act.
9. Since Mr Anderson was a director of both Ashington Capital and Ashington Management at all relevant times (thus engaging subparagraph (k) of the definition of "Related Entity" in the Corporations Act) it is contended that Ashington Management was a Related Entity of Ashington Capital; and hence that Ashington Capital thus entered into the PPB Confidentiality Agreement "including in its capacity as agent for [Ashington Management], with authority to bring proceedings in its own name, in respect of breach of PPB's covenants relating to documents confidential to [Ashington Management]" (pleading at [281K]). It is submitted that the entry by Ashington Capital into the PPB Confidentiality Agreement in multiple capacities supports the conclusion that it must also have entered into it in its personal capacity.

PPB's submissions

1. In accordance with the defence raised by PPB (considered above) to the effect that any such causes of action were held by Ashington Capital in its capacity as trustee of ADF and ADF2 (and passed to Parissen in its capacity as trustee of ADF and ADF2 and were thus unassignable by the liquidator of Ashington Capital), PPB says that, contrary to the terms of the Confidentiality Agreement, in which Ashington Capital is detailed as the contracting party, it should be inferred that the Confidentiality Agreement was entered into by Ashington Capital in its capacity as trustee of ADF2.
2. PPB refers to the position of Ashington Capital as trustee and says, that where information relates to the administration of the trust or comes into the possession of the trustee by reason of it being the trustee, such information cannot be used for the trustee's personal purposes (as such use would involve an impermissible conflict of interest); and that such information could only be permissibly disclosed by the trustee, in its capacity as such, for a purpose disclosing no conflict with the interests of the beneficiaries or objects of the trust.
3. PPB points to the distinction between, on the one hand, documents forming part of the trust property in the traditional sense (to which a beneficiary ordinarily has a right of access) and documents which may be used by the trustee in relation to trust business but which do not become trust property (i.e., which remain the property of the trustee and can also be used for the trustee's personal purposes, albeit that in some circumstances the trustee might be required to produce those documents - say to an incoming trustee) (see Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 432-433 per Mahoney J). PPB argues (although this seems to be inverting the discussion in Hartigan) that it follows that what might be done with such information by a trustee does not depend on whether the information is recorded in documents forming part of the property of the trustee; it depends on whether the information is of a kind to which the trustee's fiduciary obligations might attach and the scope and content of those obligations.
4. PPB submits that there is an incongruity in the notion that Ashington Capital, in its personal capacity, had a cause of action (which was then assigned to the plaintiff) for recovery in respect of a loss that it allegedly personally suffered, arising out of an alleged breach of confidence involving information the use and disclosure of which by Ashington Capital was governed by its fiduciary obligations. PPB says that, implicit in that proposition is the notion that Ashington Capital as trustee of ADF or ADF2 had an interest in the use of that information separate from, and independent of, compliance with its fiduciary duties.
5. As to the capacity in which Ashington Capital entered into the PPB Confidentiality Agreement, PPB says that it was not consistent with the nature of Ashington Capital's duties as trustee for it to have entered into an agreement pursuant to which obligations were owed to it in its personal capacity in relation to the use of information pertaining to the management and affairs of ADF2; and that, were it otherwise, Ashington Capital would have been at liberty to create an interest for itself in information that came into its possession by reason of its position as trustee, principally in the form of a right to recover damages, for itself and not for ADF2, consequent upon a breach of the obligations in the PPB Confidentiality Agreement.
6. Thus, PPB submits that although the contracting party was Ashington Capital, Ashington Capital entered into the PPB Confidentiality Agreement as trustee of ADF2; a conclusion that PPB says is reinforced by the circumstance that the expression "Approved Purpose", which set the limits upon PPB's use of Confidential Information, was fundamentally concerned with ADF2. I agree. I have dealt with this issue earlier.
7. As to the plaintiff's argument that Ashington Capital entered into the PPB Confidentiality Agreement in its personal capacity, PPB says that the language of cl 19 does not readily support a finding of agency, noting that the clause speaks of the agreement being for the benefit of "each of us and our current or future Representatives". PPB says that one cannot be an agent for a future, unascertained principal; and that, because cl 19 purported to confer on Representatives an entitlement to enforce the agreement, this militates against a finding that Ashington Capital held the benefit of PPB's covenants on trust for those Representatives because, assuming a trust, enforcement would be responsibility of Ashington Capital as trustee.
8. Moreover, PPB says that there is nothing to suggest that either Ashington Capital or PPB, in entering into the PPB Confidentiality Agreement, was abandoning its right to vary that agreement by subsequent agreement, referring to the caution expressed by de Parcq LJ in Re Schebsman as to the discovering of indications of an intention to create a trust, his Lordship saying that: I have little doubt that in the present case both parties (and certainly the debtor) intended to keep alive their common law right to very consensually the terms of the obligation undertaken by the company, and if circumstances had changed in the debtor's life-time injustice might have been done by holding that a trust had been created and that those terms were accordingly unalterable.
9. PPB argues that cl 19, and the reference to "Related Entities", may amount to no more than an attempt to circumvent privity of contract. It is submitted that, if that is correct, there should be a finding that Ashington Capital entered into the PPB Confidentiality Agreement as trustee for ADF2. I accept that such a finding should be made. Ashington Capital entered into the PPB Confidentiality Agreement for the stated benefit of at least the benefit of beneficiaries of ADF2. Insofar as it was for the benefit of current representatives or related entities, it must have done so in its capacity as trustee of ADF2.
10. PPB points out that, at the time of entry into the PPB Confidentiality Agreement, the scope of PPB's engagement by the superannuation fund investors was significantly narrower than it later became. It was contemplated in early July 2009 that PPB would undertake "a strategic review" of ADF2 and produce a report within "3 weeks from access to Ashington's records" (that timing explicable by reference to the then impending expiry of the Investec Stonington Facility on 25 August 2009). PPB says that the provision of the First PPB Report on 14 August 2009 marked the achievement of the Approved Purpose, as defined in the PPB Confidentiality Agreement; and hence that information provided by Ashington Capital to PPB after the circulation of First PPB Report was not made available "for or in connection with the Approved Purpose" and thus was not covered by the PPB Confidentiality Agreement. (PPB says that the same applies to information concerning ADF, as distinct from ADF2.)
11. PPB says that, while information had plainly been given to PPB prior to the completion and circulation of the First PPB Report, it is not clear, from the evidence, when any particular item of information was provided by Ashington Capital to PPB; and, hence, PPB says that the plaintiff has not discharged the onus of proving that any particular information was provided to PPB pursuant to the PPB Confidentiality Agreement.
12. In any event, PPB points to cl 1 (the definition of "Confidential Information as meaning information "made available by us or our Representatives" and cl 5 (which permits disclosure with "our prior written consent"); and says that, even if the reference to "related entities" within the meaning of the Corporations Act has the effect for which the plaintiff contends, the effect of the terms "we" and "us" (to be taken as including "any of our Related Entities") and the more expansive definition of "Representative" (to include "an employee, agent, auditor, adviser, partner, consultant, joint venturer, contractor or sub-contract of" the relevant party "or a Related Entity of one of those persons") means that under the PPB Confidentiality Agreement: (a) "Confidential Information" could include information provided by a Representative of Ashington Capital that was not a Related Entity of that company; and (b) a Related Entity of Ashington Capital could consent to the disclosure of that information by PPB.
13. Thus, PPB says that it follows from the plaintiff's construction of the PPB Confidentiality Agreement that a Related Entity of Ashington Capital could consent to the disclosure by PPB of information confidential to, or provided by, some other person. PPB places significance on this because the expression "related entity" is defined in s 9 of the Corporations Act also to include "a beneficiary under a trust of which the first-mentioned body is or has at any time been a trustee" (sub-paragraph (h)) and, before sending Acorn and Albany the information requested by them on 16 October 2009, PPB requested written approval from the superannuation fund investors for the provision of information to Acorn and Albany "on a needs be basis" so as to allow them "to gain a better and more detailed understanding of the assets", with a view to them presenting "a conceptual plan, which will be subject to more detailed due diligence & approvals etc". It is noted that such approval was given by Mr Flett of Frontier on behalf of LUCRF, Ms Chan for Sunsuper, and Mr Hastings of HESTA.
14. Accordingly, PPB says that it acted with the consent of Related Entities of Ashington Capital in providing information to Acorn and Albany, in accordance with cl 5; and that there was therefore no breach of the PPB Confidentiality Agreement (and, even if there were, for the reasons already given, no cause of action for such breach could have been assigned to the plaintiff, as Ashington Capital entered into the agreement as trustee for ADF2).
15. As to the PPB Mandate Letter, PPB says that, by providing information about ADF and ADF2 to Acorn and Albany, it was "communicating with … other third parties that are relevant to the ongoing operation and viability of the Funds", with a view either to "achieving a legally effective restructure of the current trustee … arrangements" or "recommending a medium term strategy for the Funds", namely, to accept the Parissen proposal (i.e., within the scope of the PPB Mandate Letter). It is said that Acorn and Albany were vital to the ongoing operation and viability of the funds, because they were actively considering injecting equity into the funds, in circumstances where Ashington Capital in its various capacities had defaulted under its financing arrangements.
16. PPB refers to the statement in the PPB Mandate Letter making clear that PPB would "not be acting for the Trustee in any capacity". PPB says that, by signing the PPB Mandate Letter, Ashington Capital agreed to this, and represented and warranted to PPB that it understood that any communications from PPB "would be for the benefit of and to the Investors, regardless of whether the Trustee is privy to such communication" and that PPB was not acting as a fiduciary for or as an adviser to Ashington Capital. That being so, PPB says that the use of the words "assist the Trustee" in the letter are not to be understood as denoting action taken for the benefit of Ashington Capital as trustee of ADF and ADF2; rather, that those words recognise that, while Ashington Capital remained trustee, the management of ADF and ADF2 was the province of Ashington Capital, such that PPB was in no position to exercise control in respect of either the funds or Ashington Capital itself. PPB thus submits that the notion of assisting the Trustee was used in the letter in contradistinction from directing, or dictating the actions of, the Trustee.
17. PPB cavils with the proposition that the phrase "legally effective restructure of the current trustee and security arrangements" should be read as referring only to the need to address the structural risk identified with Ashington Capital being the trustee, not merely of ADF and ADF2, but also of the various sub-trusts through which the Ashington group's development projects were to be carried out. It is said that such a construction is significantly narrower than the natural meaning of the phrase, which, as a matter of ordinary English, is capable of extending to the removal and replacement of the trustee of the funds. (As to this, while I would not read down the phrase to be limited only to Ashington Capital as trustee, I do read the phrase as focussing on the structural issues, and at the relevant time that related to the difficulties with common trustee at head and sub-trust level.)
18. As to the plaintiff's reliance on statements in PPB's Strategy Update No. 1, in the context of a recommendation in the same Strategy Update that PPB's role be expanded to reflect what was ultimately stated in the PPB Mandate Letter, as suggesting simply a structural concern with Ashington Capital's role as trustee of both the head trusts and the sub-trusts in the Ashington business, and with the fact that Ashington Capital had nine charges registered against it (including the concern that such a structure did not "quarantine the group from enforcement action by lenders to the trusts, should one of the sub trust assets default on its debt or other creditor obligations", unlike a structure which involved "establishing separate borrowing entities for each of the [Funds'] sub trusts"), PPB raises the following matters.
19. First, that, notwithstanding that PPB sent a copy of Strategy Update No. 1 to Mr Anderson and Mr Steel on 21 August 2009, the PPB Mandate Letter included a representation and warranty by Ashington Capital that it was "not relying on any communication (written or oral) from PPB, it being understood that any communications from PPB (written or oral) shall be for the benefit of and to the investors, regardless of whether the Trustee is privy to such communication". In PPB's submission, the effect of this provision is to preclude recourse to Strategy Update No. 1 as an aid to the construction of the PPB Mandate Letter. PPB says that it was effectively an "entire agreement" clause (noting the observation of Davies JA in Macdonald v Shinko Australia Pty Ltd [1998] QCA 53 to the effect that the purpose of such a provision is, amongst other things, to exclude any evidence outside the relevant instrument "to construe the instrument in way different from the meaning to be inferred solely from its terms"). PPB says that it was thus never open to Ashington Capital, and it is not open now to the plaintiff, to rely upon the Strategy Update as imposing a limit upon the meaning of the words of the PPB Mandate Letter.
20. Second, as to the assertion that the PPB Mandate Letter should be read down by reference to what was said in Strategy Update No. 1, PPB says that what was envisaged in Strategy Update No. 1 was that Ashington Capital retain PPB to assist in achieving the contemplated restructure. It is noted that, amongst other things, the Strategy Update recommended that PPB be additionally retained by Ashington Capital to provide advice to Ashington Capital in respect of investor supported strategies, noting that the role at that stage was to involve "[t]o assist the company in achieving a legally effective restructure of the current trustee and security arrangements". However, PPB again points out that the PPB Mandate Letter makes clear that, by signing it, Ashington Capital was accepting that PPB was not acting as its adviser, but instead was acting for the superannuation fund investors. It is said (and I accept) that the PPB Mandate thus contemplated a fundamentally different role for PPB from that proposed in Strategy Update No. 1. PPB says that there is no reason why, with the PPB Mandate Letter departing so significantly from the recommendation contained in Strategy Update No. 1, the Strategy Update should be seen as a form of extrinsic material to which recourse may be had in guiding the construction, and limiting the meaning, of the text of the PPB Mandate Letter.
21. Third, it is said that, prior to signing it, Mr Anderson himself appears to have understood the PPB Mandate Letter as signalling the possibility of an attempt by the investors to removal Ashington Capital as trustee of ADF and ADF2. (Pausing there, Mr Anderson's subjective construction of the PPB Mandate Letter would not of course be relevant to its objective construction.)
22. PPB maintains that its relevant communications to Acorn and Albany, attaching, enclosing or otherwise transmitting various documents and information about ADF and ADF2 from 16 October 2009, were thus authorised by the PPB Mandate Letter; and, to the extent that such conduct would otherwise have constituted a breach of the PPB Confidentiality Agreement, it is said that that agreement was superseded by the PPB Mandate Letter.
23. Further, PPB says that, whatever duty of confidence might otherwise have arisen in equity, the content of that duty must accommodate the terms and operation of the PPB Mandate Letter. It is said that, at the very least, the terms of the PPB Mandate Letter militate against any contention that information was provided to PPB "was received in circumstances importing an obligation of confidence".
24. Finally, PPB says that, in any event, if, as pleaded by the plaintiff, the PPB Mandate Letter gave rise to an obligation on PPB not to use any information provided to it by Ashington Capital for purposes connected with the termination of the Ashington group's role in the management of ADF and ADF2, that obligation was owed to Ashington Capital as trustee of those funds. Consequently, any cause of action for breach of that obligation must have been transferred to Parissen following its appointment as replacement trustee, with the result that no such cause of action could have been assigned to the plaintiff. (I have dealt with this issue already).
25. As to the claim for breach of an equitable duty of confidence, PPB says (for the reasons given in relation to the PPB Confidentiality Agreement and the PPB Mandate Letter), that the plaintiff cannot establish the fourth of the requisite elements (an actual or threatened misuse of the information without consent); nor, in light of the reference to the restructure of current trustee arrangements in the PPB Mandate Letter, can the plaintiff establish the third (receipt of information in circumstances importing an obligation of confidence). It is noted that in Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health [1990] FCA 206, Gummow J said, of cases involving the disclosure to the defendant of information for limited purposes, that: it is not necessary that the defendant have known of the limited purpose of the disclosure to him. However, whether the defendant neither knew nor ought to have known of the alleged limited purpose of the disclosure, it is difficult to see on what footing equity should intervene to bind his conscience.
26. PPB says that, in this case, the text of the PPB Mandate Letter tells against any contention that PPB ought to have known that the purpose of the provision of information was so limited as to exclude the possible use of such information to aid in the removal of Ashington Capital as trustee of ADF and ADF2.
27. PPB further says that, whatever the effect of the PPB Confidentiality Agreement and the PPB Mandate Letter, the circumstances in which Ashington Capital provided information to PPB did not import an obligation not to use such information in effecting the removal and replacement of Ashington Capital and Ashington Management as trustee and development manager respectively (referring again in this context to the discussions between PPB and the superannuation fund investors in July and August 2009 concerning the replacement of Ashington Capital as trustee). PPB says that there was a similar appreciation of the possibility of such removal and replacement within Ashington itself (referring to Mr Bouris' 13 July 2009 email as to the need to rebuild credibility to the investors to avert any possible action to terminate the management agreement; and the 6 August 2009 email from Mr Bouris expressing the view that "whatever happens it would appear that what has happened will adversely affect the nature of the mandate going forward with the investors"). PPB says that it is telling that, in cross-examination, Mr Anderson volunteered that he understood the term "mandate" as referring to the relationship between Ashington Capital and the superannuation fund investors (T 621.25).
28. PPB contends that Mr Anderson must have understood, from July 2009, that there was a not insignificant possibility that the superannuation fund investors might move, at the very least, to replace Ashington Capital as trustee. Moreover, having directed Ashington Capital to cooperate with PPB's requests for information (T 624.8-10), PPB says that Mr Anderson must have expected that (to use his words) "something that we're handing over would find its way in one form or other into the final conclusions [of] PPB" (T 626.11-12) and must have understood that the superannuation fund investors would use whatever was reported to them by PPB to guide their decision-making in relation to their investment (T 626.22-25). PPB says that it must then follow that Mr Anderson, and Ashington Capital more generally, must have understood that there was a real possibility that information given to PPB might eventually be used in the process to remove Ashington Capital as trustee. PPB says that the notion that Ashington Capital might be removed as trustee of ADF or ADF2 thus formed part of the milieu in which information was provided to PPB; and hence the plaintiff's claim for breach of an equitable duty of confidence must fail.
29. As to the nature of the information said to have been provided to PPB in the course of attempting to procure the removal and replacement of Ashington Capital and Ashington Management as trustee and development manager, respectively, PPB says that this highlights the extent to which any claim for breach of confidence (which is otherwise denied) was properly that of the trustee of ADF and ADF2, and not Ashington Management or Ashington Management personally.
30. PPB notes that, insofar as Acorn and Albany's due diligence was conducted by review of documents uploaded to an online data room (defined at [116] of the second further amended statement of claim as the "Stonington Data Room"). PPB says that there is no evidence to suggest that PPB was involved in this activity; and PPB maintains that it did not create, maintain, or upload documents to, the Stonington Data Room, nor did it access the Stonington Data Room.
31. As to the "16 October Information", this relates to the emails sent on 16 October 2009 by Mr Block to Mr Ko, Mr Routley and Mr Sheehan attaching documents (referred to in the second further amended statement of claim as the "16 October Information", the "Cross Project Information", and the "Key Issues Information"). These documents comprised, variously: (i) constitutions, information memoranda, financing documents, acquisition documents, feasibility reports, tax opinions, valuations, commercial documents such as balance sheets, debtors tables, relating to ADF, ADF2, the various sub-trusts within those trusts and the assets owned by the sub-trusts; and (ii) PPB's strategy reports and a "key issues" document prepared by PPB.
32. PPB says that the documents falling within the first of those categories (including those that pertained to the sub-trusts and the assets held within them), were all records of ADF and ADF2 and that, pursuant to cl 16.4 of the constitutions of each of the sub-trusts (extracted earlier), the "member" (being Ashington Capital as trustee for, relevantly, ADF or ADF2) had day-to-day control over the operation of the sub-trusts. For this reason, PPB says that the information provided to PPB and disclosed by PPB relating to the sub-trusts was information that had been held, and was then provided to PPB, by Ashington Capital in its capacity as trustee for ADF or ADF2, as the case may be.
33. In relation to the second category (PPB strategy reports which PPB provided to Acorn and Albany as part of the "16 October Information" and the "key issues" document), it is noted that these were documents created by PPB as part of its review of ADF and ADF2 as instructed by superannuation fund investors. It is said that, to the extent that they contained information that had been provided by Ashington Capital, that was information pertaining to the management and affairs of the funds, either generated by Ashington Capital in the course of administration of the funds or coming into its possession by reason of its position as trustee.
34. As to the email providing Ashington Capital's constitution, PPB notes that Mr Block requested this from Ms Briggs but that she regarded this request as falling outside the scope of PPB's engagement. It is said that there is otherwise no evidence that the Ashington Capital constitution was provided to PPB (or that PPB provided that document to Acorn or Albany). Ms Briggs' current evidence is that she "[does] not now recall receiving an instruction from Ms Garrett to send the ACPL constitution to Mr Block, or sending an email doing so". (I would interpose to say that the weight to be attached to this is perhaps little given Ms Briggs had a singular lack of memory of any of the relevant communications or of the matters to which she had previously deposed.)
35. In relation to the "20 October Stonington Information", PPB says that the relevant emails, which were copied to but not sent by either Mr Lord or Mr Block, disclose no conduct by PPB which can amount to a breach of any obligation of confidence.
36. In any event, as noted above, to the extent that the disclosure of any information by PPB can be said to give rise to any breach of the PPB Confidentiality Agreement, the PPB Mandate Letter or an equitable obligation of confidence, PPB says that any rights relating to such a breach were held by Ashington Capital as trustee for ADF or ADF2.

Determination

1. Had the issue arise, I would have concluded that there was no breach of contract or equitable obligation of confidence. While I would not go so far as to say that the documentary evidence supports the conclusion that Mr Anderson must have understood that there was a possibility that the information would be used as part of a proposal to replace the Ashington entities, though I accept that there was a possibility that this might have been a possibility or option considered by PPB. What the initial disclosure was for was for the purposes of the PPB Mandate and was an authorised used for that purpose. Subsequently, access to the documents was dealt with by consent of the superannuation fund investors. Further, in relation to the various items of confidential information I am not satisfied that it was provided to PPB.

Claim for breach of contract against Acorn

1. The breach of contract claim ([297A]-[297N] of the third further amended statement of claim) against Acorn is based on the allegation that Acorn allegedly accessed and used Data Room Information (defined in [116(b)] of the pleading) for the Consortium Objective (defined in [111] of the pleading), contrary to the terms of the Non-Disclosure Agreement dated 9 October 2009 between Ashington Capital and Acorn (the Acorn Undertaking). The Acorn Undertaking contained materially identical terms to that entered into by Albany.
2. Acorn denies having done so ([297L] of the Acorn defence) but further pleads that, to the extent that Acorn is found to have breached any term of the Non-Disclosure Agreement, that chose of action was not and could not have been assigned to the plaintiff pursuant to the Deed of Option between the liquidator of Ashington Capital and Ashington Management and the plaintiff ([297M] and [297N] of the Acorn defence).
3. The plaintiff notes that that the access log for the Stonington data room shows that Mr Sheehan of Acorn accessed the Stonington Data Room four times between 9 October 2009 and 10 October 2010. The plaintiff says that the "Purpose", properly construed, did not extend to the use of information for pursuing a plan to replace Ashington as trustee and manager of ADF and ADF2, and its use for this purpose was therefore a breach of the confidentiality undertaking.
4. Acorn contends that the plaintiff has not identified with specificity the information Acorn is said to have accessed in the Stonington Data Room; nor has it demonstrated that the identified Stonington Data Room information had the necessary quality of confidentiality, that it was provided in accordance with the terms of the Undertaking; or that there was any actual misuse of the identified Stonington Data Room information (the four elements noted in Patersons and PPB's respective submissions).
5. Acorn accepts that the entries from the Access Log show that at 4:04:47pm on 10 October 2009 someone using the access details for Mr Sheehan of Acorn viewed the Project Model Document. Otherwise it says that all of the other entries in the Access Log using the access details for Mr Matthew Sheehan establish that no document was accessed ("accessed extranet" - 9 October 2009 at 3:24:57pm and 3:44:06pm and 10 October 2009 at 4:04:11pm) other than the index to the documents in the Stonington Data Room ("accessed document" - 9 October 2009 at 3:25:14pm - described as "336_Glenferrie_Road\00._Index\C19AB3FB-A1F9-E217-C9146003BEDCC356.lnk"). Acorn says that the only evidence of the form of this Index shows it to be bereft of any information which might be considered to be confidential. Acorn says that any case that Acorn had some generalised access to all of the Data Room Information in the Stonington Data Room is not established on the evidence (pointing particularly to the evidence of Ms Briggs on this matter).
6. Mr Routley's evidence is that he did not access the Data Room Information or rely on any of the documents in the Stonington Data Room for any purpose. Acorn says that the plaintiff has not established how Acorn misused or relied upon the Project Model Document (see chronology at 9 October 2009). Further, even if there had been any use of the information in the Project Model Document by Acorn, it is said that this would have been solely "to enable [Acorn] to evaluate, consider and negotiate a transaction in relation to the property at 336 Glenferrie Road, Malvern, Victoria" (the address of the Stonington Project), which was the permitted "Purpose" under the terms of the Non-Disclosure Agreement. It is said that at all times during Acorn's evaluation of a proposed transaction in relation to the Stonington Project, Acorn had the "Purpose". Thus, it is said that Acorn is not liable for any alleged loss for the claim for breach of the Non-Disclosure Agreement.
7. Thus, Acorn says that the plaintiff has not established the first element of the claim for breach of an equitable obligation of confidence because the plaintiff has not identified, in oral or written closing submissions, the identity of the Project Model Document. Further, Acorn says that, having not identified the Project Model Document, the plaintiff has not established that the document had any necessary quality of confidentiality (the second element of a breach of confidence claim).
8. Finally, in the above circumstances, and in light of the plaintiff identifying no evidence to this effect in the oral or written closing submissions, Acorn says that the plaintiff has not established that the Project Model Document was misused by Acorn outside the terms of the Undertaking (the fourth element of a breach of confidence claim). Acorn says that the plaintiff's submissions do not articulate how it is that Acorn used (if at all) the information in the Project Model Document in a manner inconsistent with the permitted "Purpose" under the terms of the Non-Disclosure Agreement "to enable [Acorn] to evaluate, consider and negotiate a transaction in relation to the property at 336 Glenferrie Road, Malvern, Victoria". It is said that mere assertions and speculation in this regard are insufficient.
9. Accordingly, Acorn says that the plaintiff has not established this cause of action on the balance of probabilities. I agree.

Determination

1. The elements of a claim for breach of a duty of confidence were succinctly summarised by Gleeson CJ in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63 at [30] as follows: The usual elements for an equitable remedy are, first, that the information is confidential, secondly, that it was originally imparted in circumstances importing an obligation of confidence, and thirdly, that there has been, or is threatened, an unauthorised use of the information to the detriment of the party communicating it.
2. (See further Streetscape Projects (Australia) Pty Ltd v City of Sydney (2013) 295 ALR 760; [2013] NSWCA 2 at [149]ff per Barrett JA (with whom Meagher JA and I agreed).
3. The Project Model document is the only document to which the access log shows that anyone at Acorn had access and that might, by its description, appear to be confidential. However, it is not clear precisely what that document is or how it is said to be confidential or misused. The claim had it arisen is not made good.
4. From a contractual perspective, "Confidential Information" was defined as "all information provided by [Ashington Capital] to the Interested Party [Acorn] (including the Transaction Documents and any information relating to the Transaction Documents for the Purpose)". Therefore, the Project Model Document would fall under the definition of Confidential Information in the Acorn Undertaking.
5. Under cl 3.2, Acorn "must use the Confidential Information solely for the Purpose" and "must not use or exploit the Confidential Information for any other purpose, or allow any other person to do so without prior written consent of [Ashington Capital]". As noted, "Purpose" was defined as "to enable the Interested Party to evaluate, consider and negotiate a transaction in relation to [the Stonington Property]". I accept that Acorn accessed the Project Model Document on 10 October 2009 in the Stonington Data Room to consider a transaction in relation to Stonington. As the Swan Email makes clear, at the same time that the confidentiality agreements were being executed and the document was accessed, Mr Routley still characterised the investment opportunity as having "two components", one of which was the "Stonington Trust Mezzanine". However, even if accessing the Project Model Document breached cl 3.2 of the Acorn Undertaking, the plaintiff has not established how this caused any loss to Ashington.

Claim for breach of contract against Albany

1. A similar claim for breach of contract is made against Albany. The plaintiff pleads that Albany used information contained in the Stonington Data Room in breach of cl 3.2 of the 8 October 2009 confidentiality undertaking signed by Mr Ko on behalf of Albany ([290]-[290E] of the third further amended statement of claim), which, as noted above, is materially identical to that executed by Mr Routley (Albany Undertaking).
2. It is not disputed that the confidentiality undertaking was executed to gain access to the Stonington Data Room. Albany refers to the "Purpose" of the Albany Undertaking and definition of "Confidential Information" (as detailed above) and thereby accepts that the term "Confidential Information" could extend to documents in the public domain or not otherwise confidential in fact (but see cl 3.7 to which I refer below). The term "Transaction Documents" was defined in cl 1.1 to mean documents in the Stonington Data Room and any other documents which Ashington Capital advised Albany were Transaction Documents prior to disclosing them.
3. I have outlined cl 3.2 above. Pursuant to cl 3.7 of the Albany Undertaking, Albany was not required to treat as confidential (and the undertaking did not apply to) information which: is in or becomes part of the public domain; is lawfully known to it before the date of this deed; or is or becomes available to it from another person who is in possession of it lawfully and can disclose it to the party on a non-confidential basis.
4. The plaintiff says that the access log for the Stonington Data Room shows that Mr Ko accessed the Stonington Data Room 83 times between 9 October 2009 and 24 February 2010. Again, the plaintiff says that the "Purpose", properly construed, did not extend to the use of information for pursuing a plan to replace Ashington as trustee and manager of ADF and ADF2, and its use for this purpose was therefore a breach of the confidentiality undertaking.

Albany's submissions

1. Albany says that almost all of the information concerning Ashington received by Albany came from PPB, the financiers or was in the public domain. As noted above, Albany says that only one (inconsequential) document was provided by Ms Garrett to Mr Ko and that further (inconsequential) documents were provided by Mr Renauf to Mr Tremaine, both on 20 October 2009. Albany says that all other documents came from PPB on express instructions from the superannuation fund investors, who had been provided with the documents by Ashington in their capacity as trust beneficiaries and who were entitled to use them to protect their own interests in that regard. Albany adopts PPB's submissions (at [4]-[9]) in relation to the superannuation fund investors' right to access Ashington's documents.
2. Albany points out that the only information provided by Ashington Capital to Albany to which the Confidentiality Undertaking applied was the information comprising the Data Room documents. Therefore, Albany says that the Confidentiality Undertaking does not apply to the document provided by Ms Garrett on 20 October 2009 or the documents provided by Mr Renauf in relation to Double Bay. (In any event, as already noted, Albany says these documents were inconsequential.) A schedule which identifies the documents accessed by Mr Ko by reference to the index to the documents in the Stonington Data Room was annexed to Albany's submissions.
3. Albany says that much of the material in the Stonington Data Room was not confidential. For example, it is noted that, of the documents accessed by Mr Ko, the pro forma contracts and the marketing animation were readily available to the public and that the contents of the Project Model had already been provided to superannuation fund investors in June 2009. It is noted that when a similar undertaking was executed by the Victor Smorgon Group that entity noted that "a lot of the site information [they had] … already gained from others" (see Ex C at Tab 9). (I interpose to note that I construe that statement by Mr Orloff of Victor Smorgon Group differently. Mr Orloff makes that statement prior to access to the Stonington Data Room and so does not yet know of the Data Room's contents; rather, in context, I consider that Mr Orloff is referring to the Stonington site, noting that his spouse was the purchaser of the Stables.) Albany says that it was in a similar position. It says that most of the information in the Stonington Data Room had already or would become part of the public domain; was already lawfully known to Albany before the deed was executed; or, most significantly, became available to Albany from another person lawfully in possession of it (namely, PPB).
4. Albany says that the plaintiff's closing submissions at [197] do not identify in any detail why the information accessed by Mr Ko in the Stonington Data Room was confidential nor how it was relevant to Albany's decision to offer to replace Ashington. In any event, Albany says that the information accessed was not confidential and/or was not material to Albany's proposal to superannuation fund investors.
5. Dealing first with the particular documents accessed, the Stonington Data Room access log indicates that someone using Mr Ko's email address accessed five categories of documents in the Data Room. It is noted that only three of those documents were accessed prior to Albany/Acorn meeting with investors on 12 November 2009; the superannuation fund investors agreeing on 19 November 2009 to Parissen taking over as trustee to complete its due diligence; and Ashington retiring as trustee on 23 December 2009.
6. In particular, Albany points out that the Access Log indicates the following.
7. The Index was accessed once on 9 October 2009. It was not accessed again by Mr Ko's email address until 26 January 2010 (well after Parissen took over as Trustee on 23 December 2009). Further, Albany notes that the document does not contain (and is not alleged to contain - see Mr Anderson's 9 December 2019 affidavit at [22]) any confidential information in itself.
8. The Development Masterplan was not accessed by Mr Ko until 31 January 2010 (well after Parissen took over as trustee) and does not (and again is not alleged to) contain any confidential information. Albany says that this is consistent with the fact that it is merely an aerial diagram of the proposed Stonington development, similar to that which was provided to superannuation fund investors, used by valuers, provided to PPB and included in marketing brochures.
9. The Project Animation was accessed three times on 10 October 2009 via Mr Ko's email address. It was not accessed again until 24 February 2010. (I was not taken to the animation, which is contained on a USB.) Albany assumes (noting the comments made by me as to the electronic court book at T 86.8) that the plaintiff does not rely on it as a confidential document as no assessment of its confidentiality can be made. In any event, it is noted that the animation is contained within a subfolder titled "Marketing Brochures" and Albany says that it can comfortably be inferred that it was used for the advertising of the Stonington pre-sales and therefore was publicly available (and was not itself confidential).
10. The Contracts for Sale were first accessed via Mr Ko's email address on 23 November 2009, a week after superannuation fund investors agreed on 19 November 2009 to authorise Parissen to take over as trustee so Parissen could complete its due diligence (and hence it is said that it could not have contributed to Albany's proposal to the superannuation fund investors). Further, Albany says that the pre-sales contracts were not confidential: they were pro forma contracts (T 852.47); they did not contain price information (T 853.01); they had been provided to a number of agents for the purpose of selling lots off the plan (T 852.20); the version provided to potential purchasers did not contain any header stamp as to confidentiality (T 851.49); and they were available to anyone who asked for them. Albany says that they were either part of the public domain, or available from persons who lawfully obtained copies (i.e., the agents) such that they were not confidential.
11. Finally, the Project Model accessed in October and November 2009 via Mr Ko's email address. Albany says that, even if the contents of that document were confidential, the information contained within it had already been lawfully provided to the superannuation fund investors and/or PPB and could have been made available by them to Albany.
12. Dealing with each page of the Project Model, it is noted that: (i) as to the "Stonington Project Summary - Financials - Project feasibility", a similar document was sent to the superannuation fund investors on 19 June 2009; (ii) as to the "Inputs", the same information was held by PPB in an Estatemaster Feasibility Model dated 6 June 2008; (iii), as to "Hotel, Retail, Residential" schedule, the same information was provided to investors on 10 June 2009; (iv) as to "Project Feasibility Projected Cashflow" schedule, the same information was provided to investors on 10 June 2009; (v) as to the "Trial Balance" document, the same information was provided to investors on 10 June 2009 (albeit the data in the documents were as of different dates); (vi) as to "Balance Sheet [Spreadsheet]", the same information was held by PPB and later provided by PPB to Albany and Acorn on 16 October 2009 (also a less detailed version was held by PPB and provided to Albany and Acorn on 16 October 2009 (although these also covered different date ranges); (vii) as to the pages of the Project Model depicted, it is noted that these are illegible in the Court Book but it is said that it can be inferred that those documents were, like the other pages identified above, provided to investors and/or PPB and could have been lawfully made available to Albany; (viii) as to the final page of the Project Model, Albany says that although there was no evidence that it was provided to the superannuation fund investors and/or PPB, given that all other pages were provided the probabilities are that it was provided; in any event, the final page is of limited utility; and in all likelihood Ashington would have provided that page to PPB if requested (T 491.44; T 521.43) and it is submitted that a breach of the Confidentiality Undertaking would not be found on the basis of that single page.
13. In addition, it is noted that PPB was provided with (and subsequently provided to Albany and Acorn) a Stonington Final Approved Feasibility workbook. Although this document is in a different format, Albany points out that it contains similar or the same information to the Project Model in the Data Room.
14. Albany thus submits that the information in all of the documents accessed via Mr Ko's email address before the Parissen offer was accepted by the superannuation fund investors was otherwise available to Albany from another person who was in possession of it lawfully within the meaning of cl 3.7(c).
15. The issue with this argument is that cl 3.7(c) states "which is or becomes available to it from another person who is in possession of it lawfully and can disclose it to the party on a non-confidential basis" and the PPB Confidentiality Agreement states: 5. You must not without prior written consent disclose: … (b) any of the Confidential Information to any person other than to those of your Representatives who need to have access to the Confidential Information to carry out the Approved Purpose and the investors in the Ashington Development Fund No 2. Unless disclosure is required by any law, order of a government agency or the rules of any stock exchange and provided that, prior to such disclosure, you provide us with sufficient notice to enable us to seek a protective order or other remedy. 6. You must not use, disclose, or reproduce any of the Confidential Information for any other purpose other than the Approved Purpose Representative is defined as (cl 2): a Related Entity of the Party and an employee, agent, auditor, adviser, partner, consultant, joint venturer, contractor or sub-contractor of that party or a Related Entity of one of those persons. Approved Purpose is: Assisting PPB to conduct a review and prepare a report of [ADF2] as instructed by investors in [ADF2] So arguably, PPB could not disclose the information on a non-confidential basis and therefore, the exception in cl 3.7(c) of the Albany Undertaking would not apply
16. In any event, Albany says that the plaintiff has not demonstrated that any document accessed via Mr Ko's email address in the Stonington Data Room made any material contribution to Albany's decision to offer to replace the Ashington companies or materially assisted Albany in doing so. As already noted, the only Data Room documents which were accessed prior to Albany and Acorn making that offer on 12 October 2009 were the publicly available Project Animation and the Project Model, which related solely to the Stonington development. Albany says that there is no direct or indirect evidence to suggest or infer that either document contributed to or assisted in the making of the offer or negotiations with the superannuation fund investors, particularly given Albany was provided with voluminous material on 16 and 19 October 2009 by PPB.
17. In those circumstances, Albany says that no breach of the Albany Undertaking has been proved and there is no evidence that any breach caused or contributed to the Parissen Proposal, so that there is no basis for a finding that Albany is liable pursuant to cl 5(a) of the Albany Undertaking to Ashington Capital for any loss, damage, expense or cost.
18. In any event, even if there is a causative breach, Albany says that only Ashington Capital is entitled to contractual damages for breach (not Ashington Management or any other Ashington company, including any shareholder in Ashington Capital). Accordingly, it is said that any contractual claim would be limited to trustee fees of Ashington Capital (the only business of Ashington Capital).
19. Albany further says that (notwithstanding indications in the evidence that some people were concerned with keeping the fact of communication between the superannuation fund investors/PPB and Acorn/Albany "secret" during October and November 2009), there was nothing that Mr Anderson could have done personally, or that Ashington Capital or Ashington Management could have done either practically or by resort to legal process, to prevent the superannuation fund investors proceeding to implement their decision to remove the Ashington companies by dealing with Albany.
20. Albany contends that Mr Anderson had exhausted the patience of Ashington's financiers (Investec, Westpac, Hamton, St George and NAB), such that Mr Anderson had no practical chance of changing the investors' minds. Albany argues, in this context, that no injunction would have been granted to Ashington Capital (or Ashington Management) to restrain the superannuation fund investors exercising their rights to terminate Ashington Capital's appointment as trustee. Albany contends that it cannot now be liable for equitable compensation for participation in the implementation of a decision by the superannuation fund investors to remove Ashington Capital as trustee which would not have been prevented by an injunction at the time.
21. For those reasons, Albany says that the elements of either cause of action brought against Albany have not been proved; and that, even if proved, the conduct caused no loss or damage; or that even if it did, that the loss or damage is anywhere near the quantum claimed.

Determination

1. Again, these claims do not arise. Had they arisen I would have concluded that there was no breach of contract and no breach of the equitable duty of confidence for the reasons put forward by Albany. There was a lack of specificity as to the confidential information said to have been provided, the confidentiality of the documents was not established and there was no evidence of any misuse of confidential information. Even if there was, it is difficult to see what damages would flow therefrom in any event in circumstances where the information does not appear to have been inherently confidential and not sufficient for a decision in relation to the replacement proposal in any event (since the ultimate proposal included a due diligence period).

Relief claimed by the plaintiff

1. The principal relief claimed against the defendants (other than the 7th and 8th defendants) is equitable compensation in respect of the loss and damage suffered by Ashington Capital and Ashington Management. Having regard to the conclusions reached above, the only claim that has succeeded is the claim by the plaintiff against Ms Garrett and Mr Renauf for breach of the obligations of good faith and honesty owed by them as an incident of their employment relationship with Ashington Management and through it the Ashington group; which would sound in damages on the contractual measure (not equitable compensation) and which I address in due course. However, again lest any of the earlier conclusions be wrong, I consider below the claim put by the plaintiff for equitable compensation.
2. The plaintiff says that its loss and damage is the loss of Ashington's business, being the rights of Ashington Capital and Ashington Management to receive trustee and management fees respectively in relation to ADF, ADF2 and the future funds that Mr Anderson intended to establish.
3. Pausing here, the main difference between the parties in this regard (and the experts who addressed the issues relating to this) seems to have been whether the plaintiff's claim is for loss of a business (as pleaded) or for loss of the opportunity to earn its existing income streams and prospective future income streams (as it developed or was clarified in the course of argument). A claim for loss of a business (the former) is assessed by reference to what a willing but not anxious buyer would pay for the business to a willing but not anxious seller (the eponymously named test in Spencer at 427); on methodology considered appropriate in the circumstances (capitalised earnings, discounted cash flow methodology, EBITDA for example; or perhaps simply on the value of its assets). A claim for loss of a chance (the latter) is assessed by reference to the prospects of success of that opportunity had it been pursued (Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 (Sellars)). Therein lay the root of the differences between Mr Halligan's successive valuations (ranging from $140 million odd to $5.25 million) and Mr Hall's valuation of nil, as discussed earlier. Relevantly, even Mr Halligan's lowest valuation would still need to be discounted (as seemed to be accepted by the plaintiff) not just for offsetting amounts (such as unpaid capital calls that had not been factored in by Mr Halligan) but also to reflect the likelihood that the lost opportunity would actually have been achieved but for the (on this hypothesis) wrongful conduct.

Principles of causation and loss in equitable compensation claims

1. Equitable compensation serves a compensatory purpose to place the beneficiary in the position, as near as possible, in which it would have been had there been no breach by the errant fiduciary. The plaintiff points in this context to Oliana Foods Pty Ltd v Culinary Co Pty Ltd (in liq) [2020] VSC 693 (Oliana Foods) at [506], where Connock J referred to the discussion in Meagher, Gummow & Lehane's Equity Doctrines and Remedies regarding the hypothetical inquiry and the structured exercise undertaken in connection with breaches of fiduciary duty, including proceeding on the assumption that the defendant fiduciary would have performed all duties and referred with approval to the statement by the authors that "… when deciding what would have happened absent a particular breach of duty, it must be supposed that the defendant trustee or other fiduciary would have acted according to conscience" (see JD Heydon, MJ Leeming, PG Turner, Meagher, Gummow & Lehane's Equity Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths) at [23-425]).
2. When assessing causation for the purposes of equitable compensation, the "true enquiry is whether the loss would have happened had there been no breach, not whether the loss was caused by or flowed from the breach" (O'Halloran at 276-277 per Spigelman CJ (with whom Priestley and Meagher JJA agreed); Re Purcom No 34 Pty Ltd (in liq) (No 2) [2010] FCA 624 at [23]-[24] per Gordon J). It is said that, once the relevant counterfactual is determined, there must be an "adequate or sufficient connection between the equitable compensation claimed and the breach of fiduciary duty" (Maguire & Tansey v Makaronis (1997) 188 CLR 449; [1997] HCA 23 (Maguire) at 473 per Brennan, Gaudron, McHugh and Gummow JJ); and that regard must be had to equity's concern with the "enforcement and support of fidelity, conscience and trust" (Lifeplan Australia Friendly Society Ltd v Ancient Order of Foresters in Victoria Friendly Society Ltd (2017) 250 FCR 1; [2017] FCAFC 74 at [67] per Allsop CJ, Middleton and Davies JJ). It is noted that the fiduciary relationship has "trust, not self-interest, at its core, and when breach occurs, the balance favours the person wronged" (Canson Enterprises at [3] per McLachlin J).
3. Thus, once a sufficient connection is found, causation is established irrespective of the identification of a separate and concurrent cause (provided that the loss would not have occurred if there had been no breach of duty) (O'Halloran at 277). Further, in equity, there is no application of the doctrine of novus actus interveniens, nor is the loss or damage claimed limited by questions of remoteness or foreseeability (Maguire at 470; O'Halloran at 273; Nicholls v Michael Wilson & Partners Ltd [2012] NSWCA 383 at [171] per Sackville AJA (with whom Meagher and Barrett JJA agreed)). Causation in equity is not susceptible to the formulation of a single test (O'Halloran at 274-275).
4. As to the loss of opportunity claim, Meagher JA (with whom Bathurst CJ and Beazley P, as Her Excellency then was, agreed) in Hart Security Australia Pty Ltd v Boucousis (2016) 339 ALR 659; [2016] NSWCA 307 (Hart Security) at [131]-[134] said that where a claim is made for damages for loss of a valuable opportunity the initial question to be decided on the balance of probabilities is whether the breach of contract, negligence or breach of statutory duty caused the loss of an opportunity answering that description. It is noted that in Sellars, the position in relation to such cases was stated by the plurality (Mason CJ, Dawson, Toohey and Gaudron JJ) at 355: ... the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. [Emphasis added]
5. Patersons contends that the assessment of loss (in the way in which the plaintiff now appears to put the claim) is thus to be undertaken in accordance with the principles in Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20 (Malec), which (as the plurality stated in Sellars at 355) require that damages for deprivation of a commercial opportunity be ascertained by reference to the prospects of success of that opportunity had it been pursued. Reference is made to Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 at [40] where French CJ, Kiefel J (as her Honour then was) and Keane J pointed out that there must be a determination, according to the balance of probabilities, as to whether there was a substantial prospect of a beneficial outcome. It is noted that the plaintiff's onus in that respect is discharged only by proof that it was more probable than not than an opportunity of value would have been received but for the defendants' conduct; and that it must be shown by the plaintiff that there was an opportunity that was substantial and not merely speculative.
6. Once that onus is satisfied, the value of that lost opportunity is to be ascertained by reference to hypotheses and possibilities which, though speculative, can be evaluated as a matter of informed estimation (and, in assessing the likelihood of hypothetical events, the balance of probabilities has no role to play) (Berry v CCL Secure Pty Ltd (2020) 381 ALR 427; [2020] HCA 27 (Berry) at [32] per Bell, Keane and Nettle JJ; see also Hart Security at [134]).
7. The plaintiff says that it not necessary (and will in many cases be inappropriate) to adopt a scientific or actuarial approach; and that the proper approach, having weighed all the possibilities, will often be to settle on a single hypothesis and a more intuitive method (Norris) at 71-73 per Clarke JA (with whom Handley and Sheller JJA agreed); Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [11]-[12] per Einstein J). In this regard, the plaintiff points to the following statement of Einstein J in Tranquility Pools & Spas Pty Ltd v Huntsman Chemical Co Australia Pty Ltd [2011] NSWSC 75 at [380] as to the consideration of positive contingencies: Where this hypothetical is being posed in the case of an income stream which has a limited history but significant potential for growth - as was the case with the plaintiff (a talented actor) in Norris v Blake, and with the plaintiff (a champion boxer) in Fightvision Pty Ltd v Onisforou - it is important to allow for both negative and positive possibilities, including that of explosive growth.
8. However, Patersons says that Einstein J's statement above is not applicable to the present case as the funds management business of Ashington Capital and Ashington Management had a significant history (in respect of ADF and ADF2) and its past performance was strained. It is submitted that the evidence did not rise so high as to establish a "significant potential for growth" (cf the position in Fightvision and Norris).
9. The plaintiff also refers to the principles relevant to the assessment of hypothetical events (both in respect of causation and for quantification): one such principle being that where "a wrongdoer purposely chose to achieve a certain result by means of a calculated deceit, the natural inference is that the wrongdoer was not and would not have been prepared to bring about that result by lawful means" (Berry at [39]) (which it is said applies equally to a knowing participant in the erring fiduciary's dishonest and fraudulent design - Ancient Order of Foresters at [88] per Gageler J); another being that, in claims of equitable compensation, one is entitled not to speculate against the interest of the plaintiff (citing GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113 (GM & AM Pearce) at [66] per Warren CJ (with whom Chernov JA and Dodds-Streeton AJA agreed)). As to the latter principle, it is noted that a plaintiff may lead "only a minimum of evidence to discharge the evidentiary burden of causation" and that "[e]quity must strive to repair the breach of fiduciary duty lest the fiduciary in default could be exonerated too easily … [and] the courts being seen to wink at wrong-doing" (GM & AM Pearce at [71]; Maguire at 492-493 per Kirby J).
10. Furthermore, the plaintiff says that where a defendant's breaches of duty have made problematic an accurate determination of damage or loss, doubtful questions should be resolved against that party and damages or compensation should be assessed in a robust manner (citing Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 59 per Handley JA (with whom Mason P and Beazley JA, as Her Excellency then was, agreed)). It is said that this principle extends beyond circumstances where the defendant's conduct in the litigation has made assessment of damages difficult to situations (such as the plaintiff says is here the case) where the assessment of the plaintiff's loss is made uncertain as a consequence of the fiduciary's breach by the need to prove hypothetical facts. Reference is made to Young JA's statement in McCartney v Orica Investments Pty Ltd [2011] NSWCA 337 at [218] that "where the plaintiff is entitled to damages and compensation and their computation is made more difficult by the defendant's action, then the court may assume the worst against the defendant consistent with the evidence"; noting that the task remains one of assessing proper compensation for the plaintiff's loss and not of levying punishment on the defendant.
11. Reference is made (by both the plaintiff and the defendants) to the decision of the Court of Appeal in Australian Executor Trustees (SA) Limited v Kerr (2021) 151 ACSR 204; [2021] NSWCA 5 (AET v Kerr). There, Gleeson JA at [96]-[99];[104] (with whom Leeming JA and Emmett AJA agreed) noted that a claim for equitable compensation requires a causal link between the breach and the loss, assessed on a common sense view of causation (the appropriate test being the "but for" test) and that "once the plaintiff's onus to prove loss has been discharged, the onus shifts to the defendant to demonstrate that all or part of the loss would have been suffered even if the defendant had not breached the trust". It is noted that, in assessing causation and loss, the Court has the full benefit of hindsight and is entitled not to speculate against the plaintiff, though this does not displace the plaintiff's onus to prove causation (i.e., a sufficient causal nexus between the conduct and the alleged loss) and to produce what evidence it reasonably can of loss. Further, where a defendant sets up an alternative counterfactual, it bears an evidentiary onus to make that counterfactual out (AET v Kerr at [128]); and where the defendant's actions have made an accurate determination of damage or loss problematic, including by requiring the plaintiff to establish a hypothetical counterfactual, then a robust approach ought to be adopted in respect of the plaintiff's difficulties of proof. It is noted that the flexibility of equitable compensation must still accommodate "the need to ensure that the remedy is not 'transformed into a vehicle for the unjust enrichment of the plaintiff" (Ancient Order of Foresters at [94] per Gageler J).

Principles of causation at common law

1. In addition, the plaintiff seeks damages at law for breach of covenants contained in the employment contracts of the employees, the Paterson Mandate, and confidentiality agreements with each of the defendants. The plaintiff submits that damages at law will be largely co-extensive with equitable compensation, though noting questions of causation and remoteness are addressed somewhat differently.
2. As to the doctrine of novus actus interveniens that applies at common law, the plaintiff notes that it has been held that to break the chain of causation, there must be something "ultroneous, something unwarrantable, a new cause coming in disturbing the sequence of events, something that can be described as either unreasonable or extraneous or extrinsic" (Lord v Pacific Steam Navigation Co Ltd (The Oropesa) [1943] 1 All ER 211 (Lord v Pacific Steam Navigation) at 215 per Wright LJ); and that, where the relevant conduct said to break the chain is a person's own act or omission, this "usually constitutes a link, rather than a break, in the chain of causation which stretches from the contravening conduct to the loss" (Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72; [2012] FCA 211 at [240] per Reeves J, affirmed on appeal Consolo Ltd v Bennett (2012) 207 FCR 127; [2012] FCAFC 120). The plaintiff says that it makes no sense to regard an action which is the very kind of thing likely to happen as a consequence of the defendant's breach as a new intervening act even if the act is deliberate and voluntary (March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; [1991] HCA 12 at 517-519 per Mason CJ (with whom Toohey and Gaudron JJ agreed)).

Pleading

1. The pleaded causation case (to which the defendants say the plaintiff must be held) is set out at [160], [162], [180] and [181] of the third further amended statement of claim, as follows: 160. ACPL [Ashington Capital] at 11 December 2009: a. did not have an alternative financing option for Stonington acceptable to investors because: (i) Patersons did not progress the Patersons Mandate; and (ii) the ADF2 Investors rejected any proposal advanced by Anderson; b. had sustained among the ADF2 Investors severe reputational damage by the conduct of the Consortium particularly PPB such that the ADF2 Investors had become committed to the removal of the Ashington companies as trustee and manager; c. had its business relationships undermined because representatives of the Consortium had presented to third parties including Investec and St George, on the basis that a refinancing option was in train that would involve the removal of the Ashington companies as trustee and manager; d. had no commercial option other than to resign as trustee and cause AMPL [Ashington Management] to resign as manager; e. and accordingly accepted the Retirement Demand that the Ashington companies would step aside as Trustee and manager subject to its terms of doing so. 162. By reason of the matters pleaded above, by the conduct of the Consortium the Ashington companies had no option other than to retire as trustee and manager. … 180. The receivership and subsequent liquidation of ACPL [Ashington Capital] and AMPL [ Ashington Management], was caused by the Consortium. 181. But for the formation of the Consortium and the activities of its members pleaded above, the Ashington companies: a. would not have been placed in the positions pleaded in paragraphs 160 and 162 above; and b. would not have resigned as trustee and manager; and c. would not have lost the Ashington business; and d. accordingly would not have suffered loss and damage.
2. The defendants say that the foundational paragraphs ([160] and [162]) bear no relationship to the case that the plaintiff advanced at trial. In particular, it is said that the plaintiff's causation case appears now to be that either Ashington Capital lost the chance to pursue the Wingate Proposal, or it lost the chance to have Ms Garrett save the business by replacing Mr Anderson as the face of the business.
3. The allegation of loss and damage was further particularised in the plaintiff's further and better particulars served on 21 February 2021 and ultimately at [304] of the third further amended statement of claim (filed with leave on 29 March 2021) as follows (the underlining reflecting the latest amendments): 304. The causes of action pleaded above caused loss and damage to ACPL and AMPL: Particulars (a) ACPL and AMPL lost the property development business, comprised in ADF and ADF2 and anticipated future funds. (b) ACPL and AMPL were unable to recover and went into receivership and then liquidation. (c) In the alternative to (a), the loss and damage to ACPL and AMPL is the loss of a chance to retain their property development business, comprised in ADF and ADF2 and anticipated future funds. (d) In the alternative to (a) and (c), the loss and damage to ACPL and AMPL is the loss of a chance to receive future income (including the Trustee Fee and the Development Management Fees) as a result of their position as trustee and manager of ADF and ADF2 respectively, and also including the loss of chance to receive future income from the establishment and operation of future funds such as the proposed AOF3.

Plaintiff's submissions on causation

1. In considering causation in fact, the plaintiff maintains that the starting point is the relevant hypothetical counterfactual, namely that, rather than conspiring to acquire Ashington's business, the defendants had performed their duties to the plaintiff. It is said that this counterfactual involves more than simply hypothesising that the "Consortium" did not come into existence and act as it did. Rather, it is said that (as in Oliana Foods), the relevant counterfactual hypothesis requires that it be assumed that Ms Garrett, Mr Renauf and Patersons in fact complied with their duties of fidelity and actively pursued that which they were retained to effect (namely, the Stonington Capital Raising).
2. The plaintiff emphasises in this context that in mid-2009 Ashington Capital and Ashington Management operated a valuable funds management and property development business; that Ashington Management stood to receive management fees for ADF2, and Ashington Capital stood to receive trustee fees for both ADF and ADF2; and that both businesses had the potential to participate in further projects being developed by Ashington; whereas, by sometime in early 2010, Ashington Capital and Ashington Management had ceased to receive any fees and Ashington's business was destroyed, having been acquired by Parissen. It is said that the loss of Ashington's business was the direct consequence of the conduct of the defendants.
3. The plaintiff maintains that the evidence supports a conclusion that, had the defendants fulfilled their duties, the business would have continued, and that Ashington Capital and Ashington Management would have earned the trustee and management fees to which they were entitled. In closing submissions, it is put that, had Mr Carolan, Ms Garrett and Mr Renauf properly prosecuted the Patersons Mandate, there was a "very high chance" that the Stonington Capital Raising would have been successful. In this regard, the plaintiff points to a number of matters.
4. First, that Ms Garrett and Mr Renauf were recognised as being experienced and competent; the plaintiff noting that Ms Garrett was described by Mr Anderson on 10 July 2009 as "one of the industry's most respected Fund Managers [who in] her former role as Group Head of Funds Management at Valad…she was responsible for A$10 billion of assets under management" and that her skills included the ability "to identify and source debt across a range of fund platforms". It is noted that, during September 2009, Ms Garrett expressed confidence that she could effect the Stonington Capital Raising. It is also noted that the offer was considered to be attractive to investors (referring to the 11 September 2009 email from Ms Garrett to Mr Anderson and Mr Minahan advising that the offer needed to be "compelling" to investors; and the 21 September 2009 email from Ms Garrett to Mr Carolan referring to the offer as "a 'money for jam' investment" which is "low risk, high return" with enough security that lenders will be paid out even on a fire sale).
5. Second, that Patersons accepted a mandate to procure a replacement mezzanine financier for Stonington, and never expressed to Ashington any opinion that it would be difficult or impossible to obtain. The plaintiff points out that the defendants were confident that they would obtain finance (referring to Patersons' agreement, as at 23 September 2009, that envisaged a six-week completion timetable, and Patersons' belief that it was ahead of schedule given the positive discussions already undertaken with prospective investors, noting that on 22 September 2009 Mr Shorrocks advised Mr Minahan that Patersons "will have sufficient interest to complete the capital raising in the prescribed timetable" - see chronology). Reference is also made to the fact that, on 29 September 2009, Ms Garrett and Mr Renauf informed the superannuation fund investors that they were confident they could execute their recapitalisation strategy within four months; and that Mr Carolan and Mr Doherty also expressed confidence in the last week of September 2009.
6. The plaintiff points to Mr Shorrocks' evidence in cross-examination (at T 761.15ff): that the marketing for the Stonington Capital Raising was kept fairly narrow (to Sydney and Melbourne institutional investors on the Patersons contact list), one reason for which being Mr Shorrocks' view at the time that it would be highly attractive to those investors; but that Patersons had a much larger contact list of potential investors at the time, of up to 100,000 clients; and that the intent was that, in the ordinary course of things, if the initial marketing did not produce a positive response, the circle of people to whom the proposal would be circulated would grow. (This passage of evidence is somewhat unclear as to whether Mr Shorrocks was agreeing that there are 300 potential investors, but seeking to point out that Patersons has 100,000 clients (meaning the ratio of clients to investors is quite stark) or whether he is saing what the plaintiff interprets i.e., that there were up to 100,000 potential investors, but the contact list is of 300 personnel (perhaps if Patersons has contacts with other businesses that have access to particular groups of investors or something like that, such that one contact might include 1,000 potential investors). In any event, this was not further explored and nothing much seems to turn on it.
7. While Patersons accepts that, but for his wrongful conduct, Mr Carolan could have progressed the Patersons Mandate further to some of the personnel on Patersons' books (but recognising that the initial intention was not to "go wide" and that the pool would have been smaller given the transaction concerned an unlisted fund and the contractual timetable only provided for a week of marketing concluding on 2 October 2009), Patersons says that this does not mean that, for the purposes of the plaintiff's counterfactual, the plaintiff has proven on the balance of probabilities that one of those clients would have been seriously interested in investing on acceptable terms within the contemplated timeframe. Patersons further says that the attempt by the plaintiff in the cross-examination of Mr Shorrocks to suggest to him, by showing him Patersons' List of Documents in respect of its discovery in these proceedings, that it was inconceivable that there would not have been more responses to these marketing materials than as set out in the List of Documents did not take the matter far and ought not be afforded any significant weight in the assessment of this issue (T 773-774).
8. Third, that neither Ms Garrett nor Mr Renauf (nor anyone from Patersons), ever expressed the view to Mr Anderson that he should not pursue the Stonington Capital Raising because it was futile or because his business was doomed in any event.
9. Fourth, that Albany and Acorn both thought the business was valuable (as did Ms Garrett insofar as she was willing to position herself as the new funds manager for consideration that would include an equity stake). Again, it is not clear how far the perception of others of the value of the business takes matters when one is considering, in hindsight, just what was in reality lost at the relevant time by reason of the alleged breaches. Moreover (as the defendants note), the opinions as to value must be understood as including that there was a substantial capital contribution to be made in order to achieve any such value.
10. Fifth, that, by some time in November 2009, it was clear to Ms Garrett, Mr Renauf and Patersons that mezzanine finance would be available (for instance from Victor Smorgon or Apex Capital). It is said that, on the relevant counterfactual (rather than at the same time obtaining finance for the Consortium and making it more difficult for Ashington to do so) Ms Garrett, Mr Renauf and Patersons would have obtained finance on behalf of Ashington. (It might more accurately be said that, at around this time, Ms Garrett and Mr Renauf became aware of other potential investors - it is not clear that Patersons (other than Mr Carolan perhaps) was privy to this information; nor is it clear that those potential investors would have ultimately finalised the proposed refinance; and, in the case of Apex Capital, its offer contemplated the acquisition of management rights at least in relation to the Stonington Project in any event.)
11. The plaintiff says that the evidence shows that finance was available (albeit largely pointing to events up to the end of September 2009). It is noted that, on 30 September 2009, Ms Garrett emailed Mr Anderson and Mr Steel reporting that they were "getting traction" and had "locked three excellent mezz meetings" for 2 October 2009; that later that day Ms Garrett reported to Mr Renauf that Mr Doherty thought he would "get more meetings"; and that on 24 September 2009, a high-net-worth individual, Mr Campbell Smith, made an offer to invest some $7-8 million (Ex C at Tab 5). The plaintiff also points out that Ashington was able to conclude finance with Wingate (a reference to the signed indicative term sheet that ultimately did not proceed), as did Parissen with Acorn; and it is said that there was also serious interest from others such as Mr McCabe and the Smorgon family.
12. Indeed, the plaintiff (in closing submissions seemingly for the first time) submits that the inference should be drawn that there was interest in the Stonington Capital Raising but that the evidence of that interest was supressed by Ms Garrett and Mr Carolan, and is now lost. It is noted that Mr Shorrocks left the subsequent stages of the Stonington marketing to Mr Carolan, whom he expected to deal with follow-up, due diligence and closing. It is noted that work in progress templates produced by Mr Carolan recorded him as continuing to work on the Stonington Capital Raising until November 2009. It is noted that Mr Shorrocks agreed that, assuming that the mandate was not terminated and Patersons was not told to cease work on it, Mr Carolan's job was to continue to pursue it. The plaintiff says that, despite this, there is no evidence that Patersons progressed the Stonington Capital Raising after 2 October 2009.
13. The plaintiff points out that Mr Shorrocks accepted that a retainer such as the Stonington Capital Raising would ordinarily have involved both a hard copy and electronic file; and that Mr Shorrocks accepted that marketing emails were sent by Patersons to professional investors or high-net-worth individuals who had an ongoing relationship with Patersons and generally elicited responses (whether positive or not) and, if follow-up was required, it was Mr Carolan's job to do so. The plaintiff notes that disclosure was sought from Patersons of that file, but that the documents produced contained no further marketing emails after 2 October 2009, and no responses to any marketing emails other than the ones that were sent to Mr Shorrocks.
14. The plaintiff also says that it seems that some of the first parties interested in the Stonington Capital Raising were still open to providing it to Albany and Acorn in late November 2009; pointing to an email from Mr Ko to Ms Garrett and Mr Renauf on 14 November 2009 in which Mr Ko noted that Victor Smorgon Group had offered to provide mezzanine funding to complete the Stonington Project and that the Consortium was going to give them a chance to match Apex Capital's offer before committing to Apex Capital. (It is noted that both Apex and Victor Smorgon had indicated interest in the Stonington Capital Raising in late September or early October).
15. Last, the plaintiff notes that on 8 October 2009, the property agent (Knight Frank) expressed the view that, over the past six months, the property market had "rebounded strongly"; and that this is also the view held by Mr Wist (though see my comments above as to his evidence). It is said that this was demonstrated, among other things, by the fact that, by November 2009, Ashington had made $42,569,500 in pre-sales on the Stonington Project.
16. The plaintiff submits that it follows that the defendants caused Ashington Capital and Ashington Management to lose their business; and the plaintiff says that that business had value. It is said that the various matters raised by the defendants as to the value of Ashington's business are relevant to the quantification exercise (and are to be determined as part of a process of informed estimation weighing all possibilities, including the possibility that Ashington would have established AOF3 (and following trusts) and earned fees from those later projects).
17. The plaintiff says that there can be no objection that compensation for such loss is too remote; and that, given that the opportunity to pursue such projects is obviously valuable, all that is required to establish causation is evidence that Ashington could and would have pursued them.
18. It is submitted that causation is established in the present case by the evidence that, in late 2008 and early 2009, having successfully established ADF and ADF2, Ashington was developing a strategy to establish its third fund, AOF3 (noting that this had gone beyond mere conjecture as, in late 2008, Jones Lang LaSalle was appointed to represent Ashington in its international capital raising).
19. The plaintiff cavils with the contention that the retirement of Ashington was a deliberate, informed, voluntary act which constituted a novus actus interveniens between the wrongful conduct of the defendants and the loss of Ashington Capital and Ashington Management. The plaintiff says in that regard that such an argument is not available to the defendants, who are liable in equity; and, second, that Ashington's retirement was a reasonable response to the defendants' breaches of duty, which were designed to have (among other things) exactly the effect they did have - of causing Ashington to retire, and of replacing Ashington as trustee and manager with Parissen.
20. The plaintiff says that there is no evidence that Mr Anderson had any intention to cause Ashington to resign until he was required to do so by the superannuation fund investors; rather that Mr Anderson then felt that Ashington had no choice but to retire by reason of the circumstances engineered by the defendants (akin to the position in Medlin v State Government Insurance Commission (1995) 182 CLR 1; [1995] HCA 5). It is said that it was only once Mr Anderson was convinced that Ashington could no longer remain as trustee and then later as manager (by reason, it is said, of the "intense pressure" exerted by the superannuation fund investors upon him; and having come to accept that the relationship with superannuation fund investors had irretrievably broken down) that he turned his mind to an indemnity for the wrongs alleged. The plaintiff submits that, having conspired to achieve this very end, the defendants cannot now be heard to argue that the decision of Mr Anderson for Ashington to retire was "ultroneous" or "unwarrantable" and "extraneous" to their conduct (Lord v Pacific Steam Navigation).
21. Reference is made to the account given by Mr Anderson in his principal affidavit as to his decision to retire (and to the communications that followed Mr Block informing him of the decision of the superannuation fund investors on 27 November 2009). The plaintiff submits (and I accept) that Mr Anderson's evidence (that he felt he had no choice but to retire as trustee) was not shaken in cross-examination; and hence the plaintiff submits that the defendants' contention that the retirement was voluntary (and that the conduct of the defendants did not materially contribute to Ashington Capital and Ashington Management's loss in causing Mr Anderson's decision to retire) is not supported by the evidence. I would accept the former proposition (i.e., that the retirement was not in the relevant sense voluntary but was a result of the pressure of the situation that Mr Anderson then faced) but I do not consider that the latter proposition (i.e., that the defendants thereby materially contributed to the claimed loss) necessarily flows from that.

Defendants' position on causation

1. As noted above, the counterfactual posited by the plaintiff is that, but for the conduct of the defendants from 1 October 2009, the Stonington Capital Raising would (or would likely) have been successful; the Investec and Hamton facilities would have been paid out; superannuation fund investors would have been required to pay the $6 million in remaining uncalled capital into ADF2; the Wylde Street Property would have been sold for a surplus of $7 million; and that, as a result of these cash-generating events, ADF and ADF2 would have been sufficiently capitalised for the Ashington companies to keep trading as a going concern (see [247] of the plaintiff's closing submissions). The defendants dispute this; and say that it is an exercise in Mr Anderson's "own optimistic speculation" (noting that the posited counterfactual is derived from Mr Anderson's affidavit of 19 December 2017, to which Patersons says very little weight can be placed having regard to credibility concerns with his evidence).
2. The defendants say that, in reality, the superannuation fund investors in ADF and ADF2 had serious concerns (for good reason) as to the ability of Ashington Capital to continue as trustee, and Ashington Management to continue as manager, and had formed the view that they should be replaced prior, and for reasons unrelated, to the actions of the defendants (including significant breaches of the funds' governing documents). On the issue of causation, the defendants emphasise the loss of trust and confidence on the part of the superannuation fund investors (by, it is said, the middle of 2009); and submit that the Ashington entities would thus have been removed (and its business would have come to an end) even if the alleged wrongful conduct did not occur; and hence the "but for" test is not here satisfied.
3. The defendants contend that, against the background of the severe impact of the GFC on Ashington's business, the real and effective cause of the retirement as trustee and manager of Ashington Capital and Ashington Management, respectively, here the repeated and significant breaches of trust and financing arrangements (without appropriate disclosure) by Ashington Capital.
4. The defendants say that the pleaded causation case requires the plaintiff to prove: first, that Patersons did not progress the Patersons Mandate, second, that the Patersons Mandate could have succeeded and, third, that the Stonington Capital Raising would have allowed the Ashington business to continue operating. Patersons argues that, as a threshold issue, unless the plaintiff can establish on the balance of probabilities that the Stonington Capital Raising would have occurred on the terms and within the timeframe pleaded it must follow that was no "substantial prospect" of a valuable commercial opportunity (and hence the plaintiff would fail at the first step of the Sellars analysis). It is noted that the plaintiff accepted in oral closing submissions that if it is determined that the Stonington Capital Raising would not succeed then the Ashington business was not a going concern.
5. The defendants have identified numerous difficulties with the plaintiff's counterfactual.

The Stonington Capital Raising would have involved breaches of trust

1. First, it is said by PPB that Ashington Capital cannot raise, for the purpose of counterfactual analysis, the prospect of a successful Stonington Capital Raising or execution of the Wingate Proposal, because these proposals would have involved breaches of trust on the part of Ashington Capital.
2. PPB says that it was a significant breach of trust to execute the Investec Stonington Facility, such that Ashington Capital would have lost its right of indemnity out of the property the subject of the relevant trust for liabilities or expenses properly incurred in the execution of the trust, such that it would personally have had to repay the Investec Stonington Facility (see cl 19 of the constitution of ADF2 extracted earlier). The relevance of this is said to be that, if Ashington Capital as trustee of ADF2 subsequently borrowed or otherwise raised funds for the purpose of discharging the liability owing under the Investec Stonington Facility, or if it had offered the assets of ADF2 or of the Stonington Trust as security for such borrowing, that would have constituted a further breach of trust.
3. A trustee is not entitled to a right of indemnity where: expenses are incurred by conduct outside the scope of the trust or in excess of the powers conferred by the trust; and where expenses are incurred as a result of conduct in breach of a duty which the trustee owed to the trust, including the duty to execute the trust with reasonable diligence and care (see Spigelman CJ in Gatsios Holdings at [14]). Spigelman CJ in Gatsios Holdings (at [15]) noted the observation of Lord Selborne LC with respect to the contractual rights of indemnity of a mortgagee or trustee to the effect that such rights "resting substantially upon contract, can only be lost or curtailed by such inequitable conduct on the part of the mortgagee or trustee as may amount to a violation or culpable neglect of his duty under the contract" (see Cotterell v Stratton (1872) LR 8 Ch 295 at 302). Reference is also made to the observations of Ormiston JA in Nolan v Collie (at [53]) that: The negative test is the relevant test, that is to allow indemnification for what has not been shown to have been improperly incurred. Thus it may be shown that a particular act is either outside the relevant power, done in bad faith, or exercised with an absence of the care and diligence that a person of ordinary prudence should exercise. noting that the relevant standard is that of "ordinary diligence and care required in the management of trust affairs which might be expected of a trustee as objectively but not over-zealously enforced" (and see Bowen LJ in Re Beddoe; Downes v Cottam [1893] 1 Ch 547 at 562 that "mere errors of judgment which fall short of negligence and unreasonableness" should not deny the right of indemnification).
4. In this regard, PPB points to the terms of the Investec Stonington Facility entered into on 25 February 2009 by Ashington Capital as borrower in its capacity as trustee of ADF2 and as guarantor in its capacity as trustee of the Stonington Trust, including cl 21.2, which it says has the effect that the limit on the liability of Ashington Capital under the Investec Stonington Facility (by reference to its right to be indemnified out of the assets of ADF2) did not apply if Ashington Capital's right of indemnity was lost by, amongst other things, negligence or breach of trust (see cl 21.2 (e)).
5. PPB emphasises in this context cl 19.2 of the Investec Stonington Facility which provided for the Stonington Uncalled Capital Undertaking and included a covenant to notify Investec of any reduction in uncalled capital and not to make calls on the unitholders (including calls under any uncalled additional equity) without Investec's written consent; and to the irrevocable power of appointment of Investec as Ashington Capital's attorney, inter alia, to make calls on any unitholders in the trust under partly paid units and under any uncalled additional equity up to the amount of the Investec debt (cl 20(a)).
6. It is noted that cl 6.1(b) of the Investec "General Terms and Conditions December 2008 Version", incorporated by reference into the Investec Stonington Facility made it an "Event of Default" if there was a breach of any undertaking in the Investec Stonington Facility (which would necessarily include the Stonington Uncalled Capital Undertaking given in cl 19.1) and that Investec's rights on the occurrence of an "Event of Default" (see cl 6.3 of the General Terms and Conditions document) permitted Investec to demand immediate payment of the moneys advanced under the Investec Stonington Facility and to enforce any security. It is noted that the security granted to Investec included a fixed and floating charge over the "Secured Assets" of ADF2, including: the whole of the property, assets and undertaking (including all rights to call uncalled capital) of the Trust … but excluding only the interest of the Trust in any units held in the Noosa Venture Trust and the Double Bay Trust and the interests of the Chargor in any loans made by the Chargor to Ashington Capital Limited in its capacity as trustee of the Noosa Venture Trust and the Double Bay Trust
7. Thus, PPB says that the "Secured Assets" subject to the charge granted to Investec included at least "all rights to call uncalled capital" and all debts owed to ADF2, which included amounts owed by Ashington Group and Ashington Capital as trustee for ADFIT in respect of unfulfilled calls for capital, and debts owed by Ashington Capital as trustee of ADF1 to ADF2. It is noted that these included debts of approximately $2,327,000 recorded in Ashington Capital's accounts, as well as a debt of approximately $5.2 million owed by Ashington Capital as trustee of ADF in respect of contributions made by ADF2 to the Project X Hotel Trust following the raising of $20 million of equity in December 2008.
8. It is contended (and it does not seem able to be disputed) that when Ashington Capital entered into the Investec Stonington Facility, there was insufficient uncalled capital in ADF2 for Ashington Capital to meet both the Stonington Uncalled Capital Undertaking (which required $10 million in uncalled capital to be maintained in ADF2 for the life of the facility) and the Project X Uncalled Capital Undertaking (which required $15 million less certain amounts to be maintained "which in the records of ADF2 is allocated solely to its obligations under the Finance Documents").
9. This constituted a "Default" under the Project X Security Deed (see cl 33.1(d)). PPB notes that, to the extent that the undertaking in cl 19.1(c) of the Investec Stonington Facility was given to support the further undertaking in cl 19.1(h) and the power of attorney granted in cl 20, this too was incapable of being complied with (in the sense that the uncalled capital in ADF2 was not capable of being allocated solely to Ashington Capital's obligations under the Investec Stonington Facility) and there was accordingly a default under the Investec Stonington Facility within the meaning of cl 6.1 of the "General Terms and Conditions December 2008 Version".
10. It is noted that a register of unitholders for ADF2 shows that, as at 25 February 2009 and taking into account the additional equity raised in December 2008, the uncalled capital in the fund was around $13.5 million.
11. PPB points out that the management team within Ashington Capital was aware of this difficulty even before entry into the Investec Stonington Facility (referring to the 27 December 2008 email from Mr Steel); and reference is made to Mr Anderson's evidence that, in late 2008 and early 2009, he understood that: the superannuation fund investors in ADF2, particularly HESTA, "would have been concerned if their equity contribution had been double pledged" (T 410.33-40); and NAB "would have been concerned if [he] covenanted with it to keep an amount of uncalled capital and then gave a covenant to another lender over the same amount of uncalled capital" (T 410.42-46).
12. Insofar as the plaintiff's submiis that if there was no better option for investors (other than breaching the Stonington contract, losing the deposit, and making the fund liable for damages) then it might well have been a breach of Ashington's duties as trustee not to accept the terms offered by Investec (see plaintiff's closing submissions at [16(a)]), PPB says that this has two difficulties.
13. First, that while Ashington Capital stood to lose its deposit if it failed to complete the acquisition of the Stonington Property, the Contract for Sale with Hamton included provision (cl 36.1) limiting the trustee's liability to the assets of the trust out of which it was entitled to be indemnified as trustee. PPB argues that, having regard to cl 36.1 and given the paucity of the assets in the Stonington Trust prior to completion of the purchase of the Stonington Property, breach of the Contract for Sale would not have exposed Ashington Capital, as trustee of the Stonington Trust, to a substantial liability above and beyond the loss of its deposit. PPB says that this must be weighed against the fact that completing the purchase of the Stonington Property and accepting the terms that Investec proposed for advancing mezzanine finance involved a potential, if not actual, default under the terms of the Project X Security Deed, in circumstances where: the limit of the Project X Facility was $50,375,000; the Double Bay Property was "the jewel in the crown of the business" (T 6.11-12); and the Project X Facility appears to have been secured by, amongst other things, a registered mortgage over the Double Bay Property.
14. Second, that it ignores that a trustee, as a fiduciary, should act with candour towards its beneficiaries. It is said that Mr Anderson knew of the looming financial difficulties facing the fund for some time before 25 February 2009 (the settlement of the Stonington Property having been twice delayed in late 2008 and early 2009, and in the course of those delays Ashington Capital having agreed to an increase in the purchase price and a doubling of the deposit, at the same time as the Investec indicative terms had been signed on 18 December 2008 which included the uncalled equity commitment); and referring to Mr Steel's warning on 27 December 2008 that Ashington Capital could not realistically meet dual commitments in relation to uncalled equity. PPB says that it was open to Mr Anderson at any stage to withdraw from the settlement of the Stonington Property, or to include (in the scope of the request for additional equity that Ashington made in late 2008 to meet the requirements of the Project X Hotel Trust) sufficient funds to meet Ashington Capital's foreseeable, and foreseen, difficulties in relation to the Stonington Trust.
15. PPB says that, by entering into the Investec Stonington Facility, Ashington Capital was risking a default under a $50 million facility and the enforcement of a mortgage over the most prestigious of its properties, in order to avoid the possible loss of a $9.3 million deposit paid under the varied Contract for Sale in respect of the Stonington Property. Further, default of the Investec Stonington Facility created a risk that Investec would treat its debts under that facility as immediately due and payable, and enforce its security rights, including its rights to access the uncalled capital in ADF2 or to enforce its fixed or floating charge over the assets of ADF2.
16. PPB says that, having regard to what was understood by Mr Anderson in late 2008 and early 2009, entry into the Investec Stonington Facility cannot have involved anything other than a breach by Ashington Capital, as trustee of ADF2, of its duty to administer that trust in the manner of an ordinary, prudent person of business conducting his or her own affairs. It is said that, given the potential adverse consequences of that transaction for Ashington Capital, particularly under the Project X Facility and the Project X Security Deed, it is implausible to suggest that entry into the Investec Stonington Facility was, on balance, beneficial for ADF2, such that Ashington Capital should retain the right to be indemnified from the assets of that trust.
17. PPB argues therefore that the trustee's right to be indemnified was lost when Ashington Capital entered into the Investec Stonington Facility on 25 February 2009 and that it was lost by reason of Ashington Capital's negligence or breach of duty (such that Ashington Capital was personally liable under the Investec Stonington Facility for the full amount of its indebtedness).
18. PPB says that if, against the background of the above matters, Ashington Capital as trustee of ADF2 had borrowed or otherwise raised funds for the purpose of discharging the liability owing under the Investec Stonington Facility, or if it had offered the assets of ADF2 or of the Stonington Trust as security for such borrowing, that would plainly have constituted a further breach of trust. It is said that any such arrangement would have involved a conflict between Ashington Capital's personal interests (as a party owing a substantial personal liability to Investec) and those of the superannuation fund investors. PPB says that this is significant because the Stonington Capital Raising (as defined in the pleading), which Patersons had been mandated to pursue, contemplated the advancement of a short-term mezzanine facility to Ashington Capital as trustee of ADF2, secured by a second-ranking security behind Westpac's mortgage in respect of the Stonington Property. Thus, it is said that the Stonington Capital Raising would itself have involved a breach of trust.
19. Insofar as the plaintiff alleges that the Stonington Capital Raising would not have been a breach of trust by Ashington Capital because the superannuation fund investors were aware at the time at which the pursuit of the Stonington Capital Raising was approved, of each integer of Ashington Capital's conflict of interest arising out if its earlier breach of duty, and because they were receiving advice from PPB and from solicitors (Norton Gledhill) at that time, PPB says that this allegation is not supported by the evidence.
20. It is noted that, in New Zealand Netherlands Society Oranje Inc v Kuys [1973] 2 All ER 1222, Lord Wilberforce, speaking for the Privy Council, observed (at 1227) that "if an arrangement is to stand, whereby a particular transaction, which would otherwise come within a person's fiduciary duty, is to be exempted from it, there must be full and frank disclosure of all material facts"; and it is accepted by PPB that "[w]hat is required for a fully informed consent is a question of fact in all the circumstances of each case and there is no precise formula which will determine in all cases if fully informed consent has been given" (Maguire at 466). However, PPB points out that (in the context of a solicitor proposing to act for both sides of a transaction), it has been said that an informed consent requires the client's knowledge that a conflict exists and that "as a result the solicitor may be disabled from disclosing to each party the full knowledge which he possesses as to the transaction or may be disabled from giving advice to one party which conflicts with the interests of the other" (Mantonella Pty Ltd v Thompson [2009] 2 Qd R 524; [2009] QCA 80 at [84], citing what was said in Clark Boyce v Mouat [1994] 1 AC 428 at 435-436).
21. PPB argues that, in circumstances where a well-remunerated professional trustee is proposing to engage in a course involving an actual or potential conflict of interest, the beneficiaries cannot be said to have granted fully informed consent to that course without being made aware of the existence or potential existence of that conflict; emphasising that in the present case no such conflict was ever disclosed to the superannuation fund investors.
22. PPB says that it may be accepted that the superannuation fund investors were aware of "technical breaches in compliance" when they agreed, in late September 2009, to the notion of raising mezzanine finance as an alternative to selling the Stonington Property. However, it is said that there was no disclosure to those investors of, at the very least, the possibility that Ashington Capital might not have been entitled to be indemnified out of the assets of ADF2 in respect of its liability under the Investec Stonington Facility. PPB points out that it is that loss of the right of indemnity which gave rise, in September 2009, to the conflict between Ashington Capital's personal interests and the interests of the superannuation fund investors. It is submitted that, that being so, there cannot have been a full and frank disclosure to the superannuation fund investors without disclosure of Ashington Capital's loss of its right of indemnity (and it says that, to suggest otherwise, is to accede to the notion that, instead of relying on Ashington Capital to comply with its fiduciary obligations as trustee of ADF2 and to exhibit a level of candour consistent with being a fiduciary, the superannuation fund investors should in effect have discovered this themselves). PPB argues that the fact that the superannuation fund investors were receiving independent advice does not assist the plaintiff.
23. Thus, PPB says that there can no plausible invocation of the defence of fully informed consent in the face of the proposition that, had either borne fruit, the Stonington Capital Raising or the Wingate Proposal would have involved breaches of trust by Ashington Capital as trustee of ADF2; and hence that neither can be relied on as arising in a counterfactual for the purpose of establishing causation of loss. PPB says that the same follows in respect of the Wingate Proposal, which, again, contemplated borrowing by Ashington Capital otherwise than in a personal capacity.
24. The plaintiff responds to this particular allegation of breach of trust (and its contended consequences) as follows.
25. First, the plaintiff says that entry into the Investec Stonington Facility was not a breach of trust. It is said that the defendants have failed to establish that entry into that facility constituted a lack of prudence such that Ashington Capital breached its duty to its beneficiaries.
26. Second, it is said that, even if there was a breach of trust, the result for which PPB contends does not follow. It is accepted that, by 30 September 2009, the Investec Stonington Facility was in default and that, if the default was not addressed, Investec could exercise its security (and destroy what hope there was of preserving or enhancing investor equity in ADF2). However, it is said that PPB has not pleaded a term of the trust instrument which would have the effect for which it contends. It is said that Ashington Capital had not only the right, but the duty, to act in the best interests of the superannuation fund investors with reference to the Investec Stonington Facility (unconfined by whether it had previously breached its equitable duty of care). It is submitted that, if PPB's proposition was correct, the result would be a "perverse crippling" of the trustee's powers to fulfil its role by reason of an earlier breach of duty and where it may not even be conscious of its wrongdoing (if any) because the relevant test is objective. (In response, PPB says that, if Ashington Capital was crippled in its ability to refinance the Investec Stonington Facility in August 2009, it was by Mr Anderson's decisions in late 2008 and early 2009, and by its own breaches of duty as trustee on and from 25 February 2009; and that, to accept the plaintiff's submission, would be to allow a trustee to hide behind previous breaches of duty to justify further breaches of duty.)
27. The plaintiff argues that the Stonington Capital Raising was the only prospect of preserving the superannuation fund investors' equity in the trusts (something which it is said was recognised by the defendants and the plaintiff at the time). It is said that, even assuming (which the plaintiff denies) that Ashington Capital was in breach of its equitable duty of care by entering into the Investec Stonington Facility, it could not be a breach of trust for the trustee to find alternative finance if that was in the best interests of the investors and the trustee had the power under the trust deed to do so.
28. Furthermore, it is said that the superannuation fund investors were well aware of the alleged breach of trust. It is noted that it was that matter that had caused the appointment of PPB, and upon which PPB had reported to the superannuation fund investors; and yet, fully informed of those matters, the superannuation fund investors approved the Stonington Capital Raising.
29. More broadly, the defendants say that the suggestion by the plaintiff in oral closing submissions that Mr Anderson could not be criticised for progressing the Wingate Proposal because Mr Anderson did not realise that the superannuation fund investors would be concerned about the proposal is inconsistent with: Mr Anderson's position vis-à-vis Investec that "it will be a debt transaction, thus no need to involve the investors…"; the correspondence with Norton Gledhill; and Mr Anderson's 23 November 2009 email to Mr Steel (giving instructions for the application fee to be paid to Wingate) in which he advised that "I'm just off to Investec to make sure they support the deal with Wingate ie. Support any challenges from PPB / Investors". It is said that Mr Anderson knew full well that what he was doing was contrary to the interests of superannuation fund investors; and that he did it anyway to advance his own interests.

Funds raised by the Stonington Capital Raising would have been insufficient

1. Second, that even if, on the counterfactual, the Stonington Capital Raising was not a breach of trust and had been successful, any funds thus generated would have been insufficient to pay several of ADF2's financiers or to continue to operate several of the projects held in the sub-trusts. It is said that the plaintiff has not proved, through admissible evidence, that the Ashington Group could have remained in business for any meaningful amount of time; and that the Stonington Capital Raising would not have changed the going concern analysis (rather, it was at best a limited reprieve).
2. The proposed refinance of Stonington under the Patersons Mandate involved a mezzanine facility with an interest rate of 30%, payable at the end of a term of 6 months; and the proposed facility included an undertaking not to obtain any construction finance during the term (which it is noted meant that it would not have been possible to develop Stonington until the mezzanine facility had been repaid).
3. It is said that, because of the undertaking not to obtain construction finance until repayment of the mezzanine finance, the Patersons Mandate could never have supported the development of Stonington; and that, instead, Ashington would have had to seek further accommodation from financiers in six months' time (with additional debt and no better placed to resolve any of the issues facing the business, particularly in the context of the GFC). It is submitted that it would be inferred that at least Westpac (whose senior facility over the Stonington Property had been in default since August 2009) and St George/NAB would not have waited another six months before taking enforcement action.
4. As above, the plaintiff submits that if the Stonington Capital Raising was successful, the Stonington Capital Raising would have been successful, the Investec and Hamton facilities would have been paid out, the superannuation fund investors would have been required to pay the $6 million in remaining uncalled capital into ADF2, the Wylde Street Property would have been sold for a surplus of $7 million, and that consequently ADF and ADF2 would have been sufficiently capitalised.
5. As to repayment of the Investec and Hamton debts, PPB notes that information extracted from Ashington Capital's MYOB accounting records shows that, as at 30 September 2009, Hamton was owed $2,621,103.11, and that the Stonington Trust owed $1,590,628.78 to creditors other than under the Westpac Stonington Facility or the Hamton Vendor Finance (of which sum $804,104.68 had been owing for over 90 days). When Hamton commenced proceedings seeking judgment in respect of the Hamton Vendor Finance, it sought judgment in the amount of $2,927,047.69 together with interest and costs; and ultimately, it obtained judgment in the amount of $3,091,151.62 against Ashington Capital as trustee of the Stonington Trust.
6. Accordingly, PPB says that it should be assumed that the replacement facility obtained by means of the Stonington Capital Raising would have needed to be been at the high end of the $10-15 million range in the Patersons Mandate. It is noted that the final version of the Patersons Mandate, which the plaintiff submits is the version likely to have been signed, involved a coupon of 30% per annum payable at the end of the six-month term (i.e. a 15% return). PPB says that this would have required a repayment of $17.25 million in around April 2010, assuming that $15 million was borrowed.
7. As to the suggestion that the superannuation fund investors would have been required to meet the call for the remainder of the $6 million of uncalled capital in ADF2, PPB points to the fact that the terms of the superannuation fund investors' applications for new units in December 2008 and February 2009 expressly required that the trustee would not make calls on the pro-rata proportions on members unless it had called up all the existing equity capital of the fund. PPB says that the plaintiff has not proved that Ashington Capital as trustee of ADF2 made calls on Ashington Group and Ashington Capital as trustee of ADFIT for all the uncalled capital to which those entities had subscribed. It is said that those entities did not meet any previous calls (this being one of the perceived breaches of trust referred to above).
8. PPB says that, even assuming that the superannuation fund investors would have been required to meet the call, all of this money would have been required to meet Ashington Capital's obligation to pay NAB and St George a $6 million principal reduction following the refusal of the Double Bay development application (which was the subject of notices of default from those banks on 2 and 6 October 2009). Reference in this regard is made to cl 31(c) of the Project X Security Deed, the failure to comply with which constituted a "Default" for the purposes of cl 33.1(b) of the Project X Security Deed.
9. PPB notes that the $6 million of uncalled capital remaining in ADF2 by 30 September 2009 was committed by the superannuation fund investors in December 2008 and February 2009, following a request for further equity by Ashington Capital in December 2008 which was said to be expressly for the purpose of the Project X Hotel Trust (pointing to correspondence and the HESTA Side Letter).
10. Thus, PPB says that, in the plaintiff's proposed counterfactual recapitalisation, the $6 million in uncalled capital which the superannuation fund investors would have been required to pay would have been applied to meeting this obligation owed to NAB and St George.
11. As to the $7 million surplus postulated on the sale of the Wylde Street Property (which the plaintiff says would have permitted an inter-trust loan of about $2.3 million from ADF and ADF2 to be paid and the balance used to pay outstanding creditors), PPB says, first, that there is reason to doubt that the inter-trust debts from ADF and ADF2 were limited to $2.3 million. It is said that Ashington Capital, as trustee for ADF, likely owed a further $5.2m to ADF in respect of contributions ADF2 made on ADF's behalf into the Project X Hotel Trust following the raising of additional equity in December 2008 and February 2009. In any event, PPB says that the plaintiff has not proved, through admissible evidence (such as expert property valuation evidence), that such a surplus could have been achieved (although I note that the plaintiff relies on the Colliers valuation of $19 million dated 23 September 2009 in this regard - see chronology). Patersons points out that contrary to Mr Anderson's optimistic assertions as to the property, according to the documents, Ashington had earlier in the year made the decision to put the pre-sales and marketing program on hold until the market recovered (implying that the market was problematic) and that even if it had been sold this would not have been before the expiry on 31 October 2009 of the Investec senior debt facility in the amount of $10.78 million (on 3 November 2009 Investec issued a demand for repayment of this debt - see chronology); and that even if Investec did not enforce its rights, $10.78 million of the sale proceeds from Wylde Street would have been used to pay off the Investec loan (although I understand this figure is taken into account to reach the $7 million surplus).
12. As to the plaintiff's submission that the delay in selling the Wylde Street Property was attributable to the conduct of the defendants, Patersons says that ought not be accepted; noting that the evidence was that Mr Renauf was managing this process and had approached Knight Frank to administer it; yet no buyer had been found by 31 October 2009.
13. In any event, it is said that the moneys received in this way through the sale the Wylde Street Property would have been insufficient to resolve the liquidity problems facing ADF and ADF2.
14. Further, PPB says that the plaintiff cannot explain how Ashington Capital would have been in a position to repay the Westpac Stonington Facility (of $23 million) and to avoid the enforcement of Westpac's mortgage over the Stonington Property.
15. PPB accepts that, as the plaintiff points out, the evidence indicates that in October 2009 Westpac agreed to extend the facility to 31 December 2009. However, insofar as the plaintiff suggests that enforcement against the Stonington Property was unlikely in the counterfactual (because Westpac was in talks with Parissen for an extension of the facility in January 2010), PPB refers to the communications between Westpac and Ashington (culminating in Westpac's 26 October 2009 email advising that Westpac would not provide funding to complete the Stonington Project) as indicating that Westpac only engaged in discussions with Parissen because it was not Ashington. PPB says that (as it says was also the case with Investec, NAB and St George) Westpac's willingness to negotiate with a different manager is no indication of what action it would have taken if it had to continue to deal with Ashington. In any event, PPB says that there is no evidence of the outcome of Westpac's negotiations with Parissen.
16. PPB says that it is implausible to suggest that Ashington Capital as trustee of the Stonington Trust would have been able to meet its obligations to its financiers through a staged development of the Stonington Property. It is noted that Ashington Capital had no funds by which to fund any development. PPB says that it does not assist the plaintiff to suggest that only $2.7 million of construction finance was required to fund stage 1 of the Stonington development because it would be remarkable for any lender to advance any funds at all to Ashington Capital as trustee of the Stonington Trust while it was in default of a $23 million facility to Westpac (even more so having regard to Ashington Capital's defaults under the Project X Facility, and the fact that, on the plaintiff's counterfactual, Ashington Capital would sell the Wylde Street Property undeveloped in circumstances where the senior debt to Investec of $10.78 million was payable on 31 October 2009).
17. PPB says that the more likely scenario is that Ashington Capital would have had no alternative but to sell the Stonington Property or that Westpac would have exercised its rights under its registered mortgage over that property. As with the Wylde Street Property, PPB says that the plaintiff has not proved through admissible evidence (such as expert valuation evidence) that sufficient funds could have been raised from asset sales to meet Ashington Capital's obligations; and thus, has not proved that the Stonington Trust would have survived the difficulties it faced before 30 September 2009.
18. PPB says that, even if contemporaneous valuations of the Stonington Property were to be read as evidence of the value of that property, it is apparent that Ashington Capital as trustee of the Stonington Trust would not have been able to repay its lenders. It is noted that a valuation dated 22 July 2009 of the Stonington Property commissioned by Ashington and Westpac (by Charter Keck Cramer) valued the property at $35.2 million. PPB says that, with $23 million owing to Westpac, and approximately $17.25 million to come due under the Stonington Capital Raising in April 2010, the sale of the Stonington Property would have caused the Stonington Trust to be insolvent. Insofar as the plaintiff has from time to time asserted that the Stonington Property could have been sold at a higher price, PPB points out that an internal Ashington Project Control Group Report in November 2009 noted that "[a] more likely price is $35 - $40M". PPB says that even the high end of that range would not have been sufficient to pay Westpac and the hypothetical lender under the Stonington Capital Raising.
19. As to Double Bay, it is said that the counterfactual does not deal with how the funds were going to be used to pay NAB and St George in respect of the $6 million principal reduction which was in default. Further, PPB says that (assuming that the $6 million principal reduction was met from the uncalled capital in ADF2), it nevertheless remains unclear how Ashington Capital as trustee of the Project X Hotel Trust could have met its obligations under the Project X Facilities, each of which fell due on 31 December 2009, (the three facilities totalling approximately $65 million). It is said (and I accept) that Ashington Capital had no means of repaying these facilities; and that the consequences of a "Default" under the Project X Security Deed included the possibility that NAB as Security Trustee would enforce its mortgage over the Double Bay Property. In addition, it is noted that Ashington Capital as trustee of ADF and ADF2 respectively gave guarantees to NAB and St George, albeit "limited to interest, costs and any funded cost overruns in addition to principal of $6 million".
20. PPB notes that on 19 October 2009, NAB and St George appointed KordaMentha as an investigating accountant to undertake a review of the financial position of ADF2; and that KordaMentha's recommendation in the event that neither of the Wingate and Parissen proposals proceeded was that it was critical that Ashington be removed from control of the development application process as soon as practically possible (since obtaining a timely and suitable development application approval was likely to lead to full recovery of both the Senior and Mezzanine facilities). PPB points out that this was, in effect, a recommendation to appoint a receiver or a receiver and manager under the banks' mortgage if Ashington remained in control of the development.
21. PPB says that it does not assist the plaintiff to point out that St George and NAB eventually reached agreement with Parissen on 31 January 2010 to extend their facilities for a further two years with a $22 million paydown (though noting that there is no evidence available as to whether this transaction was formalised or executed). It is said that KordaMentha's position (aw was its recommendation) was reflected in NAB and St George's actions in October to December 2009, prior to entry into this agreement, namely, the steps taken preparatory to the appointment of a receiver and manager, to enforce their rights until a substantial capital payment was made. PPB says that it is notable that these developments took place simultaneously with the development and acceptance of the Parissen Proposal, and the retirement of Ashington Capital as trustee of ADF and ADF2; yet, despite these developments and the injection of capital by Parissen, a receiver and manager was appointed to the trustee of the Project X Hotel Trust.
22. PPB says that, unlike Parissen, Ashington would not have been in a position to make a significant paydown in order to extend the Project X Note Facilities. Ms Garrett and Mr Renauf also say that Parissen was not the cause of the breaches and had not lost the confidence of the banks and that unlike Ashington, Parissen: had the support of its investors; fresh capital; substantial backing; the support of KordaMentha. In those circumstances (and given KordaMentha's earlier recommendation), it is said that, in the absence of the Parissen Proposal, it is likely that a receiver and manager would have been appointed to take control of the development application process.
23. PPB says that, again, there is no admissible evidence available to indicate that, were NAB and St George to cause the Double Bay Property to be sold, there would have been a surplus upon repayment of the debts owing to NAB and St George under the three Project X Note Facilities. It is noted that KordaMentha's report to NAB and St George of 23 November 2009 notes that the Double Bay Property "was valued on 6 October 2009 by Colliers at $40.0m 'as is' assuming continued use as a hotel, and $60.3m 'as is' assuming a mixed use development scheme" and that "a sale at valuation ($60.3m) would be very difficult in the current environment … a further discount is likely to be applied to a purchase price". PPB says that there is accordingly no basis to believe that a surplus could have been achieved on such a sale (given that the principal owing to NAB and St George totalled $65 million).
24. It is therefore contended that it is more likely that NAB and St George would have enforced the guarantees given by Ashington Capital as trustee of ADF and ADF2, the result of which would have been to expose the assets in those funds to enforcement processes, assuming judgment in favour of NAB and St George.
25. Thus, in relation to the plaintiff's proposed counterfactual, the defendants submit that, even if the Stonington Capital Raising had succeeded in generating mezzanine finance on the terms contemplated in the Patersons Mandate, it would have been insufficient to deal with the financing problems facing Ashington Capital as trustee for the Stonington Trust.
26. Even if the steps on which the plaintiff's counterfactual is based had occurred, the defendants maintain that the superannuation fund investors would not have permitted Ashington Capital (as trustee) to use the funds from the new mezzanine facility, the $6 million in uncalled capital and the proceeds of sale of the Wylde Street Property to pay their outstanding creditors as well as the $1.58 million in fees and commissions then owing to Ashington. It is said that this scenario expressly envisages the intermingling of trust money amongst the various sub-trusts, a matter which had caused discontent among the superannuation fund investors several months before and ultimately led to a complete loss of confidence in the trustee. Thus PPB argues that the transactions implied in the proposed recapitalisation would therefore have involved further breaches. It is said that, at the very least, they would have involved conduct rendering the representations in the information memoranda misleading and deceptive.
27. It is thus submitted by the defendants that the counterfactual posited by the plaintiff is untenable; and that it is far more than simply the application of "evidence provided by hindsight" (cf, plaintiff's closing submissions at [248]); and it ought to be rejected. (As noted earlier, Patersons says that all of these matters are properly to be treated as threshold causation barriers but that, if they are instead brought to bear as matters bearing upon the probability of Ashington achieving the cash flows or financial returns postulated, then Patersons says that they discount any loss suffered to an amount that is "vanishingly small".)

No evidence that the Stonington Capital Raising could have succeeded

1. Third, that there is no evidence that, in the absence of the Parissen Proposal, the Stonington Capital Raising could have succeeded. It is said that there is no evidence of any real interest in the Stonington Capital Raising, and that the Wingate Proposal was incapable of being completed (see above).
2. The defendants submit that the plaintiff's case that the Stonington Capital Raising would have succeeded rests on: the positive expectations of various sales people, usually before the Double Bay development application refusal; a couple of indicative responses from investors; and the terms of the Patersons Mandate itself. From the fact that Mr Anderson was only able to obtain the Wingate Proposal (described as a value destructive proposal), the inference is invited that the Patersons Mandate was not going to be on terms that investors would accept; and that no rational investor would accept the terms of the Patersons Mandate. (Any such inference would to my mind be relatively weak given the respective positions of Mr Anderson and Patersons.)
3. The defendants point out that, although a number of investors had expressed some interest in various forms of finance into Stonington, in the end none of those investors proceeded; nor did any other investor express interest in the Stonington Capital Raising after any due diligence. It is said that expression of an initial interest in providing finance does not provide a proper basis to infer that the interested party would in fact provide that finance (and it is said that this is particularly the case where the company is one whose closet was full of "skeletons" that, on due diligence, would inevitably have changed a financer's mind).
4. As to those initially expressing interest, the defendants note the following.
5. The proposal by Apex Capital (on 1 October 2009) involved it taking over the management of Stonington (i.e., it was predicated upon Ashington having a significantly diminished role) and that it would own a substantial majority equity stake in Stonington; and required a 14-day exclusivity period. It is said that, based on Mr Anderson's evidence that he would have fired Ms Garrett and Mr Renauf for progressing a transaction that involved an equity stake or losing management rights, the plaintiff cannot seriously now contend that this proposal ought to have been further advanced (but that in any event in terms of timing, it was not feasible to agree to the 14-day exclusivity period).
6. As to the Wessex response, it is noted that by 2 October 2009, Wessex had advised Mr Renauf that there was an "insufficient margin in the project" and that the "gross realisation of 76 dwellings would be $95m only" and that "at a current value of $43m, aggregate senior and mezzanine debt of $38m + interest represents an unacceptably high LVR … which looks like a very high risk project"; that the exit strategy was very vague and that "in the current financial climate, "there is a huge gulf between 'advanced negotiations with Westpac' and loan approval".
7. As to Mr McCabe, it is said that he could not transfer funds to Investec due to a non-compete provision with Valad.
8. As to the Victor Smorgon Group, by 21 October 2009, it had advised that it was not progressing with the transaction); and it is noted that Mr Anderson himself had said that Sensata and Icon Constructions could not progress with the transaction.
9. Mr Anderson accepted in cross-examination that, as at November 2009, it had been reported to him that all of the other active proposals had "dropped away" (T 485.1-3); and it is noted that this evidence is consistent with what he told investors at the time, namely, that there was no offer other than Wingate that met the "requirements of the manager".
10. The defendants point out that, even if some of these investors may have been open to providing finance to the Consortium, the documents do not suggest that this was on the same terms. In any event, it is submitted that the logical inference to draw is that any interest that proposed investors had was informed by the large infusion of cash that the Parissen Proposal contemplated (as well as, or perhaps if not also, the absence of Mr Anderson).
11. As to the Wingate Proposal, the defendants say that the Wingate Proposal was unrealistic and value destructive (as, even on Mr Anderson's modelling, this would have seen a 30% loss on investment); that the conditions precedent could never be satisfied by Ashington; that Wingate would never have provided the finance in any event; and, further, that even if Wingate had provided finance, the finance was not enough, and at too high a cost to make the project work. It is suggested that the motivation for Mr Anderson to execute the Wingate Proposal (although Mr Anderson denies this) was his personal desire to avoid being bankrupted by Hamton and his attempt to maintain control.
12. On 20 November 2009, Mr Anderson signed the Wingate Proposal. The terms of that proposal included that: (a) Wingate would advance $11 million to Ashington Capital upon settlement of Stage 3 of the development of the Stonington Property, subject to establishment fees of $300,000 being paid; (b) an interest rate of 38% per annum compounding monthly, and an additional $200,000 annual fee for the two- year term of the loan; (c) by way of security, Ashington Capital as trustee of the Stonington Trust would grant a fixed and floating charge over its assets and undertakings, as well as a registered mortgage in respect of the Stonington Property, both of which would rank behind Westpac's securities; and (d) a number of conditions precedent be satisfied (all of which it is said would need to have been satisfied within a short period of time, given the looming deadline created by the Hamton proceeding).
13. A further $10 million was to be advanced either as a loan or as equity to enable Ashington Capital as trustee of the Stonington Trust to pay Hamton, its unsecured creditors and other obligations. It was then contemplated that Wingate would be repaid out of sales from the Stonington Project, and that $15.3 million would be returned to the superannuation fund investors (representing a loss of $7.4 million for the superannuation fund investors).
14. Security condition 2 required a registered mortgage over the land. It is noted that Investec considered this may be a major impediment to the transaction, Mr de Rooy noting, following a conversation with Mr Anderson, that it did not appear that consent had been obtained from Westpac (the first mortgagee.
15. Security conditions 3 and 4 which required a deed of priority with the senior lender and a quadripartite deed with the lender and builder. There is no evidence of negotiations about these matters (from which the defendants submit that it should be inferred that these conditions were not capable of satisfaction within the time required).
16. The conditions precedent in the Wingate Proposal included, at [1]-[3], a restructure of the terms of sale of "Stage 3" of the development and the lot known as "the Stables". The restructure included changes, apparently increases, of price, and a structure whereby purchasers would pay the equivalent of the purchase price upon signing (by way of a loan), which would be repaid upon settlement of the sales (presumably with interest). Those settlements were to be deferred until the sales under "Stages 1 and 2" were completed (which would be years away). (Thus, it is noted that purchasers would effectively be asked to pay the purchase price upon signing and not receive the land for some years until, and assuming, the Stonington Trust completed sales of Stages 1 and 2.)
17. Mr Anderson accepted that these conditions precedent essentially required a $10 million interest free loan to be provided to Ashington by the Stage 3 and Stables purchasers. The defendants submit that it would be inferred that no reasonable purchaser would provide that financial assistance in a commercial arrangement, especially where the mezzanine financier was requiring above 40% interest to provide the same loan. It is said to be unclear why any purchaser of residential land would agree to such terms without requiring a steep discount in price. Mr Anderson's explanation in cross-examination was that these could be achieved because the purchasers were "known to", or perhaps even "an investor in" Wingate (T 494). The defendants query the unexplained premise of this explanation (i.e., that a purchaser of land would take on a developer's completion risk only because it "knows" the vendor's financier).
18. Condition precedent 5 required an independent valuation to be obtained to support the feasibility. It is said that the Wingate feasibility assumes the valuer will adopt a land valuation of $47 million, which is a critical assumption that supports (for example) the LVR (Loan to Valuation Ratio) and the availability of construction finance. The defendants point to the evidence of a recent valuation of $35 million, which they say would be inferred was more in line with the conditions prevailing at the relevant time. Reference is also made in this context to PPB's opinion that the assumed land value of $47 million was a significant issue.
19. Condition precedent 6 required construction finance to be obtained from a "Big Four" bank ("[c]urrent indicative terms for a construction facility for Stages 1 and 2 issued by a 'Big Four' Senior Lender which, in [Wingate's] opinion, are capable of being fully satisfied by the Borrower"). The defendants submit that it would be inferred that the major banks would not provide Ashington with such finance. , noting that In the case of Westpac (the senior lender for the Stonington Trust had refused to provide construction finance (see the 16 October 2009 advice in the chronology above to that effect). It is submitted that, given Ashington's deteriorating relationship with its financiers, it is fanciful to suggest that Ashington Capital could ever have obtained construction finance from a "Big Four" senior lender in the midst of the GFC. It is said that any bank would have discovered the default under the Westpac Stonington Facility, as well as Ashington Capital's defaults under the Project X Facility and the Investec Stonington Facility upon conducting even the most cursory due diligence; and that, having discovered defaults by Ashington Capital under facilities provided by three of the "Big Four" banks and Investec, no lender would have advanced Ashington Capital construction finance.
20. PPB says that it is telling that, in correspondence with KordaMentha on 7 December 2009, Mr Anderson conceded that satisfaction of that condition precedent would be "challenging".
21. Condition precedent 12 required the provision of corporate financial statements and tax returns for the past two years for Ashington Capital as trustee of the Stonington Trust, the finance facility documents and other Ashington documents. Condition precedent 13 included the provision of "[d]etailed update of all current Ashington Group developments".
22. Emphasis is placed on the fact that Ashington Capital was unable to prepare audited accounts for ADF or ADF2 for the 2009-2010 financial year and that it is not clear when, if ever, Ashington would have been able to have the audit of its accounts completed (pointing to the 12 November 2009 communication from Mr Steel to PPB as to the status of the audited accounts). The defendants say that the evidence suggests that the appointed auditor was not able to finalise the audit at the relevant times and it should be inferred that these documents could not be provided to the satisfaction of Wingate. (It is submitted that it would also be inferred that: the other facility breaches had not yet been disclosed to Wingate and that once the other facility breaches were disclosed to Wingate, Wingate would refuse to advance funds.)
23. For similar reasons, PPB says that it is unlikely that Wingate itself would have completed on its proposal, if it was ever provided with the information required to be provided under conditions precedent 12 and 13. PPB submits that any honest attempt to provide a "[d]etailed update of all current Ashington Group Developments" to Wingate would have revealed Ashington's many defaults, its double-pledging of uncalled equity, the exposure at the head-trust level in relation to the Investec Stonington Facility, and Ashington Capital's otherwise parlous financial position.
24. Accordingly, the defendants submit that Ashington Capital as trustee of the Stonington Trust had little, if any, prospect of satisfying the conditions precedent of the Wingate Proposal and signing a facility agreement with Wingate.
25. As to the special conditions of the Wingate Proposal, it is noted that special condition 4 imposed a 21-day exclusivity period, which the defendants point out excluded the possibility of any alternative finance if (as the defendants say was inevitable) Wingate did not complete; special condition 7 stated that, Wingate accepted that the final documentation may require the support of Ashington's investors and/or financiers, but that in the event that such support is not provided, the binding elements of the Offer would still hold (the defendants say that investor consent was required, because the ADF2 Information Memorandum required investor consent for transactions involving a material conflict of interest and the Hamton conflict was material).
26. In addition, it is noted that the Wingate Proposal was subject to approval from its credit committee. The defendants submit that the committee would never have approved it. It is said that a rational financier would have required the following matters to be satisfied before granting approval: (a) binding terms for construction finance with a reputable bank and builder, so that the property could be developed and ultimately return their funds (it here being noted that Wessex in its rejection of the proposed investment had pointed the huge gulf between "advanced negotiations with Westpac" and loan approval"; (b) provision of audited accounts for the Stonington sub-trust, so that the investor could be satisfied of the financial position of the borrower; (c) evidence that outstanding creditors (i.e., Investec and Hampton) would agree to the proposal, and not move to wind up the company; (d) details of the relationship with the other sub-trusts and head trust, and confirmation that there was no risk of a failure in one sub-trust contaminating other sub-trusts; (e) a feasibility model that showed that the project could return the promised returns and had sufficient contingency to allow for delays in the projected construction and/or sales timetable; and (f) sufficient pre-sales to non-related parties to demonstrate that the projected $/sqm sales value in the project feasibility was in -line with current market conditions and there would be appetite for the developed real estate.
27. It is said that contemporaneous documents provide a clear basis from which it would be inferred that Ashington would not have been able to satisfy Wingate of these matters. In particular, reference is made to the following: (a) the issues then facing the Ashington group; (b) that Ashington would not have been able to provide audited accounts; (c) that, by 10 November 2009, the Double Bay account was "effectively basically frozen"; (d) that superannuation fund investors' consent would have been refused (noting that, on 10 November 2009, investors informed Anderson that they required a copy of any terms and an opportunity to comment before a deal was executed); (e) that Investec consent would have been required (since at a practical level Investec had the right to take enforcement action at any time) and that Investec's position was that it continued to reserve its rights and required to be repaid.
28. The defendants further contend that it should be inferred that the Wingate finance could not support the project to completion, pointing to: the assessment of Mr Wyeth on 11 November 2009 that Wingate's total effective cost would be $27 million and that the proceeds were insufficient to cover both the senior debt and the Wingate principal and that there would be $3.5 million shortfall; Mr Wyeth's advice on 13 November 2009 that there was a $2.2 million interim funding gap and also insufficient proceeds from Stages 1 and 2 on the take-out end to repay all the interest, calculating a $3.75 million shortfall; and that on 16 November 2009, Mr Steel had identified that the Wingate model contained a double counting of $3.65 million revenue from the sale of the Stables in the revenue forecast.
29. It is noted that, on 14 December 2009, Wingate approached Investec with different terms for refinancing the Investec Stonington Facility than those set out in the Wingate Proposal, proposing that (rather than have the Investec Stonington Facility paid out, Investec agree effectively to convert its debt into a 50% interest of a $22 million facility to be advanced to the Stonington Trust). It is said that this appears to have been driven by an appreciation of the need to ensure that Westpac was paid out before commencement of construction on the Stonington Project. PPB says that it is telling that, in an email discussing Wingate's new proposal with Mr Anderson, Mr Steel said, "I don't know if it would convince Westpac to fund construction". It is noted that on 15 December 2009, Mr de Rooy indicated that he would not recommend the new Wingate proposal to Investec's credit team. PPB also refers to the 17 December 2009 communication from Investec to Wingate, indicating that Investec did not have an "appetite to enter into any ongoing financing of the Stonington Project" and that it would require as a minimum (if it were to consider pursuing an arrangement with Wingate) to see a change in trustee and the appointment of an approved development manager. (PPB argues that Investec's response meets the submission by the plaintiff that, because Investec later exhibited forbearance when dealing with PPB, the superannuation investors and later Parissen, it would have refrained from enforcement action had Ashington not been removed.
30. Moreover, it is said that the evidence does not disclose whether, in the absence of participation by Investec, Wingate would have been prepared to advance $22 million on its own. Thus, it is said that the plaintiff cannot establish that, but for the defendants' conduct, Ashington Capital would have obtained finance from Wingate which would have resolved the Stonington Trust's defaults and liquidity problems and enabled Ashington Capital and Ashington Management to continue trading. The defendants say that the inevitable conclusion is that Investec would have taken enforcement action (the results of which would have been catastrophic for Ashington).
31. Further, Patersons says that it is not apparent that either the superannuation fund investors or Investec in fact authorised or consented to the transaction contemplated by the Patersons Mandate. This is said to be particularly relevant in circumstances where the Patersons Mandate contained conditions precedent that Ashington Capital was required to receive written approval from Investec for the mezzanine facility to replace the Investec Stonington Facility; and, further, that Ashington Capital was required to resume full control of the sell-down process underway in respect of the assets the subject of the Stonington Trust including by concluding the PPB mandate.
32. While Patersons accepts that these conditions precedent did not have to be fulfilled before Patersons was required to commence any work on the transaction contemplated by the Patersons Mandate (as Mr Shorrocks acknowledged in his oral evidence), it says that they did have to be fulfilled after any capital was (conditionally) raised and, implicitly, before the transaction was finalised. Patersons says that any uncertainty in that regard is to be considered in assessing the overall likelihood of the Stonington Capital Raising occurring but for the alleged conduct.
33. Relevantly, for the purposes of the counterfactual (that the Stonington Capital Raising would have been achieved), Patersons says that there should be hesitation in concluding that Ashington would have resumed full control of the sell-down process underway for the Stonington Property, that is, the existing PPB mandate was concluded. It is noted that Mr Shorrocks said in his oral evidence, that it was not inconceivable that Investec would have had an objection to capital being raised pursuant to the terms of the Patersons Mandate.

Financiers would have enforced securities

1. Fourth, that in the absence of funds to pay Investec, Investec would have enforced the security granted to it under the Investec Stonington Facility, with the likely result that at least ADF and the Stonington Trust would have been ensnared in enforcement or insolvency processes. It is said that Westpac, NAB, St George and Investec would also have enforced their security interests under facilities granted by them in relation to the Stonington Trust, Project X Hotel Trust and the 10 Wylde Street Trust; and that it is almost certain that upon such action taking place, there would be no equity left in ADF and ADF2.

No ongoing business capable of being "lost"

1. As to the plaintiff's causation case ([181] of the third further amended statement of claim) depending on the proposition that there was a viable business that was "lost" as a result of the matters pleaded in [160] and [162] of the pleading, the defendants say that they cannot have caused the loss of a business as there was no viable ongoing business capable of being "lost" by 30 September 2009 (referring to the experts reports of Mr Hall, with which Mr Halligan did not engage in this respect).
2. It is also said in this regard that the plaintiff (as the assignee of causes of action from Ashington Capital and Ashington Management) never held the "Ashington business". The defendants submit that it was Ashington's dire financial situation which ultimately forced the retirement of Ashington Capital and Ashington Management, not the conduct of the defendants (with not just the sub-trusts but also Ashington Capital and Ashington Management being insolvent or bordering on insolvency); and therefore that it cannot be concluded that, but for the defendants' alleged wrongful conduct, the business would have continued (cf, plaintiff's closing submissions at [219]). Reference is made in this respect to the fact that Mallesons gave Ashington unsolicited advice as to the consequences of directors trading whilst insolvent.
3. Thus, the defendants say that, to the extent that the loss asserted by the plaintiff is the chance, lost to Ashington, to generate future cashflows, that chance, even assuming the success of the Stonington Capital Raising, was wholly illusory.

Defendants did not cause reputation damage

1. Insofar as the plaintiff alleges that, but for the alleged wrongful conduct of the defendants, Ashington Capital would not have sustained severe reputational damage among the superannuation fund investors by 11 December 2009 (see [160(b)] of the pleading), the defendants maintain that this too has not been established. It is contended that the superannuation fund investors had become firmly predisposed to effectuating the removal of the Ashington companies as trustee and manager before 30 September 2009 (for reasons unrelated to the alleged activities of the defendants occurring after 30 September 2009) (see the discussion earlier as to the issue of loss of trust and confidence on the part of the superannuation fund investors).
2. In relation to the perceived breaches of trust discussed earlier, Patersons submit that the following matters are critical to this aspect of the defendants' causation case: the use by Ashington of funds from the first equity request on the Stonington Property (and to pay fees to support ADF), not on the Double Bay Property; the failure (contrary to the Information Memorandum, Ashington) to quarantine costs and assets within each sub-trust for ADF2 (noting the Investec Stonington Facility and Mr Anderson's lack of communication in relation thereto despite Mallesons' 31 May 2009 advice; double pledge of equity (notwithstanding Ms Briggs' representations), not disclosed until 3 July 2009; and the alleged conflict by reason of Mr Anderson's personal guarantee for the Hamton Vendor Finance of $2.5 million which was payable on 31 August 2009 (but not disclosed to the superannuation fund investors until June 2009).
3. It is said that (contrary to the plaintiff's closing submissions at [65]), by 30 September 2009 Ashington was not well-placed to restore investors' trust and confidence to allow the Stonington development to proceed. Rather, it is said that by 30 September 2009, Mr Anderson's actions had caused the investors to lose trust and confidence; that the superannuation fund investors were acting as a block with the support of PPB and their own lawyers; and that they were exploring all options, including the removal of Ashington Capital as trustee.
4. Reference is made to Mr Anderson's knowledge of the risk that Ashington Capital would be removed (referring to the 21 August 2009 email from Ms Briggs concerning the entitlement to development management fees if Ashington Capital was removed as trustee). Patersons emphasises the timing of the 21 August 2009 email as on 19 August 2009 Investec had issued its notice of default in respect of the Investec Stonington Facility; and on 20 August 2009, PPB had advised Mr Anderson that it had been engaged by the superannuation fund investors, amongst other things, to assist in achieving a legal effective restructure of the current trustee and security arrangements.
5. Patersons says that Mr Anderson was acutely aware that the superannuation fund investors were exploring options to terminate Ashington Capital as trustee as at that time (and that this could significantly impact Ashington Management's development fees); and that his evidence to the contrary is not credible in light of Ms Briggs' 21 August 2009 email.
6. Patersons contends that Mr Anderson was also acutely aware of the probability of Ashington Capital's removal as trustee as at early November 2009 (by which time the superannuation fund investors, through PPB and Norton Gledhill, had raised issues as to Mr Anderson's dealings with Wingate and failure to consult with them). Patersons points to further email correspondence between Ms Briggs, Mr Steel and Mr Anderson on 12 November 2009 in which Mr Anderson referred to the possibility that Ashington Capital "atf SPV gets sacked" (Ex 21). On 11 November 2009, Ms Briggs sought legal advice on this issue from Mallesons. Having regard to these documents, Patersons says that Mr Anderson's oral evidence (that he was not acutely aware of the real probability of Ashington Capital's removal as trustee of ADF and ADF2 at that point in time, and that this was just Mr Steel "worrying"), is not credible and should be rejected. I agree.
7. Patersons thus says that, as at 30 September 2009, the trust and confidence the superannuation fund investors had in Ashington Capital as trustee was lost; and that Mr Anderson must have appreciated that was so. Patersons says that it is not to the point that the superannuation fund investors had not formally resolved before 30 September 2009 to terminate Ashington Capital as trustee and Ashington Management as development manager (cf, plaintiff's closing submissions at [253]-[254]); rather, that it is enough that the process had been set in motion by then. Patersons contends that the only realistic outcome was the eventual removal of Ashington Capital and Ashington Management, noting that ultimately the superannuation fund investors communicated to Mr Anderson that it was in the interests of all parties for Ashington Capital to retire as trustee.
8. Therefore, Patersons emphasises from a causation perspective that the reputational damage with the superannuation fund investors already persisted as at 30 September 2009 for reasons unrelated to any conduct of the defendants.
9. It is thus said that the plaintiff has failed to establish on the balance of probabilities a sufficient causal link between the matters referred to in [160] and [162] of the third further amended statement of claim and the conduct of the defendants (assuming it was wrongful); nor has the plaintiff established a sufficient causal link between the defendants' conduct and the loss of the chance for Ashington Capital and Ashington Management to retain what the plaintiff contends was a "valuable funds management and property development business".

Defendants' counterfactual scenario

1. The defendants contend that, in the relevant counterfactual, at least one of the Ashington group's financiers would have proceeded with enforcement action or the investors would have sufficiently lost confidence in the Ashington group that the future removal of Ashington Capital and Ashington Management as trustee and manager respectively was likely. The defendants say that they do not put forward these matters as a novus actus interveniens but rather as an alternative counterfactual.
2. It is noted that the plaintiff has chosen not to lead any evidence from any of : Ashington's banks, Hamton or Investec to the effect that it would have refrained from taking the obvious and inevitable enforcement steps that had been threatened (or in Hamton's case, I note, had taken); from superannuation fund investors, to the effect that they would have contributed the $6 million in unpaid calls; or from Wingate, to the effect that it would in fact have provided finance.
3. The defendants say that there is ample evidence to indicate that by 30 September 2009 (before any of the allegedly wrongful conduct took place and before any hypothetical counterfactual scenario begins), Ashington Capital was in a hopeless position, unlikely to raise any further equity from the superannuation fund investors, or to raise mezzanine finance in the open market, and that it was likely that the superannuation fund investors would have removed Ashington Capital as trustee at the first opportunity. PPB says that there is no evidence that, by around 30 September 2009, there was any funding available to recapitalise the trusts, besides the Parissen Proposal. It is also said the fact that investors were prepared substantially to write down their investments in ADF and ADF2 in early October 2009, before the Parissen Proposal was finalised, bespeaks this outcome.
4. Reference is made in this context to the superannuation fund investors' loss of trust and confidence in Ashington Capital and Ashington Management during the course of 2009; and the steps taken to explore their replacement; as well as to the refusal of superannuation fund investors to inject further equity into ADF and ADF2. It is said that even if the superannuation fund investors had not been able to remove Ashington in a timely fashion, there is no reason for thinking that Ashington's funds management business could have survived.
5. It is noted that had the Parissen Proposal not been made and accepted, and had Investec proceeded to take action to recover its debt, the superannuation fund investors would have been compelled to pay Investec the $6 million in uncalled capital left in ADF2 pursuant to a call which it had made in exercise of its power of attorney; and Investec could have enforced its fixed and floating charge to take control of the units in the Stonington Trust and certain debts payable to ADF2, including by the appointment of a receiver. It is noted that the superannuation fund investors did not pay this call, and instead commenced negotiations with Investec through PPB which culminated in the acceptance of the Parissen Proposal. PPB says that, in the absence of that proposal it is likely that the superannuation fund investors would have had to pay this call and Investec would have had to resort to its other securities to recover the remaining $4 million owed to it.
6. PPB points out that there is no evidence in these proceedings as to the value of the units owned by ADF2 in the Stonington Trust. Where Ashington Capital as trustee of the Stonington Trust was in default of the Westpac Stonington Facility and the Hamton Vendor Finance, PPB says that (given the parlous financial condition of the Stonington Trust), in a counterfactual scenario where the Parissen Proposal was not put forward, it is not apparent that these units had any value capable of being realised in order to reduce the amount owing to Investec.
7. It is noted that ADF2 was owed at least $2.3 million by ADF, being a debt in respect of contributions made by ADF2 on its behalf to the Project X Hotel Trust; and that it was also owed debts by Ashington Group and Ashington Capital as trustee for ADFIT in respect of unpaid capital calls (which debts would have been the subject of Investec's charge). PPB says that it is likely that, upon enforcement of its charge over the assets of ADF2, Investec (or a receiver appointed by it) would have been able to call on a debt of at least $2,327,000 from Ashington Capital as trustee of ADF, and enforce that debt as an unsecured creditor of ADF, including (assuming a judgment) by execution against the assets of that trust. It is said that there is no indication in the evidence that ADF held any significant assets other than all the units in the Wylde Street Trust, Potts Point Trust, Cross+ Trust, and 25% of the units in the Project X Hotel Trust.
8. As for the liability of Ashington Group and of Ashington Capital as trustee of ADFIT to pay capital calls, PPB points to the 23 November 2009 KordaMentha report which noted that: Additionally, our review of the balance sheet of ADF2 indicates that Ashington Group Pty Ltd and ADFIT have not funded approximately $4.6 million of their capital calls in ADF2. A review of the Ashington Group Pty Ltd and ADFIT balance sheet indicates that there is no capacity for the respective entities to fund their outstanding capital calls or their portion of the remaining $6.0m in called capital ($0.4m).
9. Reference is also made to Mr Gothard's review of Ashington Group and ADFIT's financial records, from which Mr Gothard has recorded in his report of 21 June 2019 that Ashington Group had "contributions payable" of $4,361,876 as at September 2009, revealed in a balance sheet to include contributions payable in respect of ADFIT.
10. As already noted, Mr Anderson accepts that these Ashington entities did not make cash contributions to ADF2 but asserts that the Ashington companies were entitled to offset, and did offset, Ashington Group and ADFIT's obligations to pay capital calls against fees earned by Ashington Capital, Ashington Management or Ashington Real Estate. PPB says that this explanation lacks credibility (noting that, contrary to Mr Anderson's assertions, Mr Steel appeared to acknowledge that ADF2 had $4.5 million of contributions recoverable in an email to KordaMentha dated 18 November 2009 - see chronology; and that if Mr Anderson had in fact had a discussion with Mr Steel about offsetting the requirements to pay capital calls against fees, and about an election as to which invoices to offset against, as he said in cross-examination, there was no reference to this in the email to KordaMentha).
11. Thus, PPB maintains that Ashington Capital as trustee of ADF2 was owed debts by Ashington Group and Ashington Capital as trustee of ADFIT arising out of their obligation to pay capital calls; and that Investec would therefore have been able to enforce those debts upon enforcement of its charge. PPB says that it is unclear, and unlikely, that Ashington Capital held any significant assets in its capacity as trustee of ADFIT. It is noted that Ashington Group's main assets were its shareholdings in Ashington Management, Ashington Capital, ADPL and Ashington Real Estate. It is said that the plaintiff has failed to establish any value in those assets.
12. The defendants therefore say that enforcement action by Investec would have resulted in the complete collapse of the Ashington group's business.
13. Patersons further says that it is telling that, despite Mr Anderson's efforts to raise capital himself (e.g. through Wingate), he could not do so; noting that when Mr Anderson became aware that the interest of Albany and Acorn extended beyond Stonington, and acknowledged that the Stonington Capital Raising was no longer "alive", he indicated that his preference was for a preferred equity investment instead of mezzanine finance in any event.
14. Ms Garrett and Mr Renauf also say, on the defendants' counterfactual, that the following inferences should be drawn from the contemporaneous documents: that Westpac would have taken enforcement steps, rather than lending further funds; that Hamton would also have commenced a winding up application in December 2009 (having regard to Hamton's aggressive litigation of the debt); that the many creditors would have continued to pursue litigation, including winding up applications (noting that the Patersons Mandate only addressed outstanding creditors in the Stonington sub-trust); that Stonington would not have been developed (as no construction finance was available); that the Wylde Street Property would not have been sold within the relevant timeframe; that Noosa would not have been developed within the relevant timeframe; and that Double Bay would not have been developed according to the original feasibility. Reference is made to Mr Dedes' statement on 4 December 2009 that "if the Parrisen deal falls over the banks are walking in. They are waiting at the door… no reputable bank will deal with Ashington again".
15. Ms Garrett and Mr Renauf say that the preferable (and only) appropriate inference to draw from the evidence is that the Parissen Proposal was the best option for Ashington. In this regard it is said: first, that by the end of November 2009, the Ashington group had run out of time (Ashington had until early December to pay Hamton before it commenced winding up proceedings); second, the attempts to refinance Stonington had come down to a choice between Wingate and Acorn/Albany; third, the Wingate Proposal was not viable because its terms were incapable of acceptance, commercially unworkable and unpalatable to the investors; fourth, Ashington's inevitable retirement was in the interests of Ashington Capital, Ashington Management and Mr Anderson; and, fifth, there was never any prospect of Ashington Management or Ashington Capital obtaining fees from AOF3.
16. Further, Acorn says that (contrary to the weight the plaintiff has placed on the relevance of Ms Garrett and Mr Renauf offering a new face for Ashington, along with the roles that PPB, Acorn and Albany allegedly played), in all the circumstances it is at best highly speculative to accept that the superannuation investors were willing to continue to work with Ashington if the Parissen Proposal had not been presented. It is noted that, by the time that Acorn and Albany were approached by Patersons on 30 September 2009, ADF and ADF2 being wound up in insolvency was a very real counterfactual, and the superannuation fund investors had already determined not to meet any existing or future capital calls (regardless of what outcome this might have for the Ashington funds).

Ms Garrett and Mr Renauf's pleading submissions - causation

1. Ms Garrett and Mr Renauf make the following submissions particular to their case. First, they submit that, although there are vague references to the Consortium doing certain things (e.g. "by the conduct of the Consortium" in [162]), there is no direct reference to Ms Garrett or Mr Renauf in those critical paragraphs; nor are there any pleaded facts that Ms Garrett and Mr Renauf did any of the things that are alleged in [160]. In particular, it is noted that there is no allegation in [160(a)] that Ms Garrett or Mr Renauf was responsible for the lack of an alternative financing option. Only Patersons and the superannuation fund investors were said to be responsible for this, and there is no claim against the investors. It is said that if the plaintiff now proposes to allege that Ms Garrett was responsible for the lack of an alternative financing option (see the plaintiff's submissions at [174]), that allegation should be rejected as being beyond the pleaded case. Nor is there any allegation in [160(b)] that Ms Garrett or Mr Renauf contributed to the loss of trust and confidence with investors. Finally, there is no allegation in [160(c)] that Ms Garrett or Mr Renauf contributed to the loss of trust and confidence with the banks, who were, on the basis of the contemporaneous evidence, and for reasons entirely unconnected with any of the defendants, refusing to extend facilities or provide new facilities, for example the construction finance.
2. Similarly, it is said that there is no evidence that Ms Garrett or Mr Renauf did the things which are pleaded at [160]. To the contrary, it is said that: (a) Ms Garrett made numerous attempts to find suitable finance (but those attempts did not succeed), after the refusal of the Double Bay development application, there was no reasonable chance of successful fundraising for Ashington, and the investors rejected any proposal advanced by Mr Anderson due to a lack of trust and confidence; (b) there is certainly no evidence that Ms Garrett and Mr Renauf caused harm to the relationship with the investors (it is said that the various ideas floated by the plaintiff during the course of the hearing - that Mr Anderson could have stepped aside, that Ms Garrett acting in Mr Anderson's place could have salvaged matters - are all unpleaded and inconsistent with the fact that Mr Anderson would never have relinquished control to keep investors happy); and (c) the evidence does not disclose any change in the relationship between Ashington and its banks, those commercial relationships said to be beyond repair.
3. Second, Ms Garrett and Mr Renauf say that the objective, contemporaneous evidences proves that the lack of financing and loss of reputation were caused by Mr Anderson and Ashington. It is said that there was no further independent damage that could be done to the relationship between Ashington and its investors and financiers. In particular, Ms Garrett and Mr Renauf say that the evidence demonstrates that: (a) these reputational concerns were longstanding, and as far back as 2007 Mr Anderson faced criticism about non-payment of creditors and making inappropriate decisions without sufficient consultation with the investors; (b) the cause of the failed capital raising was a combination of the Double Bay development application refusal, the difficulty making the Stonington Project viable, and the impossibility of obtaining construction finance, which any mezzanine financier would have required before committing funds; (c) Mr Anderson and Ashington's relationship with investors only worsened from June to September 2009, and this was exclusively of his own making; and (d) Ashington's loss of reputation was entirely unrelated to Ms Garrett and Mr Renauf. It is said that Mr Anderson was the primary cause and, to the extent that the negative press contributed, it was either an accurate portrayal of Mr Anderson's failures or a result of Hamton causing trouble (as Mr Anderson thought at the time).
4. Thus, it is contended that any case against Ms Garrett and Mr Renauf for primary liability must fail because there is no allegation or fact that shows that they or either of them caused any loss.

Determination - causation

1. The plaintiff's submissions vary between expressing the relevant counterfactual as involving that the Stonington Capital Raising would have succeeded or that it would be likely (or highly likely) to have succeeded. To my mind on the relevant counterfactual such an assumption cannot encompass a conclusion that the Stonington Capital Raising would necessarily have been successful. However optimistic Patersons (or for that matter Ms Garrett and Mr Renauf) might have been, at various times in the chronology of events, and however experienced those parties were (or however large Patersons' book of potential investors or clients), there must inevitably have been a risk that the Stonington Capital Raising would not have been concluded in time; no matter how diligently it was pursued by Patersons, Ms Garrett and Mr Renauf. The outcome of the capital raising was never guaranteed by Patersons.
2. Hence, in my opinion the relevant counterfactual should assume that the alleged defaulting fiduciaries performed their duties in relation to the Stonington Capital Raising but cannot assume that they would have succeeded. That said, I understand the plaintiff's ultimate submissions in effect to be that, on the probabilities, it would have succeeded and would have resolved the group's financial difficulties such that the business would have continued; and, to the extent necessary for that to occur, the superannuation fund investors' confidence would either have been restored or they would have been prepared to continue with the Ashington entities in their then roles at least with the existing funds (albeit that it is unlikely on the evidence that they would have invested in any future Ashington funds).
3. The fact that Ms Garrett does not seem (at least by reference to the communications in evidence) to have been plagued with self-doubt or to have suffered a lack of confidence in her ability to effect the Stonington Capital Raising seems to me not to take matters very far; nor does the fact that Patersons accepted the Patersons Mandate (with a proposed six-week indicative completion timeframe). Optimism is hardly the same as proven success; and the expression of confidence in one's ability to achieve a positive outcome should be viewed with a healthy degree of scepticism in that regard. Nor does the fact that the offer was considered to be attractive when formulated in early September 2009 (or marketed as "money for jam"), in circumstances where the Ashington group must have been perceived to have changed markedly by the end of September 2009 by the acknowledged catastrophic effect of the rejection of the Double Bay development application.
4. Moreover, to the extent that the plaintiff points to the updates Ms Garrett sent to Ashington of the progress of the Stonington Capital Raising (e.g. the "Stonington Mezzanine Finance - Progress Report" of 6 October 2009) as evidencing that the Stonington Capital Raising could have been achieved, I see force in the submission by Patersons that little (if any) weight should be placed on those materials because, on the plaintiff's own case, Ms Garrett was not being truthful in those communications. For example, it is noted by Patersons that in that progress report, the reference to two "Perth high networths" who had reviewed the Patersons Stonington Term Sheet included Mr Glen Whiddon; but that Mr Whiddon expressed no interest when Mr Shorrocks sent him the term sheet. Similarly, with respect to Mr Campbell Smith, Patersons says that while Mr Carolan sent him the term sheet, and he might have expressed some initial interest to Ms Garrett, there is no evidence that that went any further and the data room log does not record him accessing the data room (although it is conceivabler that this could have been the very result of Ms Garrett not pursuing investors interested in the Stonington Capital Raising as opposed to a proposal to replace the trustee and manager).
5. As to the plaintiff's submission that a negative view of the Stonington Capital Raising was not expressed to Mr Anderson, one must here keep in mind the particular time at which the likelihood of success of the Stonington Capital Raising is to be assessed (and at which time it might have been thought that a negative view would or should have been expressed to Mr Anderson). The time at which Ms Garrett (or Mr Renauf) might have formed a view as to the business being doomed would not necessarily have been at the time the Patersons Mandate was signed (Ms Garrett, for example, only seems to have heard about "skeletons in the closet" at a later stage from Mr Steel; and Patersons was not privy to such information when positive views were expressed on its part as to the capital raising - or at all). As adverted to above, the Patersons Mandate was signed and the term sheet formulated before the Double Bay development application was rejected.
6. That said, there must surely have come a time at which one would have expected Mr Anderson to have been informed if the prospects of a successful capital raising had evaporated (and Mr Shorrocks in cross-examination seems to have accepted that this would have been the case). The difficulty here, however, was that the persons who knew that the capital raising had effectively been abandoned (relevantly, Ms Garrett and Mr Renauf) were the very people busily promoting the competing refinancing (who hardly had an interest in disclosing to Mr Anderson that there was no prospect of the Stonington Capital Raising being achieved). Indeed, part of Mr Anderson's (in my opinion in this sense justifiable) complaint is that he was misled into believing that Ms Garrett and Mr Renauf were actually pursuing prospects in relation to the Stonington Capital Raising at a time when it is now apparent they were doing little or nothing of the sort.
7. The relevant question is whether, but for the conduct of Ms Garrett and Mr Renauf (and other defendants' knowing participation therein - assuming the requisite knowledge had been established), on the balance of probabilities Ashington would have had the opportunity to receive future income streams. The answer to that must be yes, in my opinion. There was clearly an opportunity to progress the Stonington Capital Raising (the prospect of that opportunity coming to fruition and within sufficient time to enable the Ashington businesses to survive is another matter).
8. Assuming that Ms Garrett and Mr Renauf had complied with their duties, meaning that they continued to pursue the Stonington Capital Raising after 2 October 2009 and worked towards securing the superannuation fund investors approval for the Stonington Capital Raising (rather than the Parissen Proposal), then the evidence shows that there was a broader group of investors (known to Patersons) who would have been contacted. Indeed, Ms Garrett said to Mr Renauf on 24 September 2009 that she had received an offer from Mr Campbell Smith of some $7-8 million (and some comfort can be taken as to this in that Ms Garrett had no reason to be anything but candid with Mr Renauf - Ex C at Tab 5). Whether that offer would have progressed is a different issue.
9. I have therefore concluded that, on the balance of probabilities, the conduct of Ms Garrett and Mr Renauf caused the loss of an opportunity for the Stonington Capital Raising to be successful (and had it been successful then there was at least a possibility that Ashington Capital and Ashington Management would not have been removed in December 2009 from their respective roles and would have continued to be entitled to trustee and management fees). In this respect, I note that, while the superannuation fund investors had expressed dissatisfaction towards Ashington Capital and Ashington Management, no decision had been made prior to the impugned conduct and the prospect of the Parissen Proposal to remove Ashington Capital and Ashington Management. This, combined with the difficulty (noted in the evidence by some of the superannuation fund investors) of finding a suitable replacement trustee and manager, leads me to the conclusion that Ashington Capital and Ashington Management lost an opportunity (however small that might have been) to remain in their roles if the Stonington Capital Raising had been successful (the question of how long they would remain in those roles is, to my mind, a question of quantification of loss - see below). As to the defendants' submissions that the Stonington Capital Raising would not have been sufficient to resolve all of Ashington's financial difficulties, I accept that a capital raising of between $10-15 million was unlikely to achieve such a result. However, on the balance of probabilities, I find that the Stonington Capital Raising would have enabled Ashington to continue operations for some period of time (the duration of which would have to be accounted for in the quantification of loss).
10. On that basis, the plaintiff would have satisfied the test for causation for damages for breach of contract, since it was clearly foreseeable that such an opportunity would be lost as it was the very aim of the conduct that the Ashington entities be replaced. To the extent that the defendants raise Ashington Capital and Ashington Management's respective retirements as new intervening acts, I find that the respective retirements were the very thing likely to occur as a result of Ms Garrett and Mr Renauf's pursuit of a proposal to replace the trustee and manager.
11. Ultimately, therefore I find that there is a causal connection between Ms Garrett and Mr Renauf's conduct and the claimed loss of the opportunity for the Ashington entities to receive the income streams from their roles as trustee and manager respectively and the opportunity to expand those roles into future funds (albeit that there were clearly also other contributing causes to the decision of the superannuation fund investors to replace the Ashington entities and to accept the Parissen Proposal).
12. Pausing here, as to the PPB breach of trust claim I consider that the plaintiff's pleading complaint has force and, in particular, that it is difficult to assess on the evidence whether there was a sufficient lack of prudence in entry into the Investec Stonington Facility to amount to a breach of trust. In any event, it does not arise on the findings I have made.

Plaintiff's submissions on loss

1. The plaintiff says that the loss of Ashington Capital and Ashington Management is the loss of the business of the Ashington group, which business was constituted by the provision of the services of trustee, fund and development manager, and sales agent. The plaintiffs accepts that the prospect that that business would have failed in any event was a vicissitude that would need to be taken into account in the exercise of quantification. Alternatively, the plaintiff argues that the loss of Ashington Capital and Ashington Management was the loss of a chance of keeping their businesses.
2. The plaintiff says that, as at 30 September 2009, Ashington Capital and Ashington Management had the right to receive three streams of revenue in relation to ADF and ADF2: trustee fees, development management fees, and sales commission. It is said that the Ashington group had also taken significant steps to setting up a third fund, AOF3; and that, at the conclusion of (each of) these funds, Ashington would have been in a position to establish replacement funds to continue its business.
3. The plaintiff maintains that it is the business constituted by the right to receive fees with respect to ADF and ADF2, and the prospect of fees from AOF3 and other future funds (or alternatively the loss of chance of keeping the business), that was taken from Ashington Capital and Ashington Management by the actions of the defendants.
4. The plaintiff accepts that assessing the value of what was lost will require attention to the probability of Ashington overcoming its difficulties so that it would be in a position to pursue its future plans. I have addressed above the expert evidence on this issue. By way of general observations, the plaintiff says the following.
5. First, that in assessing the probabilities the most significant factor is the past performance of Mr Anderson, emphasising that he had a successful track record of development and fund raising from 1994 through to 2009, including that in 2006 and 2007 he had raised $130 million in equity for ADF and ADF2 from the superannuation fund investors (described in submissions as knowledgeable and careful investors, though seemingly assessed less charitably by Mr Anderson at the relevant time), and that in the wake of the collapse of Lehmann Brothers in September 2008 he nevertheless managed to raise $206 million in funding. The plaintiff also points in this regard to St George's internal assessment of Ashington to the effect that "Management capability - GOOD - Developer has good track record of completed developments, with >5 yrs experience". (Pausing here, this may be accepted but it does not to my mind sufficiently take into account the significant concerns of the superannuation fund investors from mid-to-late 2009 - concerns that Mr Bouris himself acknowledged in communications with Mr Anderson before and at the time of Mr Bouris' resignation as chairman. I cannot accept that those concerns can be sheeted home to the impugned conduct albeit I accept that they may have been exacerbated by the messages conveyed by various of the protagonists during the discussions as to the proposed refinancing.)
6. The plaintiff says that a large part of the defendants' attack on Mr Anderson focussed on his efforts to negotiate and agree the Wingate Proposal. However, the plaintiff says that the counterfactual to be determined does not involve an assessment of the Wingate Proposal.
7. Second, the plaintiff cavils with the defendants' contention that the assumptions made by the plaintiff's valuation expert (Mr Halligan) and solvency expert (Mr Melluish) have little factual foundation (other than as the aspirations of Ashington). The plaintiff accepts that what would have occurred after AOF3 was established is a matter of speculation but says that this is because the defendants destroyed Ashington's business and have taken from it the opportunity to determine whether Ashington's future plans would have eventuated. The plaintiff contends that it has adduced sufficient evidence in relation to AOF3 (see further below) to show that it was not some recent invention and points to the evidence of relevant market conditions from its expert (Mark Wist) as providing some means of evaluating the likelihood of Ashington achieving its plans. The plaintiff says that a robust view should be taken of this because the uncertainty is the direct consequence of the defendants' conduct.
8. Third, as to the view expressed by the defendants' solvency expert (Mr Gothard) that a number of the Ashington entities were insolvent as at June 2009 and September 2009, the plaintiff submits that this is of marginal relevance in and of itself (saying that the key question in each case is whether the creditors would have sought to execute rather than to come to some arrangement). In this regard, the plaintiff attaches particular significance to the defendants' conduct, which it is said indicates that the defendants thought that the business was valuable and that all the difficulties facing Ashington could be overcome. For example, the plaintiff notes that Mr Ko "pitched" the Acorn investment in Parissen on the basis that Parissen had taken over the Ashington business, and that it was a "once in a generation" strategic opportunity.
9. Fourth, that the most significant difference of valuation principle between the plaintiff's expert (Mr Halligan) and the defendants' expert (Mr Hall) is that Mr Halligan uses the discounted cash flow analysis to value the lost business whereas Mr Hall uses the "capitalised earnings" method of valuation. It is said that Mr Hall places significant reliance on what investors and purchasers would have perceived about the Ashington business at the time. The plaintiff submits that the capitalised earnings method is not appropriate as a matter of law when valuing the "lost Ashington business" for the purpose of assessing the plaintiff's loss and damage. The plaintiff says that the capitalised earnings method (which is based upon market dynamics at the time the property being valued will be sold) is not appropriate for the purpose of quantifying damages when the evidence demonstrates that the relevant property (in this case, the Ashington business) would not have been sold (and in this context the plaintiff emphasises that there is no evidence that Mr Anderson was considering a sale of its business); and that this is particularly so since (when assessing loss and damage for the purpose of awarding equitable compensation, unlike with respect to damages at common law) one has the full benefit of hindsight.
10. The plaintiff submits that the opinions that Mr Hall expresses about the likely views of investors and purchasers regarding the Ashington business in 2009 (which form the basis for his opinions of value) are irrelevant to the quantification exercise because the court is not determining the market value of the Ashington business at that time. The plaintiff says the claim is not for a lost opportunity to sell the business as at 30 September 2009 to a ready and willing purchaser (which it is said is the opportunity valued by Mr Hall); rather, that it is the loss of the chance of future cash flows associated with the business that Ashington had as at 30 September 2009 (absent the impugned conduct). Again, the plaintiff points to the opinions formed by the defendants of the value of the potential business at the relevant time (as being inconsistent with Mr Hall's assessment).

Going concern and recapitalisation

1. The plaintiff notes that Mr Hall identified three reasons for his view that the Ashington business was not a going concern: first, the prospect that Ashington Capital might be replaced as trustee; second, that the Ashington group if not insolvent, was nearly so; and, third, that Ashington would not be able to carry out the developments of existing properties to fulfilment in a manner which would restore the business to profitability.
2. The plaintiff accepts that as at 30 September 2009 the Ashington group was in a difficult financial position, including a number of indicators of insolvency, which required it to recapitalise the Stonington and Project X sub-trusts to restore it to profitability.
3. However, the plaintiff says that the key to recapitalisation of the trusts (and hence profitability for Ashington) was the Stonington Capital Raising. The plaintiff says that, on the relevant counterfactual, the defendants' "conspiracy" never emerges and there is no competing proposal put to investors in October and November 2009. As noted above, it is submitted that the counterfactual is not limited to the absence of breach of duty on the part of the defendants; but, rather, the plaintiff says that it assumes that Ms Garrett, Mr Renauf, and Patersons energetically fulfil their responsibility to make the Stonington Capital Raising a success; and that PPB advises the investors in an impartial and objective manner which is "untainted by a personal interest".
4. The plaintiff says that how the Stonington Capital Raising would have effected the desired recapitalisation of the Stonington and Double Bay sub-trusts is explained in an evolving way by the Stonington Mezzanine Finance Facility Proposal prepared by Ms Garrett in draft by 23 September 2009, Mr Steel's email to KordaMentha of 11 November 2009, and the KordaMentha description and evaluation of the proposal in its 23 November 2009 report (though it is noted that in this latter case the proposal being evaluated is the Wingate Proposal, and the case of the plaintiff is based not on that proposal but that, on the counterfactual, mezzanine finance of the kind envisioned by the Stonington Capital Raising would have been obtained) (see chronology for details). Nevertheless, the plaintiff says that the KordaMentha report does indicate how the incoming finance would have been used to recapitalise.
5. The plaintiff says that the steps in the recapitalisation process would have been as follows (on the assumption that Ashington would have obtained $15 million in third-party finance). First, funds from the new facility would pay the outstanding Investec ($10-11 million) and Hamton ($2.6 million) facilities (leaving some $2.7 million remaining). It is said that, once the debts of Investec and Hamton were fully paid, the superannuation fund investors would have become legally liable to pay $6 million in uncalled capital into ADF2 (pausing here, the defendants take issue with this proposition or at least with the assumption that they would willingly have met such a call, having regard among other things to the issues that led to the Mapeline proceeding).
6. Next it is said that the sale of the Wylde Street Property (valued on 23 September 2009 by Colliers at $19 million) would have resulted in a surplus of a further $6-8 million (the plaintiff suggesting that the higher end of the range is more likely). It is noted that a contract was ultimately exchanged in early 2010 for $18.5 million by Parissen and the plaintiff submits that much of the delay in selling the property was due to delay caused by the replacement of Ashington Capital as trustee (and the focus of Ashington prior to that time on the Wingate and other proposals by reason of the conduct of the defendants). The plaintiff says that the sale of Wylde Street would mean that over $7 million dollars was received into ADF, which would permit it to pay the inter-company loan to ADF2.
7. It is said that with funds from the new mezzanine facility, the $6 million of called capital and the proceeds of sale of the Wylde Street Property, the funds could then have paid their outstanding creditors (as well as the $1.58 million in fees and commission then owing to Ashington). It is said that the Stonington Project was structured such that Stage 1 required only $2.5 million in construction finance.

Lenders would not have exercised securities

1. The plaintiff submits that, on the relevant counterfactual, while Ashington was raising funds (with the assistance of Ms Garrett, Mr Renauf, and Patersons), it can be concluded in hindsight that the lenders would not have exercised their securities.
2. In that regard it is noted that Investec: issued its default notice on 19 August 2009; as at 21 August 2009, was reserving rights, willing to consider an extension pending the sale of Stonington; as at 23 September 2009, was willing to wait while Ashington developed its proposal for Stonington which would lead to the payment of Investec; on 26 September 2009, had agreed temporarily to suspend the sale of Stonington by PPB so that a superior solution could be determined; was still reserving its rights as at 25 November 2009, seeking a commercial outcome with both PPB and Ashington and again as at 13 January 2010, with Parissen holding talks with it for an extension pending an exit strategy; and by 26 March 2010, had reached a commercial agreement with Parissen to the effect that investment into or proceeds from Double Bay would not be the subject of the Investec charge, and Investec was to get the equity proceeds of the sale of the Wylde Street Property and the proceeds of sale from Stonington.
3. As to Westpac, it is noted that, as at October 2009, it had negotiated an extension to 31 December 2009 to allow time for a project funding solution to be put in place; and as at 13 January 2010, was holding talks with Parissen for a further extension.
4. As to St George/NAB, it is noted that: NAB had issued a default notice on 2 October 2009 without specifying an amount owing; St George issued a default notice on 6 October 2009 again without specifying an amount owing; as at 25 November 2009, they had appointed KordaMentha and were reserving their rights (and while they are recorded as being uncomfortable with the unremedied defaults they were awaiting the Project X recapitalisation proposal); and they executed binding heads of agreement with Parissen on 31 December 2009, and as at 13 January 2010 were due to execute binding terms sheets on 15 January 2010 and formal documentation on 31 January 2010 on the basis that they would extend their facilities for two years with a $22 million paydown.
5. The plaintiff submits that what links the lenders' historical actual willingness to negotiate with the trustee of the funds (rather than execute their securities), the likelihood of the Stonington Capital Raising being successful, and the likelihood of Ashington being able to negotiate further finance to pursue the remaining developments, is that all parties at the time appreciated the particular value of the Double Bay Property and, to a lesser extent, Stonington (which the plaintiff says is a legacy of Ashington having pursued premium properties for maximum growth potential).
6. With respect to the Double Bay Property, it is noted that, on 23 November 2009, KordaMentha advised NAB and St George that a development application was critical to unlocking its value and that Ashington was pursuing a strategy of simultaneously appealing the decision denying its application and an alternative low risk proposal with more acceptable parameters; and that PPB, advising the superannuation fund investors on 13 January 2010, expressed the view that the property was "[t]he key asset which underpins any future equity return for unitholders in ADF2". The plaintiff says that Ashington was developing a proposal for the property which concluded that redevelopment was the best way forward but required the introduction of an equity partner in a joint venture. Parissen, on a "within the envelope" build expected this project to deliver a 2.8x equity multiple and 35% IRR, but noted that if sales were achieved at the anticipated rate, then the equity multiple would be 3.6x and equity IRR 62%. Parissen's presentation to Acorn on 26 March 2010 noted that Parissen was "initially created to secure the Double Bay development".
7. As to the Stonington Property, it is noted that that project was divided into three stages and that at each stage, money from pre-sales would be released to fund the next stage. The required funding for the completion of Stage 1 was only $2.7 million. The plaintiff submits that, in these circumstances, if the Stonington Capital Raising was successful, Ashington would have had little difficulty obtaining the required construction finance even if Westpac maintained its position that it would not be providing that finance.
8. The plaintiff argues that although Westpac had maintained that its facility was in breach the likelihood is that it would not have enforced its security (referring to the fact that, in October 2009, it was reported that Westpac, although refusing to provide construction finance, had agreed to extend the facility to 31 December 2009). The plaintiff says that at that time, the market was improving and pre-sales to purchasers totalled $42,569,500. The plaintiff points to the evidence of both Mr Wist and Mr Anderson to the effect that banks during the GFC did not make a practice of enforcing their security when it proved more effective to keep the borrower in default but to manage the development. The plaintiff thus submits that, in circumstances where (but for the conduct of the defendants) finance was readily available (a premise, I interpose to note, with which the defendants take issue), where the LVR (Loan to Value ratio) of the Westpac Stonington Facility was less than 55%, and where Ashington had demonstrated an ability to trade out of its financial difficulties and to fund the development of Stonington and Double Bay, the prospect that the core Ashington business would have failed (on the relevant counterfactual) is remote.
9. It is noted that Mr Halligan's 7 December 2020 report values the Ashington business, including AOF3, at $27.5 million as at 30 June 2009 and at $26.7 million as at 30 September 2009. The plaintiff submits that damages should be awarded reflecting Ashington's chance of retaining that business if rather than pursuing the Parissen Proposal, the defendants had each acted in accordance with the obligations owed to Ashington.

AOF3

1. As to the prospect of future funds, the plaintiff submits that, but for the conduct of the defendants, the likelihood is that the Ashington business would have traded out of its difficulties in 2009, such that in 2010 and following it would have been in a position to take into account the different market conditions conducive to further investment set out in the evidence of Mr Wist (those being: the improving economy, the greater availability of debt finance, the appetite for property investment especially from large funds (whose internal policies required them to invest in different investment classes including a certain amount in real property), and the supply of distressed assets). It is noted that Ashington had already developed and started implementing a plan for AOF3, and it is said that it was likely that, once the GFC receded and as the property boom in Australia commenced, further funds would be invested with Ashington (and fees earned thereby).
2. The plaintiff submits that the confidence in 2009 held both by Mr Anderson and the defendants that the business had a significant value was well founded, and that the loss and damage suffered by Ashington Capital and Ashington Management was very substantial.
3. It is noted that, in Australia, billions of dollars poured into superannuation funds every year, and those funds had internal allocation rules that prescribed a certain proportion be invested into listed and unlisted property funds. In 2010, superannuation funds with more than four members held $36.2 billion in real property investments, 73% of which was in unlisted property investments. By 2013, this had risen to $44.3 billion and 76% respectively. Furthermore, in the period October 2009 to June 2010, JP Morgan reported that wholesale unlisted property trusts had issued $2.31 billion in equity, supplemented by $1.98 billion of secondary units transfers and possible equity raising of another $2.4 billion.
4. The plaintiff says that this was the exact strategy being pursued by Parissen, which, in its presentation to Acorn on 26 March 2010, noted that: (i) the GFC has damaged the majority of existing fund managers; (ii) Parissen Property Group was set up to pursue "distressed and opportunistic property investment" (and that in the aftermath of GFC there were a lot of opportunities). It is noted that the aim of the Consortium was to assume the funds managements business of Ashington, giving Parissen a head-start (a "once in a generation opportunity"; to "become a market leader within the next 3 years") it would never have otherwise had. It is noted that it was contemplated by Parissen that recapitalising ADF2 would significantly add to Parissen's credibility, leading to support from super funds, other investors, and lenders; and that the Parissen Proposal required superannuation fund investors to value their current equity in ADF2 to zero.
5. It is said that the evidence adduced by the plaintiff was not limited to general evidence regarding the availability of funds; rather, that AOF3 was a specific proposal which had already been pursued with vigour by Ashington, with the assistance of Ms Garrett, Mr Renauf and Patersons.
6. In this regard, the plaintiff points to the following (see chronology of events above): the board minutes for Ashington Capital on 24 July and 18 September 2008 and board paper dated 30 September 2008 in relation to the proposed ADF3 (later, AOF3); the evidence that Mr Anderson saw AOF3 as part of a countercyclical investment strategy which provided an opportunity that few others would pursue at the time and intended that future funds would alternate between opportunistic and development funds; the appointment of Jones Lang LaSalle in late 2008 to assist with international fund raising; inclusion of expenses relating to ADF3 in the year to date budget as at 31 December 2008; and the board papers for 16 December 2008 and 26 February 2009 board meetings, which noted that local investors were overweight in property, that overseas was a better source for investors, and that overseas investors, especially in Asia, had an appetite for opportunistic funds investment.
7. The plaintiff points out that in early 2009, Jones Lang LaSalle issued a deal summary for potential international investors; that minutes of the board meeting of Ashington Capital on 26 February 2009 referred to the strategy for AOF3 to look for distressed assets from REIT s, a planned trip to meet investors in Europe and Asia, and extensive analysis of potential sites; that expenses and fees relating to ADF3 were included in the budget as at 31 March 2009; and that an investment strategy in April 2009 contained extensive analysis by Mr Minahan in relation to proposed AOF3. It is noted that Ashington proposed that Ms Garrett would be responsible for the capital raising for AOF3 once she was formally with Ashington; and Ms Garrett wished to be involved with the term sheet. The plaintiff also points to the 16 April 2009 letter from Mr Shorrocks to Mr Minahan, noting that Ashington wished to invest $500 million in suitable Australian properties; the 8 June 2009 email from Ms Garrett to Mr Anderson regarding the AOF3 proposed business plan; and the presentation prepared for superannuation fund investors in June 2009 in relation to an Ashington opportunistic fund series. The Ashington Management balance sheet as at 30 June 2009 listed $478,699.16 as "ADF3 Establishment Costs" under the heading "Receivables"; and that item was also in the 31 October management accounts for the group.
8. Reference is made to the board paper for the Ashington Capital meeting on 9 July 2009 which noted in respect of AOF3 "we currently have seven investors that are interested in the offering and that three had begun due diligence", and that in respect of foreign investors "[t]here continues to be steady interest in AOF No. 3 from both foreign and domestic investors. Over the past 12 months Ashington has met with over 20 investors from Singapore, Hong Kong, Germany, London and the United States who have shown interest in the Fund. We are now pursing nine of these investors, four of whom have begun due diligence"; and the plaintiff notes that the board paper for the Ashington Group meeting on 9 July 2009 included ADF3 in profit and loss forecasts.
9. It is said that, from about August 2009, Mr Anderson could not devote significant time to progressing AOF3; and that, after Mr Anderson agreed with Mr King a separation on 11 December 2009, Mr Anderson thought he could "cut his losses" and replace ADF and ADF2 with AOF3, but this hope proved in vain because of the damage to its reputation.
10. The plaintiff points to the evidence by Mr Shorrocks, in cross-examination, as to the Asia trip to the effect that his assessment at the time was that there was a reasonable prospect of persuading institutions in Asia to invest in Australian property. He said, however, that "The GFC had nothing to do with it. We went to Hong Kong because we thought that the assets in question would be desirable to Asian investors" (T 742). Mr Shorrocks recalled that they were raising money for Ashington as a manager of properties, specifically the Four Seasons and the Double Bay Property. He said that "club deals" were not the reason for the trip. His evidence was that he understood purpose of the trip was to identify investors who might invest into property funds managed by Ashington and that "I thought there would be sufficient interest that it was worthy of the trip" (T 746).
11. The plaintiff submits that if Ashington had been successful in completing ADF, ADF2 and AOF3 (even if the first two funds were "somewhat impaired" by the consequences of the GFC), then it would have continued to raise further funds in order to continue its business.

Ashington's units in the trusts

1. The plaintiff submits that to the extent that units in the respective trusts are beneficially held by Ashington entities, then they form part of the plaintiff's case for compensation. It is noted that the units held by Ashington Group became worthless. The plaintiff says that, on the relevant counterfactual, the equity in Stonington would have substantially been preserved and Double Bay and Noosa would have made a profit; and hence the units would have returned some income and equity to their owners (including Ashington) which it is says forms a valid part of the plaintiff's case for loss and damage.

Fees to be earned by Ashington companies other than Ashington Capital or Ashington Management

1. Insofar as the defendants submit that the plaintiff is only entitled to revenue referable to Ashington Capital and Ashington Management (not to fees that would have been earned by, for example, Ashington Real Estate for sales commissions, and ACIPL for trustee fees of future funds), the plaintiff says that the rights to direct the earning of those future fees were held by Ashington Capital and Ashington Management, by virtue of their position of trustee and manager respectively; and that those rights were taken from them. It is said that the fact that those rights would have been directed to a related company in the group of companies does not change the fact that the right to earn those fees has been taken away from Ashington Capital and Ashington Management (and hence, it is said, must be compensated).

Value calculations

1. The plaintiff initially valued the Ashington business on the basis of future funds after AOF3 at 30 June 2009 as $140.7 million (as per Mr Halligan's 17 May 2018 report) (although that might be a typographical error since I note that [7] of that report appears to put the market value of the consolidated group at $140.9 million but reducing depending on the beneficial ownership of units to $136 million). The plaintiff says that damages should be awarded reflecting Ashington's chance of building that business in the future, had the existing business survived. However, by the close of the hearing, it seemed to be accepted that the loss claimed was far less that the upper end of Mr Halligan's calculations and that the amount would be a much discounted sum to reflect the loss of the opportunity to continue the business into the future (as per the plaintiff's aide memoire on quantum - MFI 36 - and Mr Hall's appendix 10) as I explain below.
2. In closing submissions, the plaintiff maintained the argument that on the relevant counterfactual the Stonington Capital Raising was "very likely to be successful" (elsewhere it is put that it would have been successful) and if that occurred: the Wylde Street Property would have been sold; the other projects and AOF 3 would have experienced minor delays; and ADF, ADF2 and AOF3 would have been replaced by similar funds on their expiry.
3. The plaintiff says that the value of what was lost comprises three elements: first, the net present value of the cashflows from the existing funds, and AOF3, on reasonable assumptions; second, the net present value of a continuing funds management business (in the event that the existing funds and AOF3 are net cashflow positive); and, third, the net present value of the units.
4. As to the first and third of those, it is said that Mr Halligan's valuation of the core business including AOF3 serves as a "good starting point" for a calculation as at 30 September 2009, noting that the value Halligan ascribed to the business on that basis is $26.7 million.
5. The plaintiff says that, taking more conservative assumptions (i.e., no allowance for incentive performance fees, and assuming delays in the projects including AOF3), one would instead take a low value based upon Mr Hall's "Attachment 10" calculation, which puts the value of the business on that basis at $6.7 million.
6. The plaintiff says that this sets the range for the core business (including AOF3) in the vicinity of $6.7-26.7 million. It is said that, on the counterfactual that the Stonington Capital Raising was successful, then a more than reasonable hypothesis is that Ashington's funds management business would not have terminated on the expiry of ADF, ADF2, and AOF3. The plaintiff says that the low range for this part of the business (the continuing business) is the net present value of the profitable years on Mr Hall's "Annexure 10" scenario, based on conservative assessments of the continuing business (with three funds, of $50, $80 and $65 million each, no value for the units and no allowance for incentive performance fees), which produces a net present value of cashflows of $3.9 million of the continuing businesses; whereas, at the high range, is Mr Halligan's valuation of the entire business including repeating funds as set out in his fifth report, and amended by his sixth report, being $118,181,000, less the value of the core business including AOF3 ($26.7 million), for a value of the continuing business on optimistic assumptions of $91.5 million. Thus, the plaintiff says that the range for the continuing business is $3.9-91.5 million.
7. The plaintiff accepts that, from the value of the core business plus the continuing business, the amount of unpaid calls, assessed by Mr Halligan in his sixth report as $2,563,000, ought to be deducted. The plaintiff also accepts that there must be an allowance made for the prospect that the Stonington Capital Raising was not successful (something the plaintiff submits, on the counterfactual, is most unlikely and ought to be ascribed a value of 10%).

Defendants' submissions on loss

1. Apart from emphasising the going concern issue, the defendants say that the existence of a valuable lost commercial opportunity has not been made out on the balance of probabilities; and that the value of any lost commercial opportunity must be heavily discounted by the contingencies and improbabilities inherent in the counterfactual put forward by Mr Anderson.
2. The defendants contend that there was no viable alternative to the Parissen Proposal; and they maintain that it was Mr Anderson who caused the retirement of Ashington Capital and Ashington Management (identifying the alternative to the Parissen Proposal as a suit from the superannuation investors in addition to the prospect of receivership or liquidation). As to the retirement of Ashington entities, it is said that Mr Anderson believed the superannuation fund investors had made him a generous financial offer (of some $6 million) to retire (which I note is somewhat ironic in circumstances where the revised calculations by Mr Halligan put the likely lower end of the range at some $5.25 million which would need to be discounted in any event), referring to Mr Anderson's statement on 22 December 2009 to the effect that it was in everyone's interest for Ashington to retire (though I would have read this in much the same way as a gracious loser's speech) and Mr Anderson's affidavit in the Mapeline proceeding to the effect that the promise was worth around $6 million. (I add here that it does not appear to be disputed that no such payment ended up being made to the Ashington entities.)
3. Patersons says that the plaintiff's case that loss is to be measured by reference to Ashington Capital's and Ashington Management's loss of the property development business comprised in ADF, ADF2 and "anticipated future funds" is not credible. Patersons says that the business was not a going concern as at 30 June 2009; and that it was in that position well before any impugned conduct of the defendants. Insofar as the plaintiff's case is put in opening written submissions as a series of lost commercial opportunities, Patersons says that the discount to be applied for the multitude of contingencies and improbabilities inherent in the plaintiff's counterfactual mean that there is in effect no loss.

Loss limited to Ashington Capital and Ashington Management

1. At the outset, Ms Garrett and Mr Renauf say that the only loss the plaintiff claims is a loss to which the plaintiff has no right. Ashington Capital and Ashington Management purported to assign the claims that they had in connection with their removal. The only loss that the plaintiff is claiming is the loss of the business of the "Ashington Group" (the plaintiff's submissions at [226]). It is said that Ashington Management and Ashington Capital never held that business to begin with (and they have not proved as much). It is noted that the plaintiff's submissions at [226]-[228] contain no references in the evidence to any legal or other right to the business of the "Ashington Group". Similarly, Patersons that the plaintiff can at most only recover for the loss of the funds business comprising that of Ashington Capital and Ashington Management.
2. Contrary to the plaintiff's submission, it is said that there is no basis for the contention that Ashington Capital or Ashington Management had a right to receive sales commissions (in addition to trustee fees and development management fees). More fundamentally, it is said that there is a clear disjunct between the statement that Ashington Capital and Ashington Management had the right to receive income from the ADF and ADF2 and the statement that they had a right to the business of the "Ashington Group".
3. It is noted that, at its core, the Ashington group was a funds management business. Ashington Group was the funds manager and the head company. It is said that if there was any entity that could claim to have a claim to "the business of the Ashington Group" it would be Ashington Group. However, Ms Garrett and Mr Renauf argue that no single company had "the business of the Ashington Group". It is noted that one must consider the role that each company played within the Ashington group. It is said that each of Ashington Capital and Ashington Management was responsible for part of the affairs of the Ashington group, and, to the extent that anything was lost, it could only be the potential profit steams available to Ashington Capital and Ashington Management from their respective roles as trustee and manager of ADF and ADF2.
4. Ms Garrett and Mr Renauf say that any submission that Ashington Management was entitled to the sales commissions from Ashington Real Estate should be rejected as contrary to the objective evidence and the claim as pleaded. In particular, it is noted that: [7] of the third further amended statement of claim pleads that Ashington Group was a funds manager (thus it is said that if any company owned the "the business of the 'Ashington Group'" it was likely Ashington Group, and that entity did not assign any cause of action; [10] of the pleading states that Ashington Real Estate was a subsidiary of Ashington Group and provided real estate services (it is said that if any company had rights to earn sales commissions within the group, it was Ashington Real Estate and that entity did not assign any cause of action); and [179] pleads that Ashington Real Estate lost its business when receivers were appointed to Ashington Capital and Ashington Management on 25 February 2011 as it was reliant on those entities.
5. Mr Anderson's evidence, particularly at [25] of his 19 December 2017 affidavit, confirms that each of the entities within the Ashington group had distinct roles to play. It is noted that, in particular, Ashington Real Estate was a separate entity and was established to operate as the real estate agent and was appointed by Ashington Capital to be the marketing, sales and leasing agent for each ADF project.
6. On this point, Patersons says that how the plaintiff says Ashington Capital's and Ashington Management's loss includes the sales commissions earned by Ashington Real Estate is opaque. Insofar as the plaintiff contends that Ashington Management had a right to appoint Ashington Real Estate and to supervise the selling of property, such that the sales commissions earned by Ashington Real Estate can somehow be attributed to the business of Ashington Management, Patersons says that the critical difficulty with this is that there is no such "right" of Ashington Management reduced to writing in the Development Management Deeds for each of the sub-trusts for ADF and ADF2 in evidence, nor is there in the draft Development Management Deed for AOF3.
7. Further, Patersons notes that the future fund, AOF3 (although in the infancy of its development), was not proposed to be conducted through either Ashington Capital and Ashington Management: new trustee and development management entities were proposed to be set up, and again any sales commissions were proposed to be earned by Ashington Real Estate. Patersons says that it is uncontroversial that the proposed trustee was not Ashington Capital - it was a new company Ashington Capital International Pty Ltd (ACIPL) that had been incorporated for this purpose. This company was 100% owned by Ashington Group. It is said that Mr Anderson conceded as much in his affidavit of 19 April 2018 at [53] and, although he wavered from this evidence in his oral evidence, the documentary record is clear that ACIPL was intended to be the trustee of AOF3. Patersons says that the consequence of this is that, even if there was a lost opportunity to develop AOF3 (which the defendants say there was not), it cannot be assumed that Ashington Capital would earn the trustee fees for this future fund. It is said that this is not a lost opportunity of Ashington Capital - it is a lost opportunity of ACIPL (which has not assigned any of its causes of action to the plaintiff). Ms Garrett and Mr Renauf make a similar submission on this point.
8. As to the identity of the development manager for AOF3, it is noted that Mr Anderson gave evidence in [54] of his 19 April 2018 affidavit that he did not intend a new company - Ashington Management International Pty Ltd (AMIPL) - to be created to be the development manager for AOF3. Patersons says that this is presumably because Mr Anderson was aware that development management fees were the main source of revenue for the Ashington business. It is noted that Mr Anderson maintained that position in his oral evidence, saying he was a "little bit surprised" if the development manager would be AMIPL (because all of the employees were employed by Ashington Management) (T 583). Patersons says that evidence should not be accepted in light of the clear documentary record which shows that AMIPL was intended to be the development manager for AOF3. Ms Garrett and Mr Renauf say that the true position was that Ms Briggs had been tasked with establishing AMIPL and had recorded two contemporaneous notes in her notebook to that effect (Ex 6 at 2, 4). Although Ms Briggs, did not remember the particular entries, it is noted that Ms Briggs accepted that her "to do" lists were an accurate record of tasks assigned to her. In addition, Mallesons had advised about setting up AMIPL (Ex 17 at 82). Again, it is said the consequence of this is that it cannot be assumed that Ashington Management would earn the development management fees for this future fund; and that it is not a lost opportunity of Ashington Management - it is a lost opportunity of another entity proposed to be incorporated (AMIPL).
9. Patersons says that this impacts materially on the valuation pointing to the evidence of the defendants' valuation expert (Jeffrey Hall) to the effect that, if the valuation only includes Ashington Capital and Ashington Management (rather than the entire group of companies), the business would not include any revenue from sales commissions from ADF, ADF2 or AOF3 (because those commissions were earned by Ashington Real Estate) or any revenue from trustee and funds management fees associated with AOF3 and other anticipated future funds (because those fees were to be earned by a separate entity, ACIL). It is noted that Mr Halligan never valued the business of Ashington Capital and Ashington Management only, whereas Mr Hall did (as at both 30 June 2009 and 30 September 2009), both valuations being nil. Patersons points out that, even leaving aside this threshold difficulty, Mr Hall has concluded that the value of the whole of the Ashington group as at 30 June 2009 was zero.

Units

1. Further, the plaintiff's valuation is said to be inflated because it includes in the valuation of the Ashington business the units held by ADFIT and Ashington Group in ADF and ADF2. Patersons says that this debate is arid given that it is now accepted that the unpaid calls ought to be deducted from the vale of the core business. Nevertheless, to the extent it remains an issue, Patersons says that Mr Hall's approach should be accepted (namely, an exclusion of the unitholdings from a valuation of the funds management business). It is noted that Mr Halligan agreed in cross-examination that the value of these unitholdings should only be included if the units are owned by the company the subject of the valuation (T 1315.20-44).

Limited evidence of future funds

1. Second, it is said that the high point of the plaintiff's evidence are the statements in: (a) Mr Anderson's evidence at [573] of his 19 December 2017 affidavit (subject to s 136 rulings limiting the evidence to assertion) that if the breaches had not occurred Stonington would have been "self-funding" and would have been developed, that investors would have contributed the $6 million in unpaid calls, that Wylde Street would have sold for at least $20 million which would have raised $9 million in cash and the Double Bay appeal process would have succeeded in some form; and (b) Mr Anderson's evidence from his 19 April 2018 affidavit (subject to various s 136 rulings limiting the evidence to evidence of his intention) that if the breaches had not occurred he intended to set up new funds every two years.

Superannuation fund investors' ability to remove Ashington Capital and Ashington Management

1. Further, Acorn emphasises that the "business" of Ashington Capital as trustee and Ashington Management as development manager of the Ashington funds could only ever be operated by them at the behest of the superannuation fund investors, who could terminate that "business" by removing Ashington Capital as trustee on a 75% resolution by them at any time and for any reason. It is said that Mr Anderson accepted the ability of superannuation fund investors to remove Ashington Capital as trustee (see at T 627.32-628.28) and that he had known since inception of the respective trusts that this was the case (see T 629.40-630.31; T 932.39-47).

Limitations of plaintiff's expert evidence

1. Patersons says that the plaintiff's expert evidence (Mr Halligan) is based on unrealistic expectations. Mr Halligan assessed the market value of the business of the Ashington group (i.e., the consolidated Ashington group of companies as opposed to only the business of Ashington Capital and Ashington Management) as at 30 June 2009 at $140.9 million (or $27.5 million excluding the anticipated future funds other than the AOF3 fund, which latter fund is said by Patersons to have been then highly speculative and unlikely to be realised). Patersons says that it is not credible that the projects which comprised ADF and ADF2 would have been completed as envisaged in the group's forecasts (which Patersons says were optimistic) nor that, over the following years, the group would have had five funds (comprising a mix of development funds and opportunistic funds) at any one time. Patersons says that the plaintiff's expert's valuation is underpinned by a set of assumptions divorced from the financial reality of the business which was insolvent, or bordering on insolvency, at the relevant time.