Anderson v Canaccord Genuity Financial Ltd

Daniela Alejandra Anderson (Appellant) Canaccord Genuity Financial Ltd (First Respondent) Nicola Lesleigh Garrett (Second Respondent) Samuel Mark Renauf (Third Respondent) Falcon Prime Pty Ltd (Fourth Respondent) Acorn Capital Ltd (Fifth Respondent) Albany Capital Investors Pty Ltd (Sixth Respondent) Ashington Capital Pty Ltd (in liquidation) (Seventh Respondent) Ashington Management Pty Ltd (in liquidation) (Eight Respondent)

Craig Anthony Anderson (Appellant) Canaccord Genuity Financial Ltd (First Respondent) Nicola Lesleigh Garrett (Second Respondent) Samuel Mark Renauf (Third Respondent) Falcon Prime Pty Ltd (Fourth Respondent) Acorn Capital Ltd (Fifth Respondent) Albany Capital Investors Pty Ltd (Sixth Respondent) Ashington Capital Pty Ltd (in liquidation) (Seventh Respondent) Ashington Management Pty Ltd (in liquidation) (Eight Respondent) Representation: In both 2022/00048359 and 2022/00173413:

Counsel: P S Braham SC and A Bhasin (Appellant) J A Redwood SC and E Bathurst (First Respondent) M Painter SC and T Bagley (Second and Third Respondents) G Ng and R Sud (Fourth Respondent) A S McGrath SC and J Jaffray (Fifth Respondent) S Gray and A Cameron (Sixth Respondent)

Solicitors: McLachlan Thorpe Partners (Appellant) Clayton Utz (First Respondent) Piper Alderman (Second and Third Respondent) Corrs Chambers Westgarth (Fourth Respondent) Moray & Agnew Lawyers (Fifth Respondent) Kennedys (Sixth Respondent) File Number(s): 2022/00048359; 2022/00173413 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Citation: [2022] NSWSC 58; [2022] NSWSC 649 Date of Decision: 07 February 2022 Before: Ward CJ in Eq File Number(s): 2015/00285816

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] The appellant Mrs Daniela Anderson took an assignment of claims from two Ashington companies in liquidation. Her husband, Mr Craig Anderson, was formerly a director and substantial shareholder in the Ashington group of companies. The two companies had earned fees as the trustee and manager of two unlisted unit trusts, which invested in properties suitable for redevelopment and sale. In around September 2009, the loans which had enabled one of the properties ("Stonington") to be acquired were in default, the lenders were threatening to enforce their rights, and the large superannuation fund investors which were majority unitholders were dissatisfied with the performance of the Ashington companies. The superannuation fund investors retained the fourth respondent ("PPB") to represent their interests. Ashington employed the second and third respondents, Ms Nicola Garrett and Mr Samuel Renauf, to liaise with the superannuation fund investors and to effect an urgent refinance of the Stonington debt. Ashington granted a mandate to the first respondent ("Patersons") to obtain short term finance for $11-15 million at a 30% annual return in order to buy out the existing lenders ("Stonington Capital Raising"). However, rather than proceeding in accordance with the mandate, Ms Garrett and Mr Renauf participated in developing a proposal for a new company to take over the roles of trustee and manager of the unit trusts, with funds being provided by the fifth and sixth respondents ("Acorn" and "Albany"). The Stonington Capital Raising never occurred. In December 2009, the Ashington companies ceased to be trustee of the two unit trusts, and subsequently ceased to be trustee and manager of those and other related trusts. Liquidators were appointed in 2011. Following a lengthy trial in the Equity Division, it was held that Ms Garrett and Mr Renauf had acted dishonestly and fraudulently against their employer, but that they did not owe fiduciary obligations. It was also held that if the dishonest breaches of duty had been breaches of fiduciary duty, none of Patersons, PPB, Acorn and Albany had knowingly assisted in those breaches. Further, it was held that although Ms Garrett's and Mr Renauf's conduct had caused the Stonington Capital Raising to fail, damages and compensation were assessed at nil. Nominal damages were awarded against Ms Garrett and Mr Renauf, but otherwise Mrs Anderson's claims were dismissed. By a separate judgment, the primary judge made a third party costs order against Mr Anderson. Mrs Anderson and Mr Anderson brought separate appeals from each of the judgments. After judgment was reserved, the appeals against the judgments in favour of Acorn and Albany were compromised. There were three main issues on Mrs Anderson's appeal. First, did Ms Garrett and Mr Renauf owe fiduciary obligations and was their conduct within the scope of those obligations. Secondly, did Patersons and PPB knowingly participate in any breaches of fiduciary duty by Ms Garrett and Mr Renauf. Thirdly, did the breaches of duty cause the Ashington companies to lose a valuable chance of earning trustee and management fees in the future. The Court unanimously allowed each appeal, entered judgment in Mrs Anderson's favour and set aside the third party costs order against Mr Anderson. In respect of the first issue:

1. Authority binding on courts below the High Court holds that employees are an accepted category of fiduciary relationship: at [125]-[151]. Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64; Concut Pty Ltd v Worrell [2000] HCA 64; 75 ALJR 312; John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19, applied.
2. The scope of a fiduciary obligation will vary and must be separately addressed: at [152]-[166]. Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36; Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18; Howard v Federal Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21, applied. Omnilab Media Pty Ltd v Digital Cinema Network Pty Ltd [2011] FCAFC 166; 285 ALR 63; Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6; Gunasegaram v Blue Visions Management Pty Ltd [2018] NSWCA 179; 129 ACSR 265, followed and approved. Nottingham University v Fishel [2000] EWHC 221 (QB); [2000] IRLR 471, disapproved. Metal Manufactures Ltd v Johnston (2020) 3 QR 456; [2020] QCA 42, not followed. Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1; [1999] NSWCA 408, explained.
3. Ms Garrett's and Mr Renauf's conduct by not pursuing the Stonington Capital Raising and instead seeking to replace Ashington as trustee and manager breached their fiduciary obligations: at [167]-[170]. In respect of the second issue:
4. It was sufficient that Patersons and PPB knew that Ms Garrett and Mr Renauf held senior positions within Ashington and were proposing something which was contrary to the mandate, antithetical to the interests of Ashington and to be kept secret from Mr Anderson. It was not to the point that they believed that the unitholders wanted Ashington's removal: at [193]-[215], [263]-[285].
5. It was sufficient that the assistance provided by Patersons was of a critical step, namely, to secure a meeting with Acorn and subsequently Albany: at [216]-[226]. Harstedt Pty Ltd v Tomanek (2018) 55 VR 158; [2018] VSCA 84, applied. Obiter consideration:
6. If an employee is on "a frolic of his own" the employee's knowledge and conduct will not render the employer vicariously liable, but that is distinct from whether the knowledge of the employee is to be imputed to the employer for the purposes of liability as a knowing assistant in a dishonest and fraudulent breach of fiduciary duty. Equity only holds third parties who assist in a dishonest and fraudulent breach of fiduciary duty liable if they have sufficient knowledge of the breach. The notion at the core of the equitable principle is providing assistance to a fiduciary while having sufficient knowledge that the fiduciary is dishonestly and fraudulently breaching the fiduciary's duty. Thus, at the core of the rules of attribution applicable for liability for knowing assistance is the state of mind of the natural persons who are regarded as providing the assistance. There is no general "fraud exception" to imputation of knowledge: at [230]-[262]. Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500; [1995] UKPC 5; Bilta (UK) Ltd (in liq) v Natwest Markets plc [2020] EWHC 546 (Ch); [2020] AII ER (D) 82; Aerostar Maintenance v Wilson [2010] EWHC 2032 (Ch); Gregg v R [2020] NSWCCA 245; 355 FLR 348; Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; [1995] HCA 68; Beach Petroleum NL v Johnson (1993) 43 FCR 1, considered and followed. Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 266 FCR 147; [2018] FCA 751; All Class Insurance Brokers Pty Ltd (in liquidation) v Chubb Insurance Australia Ltd (No 2) [2021] FCA 782; 154 ACSR 78, approved. In respect of the third issue:

Judgment Key individuals, companies and trusts [7] Overview of events, conclusions at trial and issues arising on appeal [20] The ADF and ADF2 [28] The acquisition of Stonington and the Investec facility [46] Events of late September and early October 2009 [62] The Stonington Capital Raising [62] The invitation to Acorn [74] The Garrett plan [79] The "Go Forward" Corporate Structure Slide [83] The 8 October Swan email [88] Subsequent events [90] The period until 27 November 2009 [90] The removal and winding up of Ashington and assignment of causes of action [93] Ms Garrett and Mr Renauf owed fiduciary duties (grounds 5 and 6) [102] Reasons of the primary judge [103] Two preliminary issues [110] The appellant's submissions [122] The nature of the fiduciary duties owed by employees [125] Employees are an accepted category of fiduciaries [129] The scope of a fiduciary obligation [152] Application to the facts of this case [167] The claim against Patersons [171] The reasoning of the primary judge [174] The knowledge of Mr Doherty - the pleading point [179] The knowledge of Mr Doherty - the evidence [188] (a) Knowledge that Ms Garrett and Mr Renauf held senior positions [193] (b) Knowledge that the information must be kept secret from Mr Anderson [201] (c) Mr Doherty was told that the investors wanted Ashington's removal [205] (d) Mr Doherty's role as introducer [207] (e) The need to establish fraud in equity [209] (f) The assistance provided by Patersons [216] Assignability of claims (grounds 1-2, various grounds of the notices of contention of the first and fourth respondents) [227] The imputation of Mr Carolan's knowledge to Patersons [230] The claim against PPB (grounds 23-26) [263] Causation - Notices of contention [286] PPB's submissions on causation [288] Not put to Mr Anderson [299] The superannuation fund investors approved the Stonington Capital Raising [306] The submission produces incoherence and leaves dishonest fiduciaries and their accessories with a windfall [309] Ms Garrett's and Mr Renauf's breaches caused loss of a valuable opportunity [315] Mrs Anderson's counterfactual [325] Overview of reason for accepting Mrs Anderson's counterfactual [331] Loss [334] Reasons of the primary judge [334] Mrs Anderson's challenge to the reasoning of the primary judge [339] Prospects of a successful timely Stonington Capital Raising [349] Would the superannuation fund investors have paid the uncalled capital? [366] Selling the Wylde Street property for some $18.5 million [382] Ashington not being removed as trustee [385] Valuation methodology [386] Broad agreement between Mrs Anderson and Patersons [386] Would the Stonington Capital Raising restore liquidity to the business? [392] The development of other properties, especially Double Bay [396] The establishment of AOF3 [404] The likelihood of further funds [407] Assessing the value of the lost opportunity [408] Remaining grounds [415] Patersons' direct breach of fiduciary obligations (grounds 38-42) [416] Breach of the Patersons Mandate (grounds 43-44) [421] Ms Garrett's and Mr Renauf's breach of the employment contract (grounds 6A and 6B; cross-appeal) [424] Costs appeal [427] Orders [428]

1. THE COURT: The main issues of law in this appeal are whether dishonest breaches of duty by two senior employees were breaches of fiduciary duty and what levels of knowledge and assistance are required in order for third parties to be accountable to the employer, and the main issues of fact are whether the breaches caused any loss.
2. The appeal is brought from a very substantially adverse judgment in the Equity Division of this Court following a five week trial: Anderson v Canaccord Genuity Financial Ltd [2022] NSWSC 58. The judgment is very long (2821 paragraphs, amounting to some 310,000 words). Much of what was in issue at trial is also in issue on appeal. That is principally because although the primary judge found that the second and third respondents, Ms Nicola Garrett and Mr Samuel Renauf, acted dishonestly and fraudulently in respect of a refinancing, her Honour found that they did not owe fiduciary obligations. Their dishonesty is unchallenged, but whether the duties they breached were fiduciary duties is at the forefront of this appeal, which well illustrates the significantly different remedies that are available against third parties involved in a breach of fiduciary duty in equity, as opposed to a breach of a contractual or tortious duty at common law.
3. The primary judge also found that the other respondents, who were alleged to have knowingly assisted in the breach of duty, lacked sufficient knowledge of what Ms Garrett and Mr Renauf were doing. None of the findings turned on her Honour's assessment of any witness giving evidence. In many respects, this Court is in substantially the same position as the primary judge in reaching conclusions as to whether fiduciary duties were owed by Ms Garrett and Mr Renauf, and the state of mind of the other respondents. That is because neither Ms Garrett and Mr Renauf nor the principals of the other respondents gave evidence or were cross-examined.
4. Separately from the above, the primary judge found that while the breach of duty caused the loss of the opportunity for a critical refinancing to succeed, nonetheless there was no compensable loss, essentially because there was not shown to have been any value in the Ashington companies or their business immediately before the dishonest breaches of Ms Garrett and Mr Renauf. Accordingly, her Honour entered judgment for merely nominal damages of $100 against each of Ms Garrett and Mr Renauf. The appellant challenges the finding of no compensable loss, and by notice of contention or cross-appeal (in the case of Ms Garrett and Mr Renauf) most of the respondents challenge the finding of causation.
5. The magnitude of the judgment from which this appeal has been brought, and the size of the record (24,000 pages of documents tendered, 28 days of hearings, some 860 pages of written submissions at first instance and 450 pages on appeal) present challenges in providing our reasons for the conclusions we have reached. We are also conscious that her Honour's judgment is readily available on CaseLaw and the first 1234 paragraphs constitute a largely uncontroversial narrative by reference to contemporaneous documents of the events giving rise to this litigation, and little would be gained by their repetition here. On the other hand, there are a small number of centrally relevant documents (mostly, emails) which are not fully reproduced in her Honour's reasons. Accordingly, we have adopted the following approach: 1. first, to identify the key individuals, companies and trusts; 2. secondly, to give a very abbreviated overview of the events, her Honour's conclusions, and the issues arising in this appeal. This will amount to a high level overview of the affairs of the Ashington companies, with some details of the structure of ADF and ADF2 and the acquisition of the Stonington property; 3. thirdly, to give a detailed account of the events of the last week of September 2009 and the first week of October 2009, when the dishonest breach of duty by Ms Garrett and Mr Renauf concerning the "Stonington Capital Raising" took place; 4. fourthly to provide an abbreviated higher level summary of subsequent events, which will need to be supplemented when dealing with pecuniary relief; 5. fifthly to deal with the principal issues in the appeal going to liability, namely, whether the duties breached by Ms Garrett and Mr Renauf were fiduciary duties, and whether other respondents knowingly assisted in those breaches; 6. sixthly, to deal with the issues of causation arising on the notices of contention and cross-appeal; 7. seventhly, to deal with the issues of loss (in so doing we will need to return to some matters of fact which were passed over when dealing with liability); 8. eighthly, to address the remaining issues, which are not dispositive in light of the conclusions already reached, and 9. ninthly, to formulate orders to resolve the principal appeal, the cross-appeal and the appeal as to costs.
6. We have adopted that course because it is the most concise and therefore the most transparent and readily comprehensible way to expose our reasons for resolving a very large appeal, which was heard in this Court over 8 full days.

Key individuals, companies and trusts

1. The appellant Mrs Daniela Anderson is the assignee of claims by the liquidator of two companies within the Ashington group of companies. Her husband, Mr Craig Anderson, was the managing director and major shareholder of the Ashington companies. He is now a discharged bankrupt, and the primary judge made a third party costs order against him: Anderson v Canaccord Genuity Financial Ltd (No 2) [2022] NSWSC 649, from which a separate appeal was brought and heard concurrently with the principal appeal.
2. Each of Ashington Capital Pty Ltd, Ashington Management Pty Ltd and Ashington Real Estate Pty Ltd was a wholly owned subsidiary of Ashington Group Pty Ltd. All are in liquidation. For most of the events relevant to this appeal, Ashington Capital was in fact a public company, Ashington Capital Ltd (it changed status to a private company in January 2010). Mr Anderson was a director and a 40.7% shareholder of Ashington Group. At material times, Mr Craig Minahan was also a director.
3. It seems that for some purposes there was no clear delineation between Ashington Capital, Ashington Management and other companies which were wholly owned by Ashington Group, all of which traded under the name "Ashington". In particular, it appears that for the purposes of analysing whether Ms Garrett and Mr Renauf owed and breached a fiduciary duty, at least parts of the litigation has proceeded on the basis that nothing turns on any distinction between Ashington Capital and Ashington Management. For example, in the 116 pages excluding annexures of closing written submissions filed on the part of Ms Garrett and Mr Renauf, no point was raised on any distinction between the two companies in relation to the duties owed by the pair, and the test was framed in terms of whether either person could exercise a power or discretion "which would affect the interests of AMPL/ACPL in a legal or practical sense", if so did they "agree or undertake … to act for or on behalf of or in the interests of AMPL/ACPL in the exercise of that power or discretion" and did they have a special opportunity to exercise a power or discretion "to the detriment of AMPL/ACPL thus rendering AMPL/ACPL 'vulnerable to abuse' by Garrett and Renauf of 'their position'?". The reasons of the primary judge reflect as much. We shall generally follow the course adopted by the primary judge and the participants at the time and often refer simply to "Ashington" to mean the companies in the group, except where it is necessary to refer to a particular company.
4. Broadly speaking, the Ashington companies conducted a business involving acquiring, redeveloping and selling high-end residential/commercial/retail properties, with the aim of generating large returns for substantial investors. Ashington Capital earned fees as the trustee, Ashington Management earned fees as the development manager, and Ashington Real Estate earned commission on the sale of the developed properties.
5. Ashington Capital was the trustee of two unlisted unit trusts, styled "Ashington Development Fund" and "Ashington Development Fund No 2" ("ADF" and "ADF2"). Most of the units in each trust were held by the trustees (or related entities) of industry superannuation funds. Ashington Capital was also the trustee of six further unit trusts, corresponding to the six properties which were the underlying assets to be developed and sold for profit as part of Ashington's business. All of the units of each of these unit trusts were held by Ashington Capital itself, as trustee of one or other (and in one case, both) of ADF and ADF2. These six unit trusts, where the trust property was the land to be developed, and whose units were all held as assets of either or both of ADF and ADF2, were called the "sub-trusts". In what follows, it will often not be necessary to distinguish the different capacities in which Ashington Capital acted, but sometimes it will be necessary to be quite clear as to whether Ashington Capital acted: 1. as trustee of a sub-trust, (ie as owner of the land, and entitled to be indemnified from the land in respect of liabilities properly incurred, and subject to fiduciary obligations to its 100% unitholder and susceptible to control by that unitholder); 2. as trustee of ADF or ADF2 (ie as legal owner of 100% of the units in each sub-trust, with the power to compel the trustee of the sub-trusts itself to take action, but subject to obligations owed to ADF and ADF2 unitholders most of which were external investors); 3. as owner of a minority of units in ADF and ADF2 as the trustee of two separate trusts, the beneficiaries of which appear to have been the officers and employees of Ashington.
6. In fact, the registered proprietor of at least two of the investment properties (the Project X Trust and the Stonington Trust) was The Trust Company of Australia, as custodian for Ashington Capital. It may be that one or more of the other parcels of land was also in the name of a custodian. Nothing turns on this, and we shall refer for simplicity to Ashington Capital having legal ownership of the land.
7. A separate company within the group, Ashington Capital Int Pty Ltd, was established to act as trustee and manager for a proposed new investment fund, the Ashington Opportunistic Fund No 3, which is only relevant to the quantification of loss.
8. The first respondent, Canaccord Genuity Financial Ltd, was formerly known as Patersons Securities Ltd and it will be convenient to refer to it as Patersons. Patersons was a stockbroking and financial services firm. It was engaged in September 2009 by Ashington Capital acting as trustee for ADF2 to raise some $11-15 million for the Stonington development project in Melbourne. We shall follow the language of the parties and the primary judge and refer to the "Stonington Capital Raising", noting that this was proposed short term debt finance, repayable in six months, secured over the land but subordinate to the first ranking security of Westpac, with an interest rate of 30% per annum.
9. Messrs Martin Carolan and Paul Doherty were senior employees of Patersons, holding the roles of "Associate Director, Corporate Finance" and "Director, Institutional Dealing" respectively. Mr Doherty was based in Melbourne. More senior than either was Mr Raymond Shorrocks, who was Head of Corporate Finance in Sydney at the relevant time.
10. The second respondent, Ms Nicola Garrett, was, according to a draft contract supplied in May 2009 and her own description in drafts of a PowerPoint presentation created in early October 2009, the "Head of Funds Management" at Ashington. The draft contract had her reporting directly to the Managing Director, with a salary of $350,000, superannuation of 9% plus a "Sign on Fee" of 70% of salary. She was at all material times married to Mr Carolan of Patersons. The third respondent, Mr Samuel Renauf, was the "Head of Acquisitions" at Ashington Management from at least July 2009 until December of that year. Each had formerly worked for another property developer, Valad Property Group, immediately prior to working at Ashington. Ms Garrett and Mr Renauf made common cause and were represented by the same solicitors and counsel. The precise nature of Ms Garrett and Mr Renauf's roles at the Ashington companies was in issue at trial and, to a lesser extent, on appeal. What is not in issue is that if and insofar as they owed fiduciary obligations to companies in the Ashington group, they dishonestly and fraudulently breached those obligations in connection with the Stonington Capital Raising.
11. The fourth respondent, Falcon Prime Pty Ltd, is an insolvency firm, and Messrs Peter Block, Brett Lord and Ian Carson were partners of that firm, with Mr Block also being a director. It was formerly known as PPB Pty Ltd and it will be convenient to refer to it by that name. That firm represented the superannuation funds which had acquired units in ADF and ADF2.
12. The fifth respondent, Acorn Capital Ltd, is a company based in Victoria engaged in investment activities, which employed Mr Robert Routley. On 1 September 2023, after this Court's judgment had been reserved, the parties advised that Mrs Anderson and Mr Anderson had resolved their claims against Acorn, and orders were made by consent dismissing each appeal against Acorn and vacating all prior orders as to costs.
13. The sixth respondent, Albany Capital Investors Pty Ltd, is a company engaged in funds management, associated with the Alter family. It is also based in Melbourne. It was, according to its letterhead, at relevant times the holder of an Australian Financial Services Licence. Messrs Byron Ko and Neil Tremaine were relevant persons at Albany, with the former signing off as "Investment Director [of] the Pacific Group/Alter Family Office". On the afternoon of 7 December 2023, after notification that judgment would be delivered had been given, the parties advised that Mrs Anderson and Mr Anderson had resolved their claims against Albany, and orders were made by consent dismissing each appeal against Albany and vacating all prior orders as to costs.

Overview of events, conclusions at trial and issues arising on appeal

1. Speaking generally, the case advanced and rejected at trial and maintained on appeal is that the respondents together took away the business of the Ashington group of companies by engineering the replacement of Ashington Capital as trustee and of Ashington Management as manager of each of ADF and ADF2 and the six sub-trusts.
2. At the forefront of the plaintiff's case at trial was the claim that Ms Garrett and Mr Renauf acted in breach of fiduciary duty, in which breach each of Patersons, PPB, Acorn and Albany were knowingly involved, such that all are liable to Mrs Anderson as assignee from the liquidators of Ashington Capital and Ashington Management.
3. Once again speaking generally, it was alleged that when Ms Garrett was charged exclusively with managing an urgent refinancing of the Stonington sub-trust, for which Patersons held the mandate, she and Mr Renauf in breach of duties they owed as employees failed to progress that capital raising, but instead brought about the replacement of the Ashington companies as trustee and manager by other companies, from which they stood to benefit, financed by Acorn and Albany, and with the support of the superannuation investors represented by PPB. The breaches of duty by Ms Garrett and Mr Renauf were alleged to be breaches of fiduciary duty, and PPB, Acorn and Albany were said to be liable to those two Ashington companies for knowingly assisting Ms Garrett and Mr Renauf in their dishonest and fraudulent breach of fiduciary duty.
4. There were a number of other ways in which the respondents were sued. Ms Garrett and Mr Renauf and Patersons were also sued for breach of contract, and Patersons was also sued for breach of fiduciary duty owed directly by it to Ashington Capital and Ashington Management. Insofar as these claims were rejected at trial and form part of the appeal, they will be addressed in due course. But the main claim was for breach of fiduciary duty by Ms Garrett and Mr Renauf, knowingly assisted by each of the other active respondents.
5. Most of the plaintiff's claims were rejected at trial. Simplifying somewhat, the primary judge found that Ms Garrett and Mr Renauf did not owe fiduciary obligations, but that if they did, they were breached in a way which was dishonest and fraudulent so as to engage the principles of knowing assistance in Barnes v Addy (1874) LR 9 Ch App 244. The entirety of the litigation has been conducted in accordance with what was confirmed in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22, namely, that claims for knowing assistance require the plaintiff to establish a "dishonest and fraudulent design" on the part of the fiduciary, but do not require showing dishonesty on the part of the third party, because it suffices if the plaintiff proves knowledge of circumstances which would indicate, to an honest and reasonable person, circumstances which would "tell of fraud or breach of trust", to use the language of Stephen J in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 412; [1975] HCA 8. (The position is different in England and Wales, as noted in Novoship (UK) Ltd v Mikhaylyuk [2015] QB 499; [2014] EWCA Civ 908 at [77].)
6. Her Honour found that Patersons did not assist, and further that it did not have knowledge of the breach of fiduciary duty, because Messrs Shorrocks and Doherty lacked sufficient knowledge, and the knowledge of Mr Carolan which would have been sufficient was not to be imputed to Patersons because he was acting on a frolic of his own in fraud of Patersons. There was no dispute that Acorn and Albany provided material assistance to the removal and replacement of Ashington, but her Honour once again found that neither company had sufficient knowledge that Ms Garrett and Mr Renauf were engaged in dishonest and fraudulent breaches of their fiduciary duties. The primary judge also found that PPB did not have sufficient knowledge of Ms Garrett's and Mr Renauf's breaches of duty.
7. An amended notice of appeal (filed on 19 September 2022), an amended notice of cross-appeal (filed 5 October 2022) and four notices of contention were before the Court. A separate appeal from the personal costs order was heard concurrently. The amended notice of appeal contained 66 grounds, which may be conveniently summarised as follows: 1. assignment of causes of action (grounds 1 - 4); 2. fiduciary duties owed by Ms Garrett and Mr Renauf to Ashington Capital and Ashington Management (grounds 5 - 6); 3. Ms Garrett and Mr Renauf's contract of employment with the Ashington companies (grounds 6A - 6B); 4. accessorial liability of Patersons, PPB, Acorn and Albany for knowingly assisting Ms Garrett and Mr Renauf in breaching their fiduciary duties (grounds 7 - 22; 23 - 26; 27 - 32; 33 - 37); 5. vicarious liability of Patersons for Messrs Carolan and Doherty's conduct in knowingly assisting Ms Garrett and Mr Renauf (grounds 14, 18 and 19); 6. fiduciary duties owed by Patersons to Ashington Capital and Ashington Management (grounds 38 - 42); 7. breach of Patersons Mandate by Patersons (grounds 43 - 44); 8. causation (grounds 45 - 47); and 9. quantification of loss and expert evidence (grounds 48 - 66).
8. The issues raised in the cross-appeal and notices of contention substantially overlap with those raised on appeal. However, some of the respondents contended additionally that the pursuit of a refinancing of Stonington itself involved a breach of trust, such that it could not be relied on by Mrs Anderson in establishing causation in equity. That argument will be considered further below.

The ADF and ADF2

1. The investments offered by the Ashington Group depended on a slightly complex structure of trusts and sub-trusts. In order to understand various aspects of the appeal, including the nature of the cashflow difficulties, the significance of the refusal of development approval to Double Bay, the significance of Ashington Capital's breach of the Investec Stonington Facility, and the submissions advanced based on the absence of a trustee's entitlement to be indemnified from trust assets, it is necessary to explain that structure in some detail.
2. It is not clear from the materials made available on appeal how many trusts Ashington Capital was trustee of, but there were at least ten which play a part in this appeal. Those ten trusts comprised: 1. the two unlisted unit trusts known as ADF and ADF2, the assets of which were 100% of the units in six further unit trusts and the entitlement to call for the unpaid parts of the purchase price of the units already issued; 2. the six unlisted unit trusts or sub-trusts which owned the land (or in the case of Stonington and Project X and perhaps others the land was owned by a custodian), with all of the units being issued to Ashington Capital as trustee of one or other (or in one case both) the ADF and ADF2, 3. the ADF Investment Trust and the ADF Investment Trust (No 2), on which trusts a minority of units of the ADF and the ADF2 trusts respectively were held, and which appear to have been for the benefit of Mr Anderson and/or the other owners of Ashington Group Pty Ltd and some employees.
3. The primary judge succinctly described the six sub-trusts at [36]-[37]: 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) … 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) … 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 Wyl[d]e 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.
4. The assets of each of the six sub-trusts were properties acquired with a view to their development and sale. They were: 1. the Cross+ Trust, which involved the purchase and redevelopment of the former Millennium Hotel in Kings Cross into a 78 room hotel, office suites, retail premises and a penthouse residential apartment; 2. the Potts Point Trust, which involved the purchase and development of the former Potts Point post office into a retail market, seven retail stores and 41 strata offices over five floors; 3. the 10 Wylde Street Trust, which involved a 38 serviced apartment complex in Potts Point; 4. the Project X Hotel Trust, which involved the Sir Stamford Hotel on Cross Street, Double Bay, for the redevelopment of which project approval under (former) Part 3A of the Environmental Planning and Assessment Act 1979 (NSW) was sought for a mixed-use five-star boutique hotel of 60-80 rooms, 40-50 apartments and retail space; 5. the Noosa Trust, which was a 50% interest in the Sheraton Noosa Hotel in Noosa as part of a joint venture with the Valad Property Group, with the intent of demolishing and rebuilding a mixed-use project incorporating retail, a boutique hotel and apartments; 6. the Stonington Trust, concerning a development site in Malvern, Melbourne, which is central to the events giving rise to this appeal, and which is addressed in detail below.
5. All those assets had been acquired using debt finance. A snapshot of the position at the time Stonington was being acquired can be found in the board papers for the meeting held on 26 February 2009, which included a "Debt Funding Table" with the following information: 1. Cross: Rolling bill facility from St George of $11.425m expiring 31 August 2009; 2. Post: Rolling bill facility from St George of $16.1m expiring 30 April 2009; 3. Wylde: Investec loan, $10.78m expiring 1 April 2009, with further facilities from Westpac of $37.44m and Investec of $5.03m to be agreed; 4. Double Bay: Loan from St George and NAB totalling $65m, expiring 31 December 2009; 5. Noosa: Loan from SunCorp of $65.52m expiring 31 October 2011 (of this an amount of $1m had expired); 6. Stonington: Loans from Westpac $23m and Investec $10m, both to be agreed, but terms of 6 months were contemplated.
6. We shall shortly address the acquisition of the Stonington site. It will be convenient to refer to the "Investec Stonington Facility" to distinguish Ashington Capital's loan from Investec for that site from its loan for the site on Wylde St, Potts Point. It may also be convenient to note that, uniquely, Ashington Capital executed the Investec Stonington Facility not in its capacity as trustee of the Stonington Trust, but in its capacity as trustee of ADF2.
7. All of the units in the Cross+ Trust, the Potts Point Trust and the 10 Wylde Street Trusts were held by Ashington Capital as trustee of ADF. All of the units in the Noosa Trust and the Stonington Trust were held by Ashington Capital as trustee of ADF2. Uniquely, the units in the Project X Hotel sub-trust were held as to 25% by Ashington Capital as trustee for ADF and 75% by Ashington Capital as trustee for ADF2.
8. The principal investors in ADF and ADF2 were four large superannuation funds: Sunsuper Pty Ltd as trustee for Sunsuper Superannuation Fund; LUCRF Pty Ltd as trustee for LUCRF Super; Commonwealth Superannuation Corporation as trustee for Military Superannuation and Benefit Fund No 1 and HEST Australia Pty Ltd as trustee for the Health Employees Superannuation Trust Australia. It will be convenient to follow the nomenclature of the primary judge and refer to these unitholders collectively as the superannuation fund investors (in contradistinction to the minority Ashington unitholders) and where the particular investor unitholder matters, to refer to Sunsuper, LUCRF, Military Super and HESTA. HESTA only subscribed to units in ADF2; Sunsuper, LUCRF and Military Super were unitholders in both ADF and ADF2.
9. The primary judge recorded at [40] that 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 (as to $3 million), Lantern Super Pty Ltd (as to $100,000) and Henelait Pty Ltd (as to $100,000), totalling $50.2 million.
10. The primary judge recorded at [62] that ADF2 was constituted on 20 September 2007, and the units were held as follows: 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. (Strictly, the units were substantially unpaid, and the dollar amounts recorded by her Honour appear to have reflected the total of the purchase price; because the units were issued at $1 per unit, the dollar amounts would thus also reflect the number of units issued.) In December 2008, a further 20,000,000 units were issued proportionately, also at $1 per unit, such that Sunsuper acquired an additional 5,000,000, LUCRF and Military Super an additional 3,750,000 each, and HESTA an additional 6,250,000 units. An additional 500,000 units were also issued to Ashington Group, and an additional 750,000 to Ashington Capital as trustee of the ADF Investment Trust (No 2).
11. Thus at all material times, the superannuation fund investors held 90% of the units of ADF, and 93.75% of the units of ADF2.
12. Ashington Capital as trustee of the ADF Investment Trust and Ashington Group were minority unitholders in ADF (between them holding approximately 10% of the units). The same companies in the same capacities held 6.25% of the units of ADF2, with 2.5% being held by Ashington Group and 3.75% being held by Ashington Capital as trustee for the ADF Investment Trust. These holdings became significant, because the superannuation fund investors complained that the Ashington companies did not provide further funds when the trustee called upon uncalled capital.
13. The trust deeds establishing the ADF and ADF2 entitled the trustee to issue partly paid units. If there were Uncalled Amounts in respect of a unit, the trustee had power to call on a unitholder to pay all or part of that Uncalled Amount on 14 days' notice, provided that the same call was made on all other units in that class which were similarly partly paid. This entitlement was described as "capital" and, if the unit trust vehicle which was deployed were regarded as functionally equivalent to a company which had issued partly paid shares, "unpaid capital" would be an appropriate label. For present purposes, what matters is that Ashington Capital's entitlement to call for the unpaid purchase price of the units it had issued was a valuable asset, and by the time Ashington Capital as trustee of the ADF2 agreed to borrow funds from Investec to complete the purchase of Stonington, it continued to be entitled to call for $10 million of "unpaid capital" from unitholders.
14. Further to the series of calls for the unpaid balance of the purchase price of the units, in November 2008 Ashington asked unitholders (via their asset consultants) to acquire additional units, proportionately to their existing entitlements, so as to increase the fund equity by $20 million, described as the "Additional Commitment". The purpose was said to be to comply with the covenants for the finance obtained for the Double Bay Project. The superannuation fund investors were told 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)". It will be convenient to adopt the language of the primary judge and refer to the facility covenant as the "Project X Uncalled Capital Undertaking". The reference was to cl 23.8 of a "Security Trust and Intercreditor Deed" dated 15 October 2008 which required that Ashington Capital as trustee of ADF2 "must ensure that at any given time it has a minimum Uncalled Capital or free cash of not less than A$15,000,000" less certain deductions.
15. The primary judge recorded at [90] that the request for further capital occurred on 10 November 2008 only a week after the 8th drawdown for ADF2. There was contemporaneous disquiet amongst the external unitholders of this course, to which they nonetheless acceded. Significantly in order to explain a source of further investor dissatisfaction with Ashington, and relevant to some of the submissions made at trial and on appeal, the offer was made on terms including that: (e) The Trustee will not make calls on the Pro-Rata Proportion of Members unless it has called up all the existing equity capital of the Fund (i.e. called up all unpaid amounts in respect of the existing partly paid units). (f) If the Trustee makes a call, it will call up the same pro-rata proportion of each Member's respective Pro-Rata Proportion (e.g. the Trustee may decided to call up 20% of each Member's commitment).
16. To anticipate, a source of the investor dissatisfaction concerned the minority of units held by Ashington Capital. Ashington Capital had not directly contributed funds like the other unitholders (claiming it was entitled to offset its obligation against an entitlement to fees), and so when Ashington Capital sought to call upon the Additional Commitment, there was an issue whether "all the existing capital of the Fund" had been called up and also an issue whether the Additional Commitment on the part of Ashington Capital's minority unitholding would be called on. There were also issues as to whether and if so how the "Terms of the Proposed Offer" bound unitholders.
17. The other thing to note is that by September 2009, most of the "unpaid capital" of the units in ADF2 had been called upon and paid by the superannuation fund investors. Calls had been made for 94% of the $100,000,000 in units issued, leaving only $6,000,000 unpaid. Of that amount, $5,625,000 was unpaid by the superannuation fund investors to which 93.75% of the units had been issued, and $375,000 was payable by Ashington companies ($150,000 by Ashington Group, and $225,000 by Ashington Capital as trustee of the ADF Investment Trust (No 2)).
18. The trustee was obliged to retire if directed to do so by resolution supported by a majority of 75% of unitholders (cl 14.4 of ADF Constitution, cl 14.2 of ADF2 Constitution).

The acquisition of Stonington and the Investec facility

1. The steps by which land in Malvern Victoria was acquired by Ashington Capital as trustee of the newly created Stonington Trust were uncontroversially described by the primary judge at [68]-[72].
2. Development consent had already been obtained for the construction of 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". The vendor was Hamton JV (Malvern) Pty Ltd. The contract for sale was entered into on 28 May 2008, with a price of $46.5 million, a deposit of $4.65 million and a settlement date of 3 November 2008. The price and deposit were later varied by deed to $47,469,890 and $4,746,989. A subsequent variation, in December 2008, increased the deposit from $4,746,989 to $9,196,989, and extended the date for payment of the balance of the purchase price to 30 January 2009.
3. Contrary to what was contemplated in the board paper mentioned above, Ashington Capital obtained funding to acquire the land from three sources: from Westpac Banking Corporation pursuant to a facility agreement entered into on 18 November 2008, with the balance through two agreements entered into on the day of settlement (which ultimately was 25 February 2009), being a facility agreement with Investec, by which Investec provided mezzanine finance of $10 million, and vendor finance from Hamton for $2,621,103.
4. Ashington Capital was the borrower and Investec was the lender. However, and significantly, Ashington Capital borrowed from Investec not in its capacity as trustee of the Stonington Trust, but in its capacity as the trustee of ADF2, of which the units issued by it as trustee of the Stonington sub-trust were but one of the trust assets. By way of security, 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 it in 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. Ashington Capital, once again as trustee for ADF2, also covenanted to maintain uncalled capital in that 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. This was referred to as "the Stonington Uncalled Capital Undertaking". Ashington Capital also executed a power of attorney allowing Investec to make calls over the uncalled capital.
5. The facility was to be repaid within 6 months, by 25 August 2009.
6. Ashington's "Quarterly Investor Report" for the quarter ending 31 March 2009 described the Stonington acquisition in the following terms: The property settled in February 2009 with land finance provided by Westpac and Investec. Discussions have commenced with lenders to progress construction finance. The facility component provided by Investec was on unreasonable terms which were amended within 24 hours of settlement. Whilst there was no alternative but to accept the terms and settle we will be proposing to investors that the facility will be paid out with equity for a period of six months and be replaced with debt upon achieving sufficient presales.
7. By July 2009, Ashington Capital was in breach of its obligations to the superannuation fund investors and to Investec. Principally this came about because in June Ashington Capital had issued the 13th drawdown notice and deployed payment from unitholders of $4,000,000 to pay interest owed to St George and NAB in respect of the Double Bay facility. The consequence was that less than $10,000,000 of uncalled capital remained available to Ashington Capital as trustee of ADF2, meaning that Ashington Capital was in breach of its covenant to maintain $10,000,000 of uncalled capital, and was unable to call upon $10,000,000 of capital if Investec required it to do so. The primary judge recorded at [234]-[236] some concerns on the part of the superannuation fund investors, and some statements by Ashington to the effect that Investec had waived the breach. However, in an internal email of 10 July 2009 to directors, the Chief Financial Officer, Mr Steel, summarised the breaches as follows: … 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.
8. The Investec Stonington Facility incorporated by reference to an Investec document entitled "General Terms and Conditions December 2008 Version", cl 6.1(b), 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.
9. On 18 August 2009, Investec asked Ashington to prepare the documentation to draw down the remaining $6 million of uncalled capital, and transfer the funds to Investec. Later that day, Ashington made the 14th drawdown for ADF2, and there was a meeting between PPB, Ashington and the superannuation investors.
10. On 19 August 2009, Investec wrote to Ashington Capital as trustee of ADF2 asserting ongoing breaches of the Investec Stonington Facility, demanding immediate payment of some $10.139 million and cancelling the facility. Its notice of default asserted that Ashington had breached its covenant to ensure that the aggregate of uncalled capital of ADF2 was not less than $10 million and not to make any calls upon unitholders including calls under uncalled additional equity without Investec's written consent. In addition to demanding the debt of $10,139,331.51, Investec utilised its power of attorney to call for the $6 million in uncalled capital.
11. At the same time, Investec's lawyers 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. Mr Bouris resigned as chairman and director of the Ashington companies shortly thereafter.
12. The consequence was that a default by Ashington Capital in respect of its obligations to Investec might entitle Investec to enforce security which affected assets outside the Stonington sub-trust. There was evidence at trial that this had been brought about because of a last minute change of stance by Investec, but nothing turns on this for present purposes. However, it was well appreciated that the ongoing default to Investec was a serious problem at the time. There is a revealing exchange of emails between Ms Garrett and her husband Mr Carolan on the afternoon of Friday 2 October 2009, at precisely the time when Patersons were to be seeking to fulfil the mandate to raise capital to replace Investec, reproduced by the primary judge at [570]. Under the subject line "Why is it so good", Ms Garrett wrote to her husband in terms which appear to have been framed so that they might be used as a pitch to investors or lenders: 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...
13. Mr Carolan replied to this email, "Perfect!"
14. To similar effect, PPB advised its clients the superannuation fund investors on 21 August 2009 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": see at [369]. (Whether or not that belief was well-founded is neither here nor there for the purposes of this appeal.)
15. The Westpac facility also expired on 26 August 2009, and a couple of days later the bank reserved its rights.
16. It is not necessary to summarise the responses to Investec's demands and Investec's further responses, which included a threat made on 9 September 2009 recorded by the primary judge at [417] that Investec would appoint receivers to Ashington Capital "this afternoon". The superannuation fund investors formulated a proposal to seek to sell Stonington rapidly so as to repay Investec, but this seems not to have progressed, in part because they agreed to a 14 day moratorium shortly after the Stonington Capital Raising commenced. By way of alternative, Ashington sought to refinance the facility, something which is central to the events giving rise to the litigation.

The Stonington Capital Raising

1. The primary judge summarised, uncontroversially, the position at the beginning of September at [426]: 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, instructions were given to Ashington's solicitors, Mallesons Stephen Jaques, to establish an electronic "dataroom", access to which would be restricted by username and password to be provided by Mallesons on instructions from Ms Briggs at Ashington.
3. On 21 September 2009, Ms Garrett forwarded a draft term sheet for the Stonington Capital Raising, explaining its motivations thus: 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.
4. 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".
5. Following an email from Ms Briggs that evening, stating that "[t]he contracting Ashington entity is wrong. I think that its probably ACL as trustee for ADF2 (as ADF2 currently holds the Investec debt)", in subsequent drafts, Ashington Capital as trustee for the ADF2 was named as the party. The formulation of the final form of the mandate, which was executed on 29 September, is described comprehensively in the reasons at [479]-[501].
6. Ashington Capital as trustee of ADF2 retained Patersons to act as "Lead Manager" to a mezzanine finance facility, the essential terms of which were an amount of $11,000,000 (with the right to accept up to $15,000,000), with minimum investments of $2,000,000 per investor, and a coupon of 30% per annum payable at the end of a six month term. The Mandate stated that "[r]epayment is targeted for early January, however in the event of early repayment Ashington will pay the full six month coupon amount". The security was to be second ranking behind $23,000,000 senior debt provided by Westpac. The "indicative timetable" in the mandate letter was for marketing of 1-2 weeks, investor due diligence of 2 weeks and loan documentation and financial close of a further week, which is to say a period of 4-5 weeks once marketing commenced. Significantly, Patersons were to have 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 absolute discretion/direction". Patersons were to be remunerated by a management fee of 1.5% of the gross amount raised plus a selling fee of 2.5% of the gross amount raised, from the latter of which any selling fees payable to third parties were to be paid. That reflects an amount of $440,000 less selling fees payable to third parties, assuming the minimum $11,000,000 was raised.
7. Patersons commenced what might be described as "pre-marketing" shortly thereafter. The essential terms of the mandate were described to their existing contacts, with clear statements that Ashington Capital had not yet signed off on the mandate (thus, for example, an email sent by Mr Carolan at 10.46am on 24 September 2009 reproduced the term sheet and then stated "PLEASE DO NOT GO OUT TO ANYONE UNTIL WE HAVE GIVEN THE OKAY …. " (Emphasis in original)).
8. One aspect of the steps taken to implement the Patersons Mandate bears directly upon whether Ms Garrett and Mr Renauf owed fiduciary obligations. A few days before executing the Patersons Mandate, Ashington was also taking steps to provide lines of communication to investors, as well as to PPB, concerning the Stonington Capital Raising. On 25 September 2009, Mr Minahan sent an email to Mr Anderson, Ms Briggs, Ms Garrett, Mr Renauf and Mr Steel which included: … Send an email to all relevant staff on Monday confirming that Nicki is point of contact going forward and that ALL investors/PPB communication is to be vetted by her and approved by her. Sam Renauf must be copied in on all correspondence.
9. That was treated by Ms Briggs, at least, as a directive from the board. Thus, in an email to Ms Garrett later that afternoon, she referred to a call she had received from Patersons, to which she had made no response, because: CA has told me that you are the point of contact for all PPB/investor correspondence and so I won't respond to his request and we can discuss on Monday. Just want to give you a heads up.
10. That was confirmed by a personal email from Mr Anderson on Monday 28 September. Mr Anderson was concerned that PPB "were getting frustrated that we didn't appear to be helping the cause in little ways", including by assisting Patersons to prepare for a weekly report that the firm provided each Friday to investors. Mr Anderson stated in his email in bold "I confirm all correspondence to investors and related parties will be generated by Nicki only."
11. An insight into the state of play from the superannuation fund investors' perspective is provided from an internal note by an employee of LUCRF, dated 1 October 2009: 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.
12. The 14 day moratorium seems to have been accepted, and lasted between 2 and 16 October 2009, which is the critical period during which the dishonest breach of duty was formulated and began to be implemented.

The invitation to Acorn

1. The Patersons Mandate was agreed on Tuesday 29 September 2009. On the morning of Wednesday 30 September at 10.44am, Mr Doherty wrote to Mr Routley, Head of Private Markets at Acorn, a boutique investment manager, with the heading "Investment Opportunity - Mezzanine Finance Facility", attaching the term sheet and saying, "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".
2. Mr Routley's response was almost immediate. At 11.01am he advised that he had "had a brief look. Unfortunately we can't do pure debt, needs to have some equity convertibility". Mr Doherty forwarded this to Mr Carolan, who replied with the question 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 explained in his affidavit that he 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. Accordingly, at 11.34am, Mr Doherty sent a further 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: It would certainly allow us to do the deal but we would still be a low probability to complete. Our preference is to invest in the manager, in this case Ashington as it means we do not have to form a view on the quality of the underlying asset (we are not property experts) rather the competency of the management team.
3. Mr Routley's response was swiftly forwarded that morning to Mr Carolan and in turn to Ms Garrett. 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.
4. Later that day, Mr Doherty and Mr Carolan exchanged emails confirming a meeting with a contact at an institutional client (to whom everyone referred as "Thorny" or "Thorney") at 10.30am on Friday, 2 October 2009. It seems also that a meeting was arranged with Mr Routley that Friday afternoon, for Ms Garrett sent the following email to Mr Anderson and Mr Steel, copied to Mr Renauf and Ms Briggs: Hi all We have locked three excellent mezz meetings: Thorny, 10.30 Friday 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. To that end, Sarah will be in tomorrow from 9am working up required information (Scott we will need your expert assistance and Elizabeth if you can be on stand-by to turn into appropriate format, review etc). We owe Paul Doherty and Marty a beer or five as they are calling in favours …
5. There is no reason to doubt that the assistance of Mr Doherty and Mr Carolan was essential to meeting potential investors. But it was also known at that time that Acorn would not be an investor in the mezzanine refinancing in the Patersons Mandate. To Ms Garrett's knowledge, Acorn was not interested in investing in the terms of the Patersons Mandate, and there was only a low probability of it investing on a different basis. Mr Routley had said that Acorn's real interest was to "invest in the manager". The words are unambiguous. There was no suggestion in any of the materials that any of the members of Ashington Group might sell their shares or issue more to Acorn, and the sustained efforts to prevent Mr Anderson from learning of the plans are inconsistent with any such attempts. Rather, Mr Routley's words must mean Acorn's real interest was to replace either or both Ashington companies as trustee and manager with a new company in which it had equity.

The Garrett plan

1. Evidently on the afternoon of Friday 2 October 2009 (after the 14 day investor moratorium had been agreed) there was a conversation between Ms Garrett and Mr Paul Doherty. On that afternoon at 3.45pm, Ms Garrett sent the following email, with the subject "Private and Confidential": Hi Paul Further to our discussion: The Investec security arrangements [sic] 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 [sic]
2. The point of that email was to secure a meeting with Mr Routley from Acorn in Melbourne the following Monday. As indicated, Mr Routley had previously been contacted by Patersons but responded almost immediately (by email of 30 September 2009 at 11.01am) saying "Thanks Paul, had a brief look. Unfortunately we can't do pure debt, needs to have some equity convertibility." Mr Doherty relayed that response to Mr Carolan shortly thereafter stating: "Marty - thorny having a look then coming back to me. Acorn can't (see below) but maybe another deal here??"
3. Significantly, almost immediately after Ms Garrett's email to Mr Doherty, Mr Doherty responded to her and Mr Carolan (at 4.22pm) saying "I've locked in Rob Routley from Acorn for 3.30pm on Monday".
4. The presentation summarised in Ms Garrett's email, unlike the refinancing and the Patersons Mandate, involved the acquisition of equity in Newco. The inference deriving from those documents, in circumstances where as will be seen no one gave testimonial evidence, is that it was deployed by Mr Doherty acting for Patersons in order to secure that which was under the mandate impossible to secure, namely a meeting with Mr Routley from Acorn on Monday 5 October.

The "Go Forward" Corporate Structure Slide

1. On Saturday and Sunday 3 and 4 October 2009 a number of versions of a PowerPoint presentation were emailed between Ms Garrett, Mr Carolan and Mr Renauf. One page of one version had a slide 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 and Ms Garrett (described as Head of Funds Management) as another. Footnotes referring to each of Mr Renauf and Ms Garrett stated that each had "signed an employment contract with Ashington Group but is currently on 'gardening leave' as per the terms of [his/her] employment arrangement with Valad. Commences post 1 July".
2. On 4 October 2009 at 2:19pm, Ms Garrett sent an email to Mr Carolan concerning the "'Go Forward' Corporate Structure Slide". They were presenting a proposal to Acorn in Melbourne the following day. Her email stated: The Existing Equity Investors in the Ashington Funds have appointed a real estate 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 [sic] 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.
3. 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. That version of the presentation was emailed by Ms Garrett to Mr Renauf on 4 October 2009 at 2.41pm. 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…
4. There was a meeting in Melbourne between Mr Routley, Ms Garrett, Mr Carolan and Mr Doherty. Mr Doherty was the only person who gave evidence of the meeting, and he was not able to be cross-examined. No notes appear to have been produced by any of the participants of what occurred at this meeting, or at the meeting involving Mr Ko later that morning. Mr Doherty's affidavit recorded that the meeting was "very short - no longer than 5 to 10 minutes", and at the commencement Mr Routley said words to the effect "Acorn will not be able to invest without the involvement of the Alter family", following which he suggested they go to meet Mr Ko, whom Mr Doherty did not know. At the latter meeting, Mr Doherty did not recall specifically what Ms Garrett said, but said that he did 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". Mr Doherty's answers to questions by the liquidator were also tendered, and are reproduced by the primary judge at [617]; they do not take the matter any further.
5. Mr Carolan sent confidentiality agreements to Mr Ko on 6 October 2009, and Mr Doherty provided Mr Routley's details to Mr Carolan for the same to occur with him.

The 8 October Swan email

1. In the absence of any cross-examination of the attendees at the meetings on 5 October, a great deal of weight was attached to an email sent by Mr Routley on 8 October 2009 at 11.26pm. It was put forward as an accurate, contemporaneous account of Acorn's understanding at the time, and therefore of considerable weight when assessing Acorn's awareness of any dishonesty on the part of Ms Garrett and Mr Renauf. It is also the most detailed, roughly contemporaneous account reflecting what must have been said in the Melbourne meetings on 5 October 2009.
2. Mr Routley's email was sent to his Acorn colleagues Mr Anthony Swan and Mr Sheehan providing a "basic overview of the opportunity" and mentioning that the "situation is still very fluid". The email was regarded as a critical document to Acorn's defence. It included the following: 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 [sic] 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: a. Stonington Trust Mezzanine… b. 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). Albany already has an AFSL licence and has a majority independent directors. They see value in Acorn given our strong brand and experience in insto funds management. 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…

The period until 27 November 2009

1. The events after the Melbourne meetings for the following eight weeks were described in great detail by the primary judge at [624]-[1012]. Her Honour summarised the plaintiff's case at [624]: 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.
2. The most important matters are the "Swan email", which is reproduced above, the receipts of formal notices of default by NAB and Investec, the investigation by Acorn and Albany of the documents in the dataroom, a letter from PPB on 12 October 2009 advising that the sale of Stonington was "put on hold"; in early October Ms Garrett began receiving payments from Ashington Management described as "salary"; and a series of written communications of meetings that took place between Acorn and Albany on the one hand, and PPB on behalf of the superannuation investors on the other hand. It will be necessary to address certain aspects of the history summarised over some 400 paragraphs below, but for present purposes they may be passed over.
3. On 27 November 2009, PPB through Mr Lord told Messrs Anderson and Minahan that the superannuation fund investors wanted Ashington removed as trustee and manager. Mr Anderson said that this was the first time he became aware of a proposal to remove Ashington. The primary judge appears to have accepted this (see below when dealing with the claim of knowing assistance against PPB).

The removal and winding up of Ashington and assignment of causes of action

1. It is sufficient for present purposes to provide a very high level summary of the remaining events. The following is almost entirely drawn from the reasons of the primary judge at [1013]-[1098].
2. Shortly after Mr Anderson was told of the proposal to remove Ashington as trustee and manager, the superannuation fund investors were told, on 30 November 2009, that Mr Anderson and Mr Minahan had "in the short term vowed to continue" and that a circular resolution for removal might be required. Coincidentally, on the same day, Mr Carolan's employment with Patersons was terminated, for reasons not said to have been related to the matters in this litigation.
3. In the first week of December 2009, Mr Anderson promoted an alternative refinancing proposal he had negotiated ("the Wingate proposal") to superannuation fund investors, seeking the opportunity to present directly to them. Nonetheless, on 2 December 2009, LUCRF and Military Super decided to appoint Parissen Property Group Pty Ltd (the newly incorporated company proposed by Acorn and Albany) as trustee of ADF and ADF2. But doing so was not straightforward. One source of complication was the fact that Clayton Utz representing Valad contended that the replacement of Ashington Capital as trustee of the Noosa Trust was a change of control event which required Valad's prior consent.
4. On 7 December 2009, Arnold Bloch Leibler provided Ashington with the original executed resolutions for its removal as trustee. Coincidentally, on the same day, the Supreme Court of Victoria gave judgment in favour of Hamton against Ashington Capital as trustee of the Stonington Trust for $3.091 million, noting that the plaintiff discontinued that proceeding as against Mr Anderson. In the ensuing days there was contentious correspondence between PPB and Ashington concerning the latter's removal, concluding with an email from Mr Block to Mr Ko on the afternoon of 11 December 2009 attaching a "first offer" of Ashington to retire as fund manager for ADF and ADF2 but saying "there will be plenty of toing and froing yet".
5. On 15 December 2009, Investec determined that it would not support the Wingate proposal and on 17 December 2009, Arnold Bloch Leibler sent written resolutions from the superannuation fund investors directing Ashington to retire as trustee of ADF and ADF2. The response was that the law firm acting for Ashington did not consider it had an obligation under the trust constitutions to act in accordance with directions from members.
6. However, on 22 December 2009, Mr Anderson advised that Ashington proposed to "retire at a head trust level today and at a sub-trust level over the next six weeks as Alter complete individual project due diligence". A letter sent that afternoon stated that "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".
7. Mr Block of PPB advised that this was "merely a stalling/delaying tactic". That proved to be incorrect, because Ashington Capital resigned as trustee of ADF and ADF2 on 23 December 2009 and Parissen was appointed. The terms of the Deeds of Appointment and Retirement were relied on as having some bearing on the grounds of appeal which challenge Mrs Anderson's entitlement as assignee from the liquidator of Ashington Capital of the cause of action. The deeds provided for all trust property to be held by the incoming trustee on the terms of the original trust. Insofar as some of the causes of action on which Mrs Anderson sued were trust property, then they, so it was said, vested in Parissen and were not included within the assignment which Mrs Anderson obtained from the liquidator.
8. Finally, in around April 2010, Acorn acquired shares in Parissen together with debt involved in the Double Bay Project X sub-trust, and Mr Routley became a director, although not until November 2010. The retirement of Ashington Capital as trustee of the sub-trusts did not occur until April, May and August 2010 (in the case of Double Bay, Stonington and Wylde Street respectively). Parissen never became trustee of the Potts Point Trust, and in April 2010, Ashington ultimately agreed to retain management of the Cross+ Trust. On 14 April 2011, Ashington Capital and Ashington Management were placed into liquidation. By Deed of Option Agreement dated 29 September 2015, the liquidator of Ashington Capital and Ashington Management granted Mrs Anderson an option to acquire the "Conspiracy Claim", which was defined 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.
9. The option was exercisable by notice within six months accompanied by payments of $255,000, and was on terms that if the outcome was a "Tangible Benefit" (including by way of judgment or settlement), then 10% was to be paid to the liquidator. The option was exercised on 29 September 2015.

Ms Garrett and Mr Renauf owed fiduciary duties (grounds 5 and 6)

1. These two grounds challenge the failure by the primary judge to find that Ms Garrett and Mr Renauf owed fiduciary obligations to Ashington Capital and Ashington Management. It is said that both individuals "owed fiduciary duties to Ashington Capital and Ashington Management to avoid conflicts and not to make an unauthorised profit because they were senior employees within the Ashington Group, had responsibility for liaising directly with Ashington's existing and potential investors and lenders in matters critical to Ashington's financial survival, and Ashington was thereby vulnerable to the abuse by them of their positions".

Reasons of the primary judge

1. The primary judge relied upon a judgment of Einstein J (Woolworths Ltd v Olson [2004] NSWSC 849; 184 FLR 121), which in turn relied upon a decision of Elias J (Nottingham University v Fishel [2000] EWHC 221 (QB); [2000] IRLR 471), for the proposition that the mere existence of an employment relationship did not necessarily give rise to a fiduciary duty: at [1839]. Her Honour, by reference to Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2013] FCA 1341 at [230]-[232], observed that the existence of a fiduciary duty on the part of an employee remained one of degree, having regard to the latitude afforded to the employee, the level of vulnerability arising from the potential misuse of power granted to the employee, and whether the employment relationship demanded a standard of loyalty exceeding the duty of fidelity prescribed by the employment contract. Her Honour observed that the precise nature of Ms Garrett's and Mr Renauf's roles or duties was not clear, aside from the fact that they had responsibility of liaising directly with potential investors and indeed there was a direction that all communications with the superannuation investors be through them. But the key factor relied upon by her Honour seems to have been the absence of powers or discretions having been delegated to Ms Garrett or Mr Renauf. The critical reasoning is at [1845]-[1847]: 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. 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. 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.
2. This focus on the necessity to identify a power or discretion by which the fiduciary bound the principal reflected a broad acceptance of Ms Garrett's and Mr Renauf's submission at trial: First, a fiduciary obligation is not owed at large. The obligation must be founded on the identification [of] a power or discretion, Garrett and Renauf did not owe a fiduciary obligation because they did not undertake to act in the interests of Ashington in the exercise of a power or discretion. No matter their title[s], Garrett and Renauf were "finders" not decisions makers.
3. Subsequently, when addressing the employee's duty of good faith, the primary judge reiterated at [1855] that not every employment relationship gave rise to fiduciary obligations: 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 … 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.
4. That was the first time her Honour referred to the first instance decision of Investa Properties Pty Ltd v Nankervis (No 7) [2015] FCA 1004; 333 ALR 193, from which an appeal had been allowed. The first instance judge in Investa Properties reproduced a lengthy portion of Elias J's judgment in Nottingham University v Fishel stating that not all employees owed fiduciary obligations, but without attempting to reconcile that judgment with the Australian authorities to the contrary. In Woolworths Ltd v Olson, Einstein J reproduced an even longer passage from Nottingham University v Fishel at [214], followed by a passage from the decision of Nettle J in Victoria University of Technology v Wilson [2004] VSC 33; 60 IPR 392 at [145] which observed that some employees, particularly senior employees, do owe fiduciary obligations to their employers, but others do not, and "The scope of an employee's fiduciary duties to the employer depends as much as anything upon the nature and terms of the employment". Both that decision, and the decision of Lindgren J in Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306 at [265], from which Einstein J also quoted, identified a series of cases where courts had recognised that senior employees had owed fiduciary obligations. One of those decisions was that of Hodgson CJ in Eq in EFG Australia Ltd v Kennedy [1999] NSWSC 922, where it was said at [30]: Although the relationship of employer and employee is generally said to be a fiduciary relationship, it seems that the fiduciary obligations of junior or "ordinary" employees are narrower than those of senior employees, and indeed that in many respects ordinary employees are not fiduciaries at all: see Austin, "Fiduciary Accountability for Business Opportunities" in Finn, Equity and Commercial Relationships (Sydney LBC 1987) at p 171-2; State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (O'Keefe, CJ Comm D, Supreme Court of New South Wales, 14/9/94); Colour Control Centre Pty Ltd v Ty (Santow, J, Supreme Court of New South Wales, 24/7/95).
5. Hodgson CJ in Eq concluded that the employee who was second in charge of managing a very large project, owed fiduciary duties to his employer.
6. The other judgment upon which her Honour relied, Bayley & Associates Pty Ltd v DBR Australia Pty Ltd (Foster J), also reproduced substantial passages from Woolworths Ltd v Olson and Nottingham University v Fishel (at [233]-[235]). However, the paragraphs upon which the primary judge relied commenced at [230] with the proposition "Employer/employee relationships fall within the category of accepted fiduciary relationships", and after citing Mason J's judgment in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64 went on to say that "while it seems generally accepted that senior employees with managerial responsibilities will owe fiduciary duties, it is also generally accepted that the same cannot be said of all employees": at [231].
7. As will be seen, the considerable weight of Australian authority supports an approach which is consistent with what was said by Foster J in Bayley & Associates Pty Ltd v DBR Australia Pty Ltd and by Hodgson CJ in Eq in EFG Australia Ltd v Kennedy, namely, that (i) the relationship between employee and employer is an accepted category of fiduciary relationship, but (ii) the scope of that relationship - the area of conduct within which the employee must not act self-interestedly - will vary and must be separately addressed. Indeed, we regard courts below the High Court of Australia as bound to adopt that approach.

Two preliminary issues

1. It is convenient first to address two issues for the purposes of putting them to one side. We do so only for completeness. We did not understand any of the submissions on appeal to turn on them.
2. The two preliminary issues are (i) the fact that no formal contract of employment was entered into by Ms Garrett or Mr Renauf, and (ii) the asserted fiduciary obligation was said to be owed to both Ashington Capital and Ashington Management. In short, the absence of a formal contract did not prevent Ms Garrett and Mr Renauf from being treated, as a matter of substance, both within the Ashington group of companies and in their relations with third parties, as senior employees, and in this respect, equity looks to the substance of the matter, rather than the form. Further, while "salary" payments were made by Ashington Management, the absence of any strict separation of the wholly owned subsidiaries of Ashington Group means that the obligations were owed to both Ashington Capital and Ashington Management.
3. To reiterate and to some extent elaborate the factual background leading to Ms Garrett and Mr Renauf working for the Ashington group of companies, following an initial invitation in December 2008, in the first half of 2009 Mr Anderson invited Ms Garrett and Mr Renauf to join him. The primary judge recorded at [1789] that it was common ground that each was paid a salary of $350,000 plus superannuation, 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. The primary judge found at [1790] that Mr Renauf's Ashington email signature, identifying him as "Head of Acquisitions", was set up on 24 July 2009, and that Ms Garrett's account would be created in September. The primary judge found at [407] that: 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 … up to December 2009, Mr Renauf held the role of Head of Acquisitions at Ashington Management (also on a salary of $350,000).
4. Further, an entry in Ashington Management's general ledger for 8 October 2009, and at least two contemporaneous emails from October, recorded that Ms Garrett was receiving weekly payments described as "salary" in the amount of $4,080. (One was Mr Carolan's email to Ms Garrett of 13 October 2009; another was Ms Garrett's own email of 19 October 2009 in the course of negotiations with Mr Ko, which stated that she and Mr Renauf "currently have a base salary of $350k per annum".) What is more, a document described as "Ashington Group: Schedule of Salary Wages - 2009" within the Ashington Group Management Accounts dated 31 October 2009 records "actual" payments of "wages" for Ms Garrett of $21,314 in October 2009, plus a "Sign on Fee" of $75,833 paid in that month, and Mr Renauf being paid $21,314 in July, $31,650 in August, $25,692 in September and $28,923 in October, each described as "wages", together with "Sign on fees" of $35,000 paid in each of September and October.
5. However, it was also common ground that neither Ms Garrett nor Mr Renauf ever executed an employment agreement, and they submitted at trial that no concluded contract of employment was reached, most notably because of a lack of agreement as to bonuses. Ms Garrett and Mr Renauf went further at trial and submitted that they were independent contractors, but this was rejected by the primary judge at [1800]. Her Honour rejected Mrs Anderson's submission that there was a binding contract of employment, instead finding at [1799] that 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". There was no challenge on appeal to the rejection of those parts of the cases propounded at trial by Ms Garrett and Mr Renauf.
6. The lack of contractual finality might have reflected an inability to reach agreement on the bonus structure Ms Garrett and Mr Renauf would enjoy. It might also have reflected everyone's consciousness that in fact neither Ms Garrett nor Mr Renauf were permitted to commence employment with Ashington until the expiry of respectively six and three months' "gardening leave" following their departure from Valad. It is not entirely clear when Ms Garrett's six month period ended, although it seems to have been late September or the first week of October. The 8 October 2009 "Swan email" records Mr Routley saying, "[Ms Garrett] was due to start Wed/Thur last after 6 months of 'gardening' leave from Valad" which would indicate 30 September or 1 October, and this is consistent with Mr Renauf commencing on 1 July 2009 after serving his three months "gardening leave". However, an earlier document from Ms Garrett, reproduced by the primary judge at [1783], stated 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". The Court was told that the promises to which she was subject to during that period were not in evidence. There may also have been other reasons for the lack of contractual finality.
7. Nothing presently turns on the precise terms or duration of the "gardening leave". For the purposes of grounds 5 and 6, the only question is whether Ms Garrett and Mr Renauf owed fiduciary obligations in October and November 2009. But a person in the position of a fiduciary, who commences acting in that position before the contractual position is finalised, will generally speaking owe a fiduciary obligation. United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; [1985] HCA 49 is an example. In answer to the claim for breach of fiduciary duty by a prospective partner, Gibbs CJ said that because the partners had embarked upon the contemplated partnership prior to executing the document, the position was the same as if a formal partnership had been executed. Mason, Brennan and Deane JJ, with whom Gibbs CJ and Dawson J also agreed, rejected the submission that no fiduciary obligation was owed until the formal document had been executed, holding at 12: A fiduciary relationship can arise and fiduciary duties can exist between parties who have not reached, and who may never reach, agreement upon the consensual terms which are to govern the arrangement between them. In particular, a fiduciary relationship with attendant fiduciary obligations may, and ordinarily will, exist between prospective partners who have embarked upon the conduct of the partnership business or venture before the precise terms of any partnership agreement have been settled. Indeed, in such circumstances, the mutual confidence and trust which underlie most consensual fiduciary relationships are likely to be more readily apparent than in the case where mutual rights and obligations have been expressly defined in some formal agreement.
8. Their Honours then turned to consider the subject matter of the fiduciary obligation, and applied what Dixon J had said in Birtchnell v Equity Trustees, Executors & Agency Co Ltd (1929) 42 CLR 384; [1929] HCA 24 to which we shall shortly come, holding it included the land the subject of the proposed joint venture.
9. This principle was applied in Rahme v Benjamin & Khoury Pty Ltd (2019) 100 NSWLR 550; [2019] NSWCA 211 at [91]-[97] concerning the obligations owed by solicitors when entering into a costs agreement with clients (including what was said by Mahoney JA in Law Society of New South Wales v Foreman (1994) 34 NSWLR 408 at 435-436).
10. The present case is a fortiori. Despite unresolved negotiations concerning aspects of the employment (it would appear, principally, bonuses), each of Ms Garrett and Mr Renauf was actually working in senior positions for the Ashington group of companies, and was actually being paid salary and sign-on bonuses. The absence of formally concluded written contracts did not prevent their being treated as employees for the purposes of analysing the fiduciary obligations they owed.
11. The second preliminary issue concerns Ashington Capital and Ashington Management. Mrs Anderson took assignments from the liquidator of both companies, and sued on those companies' causes of action. The payments of sign-on bonuses and salary were made by Ashington Management, which was also the stated employer in the draft contracts of employment. But it was not submitted that if Ms Garrett or Mr Renauf owed a fiduciary duty to Ashington Management, they did not owe the same duty to Ashington Capital. That is to say, no point was taken that there was any relevant difference between those two companies for the purposes of determining liability. That reflects the facts that (i) there was no rigid delineation within the subsidiaries of Ashington Group and (ii) the conduct at the heart of the litigation was the removal of Ashington Capital as trustee and Ashington Management as manager of the various trusts. Instead, the litigation was conducted on all sides on the basis that nothing turned for this purpose on the distinction between those two wholly owned subsidiaries of Ashington Group. That was an appropriate course to take. There never arose a question of Ms Garrett or Mr Renauf receiving directives from Ashington Management, as opposed to Ashington Capital, and the reality reflected in the contemporaneous documents (notably, the directive from Mr Anderson that all communications concerning the Stonington Capital Raising were to be through Ms Garrett copied to Mr Renauf) is that Mr Anderson was the principal source of instruction.
12. We now turn to the parties' submissions on the finding that Ms Garrett and Mr Renauf did not owe fiduciary obligations.

The appellant's submissions

1. Mrs Anderson relied on what Mason J had said in Hospital Products as the genesis of the phrase "power or discretion". She said that many of the accepted categories of fiduciary relationships did not involve a formal delegation of power to the fiduciary, that the stock broking firm in Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371; [1986] HCA 25 and the investment adviser in ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65 lacked power to bind the client or the councils and yet owed fiduciary duties. She also referred to the paradigm case of a director or senior employee diverting business opportunities, such as Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43, which did not involve binding the company to any contract. Her submission was that "[p]roperly understood, the 'power or discretion' referred to by Mason J means no more than the function, task or responsibility the fiduciary performs in fact." She relied on what had been said in Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 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". She submitted that senior employees almost inevitably owed fiduciary duties, and referred to the decisions already mentioned.
2. Mrs Anderson's submissions also identified the following features of Ms Garrett's and Mr Renauf's relationship with the Ashington entities: (i) they were senior employees, Head of Funds Management and Head of Acquisitions/Development; (ii) they had significant salaries of $350,000 each, equivalent to that of Ashington's most senior executives; (iii) they were placed in charge of developing and pursuing the Stonington Capital Raising, which was crucial to Ashington's financial survival; (iv) they were placed in charge of all of Ashington's dealings with Patersons, Investec, PPB, super fund investors and any new investors; (v) they had unfettered access to Ashington's confidential information and knowledge of its investments and business model; (vi) they were left largely unsupervised, and (vii) by way of the above, Ashington placed considerable trust in them and was vulnerable to the abuse by them of their positions.
3. We shall deal with the submissions advanced by Ms Garrett and Mr Renauf below. Our analysis will be clearer if we summarise our conclusions at the outset.

The nature of the fiduciary duties owed by employees

1. We respectfully disagree with the conclusion reached by the primary judge that Ms Garrett and Mr Renauf did not owe fiduciary obligations to the Ashington companies when soliciting and negotiating the refinancing of the Stonington debt. We do so for two separate reasons. Each suffices to sustain our conclusion.
2. First, we regard what was said in Nottingham University v Fishel about the employment relationship not of itself giving rise to a fiduciary relationship as wrong in principle, and contrary to authority which is settled in this country and binding on courts below the High Court. The opposite is the case. As a general proposition, employees owe fiduciary obligations to their employers. The relationship between employee and employer is "one of the accepted fiduciary relationships", in the words of the joint judgment in Concut Pty Ltd v Worrell [2000] HCA 64; 75 ALJR 312 at [17], or one of the "accepted traditional categories", in the words of the unanimous judgment of the High Court in John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 at [87]. But it is not sufficient to hold that a fiduciary obligation exists. The next step is to determine the scope of that obligation. Ordinarily, unless the employee is very senior, or has a large degree of authority, there is unlikely to be conduct which falls within the scope of that obligation. Once again, a powerful body of appellate authority supports the proposition that there are separate elements of existence and scope, and indeed neglect of this authority appears to underlie the analysis that not all employees are fiduciaries. Put simply, the decisions upon which Ms Garrett and Mr Renauf rely for passages which state that not every employee owes a fiduciary obligation to his or her employer are decisions which do not separately address the existence and scope of the fiduciary obligation.
3. Applied to the facts of this appeal, Ms Garrett and Mr Renauf were fiduciaries because they were employees. That of itself signifies little, until the scope of their fiduciary obligations is assessed. The scope of their fiduciary obligations extended to the performance of the Stonington Capital Raising, where they were required to act in the interests of the Ashington companies, and were not permitted to act self-interestedly to remove the existing trustee and manager, to be replaced by entities in which they had an interest.
4. Secondly, even if that be wrong, and it is necessary as Ms Garrett and Mr Renauf urge to identify facts and circumstances where the employee "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", that test is satisfied on the facts of this appeal. That is so, essentially, because the Stonington Capital Raising was time-critical and essential to the survival of the Ashington companies and was conducted in a way whereby all communications with potential investors were to be conducted through Ms Garrett and Mr Renauf in circumstances where by inaction they could cause the raising to fail. Ms Garrett and Mr Renauf were, in connection with the Stonington Capital Raising, seeking urgently to procure a refinancing of Ashington Capital's indebtedness to Investec, in the interests of the Ashington group of companies, which would, in a legal and practical sense be seriously adversely affected if they failed to act in the interests of the Ashington companies.

Employees are an accepted category of fiduciaries

1. It has been said time and time again by appellate courts in this country that the relationship between employee and employer is fiduciary.
2. This is most famously associated with what Mason J said in Hospital Products at 96-97. Mason J dissented on the facts, but as will be seen, that does not detract from the authoritativeness of his Honour's exposition of principle. The passage is familiar but warrants being reproduced in context, in light of the submissions which were made as to its meaning. It will be recalled that the defendant was the Australian distributor of surgical staples manufactured in the United States. The relevant passage is as follows: Because distributor-manufacturer is not an established fiduciary relationship, it is important in the first instance to ascertain the characteristics which, according to tradition, identify a fiduciary relationship. As the courts have declined to define the concept, preferring instead to develop the law in a case by case approach, we have to distil the essence or the characteristics of the relationship from the illustrations which the judicial decisions provide. In so doing we must recognize that the categories of fiduciary relationships are not closed: Tufton v Sperni [1952] 2 TLR 516 at 522; English v Dedham Vale Properties Ltd [1978] 1 WLR 93 at 110. The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf Phipps v Boardman [1967] 2 AC 46 at 127); viz, trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. 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. (Emphasis added.)
3. We shall return to the passage, and the submissions which were made of it. However, it is to be borne in mind that Gibbs CJ made the same point at 68: The archetype of a fiduciary is of course the trustee, but it is recognized by the decisions of the courts that there are other classes of persons who normally stand in a fiduciary relationship to one another - e.g., partners, principal and agent, director and company, master and servant, solicitor and client, tenant-for-life and remainderman. There is no reason to suppose that these categories are closed. However, the difficulty is to suggest a test by which it may be determined whether a relationship, not within one of the accepted categories, is a fiduciary one. (Emphasis added.)
4. So did Dawson J at 141: To be sure there are relationships which are ordinarily recognized as fiduciary, at least in some of their aspects, and little trouble is experienced with them. They are all relationships which are analogous to that which exists between a trustee and his beneficiary - the clearest of all fiduciary relationships. Without any attempt at classification, obvious examples spring to mind such as the relationship between partners, between employee and employer, between agents and their principals, between solicitors and their clients, between directors and their companies and between wards and their guardians. (Emphasis added.)
5. The other member of the majority in respect of the existence of a fiduciary obligation, Wilson J, was of a view which was "substantially in accord with that expressed by both the Chief Justice and by Dawson J": at 116.
6. The analysis by Mason J has been endorsed by the High Court, repeatedly. The joint judgment of a majority of the High Court in Concut Pty Ltd v Worrell said at [17]: [A]s Mason J pointed out in Hospital Products Ltd v United States Surgical Corporation, the relationship between employee and employer is one of the accepted fiduciary relationships; their critical feature 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 that will affect the interests of that other person in a legal or practical sense. An illustration respecting employer and employee is provided by the decision of Kearney J in Timber Engineering Co Pty Ltd v Anderson. In that case, the defendant employees, in breach of their fiduciary duties, diverted the business and profits of their employer to themselves and to their companies; the equitable remedies awarded included an account of profits and a constructive trust as to the business of the employees' companies. (Emphasis added.)
7. Substantially the same points were made by the joint judgment within the majority of the High Court in Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165; [2001] HCA 31 at [70] and by Gaudron and McHugh JJ in Breen v Williams (1996) 186 CLR 71 at 107; [1996] HCA 57.
8. A unanimous High Court constituted by French CJ, Gummow, Hayne, Heydon and Kiefel JJ addressed the nature of a fiduciary obligation in John Alexander's Clubs, in particular at [84]ff, in the course of addressing whether a fiduciary obligation was owed in facts which did not fall within an established category. Although parts of the analysis were uncontroversial, this was not merely a case where there was a recitation of principle, because the reasons extended to an analysis of the circumstances in which relationships which did not fall into an established category would give rise to fiduciary obligations.
9. Their Honours said at [86]-[87]: The parties accepted that the relevant principles regarding the existence of a fiduciary relationship which does not fall within an established category, and the incidents of such a relationship, are those stated by Mason J in [Hospital Products]. This is so notwithstanding that Mason J was in dissent. Gibbs CJ, Wilson, Deane and Dawson JJ each decided that the relationship between Hospital Products International Pty Ltd (HPI), controlled by Mr Blackman, and the first respondent (USSC) rested purely in contract between USSC as manufacturer and HPI as Australian distributor and was not supplemented by any fiduciary relationship. Mason J began his treatment of the issue whether HPI was a fiduciary by identifying the critical feature of what may be called the accepted traditional categories of fiduciary relationship - trustee-beneficiary, agent-principal, solicitor-client, employee-employer, director-company, and partners inter se. That critical feature was "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". From this power or discretion comes the duty to exercise it in the interests of the person to whom it is owed. (Footnotes omitted; emphasis omitted.)
10. It will be seen that that passage (a) endorses the distinction between "established categories" of fiduciary relations and cases which do not fall within an established category, and (b) identifies employee-employer as one of the "established categories".
11. Their Honours then addressed two points made by Justice Lehane extra-judicially in an article "Fiduciaries in a Commercial Context", in P Finn (ed), Essays in Equity (Law Book Co, 1985) 95. The first was that phrases such as "for or on behalf of" (and "in the interests of") another person were to be understood in a reasonably strict sense, lest the criterion they formulate become circular. The second was that "the reason why commercial transactions falling outside the accepted traditional categories of fiduciary relationship often do not give rise to fiduciary duties is not that they are 'commercial' in nature, but that they do not meet the criteria for characterisation as fiduciary in nature". Normally, the parties to such transactions are entitled to act self-interestedly.
12. Nonetheless, at the forefront of the written and oral submissions advanced on behalf of Ms Garrett and Mr Renauf on appeal was the proposition that it was wrong to read Hospital Products as dividing fiduciary obligations into two classes of case: (i) "accepted fiduciary relationships" such as trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners, and (ii) cases where it was necessary to establish on the particular facts of the case that the fiduciary acted for or on behalf of, or in the interests of, another, such that the other was vulnerable to the exercise of power or discretion.
13. Ms Garrett and Mr Renauf maintained that "[f]iduciary duties are derived from an actual or deemed undertaking to act in the interests of another, rather than status", citing Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at [188]; [1999] NSWCA 408. Ms Garrett and Mr Renauf went on to submit in writing that "if Mason J was saying that all employees are fiduciaries, this overstates the position. The existence of an employment relationship, by itself, is insufficient to support a finding that a fiduciary duty is owed", citing Woolworths Ltd v Olson, Bayley & Associates Pty Ltd v DBR Australia Pty Ltd, Nottingham University v Fishel and Investa Properties at [66]. They added that in Metal Manufactures Ltd v Johnston (2020) 3 QR 456; [2020] QCA 42 at [29]-[32] it was held that not every employee-employer relationship was a fiduciary one.
14. We shall address Nottingham University v Fishel below. The decision of Collier J in Investa Properties takes the matter no further, for three reasons: (a) the judgment merely reproduces the passage from Nottingham University v Fishel, (b) the issue in that case was whether the employee (Mr Nankervis) owed a fiduciary obligation not merely to his employer (which her Honour found he did) but also to a wholly owned subsidiary of his employer, and (c) in any event, an appeal was allowed: Oliver Hume South East Queensland Pty Ltd v Investa Residential Group Pty Ltd (2017) 259 FCR 43; [2017] FCAFC 141. Woolworths Ltd v Olson and Bayley & Associates Pty Ltd v DBR Australia Pty Ltd also do not greatly advance the analysis, insofar as those decisions on the one hand reproduce what was said in Nottingham University v Fishel about not all employees owing fiduciary obligations but also incorporate passages from other judgments which proceed on the basis that the employee-employer relationship is an established category of fiduciary relationship (the passages have been reproduced above). Neither judgment seeks to reconcile those lines of authority, or to address the force of the statements by the High Court earlier mentioned. We shall return to the passage in Metal Manufactures Ltd v Johnston below.
15. Counsel's oral submissions seized on the paragraph in Mason J's reasons in Hospital Products but commenced with the second sentence, namely: "That critical feature [of the accepted traditional categories of fiduciary relationship] was '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'". This was propounded as the test which all relationships said to be fiduciary had to satisfy, and was not made out on the facts of this case.
16. That led to the following exchange: PAINTER: … the famous articulation by Mason J, that the critical feature of these relationships is that the fiduciary undertakes or agrees to act on behalf of the interests of another person in the exercise of a power or discretion which will affect the interests of that person. The way we see that is that there's three parts to the analysis. First, the fiduciary undertakes to act on behalf of another. The undertaking to act is in the exercise of a power or discretion, and the exercise of a power or discretion will affect the interests. LEEMING JA: I must say that's not as I read what Sir Anthony Mason said. The paragraph commences with the conventionally understood relationships which give rise to fiduciary obligations, and then the sentence you read identifies the critical feature of those relationships. You then seized upon the second sentence and said you've got to establish this. I read the paragraph as the starting point is if you've got one of those accepted fiduciary relationships then prima facie there's a fiduciary obligation, get onto scope. PAINTER: But all the case law that follows, and I'll touch on this, all suggests that you do have to undertake the factual inquiry. LEEMING JA: Every trustee is a fiduciary, no more factual inquiry required. Isn't that right? PAINTER: I think that might be right, but not every employee is and that's where we are. … LEEMING JA: Every solicitor owes a fiduciary obligation to the client? PAINTER: There's case law that doesn't agree with that, and I'll take your Honour to that in a moment. LEEMING JA: Every director owes a fiduciary obligation to a company. PAINTER: Well probably. LEEMING JA: Every partner owes a fiduciary obligation to their other partners. PAINTER: Yes, it's a wonderfully robust and disparate area of the law, and obligations are fact-based. LEEMING JA: I understand the submission. I just want to raise for your consideration, that is the opposite of what I understand Sir Anthony Mason to be saying in this passage, they're not fact-based, they're status-based.
17. Counsel sought to make good her submission that there was case law that not every solicitor owes a fiduciary obligation to the client, referring to a passage of this Court's judgment in Beach Petroleum NL v Kennedy at [188]-[189]: Even in the case of a solicitor client relationship, long accepted as a status based fiduciary relationship, the duty is not derived from the status. As in all such cases, the duty is derived from what the solicitor undertakes, or is deemed to have undertaken, to do in the particular circumstances. Not every aspect of a solicitor client relationship is fiduciary. Conduct which may fall within the fiduciary component of the relationship of solicitor and client in one case, may not fall within the fiduciary component in another. The relationship of solicitor and client has at its core an element of confidence and influence which equity will preserve and protect. Nevertheless, the confidence and influence are not always so pervasive as to require equitable intervention in every facet of the relationship.
18. We understand that passage to be a way of putting the significance of scope as a limitation of the ambit of a fiduciary obligation. We emphatically agree that not every aspect of a solicitor's relationship with a client, and not every aspect of an employee's relationship with an employer, is fiduciary. A solicitor retained to undertake a certain task may thereafter lend funds to a client, or arrange for the loan of funds from other clients of the solicitor; it does not without more follow that in the solicitor's role as lender or broker, a fiduciary obligation is owed. There may be other cases where the delineation is less clear. But we would not read that passage as denying that the starting point for analysis was that ordinarily the relationship between solicitor and client is fiduciary and the next stage in the analysis is to identify the scope of that relationship - in which analysis, the terms of the retainer will normally be central. In Beach Petroleum NL v Kennedy itself, it was said at [237] that it was "necessary to specify the scope of the retainer so that it can be determined whether a conflict of duty and duty arose relevant to an impeached transaction".
19. The source of the decisions upon which Ms Garrett and Mr Renauf place reliance is the decision of Elias J in University of Nottingham v Fishel. His Lordship held that a clinical embryologist employed full-time by a university owed fiduciary obligations which were breached when he was paid for the work done by other embryologists, for which an account of profits was ordered. However, in respect of the university's other complaint, that he was remunerated for work done at overseas private clinics, Elias J considered that either no fiduciary obligation was owed, or else that there was no breach of fiduciary duty by his doing so. Elias J observed that "whether one says that there is no fiduciary relationship in all the circumstances, or whether one says that there is in principle such a relationship but that it is not engaged in the particular case, is perhaps a matter of no great moment": at 1494. Accordingly, it is far from a strong authority on a test for the existence of a fiduciary obligation.
20. However, the passage principally relied on by Ms Garrett and Mr Renauf is the following at 1490-1491: Employees as fiduciaries It is important to recognise that the mere fact that Dr Fishel is an employee does not mean that he owes the range of fiduciary duties referred to above. It is true that in Attorney-General v Blake [1998] Ch 439 Lord Woolf MR, giving judgment for the Court of Appeal said that the employer-employee relationship is a fiduciary one. But plainly the court was not thereby intending to indicate that the whole range of fiduciary obligations was engaged in every employment relationship. This would be revolutionary indeed, transforming the contract of employment beyond all recognition and transmuting contractual duties into fiduciary ones. In my opinion the court was merely indicating that circumstances may arise in the context of an employment relationship, or arise out of it, which, when they occur, will place the employee in the position of a fiduciary. In Attorney-General v Blake itself, as I have indicated, it was the receipt of confidential information. There are other examples. Thus every employee is subject to the principle that he should not accept a bribe and he will have to account for it (and possibly any profits derived from it) to his employer. Again, as Fletcher-Moulton LJ observed in In re Coomber; Coomber v Coomber [1911] 1 Ch 723, 728, even an errand boy is obliged to bring back my change, and "is in fiduciary relations with me". But his fiduciary obligations are limited and arise out of the particular circumstances, namely that he is put in a position where he is obliged to account to me for the change he has received. In that case the obligation arises out of the employment relationship but it is not inherent in the nature of the relationship itself. As these examples all illustrate, simply labelling the relationship as fiduciary tell us nothing about which particular fiduciary duties will arise. As Lord Browne-Wilkinson has recently observed in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 206A: "The phrase 'fiduciary duties' is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances. That is not the case." This is particularly true in the employment context.
21. The decision may be reconciled with the Australian approach, turning as it does upon separate inquiries of existence and scope of a fiduciary obligation, as holding that the clinical embryologist was a fiduciary, and the scope of his obligations extended to earnings paid directly to him for work done by other embryologists, but not to work done by him at overseas private clinics. Indeed, that seems to be precisely what his Lordship meant when he said that while working at overseas clinics, the fiduciary principle was not engaged. That approach also accords with what had been said by the English Court of Appeal in Attorney-General v Blake [1998] Ch 439 that every employer-employee relationship is a fiduciary one, which Elias J simply put to one side, as well as with Lord Browne-Wilkinson's statement that the phrase "fiduciary duties" is dangerous if it is understood as identifying the scope of the duty owed by a fiduciary.
22. Settled authority binding upon this Court is to the contrary of the submissions advanced by Ms Garrett and Mr Renauf. We do not think it is open to any court below the High Court to hold that there are no "accepted categories" of fiduciary relations, or that the relationship of employee and employer is something other than an accepted category of fiduciary relationship. It is telling that most of the cases relied upon by Ms Garrett and Mr Renauf fail to attend to the inconsistency between the proposition in Nottingham University v Fishel that not every employee owes fiduciary obligations, and what was said in Hospital Products and Concut Pty Ltd v Worrell and John Alexander's Clubs concerning the "established category" or "accepted category" or "accepted fiduciary relationships" of employee and employer.
23. We acknowledge that there is a passage in the reasons for judgment of the Queensland Court of Appeal in Metal Manufactures Ltd v Johnston at [29]-[32] which supports Ms Garrett's and Mr Renauf's submissions. That passage addresses what was said in Hospital Products on the existence of fiduciary duty (but not to what was said as to its scope) and Concut Pty Ltd v Worrell. In a manner resembling Elias J putting to one side what was said by Lord Woolf MR in Attorney-General v Blake, the judgment reproduced the statement of principle from Mason J's reasons in Hospital Products but states that the passage must be put in context, and then takes the "critical feature" identified by Mason J as the determinative test. The reasons do not address John Alexander's Clubs. Nor do they address the decisions on scope of duty to which we shall shortly turn. Nor was it necessary for the Queensland Court of Appeal to address the point in any detail, it being held at [33] that is was not necessary to determine whether the employee was a fiduciary. It is unnecessary to say more, because we consider that we would follow the High Court authority, and indeed are bound to follow that authority.

The scope of a fiduciary obligation

1. The fact that some relations are prima facie accepted to be fiduciary, and that it is necessary then to determine the scope of the area within which the fiduciary is not free to act self-interestedly, is central to Dixon J's analysis in Birtchnell at 407. His Honour started with the words "The relation between partners is, of course, fiduciary", and proceeded to address the real question in that case, namely, the subject matter over which the fiduciary obligations extended. "Subject matter" is synonymous with "scope", the term used by Mason J in Hospital Products.
2. Mason J's judgment in Hospital Products explicitly separates the analysis between existence and scope. The passage reproduced above dividing between accepted categories of fiduciaries and others followed the heading "Was HPI a Fiduciary?". At the conclusion of that section, at 102-104, is a separate section headed "The Scope of the Fiduciary Duty", and after that section is an analysis of breach, under the heading "Breach of Fiduciary Duty". Mason J commenced the analysis of scope as follows: The Scope of the Fiduciary Duty The categories of fiduciary relationships are infinitely varied and the duties of the fiduciary vary with the circumstances which generate the relationship. Fiduciary relationships range from the trustee to the errand boy, the celebrated example given by Fletcher Moulton LJ in his judgment in In re Coomber [1911] 1 Ch 723, in which, after referring to the danger of trusting to verbal formulae, he pointed out that the nature of the curial intervention which is justifiable will vary from case to case (at pp 728-729). In accordance with these comments it is now acknowledged generally that the scope of the fiduciary duty must be moulded according to the nature of the relationship and the facts of the case: Phipps v Boardman (at pp 123-125); Kuys (at p 1129-1130); Canadian Aero Service Ltd v O'Malley ((1973) 40 DLR (3d) 371, at pp 383, 390). The often repeated statement that the rule in Keech v Sandford ((1726) Sel Cas T King 61 (25 ER 223)) applies to fiduciaries generally tends to obscure the variable nature of the duties which they owe. The rigorous standards appropriate to a trustee will not apply to a fiduciary who is permitted by contract to pursue his own interests in some respects. Thus, in the present case the so-called rule that the fiduciary cannot allow a conflict to arise between duty and interest (Kuys, at p 1130) cannot be usefully applied in the absolute terms in which it has been stated.
3. In Chan v Zacharia (1984) 154 CLR 178 at 196; [1984] HCA 36, Deane J quoted the formulation by Dixon J in Birtchnell at 407-408: The subject-matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which the partnership exists, and this is to be ascertained, not merely from the express agreement of the parties, whether embodied in written instrument or not, but also from the course of dealing actually pursued by the firm.
4. Likewise, the unanimous decision of the High Court in Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18 formulated the applicable principles as "Ordinarily a fiduciary will be ordered to render an account of the profits made within the scope and ambit of his duty": at 559, citing Boardman v Phipps [1967] 2 AC 46 at 127.
5. French CJ and Keane J said in Howard v Federal Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21 at [34]: Despite their broad judicial formulations fiduciary duties are not infinitely extensible. That point was made in Chan v Zacharia, which concerned the content of the fiduciary duties of members of a partnership inter se. The limits of those duties were to be determined by the character of the venture for which the partnership existed, the express agreement of the parties and the course of dealings actually pursued by the firm. The scope of the fiduciary duty generally in relation to conflicts of interest must accommodate itself to the particulars of the underlying relationship which give rise to the duty so that it is consistent with and conforms to the scope and limits of that relationship. It is to be "moulded according to the nature of the relationship and the facts of the case". (Footnotes omitted.)
6. In Omnilab Media Pty Ltd v Digital Cinema Network Pty Ltd [2011] FCAFC 166; 285 ALR 63 at [206], Jacobson J said with the agreement of Rares J that: It is fundamental that the scope of the fiduciary duty must be moulded according to the nature of the particular relationship and the facts of the case.
7. In Grimaldi at [143], Finn, Stone and Perram JJ emphasised the importance of actions taken by Mr Grimaldi without request and on his own initiative in determining the subject matter over which his fiduciary obligations extended. They added at [179], in a passage cited by Gageler J in Howard v Federal Commissioner of Taxation at [110]: The concept of "duty" in the "conflict of duty and interest" formula of the first of these is convenient shorthand. It refers simply to the function, the responsibility, the fiduciary has assumed or undertaken to perform for, or on behalf of, his or her beneficiary. What that function or responsibility is, is a question of fact. It may be narrow and circumscribed, as is often the case with specific agencies; it may be broad and general, as is characteristically the case with the functions of company directors; its scope may have been antecedently defined or determined; it may have been ordained by past practice; it may be left to the fiduciary's discretion to determine; and it may evolve over time as is commonly the case with partnerships.
8. In Gunasegaram v Blue Visions Management Pty Ltd [2018] NSWCA 179; 129 ACSR 265 at [152], Gleeson JA said, citing that passage: [I]t is necessary to focus on the actual functions or responsibilities assumed by the fiduciary to determine the subject matter over which his or her obligations extend, at least for the purposes of deciding whether there is a conflict of interest and duty or a conflict between duties.
9. All those authorities support the twin propositions that (i) every employee-employer relationship is fiduciary in nature, and (ii) it is necessary then to address the scope (or "subject matter") over which the fiduciary relationship extends. Their application to the case of employees who are alleged to have breached their fiduciary obligations owed to their employers may be seen in Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 8) [2022] FCA 1404 at [230]: [T]he employer-employee relationship is an established category of fiduciary relationship (Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96 and 97 per Mason J). But the scope of the duty has to be moulded to the nature of the particular relationship and the facts of the case (Hospital Products at 102 per Mason J). (Emphasis in original.)
10. In short, the idea that, having identified a fiduciary relationship, it is necessary then to determine its scope (sometimes referred to as the "subject matter" or "ambit") is too deeply established to accommodate Ms Garrett's and Mr Renauf's submissions to the contrary.
11. A further difficulty confronting any alternative approach is how to reconcile such an approach with Fletcher Moulton LJ's celebrated example of the errand boy in In Re Coomber; Coomber v Coomber [1911] 1 Ch 723 at 728: Fiduciary relations are of many different types; they extend from the relation of myself to an errand boy who is bound to bring me back my change up to the most intimate and confidential relations which can possibly exist between one party and another where the one is wholly in the hands of the other because of his infinite trust in him. All these are cases of fiduciary relations …
12. That passage was approved by unanimous High Courts in Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at 133; [1953] HCA 2 and Warman International Ltd v Dwyer at 559-60. It was applied in United Dominions Corporation Ltd v Brian Pty Ltd at 13 to conclude that "[t]he subject-matter over which the fiduciary obligations extended" included "the land which was the subject of the proposed joint ventures and whose purchase had been funded by moneys contributed by the prospective participants or borrowed by SPL for the purposes of the proposed ventures."
13. To be clear, it seems plain that the errand boy who opened correspondence and took advantage of what he learned (to vary Fletcher Moulton LJ's example slightly) would not merely be liable for breach of contract but would also be liable to account as fiduciary. The scope of his fiduciary obligation in that instance would seem to be extremely narrow - to the particular conduct in delivering errands - but the scope of a fiduciary obligation is quite different from its existence, as Mason J made clear in Hospital Products. If however the errand boy failed to deliver the message, and made a profit from it, then that would seem a prime candidate for a breach of the rule preventing unauthorised benefits from conduct within the scope of the errand boy's fiduciary obligations.
14. In some cases, such as Fletcher Moulton LJ's errand boy, there will only be a relatively confined field of conduct within which his conduct must adhere to a fiduciary standard. In other cases much more will be within the scope of the fiduciary obligation. But even in paradigm cases of solicitors or partners, there will often be aspects of their conduct which are outside the scope of the fiduciary obligations owed to their clients or partners (a recurring example is when the trust deed or retainer or partnership deed contains provisions governing how the relationship is to be brought to an end). Bryson J explained this in Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1: where the agreement giving rise to the fiduciary obligation made express provision for how it was to be ended, the scope of the fiduciary obligation did not extend to the operation of those provisions. Another example may be seen in Murdoch v Mudgee Dolomite & Lime Pty Ltd (in liq) [2022] NSWCA 12; 398 ALR 658, where a director and an employee caused their own companies to perform contracts the plaintiff had entered into in breach of fiduciary duty, but the acquisition of a related business in Victoria was outside the scope of their fiduciary obligations.
15. Contrary to a statement by the primary judge, we would readily conclude that an employed solicitor owes a fiduciary obligation to his or her employer, and the critical issue will be whether the conduct which is impugned falls within the scope of that obligation. Test the matter this way. Suppose the employed solicitor solicited a client to conduct future work for the client after the solicitor left his or her employment. Would the employer not be entitled to an account of profits from the employed solicitor for a period for stealing the client (cf Kao Lee & Yip v Koo Hoi Yan & Ors [2003] 3 HKLRD 296; [2003] HKCFI 850 at [91] and [117])? We note that if (as Ms Garrett and Mr Renauf would contend) the employees did not owe fiduciary duties, it would be difficult to see how the employer could recover the profits (noting that an account of profits is unavailable in this country as a remedy for breach of contract: see Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) 110 FCR 157; [2001] FCA 1040 at [158]-[159]).

Application to the facts of this case

1. Ms Garrett and Mr Renauf were in fact being paid, at a salary based on $350,000 per annum, and were in fact working as employees of the Ashington group of companies, with business cards and corporate email addresses. As such they owed fiduciary obligations to the Ashington companies.
2. The scope of those obligations extended to the Stonington Capital Raising. They were the exclusive point of contact with Patersons, investors, potential investors, PPB and Investec. In so doing, they were acting for and on behalf of the company, and they were not permitted to act self-interestedly when dealing with those people in the course of seeking to refinance the Investec Stonington Facility.
3. Alternatively, even on the approach propounded by Ms Garrett and Mr Renauf, and applied by the primary judge, we respectfully disagree with her Honour's analysis. Ms Garrett and Mr Renauf were charged with effecting a refinancing which was regarded as posing an existential threat to the company. And they had actual power, in the course of soliciting offers from financiers who might be prepared to participate in that financing, to choose with whom to progress negotiations and with whom not to. In a very real sense, the decisions made by Ms Garrett and Mr Renauf bound the company on an issue which was regarded as critical to its survival. There were no documents in evidence formally delegating particular powers or discretions to Ms Garrett or Mr Renauf, and it might be doubted that either had authority to bind Ashington Capital to a multimillion dollar refinancing. But within the relevant scope of their employment, namely, seeking to obtain urgent mezzanine finance for Stonington, they had actual power and authority to make critical decisions, including whether to persevere with attempts to solicit interest, and whether to take the initial communications further and to arrange face to face meetings. No doubt the terms of any mezzanine finance raising (coupon rate, terms and commission to be paid to any intermediaries) were left as a matter for Ashington Capital's board. But that never arose, because of their conduct, which demonstrates how both exercised a real power affecting the company. And in any event, as Mrs Anderson's submissions noted, fiduciaries may lack power formally to bind their principals, such as the informal adviser in ABN AMRO Bank NV v Bathurst Regional Council. As Mrs Anderson submitted, the references in Hospital Products to the exercise of a power or discretion extends to cases where the practical result is a material adverse effect upon the person to whom the fiduciary obligation is owed.
4. We conclude that these grounds are made out. In addition to the breaches of contract found by the primary judge, Ms Garrett and Mr Renauf breached fiduciary duties owed by them.

The claim against Patersons

1. On liability, the main appeal raised three issues involving Patersons, namely: 1. whether the primary judge erred in finding that Patersons did not knowingly assist Ms Garrett and Mr Renauf in their breach of fiduciary duty; 2. whether the primary judge erred in finding Patersons did not owe a fiduciary duty to Ashington Management or Ashington Capital; and 3. whether Patersons breached its mandate.
2. The first issue is the most important by far, and was treated as such in Patersons' written submissions (of the 30 pages devoted to these issues, only five were devoted to the second and third). The main elements were challenges to the findings that Mr Doherty lacked sufficient knowledge to render Patersons liable (grounds 9-11), that Mr Doherty's conduct was insufficient to amount to assistance (ground 8), that Mr Doherty's knowledge and conduct was not attributable to Patersons (grounds 12-13), that Mr Carolan's conduct was insufficient to amount to assistance (ground 15), that Mr Carolan's knowledge and conduct could not be attributed to Patersons (grounds 16-17), that Patersons was not vicariously liable for the conduct of Mr Doherty (ground 14) or Mr Carolan (grounds 18-19), and that Patersons' conduct overall was insufficient to amount to assistance (grounds 20-22).
3. We shall return to the second and third issues at the conclusion of these reasons.

The reasoning of the primary judge

1. The primary judge resolved the claim of knowing assistance against Patersons adversely to Mrs Anderson at [2085]-[2091], doing so on the assumption (contrary to her findings) that Ms Garrett and Mr Renauf owed fiduciary duties which were breached so as to amount to a dishonest and fraudulent design.
2. Her Honour first addressed the knowledge of Messrs Shorrocks, Doherty and Carolan. Her Honour found that Mr Shorrocks was unaware of any aspect of the dishonest and fraudulent design, and there is no challenge to that conclusion. When dealing with Mr Doherty, her Honour found at [2087]: 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.
3. In contrast, her Honour found (in accordance with what had been accepted and at least in part propounded by Patersons) that Mr Carolan well knew that the transaction brought about by his wife and Mr Renauf was outside the scope of the mandate and not in the interests of the Ashington companies, but was also 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": at [2088]. Indeed, her Honour considered that there was force in the submission that Patersons was itself also a victim of Mr Carolan's alleged conduct and the impugned conduct of Ms Garrett and Mr Renauf. The consequence was that his knowledge could not be imputed to Patersons for the purposes of the claim of knowing assistance.
4. Separately from the above, her Honour found that insufficient assistance had been provided by Patersons to amount to assistance for the purposes of liability under Barnes v Addy. Her Honour's reasons for this were at [2090]: I accept that [assistance] 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).
5. Accordingly, even assuming there had been a dishonest breach of fiduciary duty, the claim against Patersons for knowing assistance was dismissed on two bases: absence of knowledge, and absence of assistance. The appellant, necessarily, challenged both aspects.

The knowledge of Mr Doherty - the pleading point

1. It is convenient to commence with the position of Mr Doherty. Mr Doherty was unavailable at trial. His affidavit was read and answers given by him at a liquidator's examination were tendered, on the basis that no Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 inference was to be drawn.
2. The parties' written submissions, and to a much lesser extent their oral submissions, addressed a pleading point, all details of which need not be summarised, and which may be addressed relatively concisely. It reduces to this.
3. The original pleading had squarely asserted that "Patersons had actual knowledge of facts matters and circumstances that would indicate to an honest and reasonable person that Garrett and Renauf were engaged in a serious breach of their fiduciary obligations to the Ashington companies and which amounted to a dishonest and fraudulent design on their part". That pleading turned on an allegation of the "Patersons Conduct", which in turn was defined as having "the knowledge and understandings pleaded in paragraphs 239 to 241 and 243 above", the first two of which paragraphs included allegations of Mr Doherty's awareness and knowledge.
4. Later in the trial, the plaintiff supplied the following particulars of knowledge on the part of Mr Doherty: 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.
5. The matters particularised at (d) to which those allegations referred were as follows: 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. ii. 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 matters, 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.
6. The primary judge had permitted Patersons to rely in closing submissions on an unpleaded point that Mr Doherty's knowledge was not to be attributed to Patersons on the basis that he was not the directing mind and will of Patersons; prior to then, no point whatsoever seems to have been taken about the plaintiff's basing her case of knowledge on the part of Patersons by reference to the knowledge of Mr Doherty.
7. On appeal, Mrs Anderson contended that Mr Doherty's knowledge was to be imputed to Patersons by reason of agency. Patersons accepted that if that were allowed, then he was an agent and his knowledge was to be attributed to his principal (transcript, 12 May 2023, p 278.27-28). However, Patersons contended that Mrs Anderson should not be allowed to rely on principles of agency, her having based her case of attribution on the "directing mind and will" approach.
8. The pleading point was rightly regarded as of secondary importance in Patersons' oral submissions. Patersons was sued for knowing assistance in breach of fiduciary duty. There could be no doubt that in order to establish that Patersons had the requisite knowledge, the plaintiff had pleaded and particularised what she said was known by, inter alia, Mr Doherty. There was no need in the circumstances of this litigation for the plaintiff separately to allege, in advancing a case that Patersons had knowledge of Ms Garrett's and Mr Renauf's breach of fiduciary duty, which case turned on the states of mind of Messrs Carolan and Doherty, that Mr Doherty's knowledge was to be imputed to Patersons as its agent. That this case was sought to be advanced by the plaintiff was perfectly clear.
9. That is to say, we do not accept that anything in the pleadings or the way the trial was conducted prevents Mrs Anderson from relying on the knowledge of Mr Doherty, as Patersons' agent for the purpose of performing Patersons' obligations under the mandate, to establish knowledge on the part of Patersons.

The knowledge of Mr Doherty - the evidence

1. It is unclear whether any of the factual matters in section (d) of the particulars reproduced above were in issue. They arise directly from the contemporaneous documents and inferences from those documents which are readily drawn in the absence of any evidence being adduced by Ms Garrett or Messrs Renauf, Carolan, Routley and Ko, and with Mr Doherty's affidavit stating (as was pointed out during the hearing) that he had no recollection of the 2 October 2009 email or conversations which preceded it, and not addressing the statements in the email about a new company being established to replace Ashington Management as manager to receive fees and that this was being managed by Ms Garrett and Mr Renauf.
2. The real issue was whether the particularised conclusions alleged to flow by reason of the particulars in section (d) were made out, and in particular whether it should be concluded that an honest and reasonable person in Mr Doherty's position would have known that (i) Ms Garrett and Mr Renauf occupied senior positions in Ashington, and (ii) the information regarding the replacement of Ashington was to be kept confidential from Mr Anderson.
3. The appellant's submissions focussed upon the 2 October email quoted above and the meetings arranged by Mr Doherty the following Monday 5 October. It was said: Now as to knowledge, Mr Doherty had the knowledge that's in the critical email at p 9029. He knew that there was an employee of Ashington advancing a proposal outside the Patersons mandate to create a new company to replace her or their employers as the manager of the funds and that the proposal was being managed by PPB, Ms Garrett and Mr Renauf, and was highly confidential, that is to say to be kept from Ashington. He had the knowledge that he explained in his transcript of examination when he went to the meeting on 5 October which was to the same effect and included Ms Garrett telling Mr Routley and Mr Ko that there would be a new fund manager and it would be her and Mr Renauf. With that knowledge, with the knowledge of the email, he arranged the introduction to Mr Routley. That's not to be waved away as insignificant and that was a critical stage in the progress of Ms Garrett and PPB's plan. If they were going to achieve it, Ms Garrett was going to achieve a role as the fund manager, she needed an investor who wanted to invest in a manager. Mr Doherty had conduct of that relationship. If Ms Garrett had not thought she needed Mr Doherty's assistance to meet with Mr Routley, she would not have asked for it. And then of course Mr Doherty didn't just introduce Mr Routley but he attended the meeting, that's also important.
4. The first half of that submission drew directly upon the terms of Ms Garrett's email. The email stated in clear terms, with a subject "Private and Confidential", that a "highly confidential" process was "being managed by PPB and myself and Sam Renauf" causing the investors "to investigate options to transfer key assets to a new Manager" which would involve Newco "replac[ing] Ashington as the Manager of these Funds and receiv[ing] the fund management fees". The second half of the submission drew upon the uncontested facts that Mr Doherty in fact attended meetings with Mr Routley and Mr Ko on the Monday, at which a presentation was made, which included a PowerPoint presentation (versions of which Ms Garrett and Mr Renauf had worked on over the previous weekend), as confirmed by the fact that three days later Mr Routley emailed Ms Garrett requesting her to "send me a soft copy of your presentation to use parts of [it] in an internal briefing".
5. Patersons' submissions in support of the primary judge's finding of absence of sufficient knowledge had a number of strands.

(a) Knowledge that Ms Garrett and Mr Renauf held senior positions

1. First, it was said that it was not shown that Mr Doherty knew that Ms Garrett and Mr Renauf occupied roles so senior at Ashington that they owed fiduciary duties. "All [Mr Doherty] knew, we say, at least as at the 2 October email, was that Garrett was Mr Carolan's wife and that she was working on the Patersons Mandate for Ashington in some undefined way."
2. However that submission is difficult to reconcile with Mr Doherty's role to introduce Ms Garrett and Mr Renauf to prospective investors, as was exposed in argument: WHITE JA: His role was an introducer. Did that include introducing Garrett and Renauf to prospective investors? Financiers, rather? REDWOOD: I accept that. WHITE JA: How would he do that if he didn't know what their roles were? REDWOOD: To be clear, I'm not suggesting that he wasn't aware that she was acting in some way for Ashington. WHITE JA: I thought you said there wasn't any evidence that [he] knew their senior positions. REDWOOD: I do say that. WHITE JA: All right, hence my question, how would he be able to introduce them to prospective financiers if he didn't know what roles they [had]? REDWOOD: I understand. I don't think it follows, with respect, that because he's involved in introducing Ms Garrett on behalf of Ashington to prospective clients that it follows that he knew that she occupied a senior role with fiduciary duties. I just don't, with respect, think it goes that far.
3. No further substantive response was given. The submission cannot be accepted.
4. It is inconceivable that in the course of introducing Ms Garrett and Mr Renauf, Mr Doherty was unaware of their roles in Ashington. Some versions of the PowerPoint presentation describe their roles, accurately, although it remains unclear which version was presented at the meeting. But what is more important is that a fundamental aspect of the role of a person whose central purpose is to persuade an investor/financier to grant an audience is to ensure that the person can tell the investor/financier what position is occupied by the people on whose behalf the audience is being sought. It would be highly amateurish if the Patersons' representative were unable to tell Mr Routley and Mr Ko what roles Ms Garrett and Mr Renauf performed, and there is nothing to suggest Mr Doherty performed his role in an amateurish fashion.
5. One may also have regard to the terms of the 2 October email itself. The first paragraph explains that the Investec security arrangements had the potential to impact other assets in the fund, and so a quick replacement financier was "critical". This is not the language of a junior employee.
6. One may also have regard to what was sought to be achieved. The point of the Patersons Mandate was to raise $11-15 million short term finance in a period of 4-5 weeks. The proposal to replace Ashington companies as trustee and manager required, for practical purposes, a similarly expedited timeframe. Messrs Routley and Ko were decision-makers, or would be presenting directly to the decision-makers within Albany and Acorn. There was no reason for anyone, least of all Mr Doherty, to proceed on any basis other than that Ms Garrett and Mr Renauf were the senior executives charged with responsibility to implement a refinancing which was critical to the survival of the Ashington companies and their business.
7. In the absence of evidence from Mr Doherty, there is no reason to doubt what is inherently plausible, namely, that he told Messrs Routley and Ko that Ms Garrett was Head of Funds Management and was charged with the capital raising which Mr Routley had seen and said he was not interested in. Even if that were not so, he was present during the meetings when Ms Garrett must have made her role plain.
8. It is not necessary, in order to reach that conclusion, to rely upon the words "will be the new Fund Manager", which are at the conclusion of Ms Garrett's 2 October email, nor the content of the PowerPoint presentation which was shown at the meeting.

(b) Knowledge that the information must be kept secret from Mr Anderson

1. Secondly, Patersons submitted that Mr Doherty did not know that what Ms Garrett was telling him was something which "he must keep from and continue to suppress from the directors of Ashington, let alone Mr Anderson, who there's no evidence he had ever met or knew, of the plan or the proposal that might be developed as set out in that email".
2. It was put that the express statements of confidentiality did not clearly extend to keeping it confidential from Mr Anderson. It was said that there were "many reasons why a transaction of this kind, in the early stages, why it would be important that it remain confidential and that Mr Doherty not circulate it amongst his contacts within the finance community".
3. We do not accept this submission. The point of the proposal was that the benefit to an investor would include the fee streams presently enjoyed by Ashington companies. Any reader of the email would appreciate that a proposal to "replace Ashington as Manager of these Funds and receive the fund management fees" was a proposal which would deny Ashington its principal source of revenue and was antithetical to its interests. The statement that it was "highly confidential" and that the information must be "managed carefully" read naturally extends to ensuring that others in Ashington including Mr Anderson must not learn of it.
4. Another way of making this point is to consider that there can really only be two possibilities. One is that Mr Anderson or those controlling the Ashington group of companies had decided for some reason to exit from ADF2, thereby giving rise to an opportunity. The other is that senior people working for Ashington were proposing to bring about Ashington's removal without Mr Anderson's knowledge let alone approval. But if it were the former possibility, which is counterintuitive on its face, then it would be natural to state as much, and to explain why those controlling Ashington, notably Mr Anderson, were proposing something directly contrary to Ashington's interests, and contrary to the Patersons Mandate - which had been signed off only a week earlier. If the latter, the need for secrecy would be palpable. The latter is the conclusion that an honest and reasonable person would reach when the company's representatives - charged with achieving a refinance to the benefit of the company - propounded a secret proposal to the company's detriment. This was not merely a case of Patersons being put on inquiry that two senior employees might be acting contrary to their employer's interest; an honest and reasonable person in Mr Doherty's position would believe that to be so.

(c) Mr Doherty was told that the investors wanted Ashington's removal

1. Thirdly, Patersons relied on the fact that Mr Doherty was being told that what Ms Garrett proposed was sought by and to the benefit of existing investors, who were the beneficiaries of the trust.
2. This third point conflates separate duties. The breach of duty which Patersons through Mr Doherty is alleged to have been involved in is Ms Garrett's and Mr Renauf's duty to Ashington Capital and Ashington Management. It is no answer to that claim of involvement in breach of duty to believe that (most) unitholders supported that course. It remains dishonest for an employee, while being paid by the employer and while being charged to achieve a refinancing to seek to do something antithetical to the employer's interests, even if it were perceived to be in the interests of beneficiaries to whom the employer owed fiduciary obligations.

(d) Mr Doherty's role as introducer

1. Patersons also relied, in its written submissions, on Mr Doherty's evidence that his role was purely to introduce the parties, that the terms of a deal were often "re-cut", and that "if there was a change in the mandate that's not my area at all". All that may be accepted. But it does not alter the force of Ms Garrett's conversation with him, and her subsequent email, upon which he was intended to and did act. In so doing, it is difficult to see how he could not have appreciated that the confidential proposal put forward by Ms Garrett was inimical to the interests of her employer and Patersons' client. But in any event, even if Mr Doherty did not himself subjectively appreciate those facts, all that matters for the purposes of Barnes v Addy liability is that an honest and reasonable person in his position would have understood that Ms Garrett's proposal, which he was himself asked to convey to Mr Routley and which the following Monday he saw her convey to Messrs Routley and Ko, was a dishonest and fraudulent breach of duty to Ashington.
2. The primary judge referred to Mr Doherty's involvement as "fleeting". In the present context, that may have two meanings. One is that (unlike Mr Carolan) his assistance was only given at the outset, and thus if his conduct was to amount to knowing assistance, then Mrs Anderson had to establish the requisite level of knowledge at an early stage. However, in our view she has done so. The other is that the assistance was limited. However, as will be developed below, that did not prevent it from constituting a critical step in the conduct which deprived Ashington of the chance to achieve the Stonington Capital Raising.

(e) The need to establish fraud in equity

1. Patersons emphasised that it was not sufficient for Mrs Anderson to show that Mr Doherty was on notice that Ms Garrett might be doing something which was wrong, and that, having regard to the nature of the finding, it could not be based on "inexact proofs, indefinite testimony, or indirect inferences", noting that in Farah Constructions at [170] it was said that the seriousness of an allegation of knowing participation in a breach of fiduciary duty meant that it ought to have been pleaded and particularised, and the assessment required by Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 kept in mind.
2. The question is whether Mr Doherty had knowledge of circumstances which would indicate to an honest and reasonable person in his position that Ms Garrett and Mr Renauf were asking for his assistance in their dishonest and fraudulent breach of fiduciary duty. As Patersons correctly submitted, that is distinct from knowledge of circumstances which would put an honest and reasonable person in Mr Doherty's position on inquiry, and it must be something which is satisfied having regard to the seriousness of the finding and in accordance with s 140 of the Evidence Act 2005 (NSW) and what was said in Farah Constructions.
3. But we regard this as a straightforward case. Mr Doherty knew that what was proposed was contrary to the mandate, and contrary to Ashington's interests. It was not a refinancing, but a replacement of Ashington as trustee and manager. Mr Doherty knew that Mr Routley was not interested in lending money in accordance with the mandate, but was interested in a proposal which replaced Ashington. Mr Doherty was being asked by Ms Garrett to meet Mr Routley for that purpose. Mr Doherty must have known that that purpose was inimical to Ashington's interest, and indeed that the benefit which was of interest to Mr Routley was the flow of fees which was presently enjoyed by Ashington. And Mr Doherty knew that all this was being proposed by Ms Garrett, who was charged by Ashington to obtain refinancing in accordance with the mandate, and was told it was to be kept confidential from others in Ashington.
4. That is sufficient to make this a clear case of knowledge of a dishonest and fraudulent breach of duty.
5. We would also find that Mr Doherty knew no later than the meeting with Messrs Ko and Routley on 5 October 2009 that Ms Garrett and Mr Renauf stood to benefit from the proposal for Ashington to be replaced by Newco, although the evidence is more exiguous. This is principally because of three considerations. First, there is no other rational reason for Ms Garrett and Mr Renauf to have been advancing a proposal contrary to the mandate and contrary to the interests of Ashington. Secondly, if the proposal were to succeed, people would be required, in short order, to run Newco and it was important to convince Messrs Routley and Ko that Ms Garrett and Mr Renauf were willing and able to do so. Thirdly, if the proposal were to succeed, Ms Garrett and Mr Renauf would have no employment at Ashington. Of course, this is also clear on the "Go Forward" Corporate Structure Slide, but even if that slide were not presented at the 5 October meeting, it is overwhelmingly likely that as much was conveyed by Ms Garrett or Mr Renauf.
6. It would also have been natural for this point to have been stated during Ms Garrett's conversation on 2 October with Mr Doherty, but it is also possible that Ms Garrett and Mr Doherty considered that that was an aspect which was not necessary to be communicated to Mr Routley for the purposes of securing the meeting on Monday 5 October. Thus, having regard to s 140 of the Evidence Act and what was said in Farah Constructions, we would not conclude that an honest and reasonable person in Mr Doherty's position would have believed that Ms Garrett and Mr Renauf stood to benefit from the proposal on 2 October, as opposed to on 5 October. As will be seen in relation to the grounds turning on "assistance", this does not alter the liability of Patersons.
7. For those reasons, we conclude that Mr Doherty's knowledge sufficed to render Patersons liable for knowing assistance.

(f) The assistance provided by Patersons

1. The defence of the primary judge's finding that Patersons, through Mr Doherty, did not provide sufficient "assistance" for the purposes of liability for knowing assistance was principally confined to written submissions and scarcely elaborated orally. Relying on what was said in Harstedt Pty Ltd v Tomanek (2018) 55 VR 158; [2018] VSCA 84 at [117], Patersons emphasised that it had not been shown that Mr Doherty's assistance facilitated a breach of duty which would not otherwise have occurred. The submission was put thus: [I]t cannot be said that, but for his organising of the meeting with Routley, Garrett and/or Renauf would not have breached their fiduciary duties and otherwise had the opportunity to pursue the scheme that they did with the other Respondents. Plainly, Garrett had determined before 2 October 2009 that this was the course she would pursue and utilising Doherty to rearrange a pre-existing meeting merely provided the then most convenient means to commence the implementation of her scheme. There is every reason to think she would have found another way to pursue the breach of fiduciary duty even if Doherty was not able to rearrange this meeting. This is apparent, for example, from her email to Renauf on 4 October 2009 … where she stated that she "promised Robert Routley [the presentation] would be forthcoming I need to take something on Monday". Doherty's significance was not akin to a bank or financial institution whose assistance was essential to effectuate the transaction. Nor can it be said that as at the time that Doherty booked in the meeting with Acorn or attended that meeting, the commission of the alleged primary breach by Garrett and/or Renauf was a foregone conclusion. There is no evidence suggesting that Acorn and/or Albany were committed to Garrett's plan as at 5 October 2009. In other words, there is a temporal and conceptual disconnect between any knowledge of Doherty (which is denied) and his alleged assistance with the essential features of the dishonest and fraudulent scheme. (Footnotes and emphasis omitted.)
2. This submission cannot be accepted, both on the facts and as a matter of law.
3. Although the position was not entirely clear, the evidence suggests that a meeting had been obtained with Mr Routley for Friday 2 October, but it was rescheduled to the following Monday 5 October. That was Mr Doherty's recollection, although he could not recall how or why this had occurred, and it is corroborated by Ms Garrett's email at 5.03pm on Wednesday 30 September stating that "We have locked three excellent mezz meetings", including Acorn at 2pm on the Friday. (The word "excellent" is difficult to reconcile with Mr Routley's emails to Mr Doherty earlier that day that "we can't do pure debt", and that even if the debt were convertible to equity, "we would still be a low probability to complete", being the email when he advised "Our preference is to invest in the manager", but there is no reason to doubt that Ms Garrett had in fact arranged a meeting on the Friday in accordance with her email.)
4. The meetings scheduled for Friday were rescheduled by Mr Doherty, and the irresistible inference from Ms Garrett's email to him (immediately following her conversation with him and immediately preceding his conversation with Mr Routley) was that her plan which involved replacing Ashington as trustee and manager was conveyed by Mr Doherty to Mr Routley with the purpose of securing a meeting. No testimonial evidence detracts from that inference, because neither Ms Garrett nor Mr Routley gave evidence, and while Mr Doherty's affidavit was read in circumstances where he was unavailable, he said that he did not recall his conversation with Ms Garrett and his affidavit was silent as to his communication with Mr Routley.
5. The fact that Mr Doherty's introduction is important is reflected by the fact that the rescheduling took place via him, as did the initial introductions in Melbourne. Ms Garrett could, if she had thought that an introduction from a Patersons' officer was unnecessary, have gone directly to Mr Routley. She did not do so. Further, her email "We owe Paul Doherty and Marty a beer or five as they are calling in favours" reflects a contemporaneous acknowledgement that entities which might on next to no notice make a multimillion dollar investment tend only to make time to meet potential borrowers when they have been recommended through an intermediary such as Patersons.
6. It also tends to be confirmed by Mr Doherty's recollection that the meeting with Mr Routley in Melbourne the following Monday was very short, lasting no longer than 5 to 10 minutes, with Mr Routley saying "Acorn will not be able to invest without the involvement of the Alter family". Acorn seems not to have held an Australian financial services licence; Albany did, and the proposal to replace Ashington as trustee could only occur with an entity that held an Australian financial services licence (the units issued to superannuation fund investors were financial products within the meaning of s 763A of the Corporations Act 2001 (Cth), and any proposal to issue more units would be a dealing in financial products and therefore providing a financial service pursuant to s 766A, thereby engaging the requirement in s 911A of the Corporations Act, noting that there may very well have been other ways in which that requirement was engaged).
7. For those reasons, it may be concluded that the involvement of Patersons, through Mr Doherty, was necessary to secure the meeting.
8. Patersons maintained that there was a "temporal disconnection", insofar as an initial meeting was secured (before it was rescheduled) prior to Mr Doherty learning of Ms Garrett's and Mr Renauf's dishonest and fraudulent design. It is appropriate to proceed on the basis that those were the facts. But after his conversation with Ms Garrett and the receipt of her email on Friday 2 October, Mr Doherty had a further conversation with Mr Routley, and met her and Mr Renauf in Melbourne so as to introduce them to Mr Routley and thereafter to meet Mr Ko, and saw and heard the presentation, and later spoke again with Mr Routley concerning his executing a confidentiality agreement.
9. This is not a case where the only assistance provided by a third party is provided before the third party acquires knowledge of the dishonest and fraudulent design. The arrangements for the actual meeting, and the meeting itself, and the subsequent arrangements for executing confidentiality agreements all took place after Mr Doherty knew of the dishonest and fraudulent design, namely, a plan inimical to the interests of Ashington which was to be kept secret from Mr Anderson. Indeed, every step, save for communications about a deal pursuant to the mandate (which was of no or low interest to Acorn) and scheduling a meeting which did not take place, took place after Mr Doherty knew of Ms Garrett's and Mr Renauf's dishonest and fraudulent design. True it is that it may not have been clear until Monday 5 October that Ms Garrett and Mr Renauf stood to gain from the proposal, but that was not an essential element of the dishonest and fraudulent breach of duty, and in any event, Mr Doherty's assistance continued thereafter, albeit administratively in providing a copy of the confidentiality undertaking for Mr Routley to execute.
10. Further to the above, Patersons' submission misapprehends the test for what is sufficient to establish assistance. The relevant paragraphs of the decision of the Court of Appeal in Harstedt are [117]-[118]: First, there will be assistance where, but for the action or inaction of the third party, the breach of fiduciary duty would not have occurred. A common example is the role of a bank or other financial intermediary the function of which is essential to effect a transaction that amounts to a breach of trust. Secondly, there may also be assistance where the third party has facilitated a breach of fiduciary duty that would have occurred in any event. It is difficult to see how, in view of equity's broad concern with preventing unconscionability, a third party in these circumstances could not be liable under the second limb of Barnes v Addy, even if there is evidence to suggest that the commission of the primary breach was a foregone conclusion. (Footnotes omitted.)
11. It is not necessary to show that but for the assistance the breach would not have occurred. Nor is it necessary to establish that the breach was a foregone conclusion. Even if Patersons' submission was accepted, it would be an insufficient answer to the claim of knowing assistance. It is not necessary in order to resolve this appeal to explore the outer limits of conduct which is necessary to amount to assistance (just as the Victorian Court of Appeal found it unnecessary to determine whether an omission or acquiescence by a third party with knowledge of a dishonest and fraudulent design could suffice), and in circumstances where that Court noted at [119] that the authorities on that point "appear to be in disharmony" and this Court was taken to none of them, it is inappropriate to do so.

Assignability of claims (grounds 1-2, various grounds of the notices of contention of the first and fourth respondents)

1. There was an issue at trial over whether the liquidator of Ashington Capital and Ashington Management had validly assigned the claims for breach of fiduciary duty and knowing assistance to Mrs Anderson. Her Honour addressed this in detail at [1271]-[1287], concluding that the claims were capable of assignment, following EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183 and Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789; 101 ACSR 233, and declining to follow Krishell Pty Ltd v Nilant (2006) 32 WAR 540; [2006] WASCA 223 which, if necessary, her Honour would have found to be clearly wrong: at [1303]. However, at [1309], inconsistently with that reasoning, her Honour said "Accordingly, I consider that the Krishell reasoning applies to render ineffective the claims for knowing assistance".
2. Mrs Anderson said that her Honour was correct when she analysed the point in detail, having regard to the terms of s 477(2)(c) of the Corporations Act, and was wrong in her conclusion at [1309]. Patersons regarded what had been said at [1309] as a slip, but by way of notice of contention maintained that a further reason for dismissing this aspect of the claim was the inability to assign a claim for knowing assistance. In their written submissions, PPB adopted Patersons' submissions, while Acorn developed the point at length, and Albany adopted PPB's and Acorn's submissions. However, during the course of the appeal, all the respondents which had maintained that the claims were not assignable formally abandoned that point (MFI 1 para 1, T 287, emails to the Associate to Gleeson JA). This point seems, so far as we can see, never to have been taken by Ms Garrett and Mr Renauf.
3. The point was, accordingly, not argued, but we see no reason to doubt that the broad power in s 477(2)(c) should permit a liquidator to assign such claims. Authorities on the breadth of the power and the underlying legislative purpose may be seen in Elfic Ltd v Macks [2003] 2 Qd R 125; [2001] QCA 219 at [81]-[83].

The imputation of Mr Carolan's knowledge to Patersons

1. In light of what has been said concerning Mr Doherty above, nothing turns on grounds 15-19 although in deference to the parties' submissions, we shall address these grounds. However, we shall do so relatively concisely, because they do not affect any order made by this Court, and also because to the extent that some aspects of them raise unresolved questions of law in an unsettled area, it is generally better for such questions to be determined in cases where they affect the outcome. That approach accords with the standard common law judicial technique of deciding no more than what needs to be decided: Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560; [2019] HCA 32 at [76]; although that minimalistic approach is qualified by the need to consider determining non-dispositive points: Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49 at [8].
2. The main point was encapsulated in ground 17. It was that the primary judge should have found that Mr Carolan's knowledge and conduct was attributable to Patersons (a) as he was Patersons' directing mind and will for the purposes of conducting the Patersons Mandate, (b) through the principles of agency, as it was acquired in his capacity as Patersons' agent acting within his actual or apparent authority, and he was under a duty to report it to Patersons, and (c) the "fraud exception" described in Re Hampshire Land Co [1896] 2 Ch 743 did not apply. Alternatively, by ground 18 it was said that the primary judge erred in finding that Patersons was not vicariously liable for Mr Carolan's knowing assistance of the breach of fiduciary duty by Ms Garrett and Mr Renauf. By paragraph 4 of its notice of contention, Patersons contended that there is no role for vicarious liability at all in the context of a claim for knowing assistance in a breach of fiduciary duty, and relied on the analysis generally to that effect (albeit in the context of a claim for an account of profits) by Besanko J in Lifeplan Australia Friendly Society Ltd v Woff [2016] FCA 248; 259 IR 384 at [362]-[374].
3. The primary judge conveniently summarised her findings in relation to the liability of Patersons for knowing assistance at [1251]-[1252] thus: 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. As to the issue of vicarious liability, I consider that the reasoning of Coulthard v South Australia (1995) 63 SASR 531 … 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.
4. The reasons for those conclusions were found over some 130 paragraphs at [1643]-[1773].
5. The primary judge recorded at [1663]-[1664] that there was substantial agreement between Mrs Anderson and Patersons that the formulation of principle by Lord Hoffmann in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500; [1995] UKPC 5 was applicable on the issue of the knowledge to be attributed to Patersons. We agree. Lord Hoffmann confirmed that the so-called "directing mind and will test" was never intended to be a universal rule, and that position has attracted a considerable weight of Australian appellate authority: see (without intending to be exhaustive) Director of Public Prosecutions Reference No 1 of 1996 [1998] 3 VR 352 at 355 (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]-[24] (Spigelman CJ, with whom Ipp JA and Hunt AJA agreed); Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421; [2016] FCAFC 186 at [62]-[63] (Allsop CJ), [97]-[99] (Edelman J); Environment Protection Authority v Wollondilly Abattoirs Pty Ltd [2019] NSWCCA 312 at [20]-[22], [99], [101]; Hallmark Construction Pty Ltd v Harford [2020] NSWCA 41; 294 IR 359 at [73], [110] and [122]. In the first Australian post-Meridian decision, Callaway JA had said: Lord Hoffmann's approach to the problem of corporate liability [in Meridian] was correct ... It merely provides a framework for analysis and dispels the notion that, for all offences, the person with whom a corporation is identified must be its directing mind and will.
6. Beach J explained the position in Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 266 FCR 147; [2018] FCA 751 at [1660]: [T]he appropriate test is more one of the interpretation of the relevant rule of responsibility, liability or proscription to be applied to the corporate entity. One has to consider the context and purpose of that rule. If the relevant rule was intended to apply to a corporation, how was it intended to apply? Assuming that a particular state of mind of the corporation was required to be established by the rule, the question becomes: whose state of mind was for the purpose of the relevant rule of responsibility to count as the knowledge or state of mind of the corporation? (see Bilta (UK) Ltd (in liquidation) v Nazir (No 2) [2015] UKSC 23; [2015] 2 WLR 1168 at [41] per Lord Mance). The question is one of the interpretation of the relevant rule taking into account its context and purpose.
7. Despite ground 17 being formulated in terms of Patersons' "directing mind and will", we did not understand Mrs Anderson to have departed from the submissions advanced at trial. Nor did we understand Patersons to dispute the general approach. Certainly, Patersons advanced no submission that the unanimous decisions of the Court of Appeal, the Court of Criminal Appeal, the Victorian Court of Appeal and the Full Court of the Federal Court were clearly wrong.
8. Accordingly, we respectfully disagree with the dispositive reasoning of the primary judge at [1676] (and which is summarised at [1251] reproduced above). An act done when an employee is on a "frolic" of his or her own will not fall within the vicarious liability of the employer: Bugge v Brown (1919) 26 CLR 110 at 128; [1919] HCA 5, CCIG Investments Pty Ltd v Schokman [2023] HCA 21; 97 ALJR 551 at [16]. But that conclusion does not answer the relevant question, which is whether the conduct and especially the knowledge of Mr Carolan is to be imputed to Patersons. That question is, in accordance with Meridian and the decisions following it inevitably contextual. In most cases, central to the context is statute. That is because most cases of attribution arise where the liability of company is sourced in statute. The point was made by Gordon J, writing extra-judicially: The Lennard case, the later House of Lords decision in Tesco Supermarkets Ltd v Nattrass and Meridian all concerned the application of particular statutory provisions. Lennard and Tesco concerned exculpatory provisions; Meridian concerned the application of substantial shareholder provisions of securities legislation. In each case, then, there was an issue of statutory construction: did the provision apply to a company and, if it did, how did it apply? Yet what was said in Lennard and Tesco has been often read as if stating generally applicable, even universal rules: Foreword, p vii, to E Bant (ed), The Culpable Corporate Mind (Hart Publishing, 2023).
9. The reason that Lord Hoffmann's analysis is not included in her Honour's criticism is because it emphasised the absence of generally applicable or universal rules, and instead insisted upon the context-dependent nature of the analysis in any particular case. The present case is unusual, because it is not concerned in any direct way with the application of statute.
10. The starting point then is the nature of liability in equity for knowing assistance in a dishonest and fraudulent breach of fiduciary duty.
11. The first element is that there must be conduct which amounts to assistance. The conduct in the present case is what was done by way of advancing the scheme of Ms Garrett and Mr Renauf to replace Ashington companies as trustee and manager, and conversely what was not done, namely, prosecute a refinancing in accordance with the term sheet. Both aspects complemented each other, because the failure to advance the refinancing in accordance with the Patersons Mandate enhanced the prospects of the plan to replace Ashington as trustee and manager. Both aspects of that conduct, but perhaps more clearly the latter aspect, are properly regarded as conduct of Patersons. After all, it was Patersons as a corporate entity which was charged with using its best endeavours to obtain a refinancing. Patersons could only do so by the actions of its officers and employees, and so the efforts of Mr Carolan to prevent the refinancing from occurring are to be attributed to the company.
12. In relation to the positive conduct, Mr Doherty secured meetings with Messrs Routley and Ko in his capacity as a Patersons employee, and could not have done so had he been acting in a private capacity. Then Messrs Doherty and Carolan met first Mr Routley and then Mr Ko on 5 October 2009, as her Honour found, in accordance with Mr Doherty's unchallenged recollection: see [615]-[616]. Once again, that conduct was in their capacity as officers of Patersons.
13. Indeed, the question of attributing the conduct of Mr Carolan to Patersons was not treated as controversial. Patersons' submissions on the point focussed heavily on whether Mr Carolan's knowledge of the dishonest and fraudulent design should be attributed to Patersons (paragraphs 23-26 of the written submissions focus exclusively on knowledge, while paragraph 27 addresses Mr Carolan's conduct, but only in connection with the "total fraud" exception).
14. Equity only holds third parties who assist in a dishonest and fraudulent breach of fiduciary duty liable if they have a sufficient knowledge of the breach of fiduciary duty. In some cases, difficult questions of aggregation of knowledge held by various officers and employees of a company will arise, but for present purposes they may be put to one side. The notion at the core of the equitable principle is providing assistance to a fiduciary while having sufficient knowledge that the fiduciary is dishonestly and fraudulently breaching the fiduciary's duty. Thus, at the core of the rules of attribution applicable for liability for knowing assistance is the state of mind of the natural persons who are regarded as providing the assistance.
15. Such authority as there is supports this approach.
16. The same question arose in the context of liability for knowing assistance in Bilta (UK) Ltd (in liq) v Natwest Markets plc [2020] EWHC 546 (Ch); [2020] AII ER (D) 82. After dealing with vicarious liability at [193]-[216], Snowden J (as his Lordship then was) considered attribution in equity in the alternative at [217]-[223]. He reproduced what Lord Sumption had said in Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1; [2015] UKSC 23 at [68] concerning the claim for knowing assistance in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378: A modern illustration of the attribution of knowledge to a company on the basis that its agent was its directing mind and will for all purposes is Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, where the Privy Council was concerned with the knowledge required to make a company liable as a constructive trustee on the footing of knowing assistance in a dishonest breach of trust. The defendants were a one-man company, BLT, and the one man, Mr Tan. At pp 392-393, Lord Nicholls of Birkenhead, delivering the advice of the Board, observed that Mr Tan had known the relevant facts and was therefore liable. "By the same token, and for good measure, BLT also acted dishonestly. [Mr Tan] was the company, and his state of mind is to be imputed to the company."
17. A "one-man company" is an easy case for attribution, whatever be the test, but Patersons was far removed from a "one-man company" such as Mr Tan's company BLT. Indeed, within Patersons Mr Carolan reported to Mr Shorrocks. But there is no a priori reason for that fact to stand in the way of the relevant rule of attribution fixing upon Mr Carolan's state of mind rather than that of his superior. Snowden J's decision is highly persuasive because it applies a Meridian analysis to a claim for knowing assistance when the assistance was made by traders in a large organisation. His Lordship concluded at [222]: Applying these principles, it is perfectly clear that in the instant case the natural persons whose knowledge is to be attributed to RBS for the purpose of determining liability for both dishonest assistance and fraudulent trading are the Traders. They were the persons who were given the authority to conduct the relevant trades on behalf of RBS which are said to have amounted to the giving of assistance and also constituted the participation in fraudulent trading.
18. That is to say, for the purposes of identifying the context-dependent rule of attribution in accordance with Meridian in the case of liability in equity for knowing assistance, what matters is the states of minds of the persons who directly controlled the conduct which is said to have involved the giving of assistance. Another example of this is Aerostar Maintenance v Wilson [2010] EWHC 2032 (Ch) at [195]-[199], where it was concluded (albeit without any detailed analysis) that the state of mind of the company's director Mr Wilson was imputed to it. (For completeness, we note that Grimaldi does not bear upon this point, because it was conceded that Mr Grimaldi was at relevant times the controlling mind of Murchison and that his knowledge was to be attributed to it, subject to "the fraud exception": see at [21] and [282].)
19. A broadly analogous question arose in the Court of Criminal Appeal in Gregg v R [2020] NSWCCA 245; 355 FLR 348. Although that was an appeal against conviction, one issue was whether a particular agreement ("the buy and sell agreement") was a sham. Bathurst CJ, with whom Hoeben CJ at CL and Leeming JA agreed, referred to Meridian and the decision of Beach J in Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) at [1660] where it was suggested that "it might be better if the label 'directing mind and will' was allowed to fade away". Bathurst CJ then said at [490]: The present case demonstrates the difficulty of determining the directing mind and will of the company for the purpose of ascertaining whether Asian Global intended the buy and sell agreement to be a sham. However, applying an analogous approach to Meridian Global, the question seems to me to be to determine who was responsible for Asian Global entering into the agreement. It is that person's intention which should be attributed to Asian Global in determining whether the agreement was a sham, and whose knowledge should be attributed to Asian Global in determining whether or not LHL intended it to be a sham.
20. That is to say, one asks who was responsible for engaging in the conduct which forms an element of the liability, and then attributes that person's knowledge to the company. The same may be seen in the action for deceit in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; [1995] HCA 68, where the state of mind of the defendant Eurolynx was based on the officer and agent who conducted the initial negotiations: "Their knowledge was the knowledge of Eurolynx, for they were the persons who were responsible for the initial negotiations and who had set the scene in which the representation had been made by the s 32 statement and the proffered contract of sale": at 582. One way of viewing the approach is that the person responsible for engaging in the conduct is regarded, for that purpose as the "directing mind and will" of the company. However, we would respectfully agree with the observations made by Beach J in that respect in Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) at [1660]: The question is one of the interpretation of the relevant rule taking into account its context and purpose. Now once you have asked and answered that question and identified the individual in question, you may then apply the title of "directing mind and will". But so to proceed adds little to the analysis. The label "directing mind and will" is nebulous if not question begging. It also follows that if you use such a label, then it will have variable application even within the same corporation depending upon the particular context and function of the relevant rule of responsibility. And as soon as one admits of that variability, the advantages in using the label become illusory, except to distinguish such a person who can be identified with the corporation from a person for whose acts the corporation is merely vicariously liable (Bilta at [70] per Lord Sumption). I agree with Lord Walker of Gestingthorpe who suggested that it might be better if the label "directing mind and will" was allowed to fade away (see Moulin Global Eyecare Trading Ltd (in liquidation) v Commissioner of Inland Revenue [2014] HKCFA 22 at [106]).
21. By analogy with the reasoning in those cases, Mr Carolan was the principal person responsible for the conduct which amounted to the assistance which is the element of Barnes v Addy liability, and thus it is Mr Carolan's knowledge which is to be attributed to Patersons for the purpose of determining whether Mrs Anderson established the knowledge element of her claim.
22. It is necessary then to address the "fraud exception", which the primary judge contingently regarded as telling against the imputation of Mr Carolan's knowledge to Patersons at [1684]: [H]ad 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.
23. As the primary judge rightly appreciated, the "fraud exception" arose in cases where the company was the plaintiff suing a director or employee or third party such as a broker for breach of duty. Lord Sumption explained why the knowledge of the defendant was not imputed to the plaintiff in such a case in Bilta v Nazir at [89]: A claim by a company against its directors, on the other hand, is the paradigm case for the application of the breach of duty exception. An agent owes fiduciary duties to his principal, which in the case of a director are statutory. It would be a remarkable paradox if the mere breach of those duties by doing an illegal act adverse to the company's interest was enough to make the duty unenforceable at the suit of the company to whom it is owed. The reason why it is wrong is that that the theory which identifies the state of mind of the company with that of its controlling directors cannot apply when the issue is whether those directors are liable to the company. The duty of which they are in breach exists for the protection of the company against the directors. The nature of the issue is therefore itself such as to prevent identification. In that situation it is in reality the dishonest directors who are relying on their own dishonesty to found a defence. The company's culpability is wholly derived from them, which is the very matter of which complaint is made.
24. That is relatively uncontroversial. It was confirmed in Singularis Holdings Ltd (in liq) v Daiwa Capital Markets Europe Ltd [2020] AC 1189; [2019] UKSC 50. But that is not the present case. In the present litigation, Patersons was not the moving party. Patersons was sued by the assignee of the liquidator and in its defence it wishes to prevent the attribution to it of the knowledge of its employee Mr Carolan, in circumstances where his conduct and his state of mind are to be attributed to Patersons in the manner explained above.
25. Some Australian authority favours the position that the fraud exception is available in this type of case so long as the company obtains no benefit from the transaction. Influential here is von Doussa J's judgment in Beach Petroleum NL v Johnson (1993) 43 FCR 1, who said at [22.34]: Provided that the director is acting within the scope of his or her authority, in civil proceedings the state of mind of a director ordinarily will be attributed to the company where there is a duty on that director to communicate his or her knowledge to the company. The exception to this rule is where the director is acting totally in fraud of the company, that is, where all the director's activities are directed against the interests of the company, and not partly for the benefit of the company. If 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.
26. But this analysis must be reconciled with later authority. It is to be steadily borne in mind that the rules of attribution are context-dependent. The circumstances in which a company is treated as liable by reason of the conduct and knowledge of the natural persons through whom it acts depends upon the particular statute or rule of common law or principle of equity. This cannot easily be reconciled with an inflexible "fraud exception", that immunises a company from attribution irrespective of the relevant statutory or common law or equitable rule, in cases where a director has acted "in total fraud" upon the company and the company has not obtained a benefit.
27. The point may be illustrated by contrasting liability in equity for knowing receipt and knowing assistance. An element of liability for knowing receipt is that the third party has received a benefit (ordinarily, property). It would seem to follow that the "fraud exception" as formulated in Beach Petroleum NL v Johnson, which turns on the absence of the company obtaining a benefit, would never be available.
28. Further, we respectfully agree with Allsop CJ in All Class Insurance Brokers Pty Ltd (in liq) v Chubb Insurance Australia Ltd (No 2) [2021] FCA 782; 154 ACSR 78 at [167]-[168]: The judgment of the Supreme Court in Bilta [2015] UKSC 23; [2016] AC 1 is to the effect that there is no general fraud exception to imputation, rather the question is 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: Bilta at 11 [9] per Lord Neuberger, see also 18-19 [41]-[45] per Lord Mance JSC, 64-73 [180]-[209] per Lord Toulson and Lord Hodge JJSC, cf Lord Sumption JSC at 38 [86]; P Watts and FMB, Bowstead and Reynolds on Agency (21st ed, Sweet & Maxwell, 2018) at [8-214]. Drawing upon the Court's reasoning in Bilta, the UK Supreme Court in Singularis Holdings Ltd (in liquidation) v Daiwa Capital Markets Europe Ltd [2019] UKSC 50; [2020] AC 1189 held at 1205 [34] that the question as to whether knowledge of a particular officer of a company should be attributed to the company depends on the particular context in which the question of attribution arises.
29. Alternatively, the same result is reached by reason of what was said as to the fraud exception in Beach Petroleum NL v Kennedy, where this Court said at [473]-[474]: Beach did not submit that its directors acted outside the scope of their actual or apparent authority when dealing with Abbott Tout: see Turton v London & North Western Railway Co (1850) 15 LT (OS) 92 and Dresser v Norwood (1864) 17 CB (NS) 466; 144 ER 188 and compare El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685 at 702. Acts of agents within the scope of their actual or apparent authority do not cease to bind the principal merely because the agents were acting fraudulently and in furtherance of their own interests: see Bowstead & Reynolds on Agency, 16th ed, Sweet & Maxwell, London, art 76 at 402. Beach relied upon decisions such as Re Hampshire Land Co [1896] 2 Ch 743, J C Houghton & Co v Nothard, Lowe & Wills Ltd [1928] AC 1 and Belmont Finance Corporation Ltd v Williams Furniture Ltd [1979] 1 Ch 250 for the proposition that where directors of a company are acting in total fraud of the company their knowledge is not to be imputed to the company. Those cases stand for the propositions that in a claim by a company against directors, who have conspired to defraud it, the knowledge of the conspiring directors is not imputed to the company because it would be irrational to do so: Belmont Finance Corporation Ltd (at 261-262); and that, where a third party claims a company is estopped by conduct amounting to acquiescence, the knowledge of directors acting in fraud of the company and outside their authority will not be treated as knowledge of the company, for reasons of justice and commonsense: J C Houghton & Co (at 14-15 and 19); see Beach Petroleum NL v Johnson (1993) 43 FCR 1. Such claims are quite different from those where solicitors are seeking to establish a defence of fully informed consent.
30. In the present case, Mr Carolan was acting within the scope of his actual or apparent authority at least when the initial meetings with Messrs Routley and Ko were arranged and took place. And for the reasons already given in relation to Mr Doherty's conduct, those initial meetings were critical to the effectuation of Ms Garrett's and Mr Renauf's purpose. In accordance with what was said in Beach Petroleum NL v Kennedy at [473]-[474], to the extent there is a fraud exception for the imputation of knowledge which is available in a claim for knowing assistance, it does not disentitle Mrs Anderson from imputing to Patersons the knowledge of Mr Carolan at least at those early meetings, because he was acting within the scope of his actual or apparent authority. And, for the reasons given in relation to Mr Doherty, even at that early stage it should have been clear to him that Ms Garrett and Mr Renauf were engaged in a dishonest and fraudulent breach of fiduciary duty to Ashington.
31. Further to the above, the same result is reached by the application of rules of agency. Mr Carolan was, on 2 and 5 October 2009, acting within his actual or ostensible authority as an employee of Patersons. As explained when dealing with Mr Doherty, the initial meetings with Messrs Routley and Ko were indispensable to the success of Ms Garrett's and Mr Renauf's plans, and even at that very early stage, a reasonable person in Mr Carolan's position would have known that Ms Garrett and Mr Renauf were engaged in a dishonest breach of duty to Ashington.
32. Thus were it necessary to do so, we would conclude that ground 17 is made out.
33. Ground 18 and paragraph 4 of the notice of contention concern vicarious liability. This issue is doubly contingent in light of the reasons above. It is also an area which is unsettled. The question was not addressed by the High Court in Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd: see at [5], [64]. Most recently, in CCIG Investments Pty Ltd v Schokman Edelman and Steward JJ explained the three different ways in which the term "vicarious liability" has been used in law. Some support for the conclusions already reached may be found in the principles of vicarious liability, insofar as the arrangement and participation in the meetings on 5 October 2009 were the product of "the ostensible performance of [Messrs Carolan's and Doherty's] work", or were "committed under cover of the authority [Messrs Carolan and Doherty] held out as possessing or of the position in which [Messrs Carolan and Doherty are] placed as a representative of [Patersons]": see Deatons Pty Ltd v Flew (1949) 79 CLR 370 at 381; [1949] HCA 60 and CCIG Investments Pty Ltd v Schokman at [33] and [58]. However, we consider that it is not appropriate to express any concluded view on this doubly contingent issue, which is of general importance, and should be reserved for determination in a case in which it matters.

The claim against PPB (grounds 23-26)

1. The primary judge rejected the claim for liability for knowing assistance against PPB at [2148]-[2157]. The reasoning is obiter, because once again her Honour proceeded on the basis, contrary to her finding, that Ms Garrett and Mr Renauf owed fiduciary obligations. Even making that assumption, favourable to Mrs Anderson, the primary judge rejected the claim against PPB for knowing assistance, on the basis that it had not been established that PPB had the requisite knowledge of dishonest breaches of fiduciary duty.
2. Her Honour observed at [2149] that: 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 … 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, recognizing 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. But against this, her Honour said at [2152] that: 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.
4. The primary judge then said at [2153] that it was "telling" that it was not until 27 November that Mr Lord of PPB spoke to Mr Anderson about removing Ashington as trustee and manager and the Parissen proposal, when PPB had been involved in the proposal for almost two months, and where there were open lines of communication between the two men on other topics, including Hamton, creditors and seeking updates. That appears to amount to an acceptance of Mr Anderson's evidence mentioned above that he had not been informed of the proposal to remove Ashington until then.
5. However, her Honour concluded that although she "had no little hesitation on this issue", 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": at [2157]. The reference to 6 October is best understood as a typographical error for 16 October, being an email of that date to HESTA from its adviser Mr Leigh Gavin, which was reproduced at [2155]: 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. (Emphasis added by primary judge.)
6. In this Court, PPB emphasised that the superannuation fund investors were resisting the call upon the remaining $6 million of uncalled capital in ADF2, that Investec was "no mere paper tiger" but was actively threatening enforcement of its security, that Investec had, on 7 September 2009 pursuant to its power of attorney, called upon the remaining unpaid capital, as a result of all of which "it could have escaped no one's notice, certainly not that of the super fund investors, that a catastrophe was imminent without a further injection of funds, and they could possibly be ensnared in litigation with Investec itself".
7. PPB's submissions addressed Mr Block's email to Mr Carson of 6 October 2009: 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 within 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 including the new mgt team, PPB, the major investor and perhaps existing investors …
8. Although there was a meeting between Ms Garrett, Mr Renauf and Mr Block on 1 October 2009 concerning the investors' attitude to the Stonington Capital Raising, it was said that there was "no evidence of any further meeting or communications between on the one hand Ms Garrett and Mr Renauf and on the other PPB, between 1 October and 6 October". It was on that basis that PPB invited the Court to consider Mr Block's email of 6 October 2009 to Mr Carson, copied to Messrs Lord and Parbery, as "a record of what Mr Block understood coming out of the meeting on 1 October".
9. But this cannot be reconciled with the contemporaneous documents. First, counsel was directed during the hearing to an email from an executive assistant at Ashington to Investec at 5.28pm on Friday 2 October 2009 stating "Nicki has just sent me a text; her meeting with PPB is running longer than expected", and accepted that in fact there was evidence of meetings involving PPB and Ms Garrett or Mr Renauf in the period between 1 and 6 October. Secondly, there is Ms Garrett's own email of 2 October to Mr Doherty referring to the potential opportunity, which Mr Doherty used to set up a meeting with Mr Routley the following Monday, and which concludes: 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.
10. Thirdly, Mr Renauf was asked by Mr Block by email on the afternoon of Sunday 4 October "Any luck getting ahold of those docs as yet?", to which Mr Renauf answered that evening that he had confirmed with Ms Briggs that the information would be provided on Monday morning and added "As you are aware Nicki and I will be in Melbourne tmrw meeting with prospective investors and will provide an update on Tuesday". This latter exchange, to which Ms Briggs was copied, was capable of being understood as confined to matters within the Patersons Mandate, but it is also suggestive of an updating communication with PPB following the meetings in Melbourne.
11. In the absence of any testimonial evidence from Ms Garrett and Mr Block, the inference is inescapable that PPB was meeting with Ms Garrett and Mr Renauf, including on the afternoon of Friday 2 October, to discuss the strategy of establishing Newco, which would "replace Ashington as the Manager of these Funds and receive the fund management fees". PPB was also being told that it would be updated following the meetings in Melbourne.
12. When on the evening of 6 October 2009 Mr Block described the position to Mr Carson, and said that "discussions have been held with", among others, "Alter Family" and "Acorn - Rob Routley has expressed interest as well" and "All (particularly the Jewish connections) have expressed comfort in seeing ABL & PPB involved", there is no reason to doubt that Mr Block knew those things because Ms Garrett or Mr Renauf had told him of the meetings in Melbourne the previous day.
13. As early as 6 October 2009, it is tolerably clear that a person in Mr Block's position knew facts and circumstances which would indicate to an honest and reasonable person that Ms Garrett and Mr Renauf, in seeking to remove Ashington and replace it with Newco, were engaged in a dishonest and fraudulent breach of duty to Ashington.
14. On 16 October at 5.51pm (the Friday of the week following the meeting on Monday 5 October) Mr Block sent a "Key Issues" document to Messrs Routley and Ko, copied to Ms Garrett at her Gmail address. Under the heading "Fund level issues", the memorandum identified a series of breaches of trust by Ashington Capital, including the call of $14 million of capital for use contrary to a side agreement negotiated on behalf of HESTA and the payment of interest to Investec from funds held on sub-trust which were transferred into the ADF2. The document then dealt with the consequences as follows: The removal of the Trustee has been investigated by our lawyers, Arnold Bloch Leibler (ABL). They have advised us the Trustee can be summarily removed from its position upon a circular resolution of members holding at least a 75% majority. We note that our clients have indicated their willingness to support such a move, in light of a revised proposal. The Development Management Agreements are a more problematic area however. The Development Management Agreements, have been entered into by ACL and Ashington Management Limited in respect of each sub Trust. They contain a code for breaches for monetary or non monetary reasons, although they allow for cure periods, depending on the nature of the breach. We note that whilst there is a significant list of breaches of the Trustee agreements, we are not as clear on the breaches of the Development Management Agreements. We have sought ABL's advice in this regard and we note the following 2 options: A. Voluntary removal of the Manager; B. The breach of Trust may allow a Court application under common law, for the removal of both the Trustee and the Manager under the agreement, as they are essentially the same entities (ie same directors, same ownership etc). The Court option will add time, cost and no guarantee of success, so we clearly favour the first option. Alternatively, in the event a recapitalisation proposal acceptable to existing investors is able to be negotiated with interested parties, the appointment of a Provisional Liquidator to ACL could be used as a mechanism to [e]ffect a restructure/recapitalisation with the support of investors. Given the fundamental and serious breaches of duty of the Trustee, together with the financial position of ACL, we 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.
15. Thus, no later than 16 October it must have been clear that what was proposed by Ms Garrett and Mr Renauf was not supported by the directors and owners of the Ashington companies. That was why PPB was spending money to obtain advice from Arnold Bloch Leibler to advise on the availability and strength of solutions to cause Ashington Capital and Ashington Management to be removed as trustee and manager.
16. It was also put on behalf of PPB that it believed that all the superannuation investors wanted the removal of Ashington. There are difficulties with that proposition, which rolls up a number of primary facts, because it is one thing to be dissatisfied with a trustee and to desire its removal, and it is another to be at a stage where a resolution can be passed removing the trustee and replacing it with another. But even taking that proposition at its highest, the unimplemented decision of unitholders to remove the trustee does not excuse or absolve PPB from assisting a breach of the duties owed by Ms Garrett and Mr Renauf to Ashington. Nor does it render those breaches any less dishonest or fraudulent.
17. It was put that from the perspective of PPB, its clients needed to be "rescued from a dire situation", with Investec threatening to enforce its security. Thus it was put orally: this might suggest that PPB was put on notice of a breach of fiduciary obligations, assuming those obligations exist. But it requires more, in my respectful submission, to establish knowledge in the relevant sense of the dishonesty of Ms Garrett and Mr Renauf. Again, it is not inconsistent with an honest, well-intentioned effort at trying to preserve the investment of the super fund investors, and Ms Garrett and Mr Renauf might've sought to stay in their roles after a change of management in ADF and ADF2.
18. It was also said that "in so doing, PPB was not on notice of anything suggesting fraud or dishonesty on the part of Ms Garrett and Mr Renauf. It was simply acting in the interests of its super fund investor clients". It was put that PPB's position resembled that of Mr Clowes in Consul Development, principally because a prima facie reasonable explanation was provided by Ms Garrett and Mr Renauf.
19. One threshold difficulty with this submission is the seeming acceptance of Mr Anderson's evidence that he was not told about the investors' desire to replace Ashington until 27 November 2009, which is difficult to reconcile with anything other than a desire to keep the Parissen proposal secret from him. Another is an email of 17 November 2009 from Mr Winterbottom, a partner of KordaMentha, to NAB and the solicitors acting for the bank reporting on a meeting with "Nicki Garrett and Sam Renauf this afternoon". He explained that "Nicki and Sam outlined the broad terms of the [Parissen] proposal as follows" and the first two bullet points were: Seeks to recapitalise and restructure ADF2 and ADF1 (including Double Bay) and the broad proposal has been sent in draft to the investors, PPB and Investec. Ashington is not aware of the proposal, and [Albany] want to keep it that way at present, as it involves removing the Trustee and Manager. (Emphasis added.)
20. The email went on to describe a call Mr Winterbottom had received from Mr Ko in the following terms (summarised by the primary judge at [963]): He broadly confirmed the proposal outlined above, although added that the current proposal has the Banks capitalising interest after the first 12 months (he said this is "negotiable"(?)), however he mentioned that once the DA was achieved they hoped the SPV was then capable of being refinanced. He met with Investec today at length and said that Investec supported their proposal and had rejected the Wingate proposal (which does not get Investec repaid fully on Day 1). Mr Ko stated that he was reluctant to provide the proposal to us at this point as he is aware St George is a lender to other parts of the Group and is concerned that the Company may be told about the proposal before they are ready to disclose it (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 [Parissen] proposal). He asked whether St George would undertake to keep the proposal confidential … (Emphasis added.)
21. There is no reason to doubt the accuracy of a contemporaneous email of a senior officer of KordaMentha relaying commercially sensitive information to his partners, his clients and their lawyers.
22. That evidence falls short of directly proving that PPB (as opposed to Ms Garrett and Mr Renauf) knew that the proposal was to be kept secret from Mr Anderson, although it seems unlikely that this would not also be something of which PPB was aware. If so, then PPB's knowledge that the proposed removal was being kept secret from Mr Anderson is difficult to reconcile with PPB merely being on inquiry that Ms Garrett and Mr Renauf were breaching their fiduciary duties by propounding the removal of the Ashington companies.
23. But ultimately this issue comes down to PPB's knowledge that Ms Garrett and Mr Renauf were senior employees of Ashington charged with the Stonington Capital Raising. This was not merely a case where PPB was put on inquiry as to whether Ms Garrett and Mr Renauf might be breaching their obligations to the Ashington companies. This is a case where the essence of the proposal was for Ashington Capital and Ashington Management to be replaced by entities to the benefit of, inter alia, Ms Garrett and Mr Renauf. PPB knew that when Ms Garrett and Mr Renauf were advancing that proposal, they were senior employees of Ashington. And they knew that the Ashington companies had not decided voluntarily to step aside. It may be inferred that they also knew that the proposal was being kept secret from Mr Anderson. An honest and reasonable person in the position of PPB would know that Ms Garrett and Mr Renauf were engaged in a dishonest and fraudulent breach of the duties they owed to the Ashington companies. It is no answer that PPB was well intentioned and acting in the interests of the super fund investors. In Australia, it is not necessary for the plaintiff to show that the knowing assistant was itself dishonest.

Causation - Notices of contention

1. At [2667]-[2670] her Honour addressed causation, in the context of the breach of contract by Ms Garrett and Mr Renauf. Her Honour found that there was a chance that the Stonington Capital Raising would have succeeded if Ms Garrett and Mr Renauf had adhered to their duties. Her Honour reasoned as follows: 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. 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). 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. 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).
2. The finding that the breach of duty by Ms Garrett and Mr Renauf caused the loss of the opportunity to complete the Stonington Capital Raising was challenged by notice of contention. PPB took the lead in advancing these submissions on appeal, as it had done at trial, with all other respondents save for Patersons joining this challenge.

PPB's submissions on causation

1. At [2538]-[2566] the primary judge summarised PPB's elaborate submission to the effect that entry into the Investec Stonington Facility would have itself been a breach of trust, such that in the determination of equitable compensation it was not permissible in the counterfactual analysis to proceed on the possibility that either the Patersons Mandate would have succeeded or the Wingate proposal have been accepted. It had been pleaded that Ashington Capital had behaved so imprudently in entering the Investec Facility that it was not entitled to be indemnified from trust assets in respect of its liability. It was therefore said to follow that Ashington Capital could not, without the informed consent of all unitholders of ADF2, borrow or raise funds in its capacity as trustee of ADF2 to refinance the Investec Stonington Facility, because such conduct would itself constitute a breach of trust involving the preferment of its personal interest over those of unitholders.
2. PPB's challenge to the finding of causation did not arise dispositively because her Honour's findings on liability were confined to the common law breaches by Ms Garrett and Mr Renauf. Nonetheless, her Honour found that causation would have been made out, and made the following observation at [2671] about PPB's submission: 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.
3. It is convenient to elaborate on her Honour's reference to "the plaintiff's pleading complaint" immediately, not merely in order to expose her reasoning, but also because the procedural history of this point bears upon the resolution of PPB's notice of contention.
4. The "plaintiff's pleading complaint" turned on an amendment to PPB's defence granted on 22 March 2021 (which was Day 23 of the trial, after the conclusion of the evidence, and adopted a point raised by an amendment to Patersons' defence, filed on 17 March 2021, also after the conclusion of the evidence) reproduced by the primary judge at [1602] as follows: [PPB] 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 subparagra[p]hs 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 …
5. Mrs Anderson said in her written submissions that PPB had not identified a term of the trust instrument which would have that result, and PPB relies on that as the "pleading point", saying that it was unnecessary to do so. An alternative approach to understanding what was meant by her Honour at [2671] is to read it as a shorthand for the response to PPB's point, as summarised at [1604]: 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.
6. It is true that after contracts to acquire Stonington were exchanged and before settlement, there was a view within Ashington that it would be better to walk away, even with the consequence of losing millions of dollars paid by way of deposit. In particular, Ashington's Chief Financial Officer, Mr Steel, had circulated an email on 27 December 2008 (reproduced by her Honour at length at [105]) to the effect that "we are not in a position to realistically meet the covenants that will be in place for the duration of the Mezz facility", and including the following simple and effective summary of the difficulty: 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! … So what are you recommending? We walk from the Stonington deal and focus on rescinding the contract to get out [sic] $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.
7. The acquisition was completed despite Mr Steel's views. Mr Anderson addressed this in his evidence, and in his cross-examination said: 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.
8. In oral address to this Court, PPB accepted the accuracy of the $12 million to which Mr Anderson referred (saying it represented a deposit which had increased to $9.1 million plus other transaction costs).
9. The argument was put thus when the appeal was heard: having lost the right of indemnity in respect of the Investec Stonington facility the Stonington capital raising would have involved borrowing, as trustee, in a manner that would permit recourse to the assets of the trust in order to discharge a liability owed by ACPL in its own right and so a Stonington capital raising would itself have been a breach of trust as it would have involved the exercise of any right or power to borrow as trustee in a manner that preferred the interests of ACPL in its own right over those of the unitholders.
10. There is no suggestion in September and October 2009, when Patersons was retained by Ashington Capital to raise the funds, that there was any appreciation by any one that there was a breach of trust in doing so. Investec did not suggest that Ashington Capital could not look to trust assets, and neither did the superannuation fund investors or their adviser PPB. PPB confirmed when the appeal was heard that the submission was advanced as a question of law, rather than something which contributed to the probabilities of the Stonington Capital Raising succeeding or failing: WHITE JA: …I had thought you were putting it on the latter basis [scil, as a matter of law]. NG: No, your Honour's quite right. I'm saying that the reason why the Stonington capital raising could not be - if I'm right that the Stonington capital raising would've been in breach of trust, the reason I say it could not form an integer in the counterfactual or provide the linchpin of the chance is that the notion of a counterfactual in which the trustee is rewarded for a breach of trust is something that would be abjured by equity. That's the legal proposition. The factual proposition then is if [there is] no Stonington capital raising in the counterfactual, then no valuable opportunity lost.
11. Thus the premise to the submission is that there has been a dishonest breach of fiduciary duty, knowingly assisted by a third party. The submission is that, even so, the plaintiff is deprived of recovery in accordance with what would otherwise have occurred because there was a separate breach of trust. Counsel confirmed that the submission was maintained no matter how dishonest the breach of fiduciary duty was, or how extensive the assistance by the third party was, and that arose as a matter of public policy. Counsel confirmed that his research had uncovered no authority in support of the proposition.

Not put to Mr Anderson

1. The first reason PPB's submission must be rejected turns on the course of the trial. Let it be assumed, favourably to PPB and the other respondents, that the point was available on the pleadings, despite the misgivings of the primary judge. The premise is that it was (a) a breach of trust by Ashington Capital to unitholders of ADF2 to complete the purchase of Stonington, and (b) a sufficiently significant breach, such that Ashington Capital lost its right of indemnity from trust assets for its liability to Investec. It is unnecessary for the purposes of resolving this appeal to address the controversial status of what was said in Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd (in liq) [2002] NSWCA 29; [2002] ATPR 41-864 (upon which PPB relied) as to the circumstances when that indemnity (which is the result of the interaction of judge-made law, statute notably s 59(4) of the Trustee Act 1925 (NSW) and the terms of the trust instrument) is available; cf QB4 Capital Pty Ltd v Guardian Securities Ltd [2023] FCAFC 72 at [90]. On any view of the matter, if Mr Anderson's decision to acquire Stonington was such a serious breach of duty that Ashington Capital forfeited its right of indemnity, as a matter of fairness, that should have been put squarely to Mr Anderson, who as noted above proceeded with the transaction notwithstanding the serious concerns voiced by the Chief Financial Officer.
2. Yet counsel for PPB did not cross-examine Mr Anderson on this issue. He pointed to the cross-examination by counsel for Ms Garrett and Mr Renauf on a different topic, but she did not go so far as to put it to Mr Anderson that it was a breach of trust for Ashington Capital to enter into the Investec Stonington Facility.
3. The cross-examination relied upon was as follows: Q. … You understood when you read this advice in May 2009 that the Investec facility and the grant of the power of attorney was inconsistent with the obligation held by ACL as a trustee of ADF2 to exercise its trustee powers in the best interests of ADF2 unit holders? A. We did exercise our powers in the best interests of ADF2 unitholders. Q. You understood when you read this letter of advice on 31 May 2009 that the grant of the power of attorney to Investec under the facility [that] equated to a breach of obligation, didn't you? A. No. Q. You understood when you read this advice on 31 May 2009 that the grant of a power of attorney to Investec under the facility equated to a breach of trust? A. No.
4. All of this was directed to a letter of advice from Mallesons acting for Ashington dated 31 May 2009 (it is summarised by her Honour at [164]-[165]). Counsel accepted, correctly, that the questions were not directed to Mr Anderson's state of mind at the time of entry into the Investec Stonington Facility. Nonetheless, it was said that one aspect of the cross-examination was that "irrespective of state of mind of particular points in time, the Investec facility and the grant of a power of attorney was a breach of trustee obligations".
5. We disagree. If this point be good, it was necessary to confront Mr Anderson with the proposition that it was a serious breach of trust by Ashington Capital to complete the acquisition in February 2009, and that by doing so, and avoiding the risk of losing part or all of the deposit of $9.1 million and the certainty of losing all value from the other transaction costs, Ashington Capital was committing a breach of trust which was so serious that it would not be entitled to have recourse to trust assets in the ordinary way to meet its liability to Investec. It fell short of amounting to a finding of dishonesty, which would attract the principles in Bale v Mills (2011) 81 NSWLR 498; [2011] NSWCA 226 at [66]-[67] and Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [67]. Nonetheless, as this Court recently observed in Western Sydney University v Thiab (2023) 111 NSWLR 241; [2023] NSWCA 57 at [170]: As a general but important rule, judges should refrain from making comments seriously critical of witnesses where at least the gist of any adverse criticism has not been put to them and where they have not been given an opportunity fairly to respond.
6. These rules of practice do not apply where a witness has "full notice beforehand that there is an intention to impeach the credibility of the story which he is telling", in which event it may not be necessary to "waste time in putting questions" upon it: Browne v Dunn (1893) 6 R 67 at 71; Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219 at 224-225; DEJ v Council of the New South Wales Bar Association [2021] NSWCA 72 at [171]-[173].
7. So far as we can see, the point was not articulated, at least in any formal way, until amendments were granted on 17 and 22 March 2021, after the evidence had closed (the Court was not taken to anything in the record which suggested it had been raised earlier). It is not surprising that his cross-examination appears to have been conducted without this issue in mind.

The superannuation fund investors approved the Stonington Capital Raising

1. The pleaded answer to PPB's new case was that "by 30 September 2009, ADF2 Investors were aware of all material facts and circumstances" and were being advised by PPB and Norton Gledhill, and "with that awareness, on or about 30 September 2009, ADF2 Investors approved the pursuit of Stonington Capital Raising and would have approved the Stonington Capital Raising or any raising of funds by ACPL as trustee of ADF2 for the purpose of relaying the Investec Stonington Facility". The factual basis of that allegation is in the approval of the Patersons Mandate, and the 14 day moratorium.
2. The only response PPB advanced was that it was necessary for their consent to be fully informed. This is a factual matter which cannot be reduced to a precise formula: Maguire v Makaronis (1997) 188 CLR 449 at 466; [1997] HCA 23. Here, the superannuation fund investors were sophisticated investors, and were armed with professional advice, and were fully aware of the uncalled capital covenants. It is true that Ashington Capital did not originally disclose the terms of the Investec Stonington Facility, and when details of the covenant on uncalled capital emerged, there was surprise and dismay (see primary judgement at [189] and [194]-[196]) but it was disclosed at a meeting with investor representatives on 12 June 2009. Some of the notes taken at that meeting (summarised by the primary judge at [200]) recorded 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 and that Ashington may have over pledged the uncalled equity commitments (which was the "main concern" for investors). This is why the proposed 13th drawdown on 29 June 2009 was cancelled (so as to "ensure that we avoid the risk of breaching the Stonington lending covenant", as Mr Anderson told investors). That is why a paper circulated by Mr Anderson to superannuation fund investors on 10 July 2009 stated 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 Stonington Facility funds covenants and thus was in breach of those facilities. Indeed, this was why PPB was appointed to advise the superannuation fund investors, and why Ms Garrett was appointed as a new avenue of communication between Ashington and those investors. And, further to the above, immediately before the events giving rise to this litigation, the superannuation fund investors approved a 14 day moratorium, in order to give the Stonington Capital Raising a chance to succeed.
3. For those reasons, the superannuation fund investors gave fully informed consent to the Stonington Capital Raising.

The submission produces incoherence and leaves dishonest fiduciaries and their accessories with a windfall

1. Thirdly, the point proves far too much. In the order of one third of the purchase price of Stonington was paid for with money borrowed by Ashington Capital. According to PPB, Ashington Capital could not look to the trust assets in order to meet that liability. Counsel eschewed the suggestion that the consequence was a $10 million gift to the assets held on trust for unitholders. Accordingly, in oral submissions PPB acknowledged that Ashington Capital might have a resulting trust over the property to the extent of its contribution to the purchase price. But how then would this affect the assessment of causation? It went beyond its notice of contention, and was not explored in submissions.
2. But the premise is unsound. Let it be accepted that entering into the Investec Stonington Facility was a breach of trust. Entering into a different facility, so as to discharge the Investec Stonington Facility, would be conduct ending the breach of trust. Why should, as a matter of legal policy, the amount to which those who are required to account to the beneficiary of a trust derive an immunity by reason of a separate breach of trust by a separate fiduciary?
3. Another difficulty is that, as it happens, the plaintiff is (an assignee of) a trustee, and the counterfactual assessment of compensation turns on what the trustee would have done. If the proposition for which PPB contends is the law, then dishonest employees of most companies (banks, finance companies, and other investment companies) which are not trustees are held to account more rigorously than dishonest employees of trustee companies. Likewise, the accessories of dishonest employees of companies which are not trustees are held to account more rigorously than the accessories of dishonest employees of companies which are trustees. There is no good reason for that outcome.
4. Further, the proposition for which PPB contends is impossible to reconcile with the discretionary aspects of equitable relief. Relief may be withheld in whole or part, or granted on terms, or denied including for unclean hands. All that accords with well-developed principles. The all-or-nothing rule propounded by PPB, that the determination of the amount for which a fiduciary or a third party is liable to account can never include conduct which is in breach of trust, irrespective of the seriousness of the breach of fiduciary duty and irrespective of the plaintiff's breach of trust, needs to accommodate those principles, but is unable to do so.
5. At the level of authority, there are statements to the effect that unlawful conduct by a plaintiff cannot be taken into account in an assessment of damages (for example, hypothetical conduct in breach of a court order: Talacko v Talacko (2021) 272 CLR 478; [2021] HCA 15 at [51]). But that is far removed from the present case, and to be fair it was not relied upon by PPB. The Court was told that researches had been undertaken and no authority could be located. We are unaware of, and PPB did not rely on, any authority that would require this Court when determining causation to put to one side the very conduct which PPB promised to seek to bring about, which Ashington Capital sought to bring about, and for which the superannuation fund investors gave a 14 day moratorium in order to permit the Stonington Capital Raising to take place.
6. Ground 1 of PPB's notice of contention must be rejected.

Ms Garrett's and Mr Renauf's breaches caused loss of a valuable opportunity

1. As noted above, the primary judge found at [2668] that the conduct of Ms Garrett and Mr Renauf caused the loss of the opportunity for the Stonington Capital Raising to be successful, in which case there was at least the possibility of Ashington Capital and Ashington Management continuing as trustee and manager and earning fees. Either by notice of contention or cross-appeal, the active respondents challenged the finding that any valuable opportunity was lost. In each case, the contentions are twofold. The first was that: the probability that the Stonington Capital Raising … would have occurred on the terms outlined in the Patersons Mandate … was so low as to be speculative, with the result that the appellant failed to establish that ACPL and/or AMPL had lost a valuable opportunity as a consequence of the alleged misconduct of the first to sixth respondents (cf [2668]-[2669]).
2. The second was that: even if the probability that the Stonington Capital Raising would have occurred on the terms outlined in the Patersons Mandate was not so low as to be speculative, the primary judge ought to have found that the probability that the Stonington Capital Raising would have enabled the businesses of ACPL and/or AMPL to operate as a going concern was so low as to be speculative, with the result that the appellant failed to establish that ACPL and/or AMPL had lost a valuable opportunity as a consequence of the alleged misconduct of the first to sixth respondents (cf [2668]-[2669]).
3. Some of the notices of contention proceeded to invoke her Honour's findings at [2775]-[2777] that the Ashington group of companies and relevant sub-trusts were not a going concern, and if not insolvent already were bordering on insolvency, that the position would not ultimately have been resolved by the Stonington Capital Raising, that the value of the business at 30 September 2009 was nil, that it was highly unlikely that the superannuation fund investors would have continued in future funds, that the superannuation fund investors would only accommodate something being salvaged if it did not require good money to be thrown after bad and resulted in prompt repayment, and her Honour's view that the appellant's calculations "had an air of unreality about them".
4. Mrs Anderson resisted all those contentions, and went on to challenge her Honour's finding at [2777] that the loss was nil.
5. We agree with the logic underlying the respondents' twofold attack on causation. The lost opportunity for which Mrs Anderson sued was not the opportunity to achieve the Stonington Capital Raising. That is because merely achieving the refinancing of Stonington (ie exchanging one second-ranking secured creditor for another) was not in itself of value to any Ashington company. As was pointed out when the appeal was heard, the valuable opportunity was the chance of Ashington companies continuing to manage a viable business so as to receive fees as trustee and manager. Mrs Anderson agreed, and acknowledged that while the Stonington Capital Raising was a "critical integer" in the continuation of the business, it was also necessary to establish that the absence of liquidity in the assets held by Ashington on trust could be reversed in the six month timeframe envisaged by the Stonington Capital Raising.
6. There is a measure of artificiality in separating whether there was the loss of a valuable chance at all and quantifying its value, as is evident from the elision by the respondents of the primary judge's reasoning on damages to support their contention that no opportunity was lost. However, conceptually the position is clear. The onus rested upon Mrs Anderson to establish, to the civil standard, that the breaches of duty by Ms Garrett and Mr Renauf caused loss in the form of a valuable opportunity. If so, then it was necessary to quantify that loss, a process which could include valuing possibilities which were quite unlikely to eventuate.
7. In light of the way in which the grounds in the notices of contention and cross-appeal have been formulated, that last point warrants elaboration. The assessment of loss falls to be undertaken in accordance with the principles stated by Deane, Gaudron and McHugh JJ in Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 at 643; [1990] HCA 20: If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high - 99.9 per cent - or very low - 0.1 per cent. But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages.
8. That approach was endorsed (in the context of statutory damages for a lost chance) by the joint judgment in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 350; [1994] HCA 4. There is no reason to think that the approach to the quantification of equitable compensation for loss occasioned by a breach of fiduciary duty would be any less generous than that available at common law or under statute, and indeed the Malec approach has regularly been followed in assessing equitable compensation: see for example Ramsay v BigTinCan Pty Ltd [2014] NSWCA 324; 101 ACSR 415 at [123]. In any event, the applicability of this approach was not in dispute in this appeal.
9. Even so, the passage in Malec is worth repeating lest its force be diluted by the references to "speculative" in the respondents' notices of contention, cross-appeal and submissions. The question is not whether the lost chance is "so low as to be regarded as speculative"; still less is it sufficient to establish that the chance is one that is merely "speculative". It is wrong to neglect the context in which the word "speculative" is used. As a matter of ordinary parlance, a chance may be "speculative" and yet be valuable. A company developing a drug that only has a 20% chance of being approved for use is most likely a company which will never make a dollar in revenue, and an investment in its shares might fairly be described as "speculative" to a retiree contemplating their purchase, but that is far removed from the remote possibilities to which the High Court referred in Malec and Adelaide Petroleum. In short, the test framed by the High Court needs to be read in context - which is to say nothing more and nothing less than what was said by the Judicial Committees of the Privy Council in Commonwealth v Bank of New South Wales (1949) 79 CLR 497 at 637-638; [1950] AC 235 at 308 and Mutual Life & Citizens' Assurance Co Ltd v Evatt (1970) 122 CLR 628 at 643; [1971] AC 793 at 809, namely, that all judicial reasoning must be understood secundum subjectam materiam (according to the subject matter), an uncontroversial proposition extensively illustrated by the decisions collected in Vanderstock v Victoria [2023] HCA 30 at [274].
10. Read in context, it is clear that the law takes into account all probabilities which materially impact upon the assessment of loss, unless the probability of the future event is so close to certain that it is practically certain and thus the risk that it does not eventuate can be ignored, or unless the probability of the future event is so low that it is close to certain that it will not occur, such that the future event can be ignored.

Mrs Anderson's counterfactual

1. Would the Stonington Capital Raising have permitted the Ashington business to continue in the medium term? Mrs Anderson's case was advanced by a "Refinance Counterfactual" aide memoire (MFI 6), which relied in part on figures taken from the KordaMentha report prepared for the banks dated 23 November 2009. Those figures were included as part of "Management's Recapitalisation Proposal", made in the context of the Wingate proposal. Nevertheless, they were informed by communications with Mr Steel (see for example his email of 11 November 2009 reproduced by the primary judge at [928]) and there is no reason to doubt that they represented a contemporaneous assessment by external professionals, made for the benefit of the firm's clients, of the likely cashflows involved in that proposal.
2. Mrs Anderson identified inflows of $15 million from the Stonington Capital Raising, $6 million of uncalled capital (corrected in oral submissions to $5,625,000), and $18.5 million from the sale of Wylde Street. The $18.5 million for the sale of Wylde Street was justified by an "as is" valuation made by Colliers on 23 September 2009 at $19 million, an $18 million offer received on 23 November 2009 from MV Developments, and the sale that in fact occurred in early 2010 at $18.5 million once Parissen had taken over as trustee and manager. The nett effect was inflows of $18.5 million into ADF and $20,625,000 into ADF2.
3. Mrs Anderson's table also identified outflows of $11 million and $10,100,000 repaying Investec's Wylde Street and Stonington facilities respectively. In addition, there were payments of $2,600,000 to repay the Stonington vendor finance, $1,300,000 for other Stonington creditors and $500,000 for unsecured Double Bay creditors. All of those outflows are found on KordaMentha's report at p 41, as is the amount of $7,300,000 for interest and debt repayment at Double Bay (divided as $1,875,000 for ADF and $5,475,000 for ADF2). In addition, the appellant allows $2,700,000 to develop Stage 1 of Stonington and $300,000 to be repaid to Westpac. (This latter element departs from the proposal in the KordaMentha report, which proffers in effect $2,300,000 to Westpac, and to which we shall return.)
4. The result on the appellant's table is outflows of $35,800,000, comprising $13,000,000 for ADF and $22,800,000 for ADF2, leaving ADF in a position $5,500,000 better, but ADF2 $1,800,000 worse off (correcting for the overstated $375,000, ADF2 would in fact be $2,175,000 worse off). The appellant's table then repays $2,300,000 from ADF to ADF2 by the inter-trust loan (to which reference is made on p 42 of the KordaMentha report), as a result of which each of ADF and ADF2 has surplus funds, of $3,200,000 and $125,000 respectively, from which management and trustee fees could be paid.
5. The point of the exercise was to demonstrate that there was a real chance of the Ashington group surviving in the six month period past the November 2009 crisis, and of having liquidity injected into it so that the funds management business could continue to operate and yield fees.
6. Mrs Anderson also acknowledged that there were critical steps in the chain of events that had to be achieved in order for the outcomes outlined above, or something closely comparable to them, to be achieved. One of those critical steps was achieving the Stonington Capital Raising in the timeframe in the term sheet. Another was the superannuation fund investors providing the remaining uncalled capital of $5,625,000, which the appellant acknowledged, properly, was a "critical part of getting to the end of the crisis period". If it were shown that there was no real prospect of either or both of those events occurring, then the recapitalisation would fail. Even if that were not shown, then an assessment of the likelihood of those events occurring would be an element of the quantification of loss.

Overview of reason for accepting Mrs Anderson's counterfactual

1. As will be seen in more detail below when quantifying loss, we agree with the conclusion reached by the primary judge that the breaches of duty by Ms Garrett and Mr Renauf caused the Ashington companies to lose a valuable opportunity. By way of overview, we agree that the chance of achieving the Stonington Capital Raising was far removed from one which was "speculative" in the Malec sense. We agree with her Honour's finding that the investors had not decided to remove the Ashington companies as trustee and manager by 30 September 2009, a finding which turns in part upon the cross-examination of the respondents' witnesses. We also agree with her Honour's rejection of the submission that the superannuation investors would not contribute the outstanding amount of uncalled capital.
2. Ultimately, Mrs Anderson's "Refinance Counterfactual" involves, in quick succession, the Stonington Capital Raising, the sale of Wylde Street and the provision of uncalled capital in the period from October 2009 - March 2010. The timing is critical, because the Stonington Capital Raising, even if it were successful, was only for six months. There was little margin for error, and the negotiations would be conducted with the disadvantage that Ashington was obliged to move quickly, and was known to be obliged to move quickly. But if there had been no breach of duty, then the Stonington Capital Raising was eminently plausible, as was the sale of Wylde Street for $18 million (the offer in November) or $18.5 million (the amount achieved in 2010). We do not think one could conclude that it was so certain that the superannuation investors would refuse to pay the $5,625,000 of uncalled capital that there was only a speculative chance that the injection of liquidity would not fail, such that there was no valuable opportunity lost. Nor do we think it was certain or close to certain that Westpac would have refused to negotiate so as to permit Stage 1 of Stonington to be built. It is likely that Westpac would have sought to insist on some repayment of debt as soon as possible (as was explicit in the "Management's Recapitalisation Proposal" summarised above). How those negotiations would have proceeded is very difficult to assess. Even so, when regard is had to the various contingencies cumulatively, as they must be, we do not think the chance was very substantial, but equally, we are unpersuaded that it was so speculative that those liable to compensate Mrs Anderson should have no liability to do so.
3. The most important elements of the conclusion summarised above (including the feasibility of the Stonington Capital Raising, the provision of remaining uncalled capital by superannuation fund investors, the absence of a decision to remove the Ashington companies as trustee and manager, and the negotiations with bank lenders) are addressed in more detail, and by reference to the evidence and parties' submissions, in the sections which follow.

Reasons of the primary judge

1. The primary judge summarised the parties' submissions extensively at [2672]-[2774], and concluded that the loss would be nil. It is not necessary to summarise all of the submissions, having regard to the way Mrs Anderson's claim for damages is advanced on appeal.
2. It is however desirable to reproduce the entirety of the dispositive reasoning, which is [2775]-[2777]: Determination - Loss 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 ultimately 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 (which was a separate entity). 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. 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 funds management 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 fund investors (and financiers) would not have been prepared at least to accommodate this (provided, and this is the critical proviso, that it did not require good money to be thrown after bad; and from financiers' perspectives resulted in a prompt repayment of the facilities). As noted earlier, 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) and I consider that those scenarios had an air of unreality about them; but ultimately if I were to assess the loss for the purposes of an equitable compensation claim, I would have held that on the balance of probabilities 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 very brief respite) was very small (less than 10%; indeed I would put it at no more than 5% such were the dire straits in which the Ashington group was placed); that the likelihood of AOF3 proceeding within a timely fashion was also very small (noting that it had been deferred more than once already and must surely have been adversely affected to some extent by the reputational damage if ADF and ADF2 had produced losses; and the prospect 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 the amount awarded would have been no more than 5% of a calculation which assumed that, even if (to the contrary of the position it was in fact in at the time) Ashington was a going concern as at September 2009, all projects were sold or abandoned and there were no repeating funds. Mr Hall's 18 April 2019 report (at [63]) produces a negative figure for those assumptions (i.e., negative $5.8 million) even without considering issues such as the offsetting claims, such as the amount identified by KordaMentha as owing for the unpaid capital calls, which it quantified as $4.6 million but which the plaintiff's calculations put at a lesser figure of $2.6 million as determined by Mr Halligan in his sixth report). Thus, the loss ultimately would be nil. As it is, the issue does not arise on the findings I have made.
3. Her Honour added that in relation to the claim for damages for breach of contract against Ms Garrett and Mr Renauf, "broadly the same exercise would follow" save for the issue of nominal damages. Her Honour thereafter addressed nominal damages, concluding at [2791] that there should be judgment against each of Ms Garrett and Mr Renauf in the amount of $100.
4. The primary judge had anticipated those conclusions in the summary of her reasoning earlier in the judgment, where her Honour said at [1262]-[1263]: 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. 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.
5. As will be seen below, Mrs Anderson and Patersons both relied on the $10.6 million valuation mentioned in [1262]. Some of the respondents relied on aspects of those two paragraphs as well, notably, her Honour's reference to there being an "air of unreality" to the calculations. It seems likely that the words "it was no more than $930,000" are a slip, and it was intended to say "it was no more than $530,000", being the figure mentioned in the previous paragraph reflecting 5% x $10.6 million (being Mrs Anderson's second scenario).

Mrs Anderson's challenge to the reasoning of the primary judge

1. Mrs Anderson pointed to two main difficulties with the reasoning of the primary judge.
2. The first was that there was no reasoning for the conclusion in [2777] that the prospects of completing the Stonington Capital Raising in the requisite timeframe was "very small (less than 10%; indeed I would put it at no more than 5% such were the dire straits in which the Ashington group was placed)". The absence of reasoning was not a ground in itself. Rather, it was relied on in order to deprive the finding of the measure of deference which might otherwise accompany an evaluative conclusion made by a judge who has presided over a long fiercely-contested trial: see Maritime Union of Australia v Fair Work Ombudsman [2015] FCAFC 120 at [34] and the cases there cited, and Mistrina Pty Ltd v Australian Consulting Engineers Pty Ltd [2020] NSWCA 223 at [1], [102] and [107]. We are conscious of the deference to be given to the conclusion of a judge who has seen the evidence unfold, and to the fact that judicial reasons, however long, are invariably an incomplete account of the considerations leading to a conclusion: see Craig-Bridges v NSW Trustee and Guardian [2017] NSWCA 197 at [116], by reference to Lord Hoffmann's observations in Biogen Inc v Medeva plc [1997] RPC 1 at 45. Even so, we respectfully disagree with the conclusion that there was no more than a 5% chance of the timely execution of the Stonington Capital Raising, for reasons which will be explained below.
3. The second and principal challenge to this reasoning concerned her Honour's reliance on the opinions of the respondents' expert Mr Jeffrey Hall. There was no real dispute that there was a difficulty with the approach contingently taken by her Honour. The respondents made the point that Mr Hall's valuation was prepared on the basis of the plaintiff's case as it had been advanced at the time the report was prepared (for example, first respondent's written submissions at [90]; second and third respondents' written submissions at [118]), at which time the plaintiff's loss of opportunity case had not been fully developed. Mrs Anderson did not deny that her case changed, although she emphasised that it remained within the pleaded case, and that no respondent contended that what was being advanced on appeal was not available to be advanced having regard to the pleadings and the way the trial was conducted.
4. However, we accept Mrs Anderson's submissions on this point, which were in essence that (a) Mr Hall's valuation was based on how a reasonable purchaser would value the business as at 30 September 2009, (b) he would not look at any event after 30 September, (c) he did not take into account the possibility of the Stonington refinancing occurring: [T]he essential point is this: Mr Hall did approach it on the basis of how a reasonable purchaser would've valued the business as at 30 September and he was quite rigorous in his view that he would not look at any event after 30 September. He did not take account of the possibility of a refinance occurring. He agreed with that in cross examination. His approach, therefore, was a valuation of the failure case, not the success case. I showed your Honour the large part of his report that dealt with all the terrible things that had happened to Ashington between the middle of the year and 30 September. He drew a conclusion from that as an advisor to purchasers, as an advisor to people who buy companies, that any incoming purchaser would form the view that the company was doomed and so, one way or another, would value it at nil. That of course is to assume the chance against us. It's the failure case, not the success case. To Mr Hall's credit, when cross-examined, he accepted that an incoming purchaser could take a view that if the company got through the immediate crisis, it had an income stream that had a value. I put that to him and he accepted the proposition, he said, "Yes, that's a view a purchaser could take".
5. But it is quite clear that when valuing a lost opportunity, it is necessary to have regard to future possibilities, even possibilities which are unlikely to eventuate, so long as they are not so vanishingly improbable that they may be ignored. It follows that her Honour was in error insofar as she relied upon Mr Hall's opinions to conclude that the value of the lost opportunity was nil in [2776] and [2777].
6. Our conclusion reflects what was substantially common ground between Mrs Anderson and Patersons.
7. At trial and in the written submissions in this Court, Patersons took the lead role on damages. Patersons did not seek to defend all aspects of the reasoning at first instance. Indeed, making the assumption favourable to Mrs Anderson and contrary to its own position that it had been established that the breaches of duty caused the loss of a valuable opportunity, Patersons accepted that it was open to value that opportunity in the range of $800,000 to $1,600,000, representing a global discount of 80%-90% upon an $8 million starting point. Very broadly speaking, Mrs Anderson agreed with much of the methodology.
8. However, on the seventh day of the hearing of the appeal, all other active respondents advised that they did not agree with the submissions advanced by Patersons. Our conclusion on the quantification of equitable compensation roughly accords with what was common ground between Mrs Anderson and Patersons. We will explain why we do not accept the submissions advanced by the other respondents.
9. Having explained the way in which these issues were fought during the appeal, the most efficient way of resolving them is to do so issue by issue. The essence of the appellant's lost chance case involved five elements: (a) executing the Stonington Capital Raising in a timely fashion and receiving $15 million, (b) calling on and receiving $5,625,000 by way of the remaining uncalled capital from the superannuation fund investors, (c) selling the Wylde Street property for some $18.5 million, (d) using those liquid funds to pay all immediately pressing creditors so as to restore liquidity to the business, (e) not being removed as trustee and manager in the meantime. The second, third, fourth and fifth elements were to be achieved within the six month time-frame of the Stonington Capital Raising. Mrs Anderson said that thereafter, Ashington would be able to continue to conduct its funds management business, which in turn required consideration of the development and sale of Stonington, and what was to occur with the Double Bay property.
10. Rather than summarising the entirety of each party's submissions on each aspect of the above, and then addressing them, the most convenient course is to address each contentious element of that opportunity in turn.

Prospects of a successful timely Stonington Capital Raising

1. The nature of the respondents' submissions is illustrated by those advanced by Ms Garrett and Mr Renauf: The Plaintiff's burden was to prove that there was a realistic chance that an investor would lend $15 million to pay out two facilities in order to rank behind Westpac's expired facility in the hope that in 6 months Ashington could somehow raise $17.25 million to pay them back (without using construction finance to develop the site). This hypothetical investor would need to be unconcerned about the lack of audited accounts and by the financial position of the group as a whole, bearing in mind that many of the group's debts were cross-collateralised in breach of the promises made to investors. The hypothetical investor could not have been provided an equity stake or management rights - they would need to be comfortable taking a passive role in the investment. There was no realistic prospect of such an investor being found.
2. Patersons' submissions to substantially the same effect were that (a) the Stonington term sheet reflected the very high degree of risk involved, (b) the absence of an underwriter, and the obvious possibility that the raising might fail notwithstanding the expertise of Ms Garrett and Mr Renauf (who "could not perform miracles or overcome the inherent problems afflicting the Ashington business"); (c) Mr Shorrocks' honest belief that the deal could be completed in four to six weeks should be discounted because he was unaware of the full picture of Ashington's financial situation, the small numbers of sophisticated clients who might lend a minimum of $2 million as an investment in an unlisted property trust, and the absence of expert evidence from a financial advisor experienced with debt capital raisings; (d) the preliminary nature of the initial interest; (e) the limited weight to be drawn from the absence of discovery from Patersons; (f) the significance of the reputation of the manager to any prospective investor, and (g) the limited weight that could be given to an opinion that the property market had "rebounded strongly". Patersons' submissions concluded: Viewed objectively, it was improbable the Stonington Capital Raising would have been successful but for the impugned conduct. It is important in this respect to appreciate that "success" for these purposes was understood as substantially in accordance with the terms and within the timeframe contemplated by the Patersons Mandate. If nothing else, it is fanciful to think the necessary junk-bond style finance could have been raised within the 4-6 week period contemplated by the Patersons Mandate, having regard to the robust due diligence any prudent investor would have performed and the raft of acute problems that would have been revealed. On any view, the probability of the Stonington funding coming through within the necessary time frame, was very slim and her Honour's evaluative assessment of 5% was within a permissible range in that regard. In those circumstances, the appellant has demonstrated no error in the primary judge's evaluative conclusion that there was a 5% chance of Stonington Capital Raising succeeding. Moreover, the suggestion in this appeal that a 90% probability (or near certainty) should be allocated to this critical element of the appellant's counterfactual is plainly unrealistic.
3. Patersons had a fallback submission, against the possibility that this Court formed a different view than the primary judge concerning the prospects of the Stonington Capital Raising, namely, that the prospects of it succeeding were no more than 40%.
4. Patersons' submission in full was as follows: Even if this Court concludes the 10% chance attributed by the primary judge was too low (contrary to Paterson[s'] written submissions at [97]-[105]), Patersons respectfully submits that when regard is had to the full range of difficulties confronting that capital raising and the state of the evidence adduced by the Appellant, on any view, there could [be] no more than a 40% prospect of the Stonington capital raising being achieved within the necessary timeframe (i.e., the probability assigned by French J to a concluded agreement with Pagini Resources in Adelaide Petroleum). 90% is plainly unrealistic. In summary: (a) first, viewed objectively, it was a very challenging fundraising of high-risk mezzanine finance for an unlisted property fund; (b) second, any initial expressions of confidence must be contrasted with the limited information then known as to the depth of Ashington's financial and reputational problems and the understandable desire to achieve a successful outcome; (c) third, there is no evidence of the terms upon which alternative mezzanine finance could have been arranged aside from the Wingate proposal which contained crippling terms (including as to the timeframe of any draw down of any funds to pay out the Investec facility); (d) fourth, a fundamental problem with alternative mezzanine financing on the Appellant's counterfactual is it assumes ACPL and AMPL (and Mr Anderson) would have remained trustee and manager of ADF2, even though that was strongly opposed, rightly or wrongly, by investors (and other financiers of other facilities within the Ashington group); (e) fifth, it must be assumed that a hypothetical investor in the transaction who would have had the benefit of extended due diligence which undoubtedly would have revealed some of the financial and investor relations difficulties being experienced with the Stonington Property, and discouraged investment; and (f) sixth, having regard to these matters, the necessary timeframe of achievement was highly optimistic. (Emphasis omitted.)
5. We do not for a moment think that the chances of the Stonington Capital Raising succeeding in four to six weeks had Ms Garrett and Mr Renauf been doing the job they were paid to do instead of subverting their employer's business were 90%. However, we also do not think that they were vanishingly small, or anything like a remote possibility. We think that there were good prospects of success, exceeding 50%, for the following reasons.
6. Powerful evidence of whether or not the Stonington Capital Raising was likely to succeed but for the breaches of duty by Ms Garrett and Mr Renauf is found in contemporaneous documents and contemporaneous attitudes of people well-qualified to gauge the likelihood of its success which are unaffected by their breaches.
7. The terms of the Patersons Mandate were ultimately approved by Mr Anderson, who had the most powerful incentive for the refinancing to succeed. The mandate was accepted by Patersons, which would only achieve its success fee if the funds were raised. The actions of well-informed participants at the time carry weight. As it was put orally, "People independent of the wrongdoing, and I point particularly to Mr Shorrocks, [were] confident it would happen", and there was no evidence to displace that contemporaneous confidence.
8. The respondents emphasised the fact that the proposed refinance was risky. Indeed it was. But that was reflected in the very high return that was offered for a short-term investment. The success fee was calculated in order to entice the interest of the intermediaries who might connect Ashington with investors interested in an unlisted property trust with a valuation and development consent, but with existing lenders who were in default, and without up to date audited accounts. It is quite plain that any potential investor would rapidly discover the existing defaults and existing indebtedness, which were after all the occasion for the investment opportunity. Contrary to some of the respondents' submissions, the question is not whether the refinance involved risk. The question is whether there was a market for a risky, high return investment constituted by the Stonington term sheet. Some short-term investors have an appetite for high yield, high risk investments. The respondents are correct to point to the absence of independent expert evidence as to the attractiveness of the offer in market conditions as they were in late 2009. But that does not stand in the way of conclusions being drawn by the actual reactions of actual market participants as revealed in the evidence.
9. The immediate response of participants in the Stonington Capital Raising tends to confirm that there were good prospects of success. Thus, within a couple of hours of learning of the opportunity, Ms Garrett emailed Mr Renauf on 24 September 2009, "Campbell is KEEN, won't do the full 11m but he will do 7 or 8m so we are halfway there". On 30 September, Mr Carolan sent an email to Mr Trevor Pike (of Patersons) and Mr Doherty attaching the term sheet, and added: BTW - I have not gone wide with this… I have two interested HNW 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.
10. Allowing for a measure of "puff" in the proposal, it is sufficient to observe that there is nothing to suggest that Mr Carolan or either of his recipients thought the prospects of the Stonington Capital Raising coming off were negligible. By email at 5.03pm on Wednesday 30 September 2009, Ms Garrett updated Messrs Anderson and Steel: We have locked three excellent mezz meetings: Thorney, 10.30 Friday 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.
11. Another source of evidence bearing upon the prospects of the Stonington Capital Raising succeeding was the attitude of the superannuation fund investors. Their adviser PPB recommended that there be a standstill of attempts to sell the land to investors, in order to permit the Stonington Capital Raising to occur. There is nothing to suggest that PPB regarded this as a waste of time because the Stonington Capital Raising was foredoomed to fail. For example, at a meeting on 29 September 2009, a representative from one of the investors (LUCRF) recorded, in a passage reproduced by the primary judge at [537]: 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.
12. All of those expressions of confidence suggest that those best placed to assess the likelihood of success regarded success as eminently achievable. There is nothing to suggest that anyone, including the relatively sophisticated superannuation fund investors, regarded this as a near-certain waste of time.
13. Ms Garrett and Mr Renauf, in response, pointed to the objections and conditions imposed by some potential investors. They said that one investor (Apex) insisted upon taking over management of Stonington and a 14 day exclusivity period, another (Wessex) said there was "insufficient margin" and it was "very high risk", McCabe was barred by a non-compete provision, Smorgon advised it was not progressing by 21 October 2009, while Sensata and Icon were turned away by Mr Anderson. They also challenged the primary judge's finding of fact at [1915] that "there was no real attempt by [Ms Garrett and Mr Renauf] to pursue the indication of interest received from at least Apex Capital" (Apex sent an indicative non-binding proposal on 2 October 2009). It is unnecessary to resolve the issue of disputed fact. The fact that some potential investors were not interested falls far short of explaining why this Court should conclude that had Ms Garrett and Mr Renauf not been breaching their duty, no investor would have emerged, and why the expectations at the time of Mr Anderson, the superannuation fund investors and Mr Shorrocks were misplaced.
14. The respondents emphasised the narrow window of opportunity for the refinancing, and emphasised that the onus lay upon Mrs Anderson to establish on the balance of probabilities that the Stonington Capital Raising would have been achieved on the terms of the Patersons Mandate and in the four to six week timeframe. It is very difficult to assess how likely that would be. All that is known is that (a) the breaches of duty stood in the way of further marketing to investors after the first few days, and (b) even when Mr Anderson learned of the breaches of duty by Ms Garrett and Mr Renauf, he rapidly secured the proposal from Wingate, albeit on disadvantageous terms. This is precisely the position in which the inferences stated in Ramsay v BigTinCan at [122] should be drawn favourably to the appellant: … the principle that where a party's actions have made an accurate determination of damage or loss problematic, doubtful questions should be resolved against that party and the Court should assess damages or compensation in a robust manner: Michael Wilson & Partners at [287]; Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 59 (Handley JA; Mason P and Beazley JA agreeing).
15. Mrs Anderson also relied upon what had been said more recently by this Court, rejecting submissions similar to those advanced by the respondents, in Australian Executor Trustees (SA) Ltd v Kerr [2021] NSWCA 5; 151 ACSR 204 at [128]-[131]: It is not in dispute that AET had an evidentiary onus because its breach of duty created difficulties of proof as to what would have occurred but for its breach, which would not exist if the duty had been performed: Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 59; Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd [2019] SASCFC 151 at [98]-[102]; Libertarian Investments Ltd v Hall (2013) 16 HKCFAR 681; [2013] HKCFA 93 at [138]. In Houghton v Immer equitable compensation was awarded in a case involving equitable fraud (but not breach of fiduciary duty), where the defendants had improved common property without lawful authority. After observing that the failure of the defendants to keep proper accounts of their actual expenditure on the common property made it difficult to assess the compensation due to the plaintiff, Handley JA said at 59 that the Court should assess compensation in a robust manner, relying on the presumption against wrongdoers, the onus of proof, and resolving doubtful questions against the party "whose actions have made an accurate determination so problematic", citing LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499 at 508. In Blong Ume Nominees, the South Australian Full Court (Kourakis CJ, Stanley and Lovell JJ) referred with approval to the remarks of Handley JA in Houghton v Immer at 59, when also citing the statement in Meagher, Gummow & Lehane's Equity: Doctrines and Remedies at [23-275] that where, "a party's actions have made an accurate determination of damage or loss problematic, doubtful questions should be resolved against that party and the [C]ourt should assess damages or compensation in a robust manner". Blong Ume Nominees also referred with approval to Libertarian Investments Ltd v Hall at [138] (Lord Millett NPJ), where the Court of Final Appeal of Hong Kong cited the passage in Houghton v Immer at 59 for the proposition that the evidentiary difficulties faced by the Court in that case form part of the consequences flowing from the defendant's original wrongdoing as a defaulting fiduciary and in such circumstances the Court adopts a robust approach to the assessment of compensation where there are difficulties of proof.
16. In response to the six points advanced in Patersons' fallback submission that the prospects of success did not exceed 40%, we would say the following. First, the issue is not whether there was high risk in the Stonington Capital Raising, but whether the relationship between risk and reward represented by the term, the interest rate and the fees made the term sheet one which was executable in the very short term. Secondly, we agree that the initial expressions of confidence are just that, and are different from opinions expressed after due diligence with full knowledge of Ashington's position. However, the absence of such evidence is a consequence of the breaches of duty by Ms Garrett and Mr Renauf, and this Court is entitled to and should draw inferences robustly in those circumstances. Thirdly, we agree that the terms of any refinancing are critical, and the Wingate proposal contained terms which were seriously adverse to the interests of the Ashington companies. However, the absence of evidence of the market's reaction to the terms of the Stonington proposal is a direct result of the breaches of duty by Ms Garrett and Mr Renauf. Fourthly, we agree that the Ashington companies remaining as trustee and manager is critical to the refinancing scenario, but this is a contingency addressed separately below. Finally, we agree that a hypothetical investor would become aware of the difficulties with Investec and the original vendor, and the concerns expressed by unitholders. It does not follow that this would have discouraged investment. The premise of the opportunity was a falling out between at least some of those with interests in the property. The most important question for a short-term investor with an appetite for risk was the adequacy of a second-ranking security, and that turns on the valuation of the land and the extent of the existing indebtedness to the banks, rather than the nature of relations between the trustee, manager, unitholders and existing lenders.
17. The result is that we conclude that the proposal in the Stonington term sheet was intrinsically viable, in the sense that there was a market for a short-term, high risk investment in property which had the benefit of a valuation and development consent, at the return and fees advertised. But for the breach of duty by Ms Garrett and Mr Renauf and the knowing involvement of the other active respondents, there were good prospects of its success. We refrain from ascribing a percentage to that likelihood. Precision in such matters is illusory. As was said in Talacko v Talacko at [35], by reference to Malec at 640, "[d]amages founded on hypothetical evaluations defy precise calculation". Related to this is the point made pithily in submissions in reply by the appellant, with which we agree: There's a risk of letting the attraction of arithmetic just disguise what is ultimately a judgment as to the continuation of a business. Arithmetic has the attraction of seeming precision, but it's just an illusion.

Would the superannuation fund investors have paid the uncalled capital?

1. A variety of submissions was advanced against the proposition that the superannuation fund investors would have paid the call for the remaining uncalled capital (that is to say, the outstanding unpaid purchase price for units which had been issued to them at the beginning of the year).
2. The submissions advanced by senior counsel for Acorn were made on behalf of all active respondents save for Patersons (transcript, 16 May 2023, p 348). There were two strands to these submissions insofar as they concerned the uncalled capital. 1. First, Acorn said that unless the Court was satisfied that Ashington had the power to compel the investors to pay the $5,625,000 in capital call, contrary to what occurred, the chance should be reduced to nil. Acorn adopted the submissions made by junior counsel who appeared on behalf of Ms Garrett and Mr Renauf in this respect. 2. Secondly, it was submitted that "the chance is no more than 5% if the Court finds that Ashington had the power to compel the investors and find that the investors would have complied". That was because of the combination of the Double Bay financiers appointing receivers and the ongoing default on the Stonington Westpac facility, neither of which issues were solved by the Stonington Capital Raising. It was said that "there are very good reasons to conclude that it was almost a certainty that one or both of those financiers would have taken enforcement steps".
3. Reliance was placed on what was said by the primary judge at [1485], namely: 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.
4. We do not disagree. But the finding is no more than a statement that the provision of funds by the superannuation fund investors was another element to which a level of risk had to be attributed. We do not understand that her Honour is to be taken to have implied that there was no chance that the superannuation fund investors would have complied with a call.
5. Part of Mrs Anderson's response to these points turned on the way the trial had been conducted. She said that it should be found that the superannuation fund investors would pay the outstanding capital in response to a call made by Ashington following a successful refinance of Stonington, in circumstances where representatives of the superannuation fund investors had been called and were cross-examined and none had stated that they would not pay a call. Mr Braham emphasised that he had not asked them those questions in cross-examination because the point had not been pleaded nor raised as an issue in the case until final submissions. It was said that this was a case advanced in submissions, without warning from the respondents, and without positive evidence from the representatives of the superannuation fund investors who were called. In those circumstances, it was said that a powerful inference should be drawn that the investors would have paid in accordance with a call, in the only circumstances which matter, namely, that there had been a successful, timely refinancing of Stonington.
6. There is force in those submissions, which cut through the questions of law sought to be advanced (some for the first time) on appeal. It is to be borne steadily in mind that the question which matters on this aspect of Mrs Anderson's "Refinance Counterfactual" is whether as a matter of fact the superannuation fund investors would have responded to the call which undoubtedly would have been made upon them.
7. Even so, we address the questions of law advanced by the respondents. The first obstacle to the investors being compelled to acquire an additional $5,625,000 in units was said to be cl 7.3(b) of the ADF Constitution, which entitled the trustee (Ashington Capital) to make a call for the unpaid price of units only if it made the same call on all other members who held units of that class which were similarly partly paid. It was said that because the Ashington companies which owned a small minority of units could not meet a call, the trustee was not in a position to comply with cl 7.3(b). Thus it was said: The trustee is exercising this power in its capacity as a trustee and your Honours, in considering the counterfactual, would have to assume that the trustee is exercising its powers consistent with the duties that it would owe and in circumstances where the question is would a related party of the trustee be unable to comply with this clause, my submission is that the trustee could not, properly exercising its powers, call on nonrelated parties when its related parties would be unable to comply with the call.
8. That submission cannot be accepted. There is no reason to deny the power of a trustee to make a call, which it may be presumed is in the best interests of unitholders, even if some investors were for any reason unable to meet the call and might be exposed to their units being forfeited or some other recovery proceeding being taken. True it is that a unitholder or successor trustee might be able to complain about the failure to meet the call by the trustee's related companies. But there is no reason to conclude that the power was not available in the first place. Another way of making this point is to state that we cannot see how the claim that a minority unitholder which is unable to meet a call somehow disentitles the trustee from making a call which is, ex hypothesi, in the interests of unitholders as a whole, most of which are able to meet the call. That remains the position even if the unitholder is related to the trustee.
9. The second submission turned on a document created in December 2008 when Ashington Capital raised $20 million from unitholders. That raising was approved, and $14 million was paid (save in respect of the minority units held by Ashington companies), with the unpaid $5,625,000 being the asset in issue in this appeal. However, as noted in the description of ADF and ADF2 at the beginning of these reasons, the document also recorded the following paragraph (e), being one of the terms of the proposed offer: The Trustee will not make calls on the Pro-Rata Proportion of Members unless it has called up all the existing equity capital of the Fund (i.e. called up all unpaid amounts in respect of the existing partly paid units).
10. It was accepted that the superannuation fund investors had acquired partly paid units, and could be called upon to pay the outstanding $5,625,000. As was pointed out in argument, there are technical difficulties with the submission: BAGLEY: … The power to convert those partly paid units into fully paid units and therefore obtain the $6 million of cash that's a necessary component of the counterfactual is in part found in the constitution, but is also in part found in these documents. WHITE JA: You refer to para (e). BAGLEY: Yes. WHITE JA: If I understand it rightly, following your last answer to Leeming JA, after this capital raising there were units that had been issued which were unpaid as to $6 million. BAGLEY: Yes. WHITE JA: Then para (e), does that then provide that calls on those units to the extent they haven't been fully paid, I don't understand how that works. Unless it means that all of the unpaid calls for the capital not yet paid have to be made at the same time? What does it mean? BAGLEY: It means that all of the unpaid amounts of existing partly paid units have to be paid before any new calls can be made. WHITE JA: The call has to be made in order for that which is unpaid to become payable doesn't it? BAGLEY: I appreciate that point that your Honour is making. I'm trying to give this [through] a practical workable commercial construction which is that if a further call is to be made because these calls can be made in tranches, a further call will only be made of each person in that pro rata proportion if everyone else has paid up the prior calls. That is a workable commercial construction of this clause, and if it's given force, as something that operates to restrict the trustee before a call can be made, then the answer to your Honour White JA's question can be no.
11. Mr Bagley's point was that Ashington companies had not met earlier calls upon units which had previously been issued to them, before the December 2008 issue of further partly paid units. But on 30 June 2009, the superannuation fund investors agreed to pay a $4 million capital call, described by the primary judge at [236]. That occurred without the existing outstanding calls from Ashington companies being paid.
12. Those facts serve to emphasise the disconnect between the legal submission advanced in this Court, and the assessment of what in fact happened and would have happened in the absence of breaches of duty by Ms Garrett and Mr Renauf. The fact of the matter is that the superannuation fund investors paid the second last call, in July 2009, with the Investec Stonington Facility about to expire. Let it be assumed that Ashington had refinanced Stonington, and Investec was no longer threatening to enforce its securities. Why would it not be assumed that the superannuation fund investors would respond differently to the 14th and final call than they had to the 13th call? That question was not put to the representatives of the superannuation fund investors, for the good reason that this point is sought to be raised for the first time on appeal.
13. It is unclear to us whether the superannuation fund investors were in fact aware of the fact that Ashington companies had set off their liability to meet calls against their entitlement to derive fees. Once again, that points to the fact that this was not explored at trial, for the reason that it is a new point sought to be raised on appeal. If they were not aware, there is no reason to think that this point would have made any difference to the decision to meet a call. If they were aware, then there is a sound basis to conclude that even if Mr Bagley is correct as to the construction of paragraph (e) of the document pursuant to which $20 million in units were issued, there was an understanding capable of amounting to an estoppel by convention that the clause was directed only to external investors, and not the small minority of units owned by Ashington companies. We note that Mr Anderson gave evidence, uncorroborated by documents or other evidence but accepted by the primary judge as his genuine belief, of an industry practice permitting a fund manager to meet its obligations to contribute funds by way of set-off against fees due to it: see at [1316] and [1318].
14. In any event, it is quite plain that Ashington was proposing to call on the remaining uncalled capital as part of its refinancing attempts in late 2009. Even if it be the case that there was a doubt about the availability of the power to make the final call, it is clear that it would be exercised, and the only question that matters on the counterfactual is whether the investors would have complied as a matter of fact.
15. The next question was whether the investors would in fact have met a call if one were made, putting to one side whether there was power to do so. It was submitted that the investors would have refused to comply with a call, and that the best evidence of that was that they had in fact done so in response to the call made by Investec pursuant to its power of attorney, and to a subsequent call of $3 million made by Ashington. We do not accept that submission. It is one thing for the investors to decline to comply with a call made by a secured lender seeking to enforce its security. It is another thing entirely for the investors to decline to make a call upon the relevant assumption in the counterfactual, which is that the Stonington Capital Raising had succeeded, and Investec was out of the picture. We accept Mrs Anderson's submissions that (a) "there is no reason to believe that they would have continued to withhold those funds once the Investec facility was retired" and (b) "no evidence to that effect was led from them when they were called by respondents to give evidence".
16. There is one further point that bears on this issue. It needs to be borne steadily in mind that the superannuation fund investors owned partly paid units. There is no reason to doubt that the financial records of the superannuation fund investors reflected that fact, including a liability or at least a provision for the future calls. Save for the various arguments advanced on appeal, the investors were bound in contract to pay the balance of the purchase price (indeed, it seems likely that the trustee had an unpaid vendor's lien over the units to the extent they had not been paid, although this does not appear to have been explored, and nothing turns on it). If the superannuation fund investors had refused to pay, they would ultimately be faced with the prospect of being sued in debt by the trustee, and if the non-payment had adverse consequences for the Ashington companies, they would be faced with a claim that that harm was recoverable as damages against them as the foreseeable consequences of their own breaches. The stakes here would be very high, because Ashington needed the capital swiftly. It might be thought that it would be a very courageous decision by a superannuation fund investor to decline to meet a call on its units and run the risk of being held liable not merely to make that call, but also for substantial consequential loss. After all, it is one thing for a superannuation fund investor to invest in high-yield high-risk assets on behalf of its members, and have to write down that investment to zero. It is another thing entirely to have to report to members that the investment it has made using members' funds has not only become worthless, but also that it is necessary to make a further provision against the balance of members' funds because the superannuation fund investors' actions in failing to make a call have led to a claim for consequential loss by the trustee.

Selling the Wylde Street property for some $18.5 million

1. This contingency may be addressed much more concisely, and for good reason it was far from the forefront of the respondents' submissions.
2. Steps were being taken to sell the Wylde Street property in September 2009. On 23 September 2009, Colliers issued 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. The sale had proceeded privately, but then in late October was proposed to be listed on the open market, as the primary judge noted at [795], although an offer of $17 million had already been received (as her Honour noted at [820]).
3. The evidence (at least so far as it was made available in the appeal books) shed little light on the marketing and negotiations which led to the eventual sale of Wylde Street. Nothing turns on this. A Parissen Property Group presentation to Acorn dated 26 March 2010 stated that "Parissen has assumed control of the sale process and has executed an agreement to sell the asset for $18.5M". There is no reason to doubt that the incumbent owner could have achieved a sale of at least the same price within the six month period of the Stonington term sheet.

Ashington not being removed as trustee

1. The primary judge found, based on evidence which included the cross-examination of the representatives of the superannuation fund investors, that a decision had not been made to remove Ashington before November 2009. The documents indicate that when advice was eventually sought on how removal might be effected, it was considerably more complicated than had initially been thought. Steps were taken to remove Ashington at the end of 2009. There is a chance that those steps would have been taken even if the Stonington Capital Raising had been achieved by early November, for which allowance should be made. But there is no particular reason to think that this was especially likely in the counterfactual world where Ms Garrett and Mr Renauf had not breached their fiduciary obligations. The most important considerations are that (a) the most pressing issues (the claims of Investec and Hamton) would have been resolved, and (b) Ms Garrett and Mr Renauf would not have been involved in a proposal to establish a replacement manager; instead they would have been loyally serving their employer as the new point of contact for Ashington.

Broad agreement between Mrs Anderson and Patersons

1. There was broad agreement between Mrs Anderson and Patersons as to the methodology in valuing the opportunity lost by reason of the breaches of Ms Garrett and Mr Renauf. This was articulated by Patersons as follows: Patersons submits that one way, on the evidence, of approaching the quantification of any valuable lost chance is to: (a) Take as a generous starting point "scenario 2" in the appellant's aide memoire on quantum i.e. MFI36 (Orange 4:1002-1003) (i.e. the lost chance being $10.6 million). Why this is generous is explained in paragraphs 10 to 14 below. (b) Deduct for the future liability associated with offsetting for unpaid calls (with Halligan calculating that liability as being $2.6 million and Hall calculating that liability as being $5.625 million). Patersons is prepared to generously assume that the deduction is $2.6 million adopted in MFI 36, meaning the starting point is $8 million. (c) Analyse and assess the probability, by reference to the evidence, of each of the key negative and "independent" contingencies affecting the appellant's lost chance, those contingencies here being: (i) the likelihood the Stonington capital raising would have been achieved and mezzanine finance would have been available to pay out the Investec facility by around 5 November 2009 (i.e., the 6 week "indicative" timeframe under the Patersons Mandate); (ii) the likelihood a successful Stonington capital raising would have rescued the Ashington funds management business from the immediate and wide-ranging financial crisis it faced; (iii) the likelihood the remaining properties within ADF and ADF2 would have been developed, with a significant sub-contingency here being whether the Double Bay property would have been developed notwithstanding the refusal of the development application; (iv) the likelihood that AOF3 would have been established, even with a 12 month delay; and (v) the likelihood Ashington would have been able to set up further additional funds of substantially increasing value (other than replacement funds for ADF 1, ADF2 and AOF3). (d) Having undertaken the above assessment of the key contingencies (within which regard would be had to particular contingencies affecting particular aspects of that main contingency), and further having regard to the fact that the $8 million starting point generously assumes in the appellant's favour, apply a global discount to the $8 million in the order of at least 80-90% which gives a range of loss - at the outer bounds of generosity to the appellant - of $800,000 to $1.6 million. (Emphasis in original.)
2. The $10.6 million starting point reflects the "[t]otal value of the lost business as at 30 September 2009". The method by which that value is derived is accurately described at [1262] of the primary judge's reasons, which is reproduced above. Mr Hall's calculation assumed the continuation of ADF and ADF2 and the creation of a third fund of $200 million, but with a delayed start in January 2011, the sale of Wylde Street, and the completion of the existing projects a year late at the costs which had been estimated in June 2009. As formulated by the plaintiff at trial, that calculation already incorporated some of the discounts which have been addressed above. Indeed, the plaintiff took the view that the negative contingencies as a whole were counterbalanced by the positive contingencies (notably, the future funds performing better than expected). However, during the hearing of this appeal, the $10.6 million was a starting point as the value of the business as at 30 September 2009, to which a global discount could be applied so as to determine a value of the lost opportunity.
3. As noted above, the primary judge described the calculations leading to the $10.6 million value as having "an air of unreality". In part that is attributable to the different view her Honour took as to the probability of the Stonington Capital Raising being achieved in the four to six week period of the term sheet. In part that is attributable to the delays in the redevelopment of Double Bay, which we agree were most unlikely to be resolved within 12 months. Perhaps the greatest contributor to her Honour's conclusion that the calculations have "an air of unreality" is that the most likely result was that one or more of the various ways in which this scenario would fail would be satisfied. We agree. But as earlier explained, the fact that an opportunity is highly likely to fail (say, 90% likely to fail) does not mean that it lacks value for the purposes of assessing compensation for loss.
4. No party suggested a better valuation than that put forward by Mr Hall. One has to start somewhere. Much more satisfactory than accepting the self-serving submissions of the respondents, all of whom, ex hypothesi, have breached or been involved in breaches of duty which has caused Ashington to lose a valuable opportunity, is to take one valuation of that opportunity and discount it for the identifiable risks in the way Mrs Anderson and Patersons contend.
5. The second step is whether there should be a deduction for offsetting calls. Mrs Anderson and Patersons disagreed as to this. We think Mrs Anderson is correct. It was common ground that the point of the exercise is to value the business operated by the Ashington companies. The business involved acting as trustee and manager thereby deriving fees. As it happened, the Ashington companies also held a small number of units in each trust, and had a practice of offsetting their liability to meet calls on those units by reference to the fees derived. But we do not see how the fact that the companies from whom the appellant has taken an assignment were also minority unitholders impacts upon the valuation exercise being undertaken. The equitable compensation to which Mrs Anderson is entitled is for loss of the business.
6. Hence we take as a starting point $10.6 million. The contingency in point (c)(i) has been addressed above; we think there were good prospects of the Stonington Capital Raising being completed in the timeframe in the mandate. We turn to consider the other contingencies raised by Patersons, for which a discount needs to be allowed.

Would the Stonington Capital Raising restore liquidity to the business?

1. The second step was, assuming a successful Stonington Capital Raising, whether that would have extricated Ashington from its financial problems so as to permit the funds management business to continue to trade solvently as a going concern. The risks incorporated within this step were, according to Patersons: 1. The likelihood that the Stonington Capital Raising would have enabled Ashington to recapitalise both the Stonington and Double Bay trusts, giving due weight in particular to views expressed by KordaMentha at the time, bearing in mind the similarities with management's recapitalisation proposal; 2. The risks presented by the expired Westpac facility, the claim by Hamton to recover debt, the default in the $6 million senior debt facility of NAB and St George over the Double Bay property; 3. The likelihood and timing of the sale of Wylde Street; 4. The need to obtain construction finance for the Stonington development; 5. The risk that audited accounts for ADF and ADF2 could not be completed so as to be provided to financiers; 6. The risk of insolvent trading while any recapitalisation proposal was being considered; 7. The risk of cross-defaults and "intra-group contagion"; 8. The risk of default on any new mezzanine facility given its burdensome terms while a recapitalisation proposal was being considered, and 9. The risk that any recapitalisation would face such opposition and be too complicated and time-consuming to implement.
2. Patersons added: There is a factual question on the appellant's counterfactual as to whether, even if the Investec Facility was paid out, the unitholders would have met the call for the remainder of the $6 million of uncalled capital into ADF2, particularly in circumstances where it was envisaged, including on the appellant's counterfactual, that this $6 million would be used to pay Ashington's outstanding creditors as well as the $1.58 million in fees and commissions then owing to Ashington. This scenario expressly envisages the intermingling of trust money amongst the various subtrusts, a matter which had highly vexed the unitholders several months before and ultimately led to a loss of confidence in the trustee, as found by the primary judge at J[1562] (Red 5:992). Even if it is accepted the unitholders were legally required to meet the $6 million uncalled capital call, the timing of receipt of those funds from existing investors must at least be treated as a contingency. (Emphasis omitted.)
3. We have already addressed the sale of Wylde Street, and the likelihood of superannuation fund investors meeting the last call for unpaid capital. It is certainly true that a large number of contingencies stood in the way of returning liquidity to the business. But it is also true that they were linked. For example, if the Stonington Capital Raising were achieved, and Investec and Hamton paid out, then that is two fewer obstacles to obtaining construction finance for Stage 1 of Stonington, for which planning approval was already obtained and the costs estimate was $2.7 million with many lots pre-sold. It is also necessary to bear in mind that bank lenders tend to be reluctant to incur the cost and risk of enforcing their securities, especially when the security is over a property which needs to be developed in order to realise the greatest value. That is not what banks are good at doing. But for the breaches of duty by Ms Garrett and Mr Renauf, and with the Stonington Capital Raising completed, there is no reason to think that the banks would have enforced their securities any earlier, and good reason to think that they would have preferred to negotiate away the defaults by Ashington.
4. In short, the contingencies incorporated in this paragraph of Patersons' submissions are real, and allowance should be made for them, but they are also dependent on one another.

The development of other properties, especially Double Bay

1. The third contingency was whether the remaining properties in ADF and ADF2 would be developed and sold, albeit with a 12 month delay. Patersons submitted that even with a delay, there was a not insignificant probability that the properties would not be profitably developed at all, especially the Double Bay property, for which there was no project approval. Patersons added: There was an attempt by Mr Anderson in his affidavit to contend that there would have been a successful appeal to the Land and Environment Court, but the primary judge correctly regarded that as speculative (see J[1485] Red 4:965). Nor could any real prospects be ascribed to Ms Garrett's throwaway line in an email (referred to at J[797]) of a potential JV partner with a buy-in price for $70 million. Such a possibility was not developed in any serious way by admissible evidence.
2. The result was Patersons' submission that there was no more than a 30% chance that the Double Bay property would have been recapitalised and developed as envisaged in the discounted cash flow analysis performed by Mr Halligan.
3. Patersons correctly acknowledged the significance of the refusal of development approval to the Double Bay Project. This affected both existing trusts, and consequently affected the timing of establishing a third trust. It is certain that obtaining approval to redevelop the site would take more time and cost more money, and it is almost certain that any approval which was obtained would be less profitable than that which was refused on 28 September 2009.
4. There was force in the submissions advanced by other respondents about the significance of the refusal of project approval to Double Bay, because it was an event of default under the relevant facilities, as well as being "hugely significant" from an investment perspective. The result was to ascribe a low probability, of no more than 5%, to the bank lenders not enforcing their security. Thus for example it was said that: The main reason for the justification of a 5% figure as being the realistic upper reach of the chance are the combination of the actions of the Double Bay financiers in appointing the receivers and also in the ongoing default on the Stonington Westpac facility. There's no reason to think that either of those issues would have been solved by the Stonington capital raising, and there are very good reasons to conclude that it was almost a certainty that one or both of those financiers would have taken enforcement steps.
5. (That submission was made on behalf of Acorn, against which Mrs Anderson has subsequently settled her appeal. However, as explained above, Acorn made submissions on questions of quantification of loss on behalf of all respondents save Patersons, and thus we accept that it ought fairly be regarded as having been advanced by the other respondents with whom Mrs Anderson continues to be in dispute.)
6. By reference to events in January 2010 following the appointment of receivers on 24 December 2009, it was submitted that NAB and St George would have enforced their $65 million facilities over the Double Bay property, and that "it took a $22 million paydown from the incoming investor, Parissen, in January 2010 to hold those financiers at bay". It was said to follow that: Your Honours should therefore conclude that the Double Bay financiers would have enforced their securities in the counterfactual, as they in fact did, and that Ashington would not have been in a position to avoid or to resist that enforcement because it didn't have the funds to do it.
7. The second and third respondents gave greater emphasis to the difficulty in establishing what would have occurred had the Stonington Capital Raising been achieved. They pointed to the expired $26 million facility with Westpac, and the Double Bay $65 million facilities which were also in default, and said that "[t]he Appellant cannot plausibly prove that a $15m refinance would have resolved $100m in defaulted debt". They emphasised the unlikelihood of investors contributing further equity, and what they said was the probability that the Double Bay financiers would have sold the property, especially given the absence of any plan to redevelop Double Bay following the refusal of project approval. We do not disagree with much of this. However, aspects of the submission go too far. Mrs Anderson did not have to prove that the Stonington Capital Raising would have "resolved $100m in defaulted debt". Mrs Anderson's case is based on the loss of a chance. She had to prove that there was a chance that the Stonington Capital Raising would succeed, and that the superannuation fund investors would pay the remaining uncalled capital, and that Wylde Street would be sold, and that Ashington would have negotiated with the continuing bank lenders, notwithstanding the refusal of project approval for Double Bay. It is also important to bear in mind that the lost opportunity for which Mrs Anderson sues is not the opportunity of making profits from the acquisition and resale of the trust assets. Instead, it was the revenue streams from Ashington Capital and Ashington Management acting as trustee and manager of the unlisted unit trusts. And there is no reason to think that any of the properties held as assets of any of the relevant sub-trusts were incapable of development and sale. The questions were timing and profitability. Those questions were very important to the unitholders, and were also linked to the viability of Ashington's efforts to establish future investment (to which we shall immediately turn), but did not of themselves stand in the way of Ashington Capital and Ashington Management earning fees.
8. We think a substantial discount should be given for these contingencies.

The establishment of AOF3

1. The fourth contingency was the establishment of AOF3. Patersons submitted that there was no more than a 20% chance of AOF3 being established even with a 12 month delay, having regard to (i) the limited progress which had been made in 2009, including as to potential properties; (ii) the imperative of Ashington focussing on its core business (ADF and ADF2) and restoring investor confidence and market reputation in the aftermath of any successful recapitalisation; (iii) the time and costs associated with roadshows, investor presentations, due diligence efforts on potential properties and preparation of marketing and information materials for investors; (iv) the past performance of the Ashington funds (and their management); and (v) the need to obtain debt finance in respect of any properties in circumstances where financiers would have been reluctant to extend any further finance to Ashington for a further fund in 2010 so soon after Ashington had recovered from the immediate crisis.
2. Patersons acknowledged that a three year delay in the development of AOF3 (after the core business had stabilised and market conditions improved) would be more realistic, but even so said that the chances of doing so were no better than even.
3. We think Mrs Anderson is entitled to compensation for loss which included the loss of the opportunity to obtain fees from AOF3, which was already being planned, for which there had been a roadshow in Asia, and which could use existing staff.

The likelihood of further funds

1. However, we do not think that Mrs Anderson is entitled to compensation based on cashflows from unforeseen funds beyond the two in existence and the third in active contemplation. This is too speculative.

Assessing the value of the lost opportunity

1. Acknowledging the appropriateness of a global discount, Patersons' submission concluded: Patersons submits that here the negative contingencies far outweigh any highly speculative positive contingencies, and this warrants a very significant global discount (in the order of at least 80-90%) being applied to the starting point valuation of $8 million (which already is generous to the appellant, as explained above). That results in a range of $800,000 to $1.6 million. A discount of at least 90% is certainly more consistent with a probabilistic assessment of the independent contingencies. For example, if one only had regard to the most optimistic and generous probabilities for the first two contingencies alone it would yield a probability of achieving the income streams on the plausible starting case of only 12% (40% multiplied by 30%). (Emphasis omitted.)
2. Patersons' approach of adopting a "global" discount reflected an approach which was common to the appellant. A court when called upon to assess the value of an opportunity which is subject to multiple contingencies may have a choice. As Patersons submitted, "if the object of an opportunity is subject to multiple contingencies (as here), a court may assess those contingencies on a global basis, or alternatively, by assessing each contingency separately", citing Falkingham v Hoffmans (a firm) (2014) 46 WAR 510; [2014] WASCA 140 at [288]. We agree. A global approach is appropriate in the present case, because the contingencies are not truly independent, and it is very difficult otherwise to assess the combined effect of partially independent contingencies. By way of example, it is quite clear that if the Stonington Capital Raising succeeded within the six week timeframe, that would bear upon the prospects of a prompt provision of uncalled capital by the superannuation fund investors, and thus diminish the possibility of secured creditors enforcing their security.
3. Doing the best we can having regard to all of the above, we would ascribe a discount of 85% to the $10.6 million starting point of the value of the business in September 2009. That reflects our view that the business was extremely likely to fail, by reason of one or more of the contingencies identified above. Although we think the Stonington Capital Raising would more likely than not have succeeded, and the superannuation fund investors would more likely than not have contributed the uncalled capital, and Wylde Street would have been sold, and there were reasonable prospects of a deal being done with Westpac to permit the Stage 1 of the development of Stonington proceeding, there is much greater doubt about what would have happened to the Double Bay property and the potential for AOF3 to be established. A discount of 85% reflects our view that there was in the order of a one in six chance of the business surviving. Another way of putting this is that we would be comfortably satisfied that the most likely outcome, by some margin, is that the business would not have survived so as to earn profitable fees. But those conclusions do not stand in the way of our view that Ashington Capital and Ashington Management lost a valuable outside chance, in the order of 15%, of surviving profitably.
4. We would add that our conclusions cohere with the finding by the primary judge, with which we agree, that the breaches of duty by Ms Garrett and Mr Renauf caused a valuable loss of opportunity, and avoid the seeming inconsistency of making such a finding but going on to assess the loss at nil.
5. We note for completeness that some submissions were made about the effect of the timing of knowing assistance. For example, it was said that if a third party only attained the requisite knowledge of the breaches of duty by Ms Garrett and Mr Renauf by mid November, then the assistance would not be causative of any loss for which it was required to account, because it was essential that there be a causal connection (O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262), but by mid November the Stonington Capital Raising would have failed to have been achieved in a timely fashion. So much may be accepted, but for the reasons already given, all respondents had the requisite knowledge by mid October.
6. For those reasons, we value the opportunity lost by reason of the breaches of duty by Ms Garrett and Mr Renauf in which the other respondents were knowingly involved at $1.59 million.
7. Prima facie, Mrs Anderson is entitled to judgment in the amount of $1.59 million against each of the first, second, third and fourth respondents. Mrs Anderson's submissions proceeded on the basis that she was entitled to pre-judgment interest. Interest until 8 December 2023 is $1,426,304.23 (the calculations are attached to these reasons). We did not understand any respondent to contend that the liability of Ms Garrett and Mr Renauf to pay equitable compensation for breach of fiduciary duty of a dishonest and fraudulent kind, nor that of the other respondents for knowing involvement in those breaches, was an apportionable claim for the purposes of the proportionate liability legislation.

Remaining grounds

1. None of what follows is dispositive of any issue in the litigation, and (reflecting that fact), the parties' submissions on these points were relatively brief. We shall adopt the same course.

Patersons' direct breach of fiduciary obligations (grounds 38-42)

1. The primary judge rejected the claim that Patersons breached fiduciary duties owed directly to the Ashington companies. Her Honour found at [1871]: 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.
2. If Patersons owed a fiduciary duty directly to the Ashington companies, its breach was causative of the same loss as has been addressed above, and Patersons' liability would be the same as its liability for knowingly assisting the breach of duty by Ms Garrett and Mr Renauf. Accordingly, nothing turns on this ground.
3. In any event, we see no error in the primary judge's conclusion. Mrs Anderson's primary submission against the primary judge's finding was that the relationship between Ashington and Patersons was akin to that of a financial adviser and their client. It was said that a relationship of this nature involved elements of trust, confidence and vulnerability, and gave rise to fiduciary obligations. The submission relied upon the High Court's decision in Daly, which held that a stockbroking firm owed fiduciary duties to their client. Reliance was also placed upon Calvo v Sweeney [2009] NSWSC 719, where it was said at [219]: There is no presumption that the relationship between a financial adviser and his client is not a fiduciary one. To the contrary, such a relationship is likely to involve elements of trust, confidence and vulnerability requiring undivided loyalty … Moreover, in the present case, Mr Sweeney was not only a financial adviser. Although not successful in raising capital, he undertook the role of a broker seeking to negotiate the raising of capital for commission. There is little to distinguish his position from that of a stockbroker engaged to buy or sell shares on behalf of his client, who owes fiduciary duties to the client in buying and selling (Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 384).
4. We do not accept Mrs Anderson's characterisation of the relationship between Ashington and Patersons. True it is that Patersons was engaged as "lead manager" to assist Ashington in capital raising. But Ashington was a funds management business with significant experience with capital raisings. The relationship was fundamentally different from that of a financial adviser and retail or consumer client. An urgent, successful refinancing was critically important to Ashington, but that did not make the relationship different from any number of commercial relationships. We see no error on the part of the primary judge in characterising the relationship between Patersons and the Ashington entities as a commercial arms' length relationship in which no fiduciary duties were owed.
5. The primary judge nevertheless considered whether there was any breach of the alleged fiduciary duty in the event that her Honour was wrong in concluding that Patersons did not owe any fiduciary duties. This was challenged on appeal. In circumstances where none of this can affect any order this Court makes, there is no good reason to make the assumption that, contrary to what has been determined by the primary judge and confirmed by this Court, Patersons did owe a fiduciary obligation, and then to consider whether her Honour's analysis on breach was correct. There is no need for an appellate court to resolve every permutation presented by the parties' appeals, especially those which turn on counterfactual assumptions which for multiple reasons cannot affect the outcome and can only prolong an already lengthy judgment: see Massoud v Nationwide News Pty Ltd; Massoud v Fox Sports Australia Pty Ltd (2022) 109 NSWLR 468; [2022] NSWCA 150 at [36]-[40] and [276]-[277].

Breach of the Patersons Mandate (grounds 43-44)

1. The Patersons Mandate provided by cl 3 that Patersons "will at all times act in good faith and in a professional and timely manner". The primary judge rejected the plaintiff's claim that Patersons had breached this express term of good faith at [1985]. This was because her Honour concluded that the knowledge and conduct of Mr Carolan was not attributable to Patersons. However, had his conduct been attributable to Patersons, then her Honour would have concluded that there was a breach of the express term 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. On appeal, Mrs Anderson advanced three independent submissions against this finding. First, Mr Carolan's knowledge and conduct was attributable to Patersons and amounted to a breach of the good faith term. Secondly, Mr Doherty's knowledge and conduct was attributable to Patersons and amounted to a breach of the good faith term. Thirdly, independent of any attribution of Messrs Carolan and Doherty, Patersons had itself failed to perform the mandate because the employees to whom it had delegated the task had abandoned it.
3. But success on any of those bases would be to naught unless Mrs Anderson had acquired the right to sue Patersons for breach of contract from Ashington Capital, and the difficulty she faces here is that insofar as the right was trust property, it vested in the new trustee and was not property which the liquidator could sell, as the primary judge found at [1304] and [1309]. In order to escape that difficulty, Mrs Anderson submitted that it was necessary to consider the damage which arose from the particular breach of contract. If the alleged breach of the Patersons Mandate was of such a nature that the relief claimed would reflect loss to trust property, then she accepted that the chose in action vested in the new trustee. However, it was said that the alleged breach in this case was such that the only relief sought was damage caused to Ashington Capital and Ashington Management through the loss of fees, which was not trust property. The submission is not free from difficulty. It would seem to follow that the same breach of contract between trustee and financier would, insofar as it caused damage to trust property, be held by the new trustee, and insofar as it caused damage to the trustee in its personal capacity, would continue to be actionable by the former trustee. In circumstances where nothing turns on it in the present litigation, but it may be dispositive in some other case, it is preferable to leave its resolution to a case where it matters. This is an appropriate case to adhere to "the standard common law judicial technique of deciding no more than what needs to be decided": Mann v Paterson Constructions at [76].

Ms Garrett's and Mr Renauf's breach of the employment contract (grounds 6A and 6B; cross-appeal)

1. The primary judge found that Ms Garrett and Mr Renauf had no binding contract of employment (at [1799]), yet found that an employment relationship existed at common law between each of Ms Garrett and Mr Renauf on the one hand and Ashington Management on the other: at [1955]. This relationship imported the usual obligations of good faith and honesty, which were breached by each of them by actively engaging in a process to effect the removal of the Ashington parties: at [1958], [1962]-[1964].
2. Both sides challenged this conclusion. Mrs Anderson submitted that the primary judge erred in finding an employment relationship in the absence of a contract of employment, contending that "the analysis of the existence of an employment relationship in the absence of a contract or any other rubric to support the relationship is incoherent". Conversely, by their cross-appeal, Ms Garrett and Mr Renauf contend that the primary judge ought to have found that there was no contract in which to imply any contractual duties, that any implied contractual duty of good faith was limited to a duty to exercise Ms Garrett and/or Mr Renauf's powers and discretions in good faith, and there was no breach of any implied contractual duty by Ms Garrett and Mr Renauf because either there was no contract, or the breach did not relate to the exercise of any relevant powers and discretions.
3. We have concluded that, contrary to the trial judge's findings, Ms Garrett and Mr Renauf owed fiduciary obligations which they breached. Nothing relevantly turns on the various common law obligations which were raised by the parties, save for the award of nominal damages, which are no longer appropriate given the pecuniary relief available in equity. Further, the analysis by the primary judge on those common law duties would have been quite different if there were a subsisting fiduciary obligation. Still further, there is an unresolved question whether some of the implied contractual duties owed by employees have a fiduciary obligation as their basis: see Concut Pty Ltd v Worrell at [26]. All of those considerations suggest that this Court should refrain from resolving those issues.

Costs appeal

1. Finally, Mr Anderson by separate proceeding sought leave to appeal from a third party costs order made against him. It was common ground that leave was not required, in accordance with Muriniti v Mercia Financial Solutions Pty Ltd [2021] NSWCA 180. Although the parties exchanged full submissions on what is a very substantial judgment adverse to him, no useful purpose would be served summarising and resolving those submissions. The result of the main appeal is that in substance Mrs Anderson will have succeeded, and for that reason alone Mr Anderson will be entitled to having the costs order against him quashed and a favourable order in relation to the costs of the application for a special costs order.

Orders

1. The parties are entitled to be heard on the question of costs, both in this Court and at first instance, and the orders below will permit that to occur. It would appear that any security for costs which has been lodged by or on behalf of Mrs Anderson or Mr Anderson should be released and any orders which are consequential upon the costs orders made at first instance (such as order 1 made on 23 June 2022 quantifying the costs of PPB) should be set aside. Any orders which are agreed by all active remaining parties may be supplied to the Associate to Gleeson JA and may be made in chambers. If there are other outstanding matters which are not agreed, they should be the subject of a notice of motion to be filed no later than 2 February 2024 together with affidavit and submissions in support, with the affected parties to supply submissions and evidence bearing upon that motion in accordance with the timetable for the resolution of questions as to costs below. If any party is of the view that any unresolved issue should be the subject of a hearing, the submissions supplied should address whether there should be a further hearing.
2. The Court's orders are as follows:
3. In 2022/00048359:
4. Appeal allowed as against all respondents save the fifth respondent Acorn Capital Ltd and the sixth respondent Albany Capital Investors Pty Ltd.
5. Set aside orders 1 and 2 made on 7 February 2022, except insofar as order 2 enters judgment in favour of the fifth respondent Acorn Capital Ltd and the sixth respondent Albany Capital Investors Pty Ltd, and in lieu thereof enter judgment in favour of Mrs Anderson against each of the first, second, third and fourth respondents in the amount of $3,016,304.23.
6. Set aside orders 1, 3, 5, 11 and 13 made on 24 May 2022 (concerning the first, second, third and fourth respondents' costs of the trial).
7. Cross-appeal dismissed.
8. Direct the parties to file and serve written submissions as to the costs of the appeal and costs at first instance not exceeding 10 pages, and any other materials in support of those submissions, on or before 2 February 2024, and written submissions in reply not exceeding 5 pages, or in the case of Mrs Anderson, 10 pages, on or before 16 February 2024, with a view to resolving the question of costs on the papers.
9. Any application for further orders to be made by notice of motion filed no later than 2 February 2024, together with affidavits and submissions in support, with the parties thereafter to supply affidavits and submissions in response and in reply in accordance with the timetable in order 5 above and with a view to the application being resolved on the papers.
10. In 2022/173413:
11. Direct Mr Anderson to file a notice of appeal in accordance with the draft notice of appeal within 7 days of today, and dispense with the requirements as to service.
12. Appeal allowed.
13. Set aside order 12 made on 24 May 2022.
14. The first, second, third and fourth respondents to pay Mr Anderson's costs of proceeding 2022/173413, and (to the extent that separate costs were incurred by Mr Anderson) to pay his costs in the Equity Division in respect of the application for a third party costs order.
15. By email sent on 6 December 2023 after the parties had been notified of delivery of judgment, Patersons said that it was not aware of the terms of the settlement between Mrs and Mr Anderson and Acorn, but sought to reserve the right to be heard on the effect of the settlement before any final orders were made. In light of the entitlement under r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) to apply to set aside or vary a judgment or order within 14 days even if it has been entered, there is no need to delay the making of final orders. Patersons still has the right to be heard on the effect of the settlement, should it wish to do so, in which event it should apply in accordance with that rule within 14 days of today. In the ordinary course, it is desirable for courts to make orders at the time reasons for judgment are delivered: Kramer v Stone [2023] NSWCA 270 at [264].

Amendments 31 July 2024 - inserted "the" in table of contents entry for [339] and corresponding heading, so it reads "Mrs Anderson's challenge to the reasoning"

• deleted comma after "especially" in table of contents entry for [396] and corresponding heading
• replaced "were" by "was a" and "subsidiaries" by "subsidiary" in [8]
• replaced "ADFIT2" by "the ADF Investment Trust (No 2)" in [37] and [44]
• replaced "to" by "with" in [94], so it reads "Mr Carolan's employment with Patersons"
• replaced ")." By ".)" in [113]'
• inserted "both" into quotation in [133]
• replaced "at 88" with "at [188]" in citation for Beach Petroleum in [141]
• replaced "is" by "are" in third sentence of [165], so it reads "which are outside the scope"
• replaced "receive" by "receiv[ing]" in quote in [191]
• deleted "of" in "something of which" in second sentence of [210]
• replaced "attribute" by "attributes" in first sentence of [249]
• replaced "Orders" by "Order" in citation for Ancient Order of Foresters in [262]
• replaced "affect" by "[e]ffect" in quotation in [276]
• inserted "[p]" in quotation in [291] so it reads "subparagra[p]hs"
• deleted "the" from [314], so it reads "Ground 1 of PPB's notice of contention"
• deleted "a" from "as soon as a possible" in [332], so it reads "as soon as possible"
• missing closing parenthesis added in [337]
• replaced "(Emphasis altered)" by "(Emphasis omitted)" at end of quote in [352]
• inserted "to" in final sentence of [364], so it reads "indebtedness to the banks" DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 July 2024