Australian Institute of Fitness Pty Limited v Australian Institute of Fitness

Background facts

1. The Institute was incorporated on 13 September 2001 and its constitution (Constitution) is dated the same day. The Institute is a major provider of education and training services in the fitness industry. The Institute operates its business through its shareholders and licensees. Each shareholder/licensee has the right and duty to operate the Institute's business in their respective Australian state or territory and use the Institute's intellectual property for that purpose.
2. The Institute was established to promote the interests of each of its individual shareholders. The Institute does not, and has never, operated to return a profit and does not itself have any business activities related to fitness accreditation. It does not employ lecturers or trainers. As described above, each shareholder holds 20% of the shares in the Institute. The Institute's role is in sales and marketing, development of training products, control of the Institute brand, provision of administrative systems, and maintenance of the status of a Registered Training Organisation (RTO) for the benefit of each regional licensee.
3. RTO status is required under the legislative scheme for vocational educational training (VET) in order for a body to be able to provide particular kinds of training services and be eligible for certain government funding schemes.
4. In late 2000 Greg Hurst (Mr Hurst) was responsible for organising a meeting of representatives (including Russell Creagh and Nigel Champion) from various fitness businesses to "formalise a network with the sole objective of working together to reduce hassle, increase profit and maintain the No 1 market position for each member at a state level and for all at a national level". Mr Hornsey attended "planning meetings" from November 2000 onwards and was the representative for the Victorian and Tasmanian regions.
5. On 24 July 2001 six original shareholders entered into the Shareholders Agreement. Recital A of that agreement provided: The shareholders have formed the company to act as a national body to market and advance the position of each shareholder in its territory.
6. Clause 2.1 provided: …the objectives of the shareholders are to have [the Institute] promote and advance the interests of the shareholders as leading businesses dedicated to education and training in the fitness industry in their respective territories.
7. On 29 April 2005 the Institute obtained registration as an RTO.
8. On 7 September 2005 Kym Weir (Mr Weir) was appointed the independent Chair of the Institute.
9. The underlying ownership of the Institute shifted by mid-2008 to early 2009 from being split between the six original shareholders to being concentrated in AIF NSW and AIF WA. In brief, the following occurred: 1. AIF NSW absorbed the ACT business and continues to operate the business in the ACT; 2. AIF NSW is co-owned and co-directed by Mr Hurst and Mr Champion, with Mr Hurst as its Chair at all relevant times; 3. AIF WA is wholly owned by Mr Creagh, and its directors are Mr Hurst and Mr Creagh, with Mr Creagh its Chair at all relevant times; 4. AIF NSW and AIF WA each own 50% of AIF Qld, with Mr Hurst and Mr Creagh as co-directors of AIF Qld and Mr Creagh its Chair at all relevant times; 5. AIF NSW and AIF WA collectively hold 44% of the shares in AIF SA/NT and the next largest shareholder is Mr Chatterton, who holds 40% of the shares; 6. Mr Hurst is a director of AIF SA/NT and its Chair at all relevant times, and was appointed by AIF SA/NT to sit on the Institute's Board as the AIF SA/NT representative until late 2014, when Mr Chatterton was appointed by AIF SA/NT.
10. Neither AIVT nor any of its directors has any interest in or control over any other shareholder of the Institute.
11. The corporate members of the Sage defendants are all owned by Holdings. Holdings, in turn, is owned by companies associated with Mr Hornsey, Ms Richardson (who is Mr Hornsey's wife) and Ms Tuchtan. Mr Hornsey and Ms Tuchtan are both directors of AIF Vic/Tas, Holdings, ACI and Sage.
12. Since 2008, ACI and other Sage entities have operated businesses providing educational and training services in areas other than fitness (namely massage, child care, aged care and certain business courses).
13. Mr Weir was appointed by Mr Hurst and Mr Creagh to sit on the Institute's Board as the nominee director for AIF Qld on 10 December 2009. Mr Weir had and has no financial interest in either AIF Qld or the Institute.
14. A document entitled "Variation of Shareholders' Agreement" dated 7 May 2010 inserted a clause 29 into the Shareholders' Agreement, which provided that shareholders: "must at all times be appointed licensees of [the Institute] …A shareholder may, with the consent of [the Institute] …nominate a nominee to undertake its rights, duties, obligations, responsibilities under the terms of any license agreement with [the Institute]…"
15. On 4 June 2010 the Institute entered into regional licensing agreements with AIF Qld, AIF SA/NT, AIF WA and AIF NSW. On 24 August 2010 Mr Hurst, then the CEO of the Institute, and Mr Hornsey executed an agreement between the Institute and AIF Vic/Tas (2010 MOU). The 2010 MOU related to AIF Vic/Tas obtaining the benefit of funding then offered by the Victorian government (VET funding). This funding was conditional on, inter alia, the Institute performing "the required tasks to re-apply for [Skills Victoria] funding if and when such funding becomes available". The VET funds received by the Institute were to be "the sole property of [AIF Vic/Tas]. The Institute had accepted Skills Victoria funding offers in 2010, 2011, 2012 and 2013.
16. Prior to the entry into the 2010 MOU, Mr Hornsey emailed Mr Hurst on 24 March 2010 saying "[t]his VicGov funding threatens the Victorian Business and it has started to impact already as more of our opposition sign up for this. Please discuss this with me as a matter of urgency."
17. In Mr Hurst's CIC report for July 2010, he made the following remarks: Significant work undertaken by National and VicTas. A detailed MOU is drafted and now awaiting approval by both parties for final execution. VicTas has proceeded with application for funding under Skills Victoria with in-principle approval from National.
18. The Institute received over $600,000 in Skills Victoria VET funding in respect of training services provided by AIF Vic/Tas.
19. The Institute consented to AIVT appointing AIF Vic/Tas to be its nominee to perform the services under a licensing agreement on 10 December 2010. On 17 December 2010 the Institute and AIF Vic/Tas entered into a regional licensing agreement (AIF Vic/Tas RLA). This RLA is materially identical in form to the RLAs entered into by the other regions.
20. A letter of 10 December 2010, on the Institute's letterhead, which accompanied execution of the AIF Vic/Tas RLA, provided: In accordance with clause 5.10 of the Regional Licensing Agreement, AIF gives its consent to allow Robert Hornsey and Charles Tuchtan, both Senior Management, to engage in other business during normal business hours.
21. Schedule 2 of the AIF Vic/Tas RLA set out fees payable by the licensee, AIF Vic/Tas to the Institute.
22. From 23 May 2012 ACI, which was at that time an RTO trading as "Sage Academic", included fitness on its scope of registration.
23. On 26 November 2012 the Board of the Institute resolved, against Mr Hornsey's wishes, that: (a) That for the 4 months commencing 1 March 2013 and thereafter until further resolution by the Board, fees payable by each licensee pursuant to clause 6 of the Licensing Agreement are such that the licensee must pay to the [the Institute] the following monthly fees based on 25% of the annual budget split equally between the regions and 75% of the annual budget based on 2012/13 budgeted revenue:- NSW/ACT $49,156 VIC/TAS $74,065 WA $28,182 SA/NT $27,144 QLD $28,182 … (b) The above fees are in complete substitution for the fees currently set out in Schedule 2 of each Licensing Agreement.
24. This is referred to as the "First Licence Fee Increase".
25. ACI applied on 14 August 2013 to register the trade mark "the institute". The trade mark is a logo comprising the words "the institute" in lower case and three stylised leaves.
26. A disputes committee (Disputes Committee) was established by the Institute to "deal with" disputes between the Institute, AIF Vic/Tas, AIVT and Mr Hornsey on 3 September 2013.
27. On 10 September 2013 the Board of the Institute (again, over Mr Hornsey's objections) resolved as follows: R4. That the annual licence fees in 13/14 for each region are: NSW $694,079 QLD $408,778 SA $375,791 WA $418,481 VIC $966,119 Total $2,863,248
28. This is referred to as the "Second Licence Fee Increase".
29. The Institute, in October 2013, became aware that ACI now included "fitness" on its scope of registration.
30. The Department of Early Childhood Development (Victoria) (Department) wrote to the Institute on 26 November 2013 offering a further VET funding contract to the Institute in respect of AIF Vic/Tas' provision of fitness accreditation services in Victoria (2014-16 Funding Offer). This offer by its terms required lodgement of acceptance documents by 10 December 2013.
31. Matthew Rowe from HWL Ebsworth emailed a version of a Service Delivery Agreement "intended to be used with the 2014 Victorian Government Agreement" on 3 December 2013. This email reflected an understanding on the part of Mr Rowe that the "plan" was to be one whereby the Service Delivery Agreement was to be provided to AIF Vic/Tas, along with a copy of the funding contract, and that AIF Vic/Tas would be informed, first, that the Institute would be seeking consent from the Victorian Government and, second, that the Institute needed the Service Delivery Agreement signed so that it could lodge the relevant VET documents.
32. Ms Ward, on 4 December 2013, wrote to Lee Watts of the Department requesting an extension of time to lodge the acceptance documents.
33. The Institute (with Ms Ward as CEO) on 6 December 2013 sent a draft Services Delivery Agreement to Mr Hornsey. This was, in the view of Ms Ward, reflective of "resolutions of the board in relation to licensees who operate with a government funding program." This document provided for personal guarantees from the AIF Vic/Tas directors, and a fee calculated by reference to the funding received, capped at a maximum of $60,000 per annum.
34. Mr Hornsey wrote to Ms Ward on 7 December 2013, saying: …I gave you an undertaking that Vic/Tas would not commence any delivery in 2014 under this new 3 year contract until National and Vic/Tas have reached an agreement in respect to delivery under the contract. … I am happy to sign the acceptance documentation on Monday the 9th and hand deliver (in the absence of a favourable reply from Ms Lee Watts).
35. Ms Ward responded, inter alia, as follows: I note you have confirmed your verbal undertaking that 'Vic/Tas would not commence any delivery in 2014 under this new 3 year contract until National and Vic/Tas have reached an agreement in respect to delivery under the contract.' Can you further qualify the word 'agreement' as we need to rely on a written agreement signed by both parties.
36. ACI commenced advertising the Sage Institute of Fitness business in Victoria from late December 2013. The Institute became aware of this from at least 15 January 2014.
37. The Institute commenced the Licence Fee Proceedings on 20 March 2014.
38. On 22 March 2014 a marketing workshop was held for the Institute. Mr Hornsey and Ms Richardson (at that time the Marketing Director for AIF Vic/Tas and Sage) were not invited.
39. AIF Vic/Tas registered itself as an RTO able to provide fitness training accreditation on 1 April 2014, but did not start using its own RTO until 1 January 2015.
40. From 4 to 6 April 2014 the Australian Fitness & Health Expo (Expo) was held in Melbourne. There is a dispute as to the arrangements made for the display stands for the respective entities.
41. The Institute issued the first of several notices of alleged default or breach of the AIF Vic/Tas RLA on 7 April 2014 (First Notice). The First Notice, from the Institute, alleged that AIF Vic/Tas was in breach of the AIF Vic/Tas RLA by obtaining its own RTO registration.
42. A second notice was issued on 8 April 2014 (Second Notice) and referred to Mr Hornsey's "workplace behaviour issues" and "competition issues" arising out of the operations of Sage in Victoria.
43. As at 8 April 2014, the Institute had not accepted the 2014-16 Funding Offer. On 8 April 2014 the Department wrote to the Institute saying the offer would be withdrawn if not accepted by 5pm 17 April 2014.
44. A third notice was issued on 9 April 2014 (Third Notice), which contained allegations about Mr Hornsey's workplace behaviour and required Mr Hornsey to "cease to hold any title or office with [AIF Vic/Tas]".
45. The Institute's Board met on 16-17 April 2014 and Mr Hurst required the following to be noted in the minutes: The Board recognises that the government [VET] funding contract … is of value to the VicTas licensee. … [the Institute] is willing to expedite and finalise this contract if appropriate confirmations are received by the VicTas licensee as previously requested. Therefore the Board will adjourn the meeting of 17 April to enable the Chair and CEO to negotiate a resolution with VicTas licensee, provided such resolution includes: - A written undertaking that the VicTas licensee not deliver training in any way or at any time under a funding contract until a suitable written agreement is reached between [the Insitute] and the VicTas licensee. - An undertaking by both parties to work in good faith to finalise an [sic] written agreement within 30 days; and - A condition precedent of any undertaking and agreement is that personal guarantees are required by Directors of the VicTas licensee.
46. The 2014-16 Funding Offer was not accepted and was formally withdrawn on 13 May 2014.
47. Ms Ward, as CEO of the Institute, informed Mr Hornsey on 23 April 2014 that the Institute's management meetings were to be split, with representatives of AIF Vic/Tas to attend only "Part B" of those meetings.
48. On 1 May 2014 the Institute issued the following further notices of alleged default under the AIF Vic/Tas RLA: 1. A Fourth Notice concerning AIF Vic/Tas obtaining its own RTO status and requiring immediate cancellation of the RTO; 2. A Fifth Notice concerning allegations about Mr Hornsey's workplace behaviour and alleged misuse of confidential information; 3. A Sixth Notice concerning the Third Notice and notifying AIF Vic/Tas of the Institute's intention to terminate the AIF Vic/Tas RLA.
49. Mr Hornsey, on 18 May 2014, received a notice of meeting for the Institute's Board on 3 June 2014, which included an agenda item entitled "Funding Levy" and gave notice of the Board's intention to raise, from its shareholders, "funding in the amount to be agreed at the meeting".
50. Ms Ward filed an application in the Fair Work Commission against Mr Hornsey on 20 May 2014 (Complaint). The application sought various remedies, including that Mr Hornsey be removed from his position and that he be restrained from contacting any external advisor of the Institute without approval in writing from Ms Ward.
51. Mr Weir, on 28 May 2014, responded to the Complaint with the comment "[the Institute] believes the allegations made by the applicant in the application and agrees that the behaviour of [Mr Hornsey] amounts to workplace bullying".
52. The Institute's Board resolved on 3 June 2014 (over Mr Hornsey's objections) to raise $800,000 by way of shareholder loans (First Funding Levy) and to expand the Disputes Committee's powers to include disputes between the Institute and any person or entity associated with Mr Hornsey.
53. A seventh notice, referring to the six previous notices, was issued on 19 June 2014 (Seventh Notice).
54. The Oppression Proceedings were commenced in the Victorian Registry of the Federal Court of Australia on 7 July 2014.
55. The Institute's Board resolved on 8 July 2014 to raise a further shareholder loan in the sum of $400,000 (Second Funding Levy).
56. The Sage Proceedings were commenced in the New South Wales Registry of the Federal Court of Australia on 9 July 2014.
57. Ms Ward ceased actively pursuing the Complaint in August 2014.
58. A resolution for a third shareholder loan in the amount of $170,000 was passed by the Institute's Board on 4 September 2014 (Third Funding Levy).
59. On 29 October 2014 a fourth resolution was passed to raise $390,000 from the shareholders of the Institute (Fourth Funding Levy).
60. In late 2014 ACI began advertising Sage in states other than Victoria.
61. The Institute sought an interlocutory injunction to restrain the advertising and promotion of Sage on 5 December 2014. On 11 December 2014 Rein J dismissed the application with costs.
62. Mr Hornsey was not permitted to attend a meeting of the Institute on 18-19 December 2014.
63. In late 2014 and early 2015 the Institute caused notices, alleging breaches of the AIF Vic/Tas RLA or demanding it be allowed to inspect AIF Vic/Tas's records, to be issued (Further Notices).
64. On 6 March 2015 a further resolution was passed to raise an amount of $1,020,000 from the Institute's shareholders (Fifth Funding Levy). This meeting was held in two parts and Mr Hornsey was not invited to attend the first reconvened meeting.
65. AIVT provided loan funds to the Institute under protest, as is made clear by emails from Mr Hornsey to Mr Weir of 6 June 2014, 15 August 2014 and 15 September 2014.

Construction of the RLA

1. The High Court of Australia recently affirmed the principles to be applied in contractual construction in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37. In that case the plurality (French CJ, Nettle and Gordon JJ), said as follows: 46 The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. 47 In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. 48 Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. 49 However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating" . It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals. 50 Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations. 51 Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties ... intended to produce a commercial result". Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". 52 These observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales and Electricity Generation Corporation v Woodside Energy Ltd . We agree with the observations of Kiefel and Keane JJ with respect to Western Export Services Inc v Jireh International Pty Ltd.
2. See also the judgment of Kiefel and Keane JJ at [107]-[111].

Oppression

1. Section 232 of the Corporations Act provides as follows: Grounds for Court order The Court may make an order under section 233 if: (a) the conduct of a company's affairs; or (b) an actual or proposed act or omission by or on behalf of a company; or (c) a resolution, or a proposed resolution, of members or a class of members of a company; is either: (d) contrary to the interests of the members as a whole; or (e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity. For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company.

Contrary to the interest of the members as a whole

1. The concept of "contrary to the interests of the members as a whole" is independent of the "oppressive, unfairly prejudicial or unfairly discriminatory" ground: Turnbull v National Roads and Motorists' Association Ltd (2004) 50 ACSR 44 (Turnbull v NRMA) at [32] per Campbell J. The section is of broad compass and "should not be hedged about by implied limitations": Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 per Gummow, Hayne, Heydon and Kiefel JJ at [178].
2. This element of s 232 has not been subject to extensive judicial exegesis. It is, however, clear that such conduct will not necessarily involve commercial unfairness. Campbell J, in Turnbull v NRMA at [32], observed: An action is capable of being "contrary to the interests of the members as a whole" in ways other than by being commercially unfair. Being pointlessly wasteful is one example.
3. The test is objective: see Goozee v Graphic World Group Holdings Pty Ltd (2002) 42 ACSR 534 at [42]-[44] (Goozee v Graphic World Group Holdings). It is to be determined by reference to whether the conduct adheres to accepted standards of corporate behaviour or is in accordance with how reasonable directors would act in attending to the affairs of the company: Goozee v Graphic World Group Holdings at [41]. The decision of what is contrary to the interests of the members as a whole directs attention not to the interests of the persons who are, in fact, the members for the time being, but rather on the interests of an individual hypothetical member: Goozee v Graphic World Group Holdings at [42].
4. It should be noted that a company has an interest, separate from its shareholders, in resisting a compulsory buyout order and in defending challenges to the validity of its decision-making: see, eg, Power v Ekstein (2010) 77 ACSR 301 at [111]-[121] per Austin J.

Oppressive to, unfairly prejudicial to, or unfairly discriminatory against

1. In both Joint v Stephens [2008] VSCA 210 (Joint v Stephens) at [134] per Nettle, Ashley and Neave JJA and Hillam v Ample Source International Ltd (No 2) (2012) 202 FCR 336 (Hillam (No 2)) at [4] per Emmett, Jacobson and Buchanan JJ it was held that the phrase "oppressive to, unfairly prejudicial to, or unfairly discriminatory against" is a compound expression. The phrase is concerned with conduct that involves commercial unfairness or, as Black J put it in Re Ledir Enterprises Pty Ltd (2013) 96 ACSR 1 (Re Ledir Enterprises) at [178], "a departure from the standards of fair dealing, or where a decision has been made so as to impose a disadvantage, disability or burden on the plaintiff that, according to ordinary standards of reasonableness and fair dealing, is unfair".
2. Consideration of whether there has been unfairness in the relevant sense is judged objectively: see the judgment of Brennan J at 472-3 of Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459 (Wayde v NSW Rugby League).
3. In Wayde v NSW Rugby League the test was described as follows by Brennan J at 472-3: …whether reasonable directors, possessing any special skill, knowledge or acumen possessed by the directors and having in mind the importance of furthering the corporate object on the one hand and the disadvantage, disability or burden which their decision will impose on a member on the other, would have decided that it was unfair to make that decision.
4. In Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 (Morgan v 45 Flers Avenue) at 704 Young J described the test as whether: …objectively in the eyes of a commercial bystander, there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision fair…
5. Although the test is again an objective one, the court should be informed by the context in determining whether a decision is unfair: Joint v Stephens at [134] and [136]; Hillam (No 2) at [4].
6. The observations of Richardson J in Thomas v HW Thomas Ltd [1984] 1 NZLR 686 at 694 were cited with approval by Black J in Re Ledir Enterprises at [179]: Fairness cannot be assessed in a vacuum or simply from one member's point of view. It will often depend on weighing conflicting interests of different groups in the company. It is a matter of balancing all the interests involved in terms of the policies underlying the companies legislation in general and sec 209 in particular; thus to have regard to the principles governing the duties of a director in the conduct of the affairs of a company and the rights and duties of a majority shareholder in relation to the minority; but to recognise that sec 209 is a remedial provision designed to allow the Court to intervene where there is a visible departure from the standards of fair dealing; and in the light of the history and structure of the particular company and the reasonable expectations of the members to determine whether the detriment occasioned to the complaining member's interests arising from the acts or conduct of the company in that way is justifiable.
7. Black J went on to express the opinion at [182] that commercial unfairness "was to be assessed in the context of the particular relationship in issue, and would not infrequently involve a balancing exercise between competing considerations".
8. In Re M Dalley & Co Pty Ltd v Sims (1968) 1 ACLR 489 at 492 Lush J considered that: In assessing the facts of the present case it is necessary to remember that the petitioner is a minority shareholder. There are in the position of such a shareholder in a proprietary company many grave disadvantages but however galling and even financially damaging these may be they do not in themselves constitute oppression…
9. The fact a minority shareholder does not get her or his way in relation to the conduct of the affairs of the company will not be sufficient, in and of itself, to constitute oppression, as was made apparent in McCausland v Surfing Hardware International Holdings Pty Ltd [2013] NSWSC 902 (McCausland v Surfing Hardware) at [647] and Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688 at 740 (which was reversed for other reasons in Fexuto Pty Ltd v Bosnjak Holding Ltd (2001) 37 ACSR 672).
10. Similarly, it will not be oppressive for the controllers of a company to insist on the adoption of policies on matters of business judgment concerning matters on which there may be legitimate differences of opinion: Ireland v Retallack [2011] NSWSC 846 at [20]. Oppression will not be found where a company has merely been mismanaged or managed poorly: see Donaldson v Natural Springs Australia Limited [2015] FCA 498 at [250]; Ananda Marga Pracaraka Samgha Ltd v Tomar (No 6) (2013) 300 ALR 492 at [417].
11. These cases reflect the proposition that the court must "avoid an unwarranted assumption of the responsibility for management of the company": Wayde v NSW Rugby League at 467 per Mason ACJ, Wilson, Deane and Dawson JJ. In HNA Irish Nominee Ltd v Kinghorn (No 2) (2012) 290 ALR 372 (HNA Irish Nominee) at [507] Emmett J considered that: The mere fact that a decision by directors might affect the interests of a shareholder adversely is not of itself sufficient, assuming good faith, to render the decision oppressive, unless it was one that no reasonable directors could have made: see John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A'asia) Pty Ltd (1991) 6 ACSR 63 at 67. The court will not interfere with the traditional roles of directors and shareholders in managing and controlling a company, as provided for in its constitution, unless appropriate cause is shown.
12. Slattery J made the following remarks in McCausland v Surfing Hardware at [651]: The Court's power should not be lightly exercised especially where lack of probity or want of good faith is not established, because the Courts must respect the traditional roles of directors and shareholders in relation to corporate management: Shamsallah Holdings Pty Ltd v CBD Refrigeration and Airconditioning Services Pty Ltd (2001) 19 ACLC 517; [2001] WASC 8 at [14] per Owen J.
13. In Chase Corporation (Australia) Pty Ltd v North Sydney Brick and Tile Co Ltd (1994) 35 NSWLR 1 at 26 and Joint v Stephens at [138] it was made clear that the question of commercial unfairness is to be judged having regard to the facts known to the parties at the time of the conduct complained of, and not by reference to what subsequently transpires or facts which subsequently become known.
14. In HNA Irish Nominee at [508], Emmett J observed (citations omitted, emphasis in the original): While parliament may have chosen commercial unfairness as the criterion for the granting of relief, it does not follow that the court can do whatever the individual judge happens to think fair. The concept of fairness must be applied judicially, and the content that is given to it by the court must be based upon rational principles. While equity may, in certain circumstances, restrain the exercise of strict legal rights in certain relationships where not to do so would be contrary to good faith, it must be remembered that a company is an association of persons for an economic purpose, usually entered into with legal advice and a degree of formality. Accordingly, the manner in which the affairs of that company may be conducted is closely regulated by the provisions of the company's constitution, with which the members have agreed and which they must be taken to have accepted. In order to give rise to an equitable constraint based on legitimate expectation, what is required is a personal relationship or personal dealings of some kind between the parties seeking to exercise the legal right and the party seeking to restrain such exercise, such as will affect the conscience of the former.
15. In O'Neill v Phillips [1999] 1 WLR 1092 at 1098, Lord Hoffmann considered: Although fairness is a notion which can be applied to all kinds of activities, its content will depend upon the context in which it is being used. Conduct which is perfectly fair between competing businessmen may not be fair between members of a family. In some sports it may require, at best, observance of the rules, in others ("it's not cricket") it may be unfair in some circumstances to take advantage of them. All is said to be fair in love and war. So the context and background are very important. In the case of section 459, the background has the following two features. First, a company is an association of persons for an economic purpose, usually entered into with legal advice and some degree of formality. The terms of the association are contained in the articles of association and sometimes in collateral agreements between the shareholders. Thus the manner in which the affairs of the company may be conducted is closely regulated by rules to which the shareholders have agreed. Secondly, company law has developed seamlessly from the law of partnership, which was treated by equity, like the Roman societas, as a contract of good faith. One of the traditional roles of equity, as a separate jurisdiction, was to restrain the exercise of strict legal rights in certain relationships in which it considered that this would be contrary to good faith. These principles have, with appropriate modification, been carried over into company law.
16. The relevant context to be taken into account includes the course of conduct undertaken by the parties, including the conduct of the plaintiff: Joint v Stephens at [136]; Hunter v Organic & Natural Enterprise Group Pty Ltd (2012) 92 ACSR 183 at [105].
17. The relevance of the plaintiff's conduct was described in the following terms by Nourse J in Re London School of Electronics Ltd [1986] Ch 211 at 222 (footnotes omitted): The conduct of the petitioner may be material in a number of ways, of which the two most obvious are these. First, it may render the conduct of the other side, even if it is prejudicial, not unfair: cf Re R.A. Noble & Sons (Clothing) Ltd [1983] BCLC 273]. Secondly, even if the conduct on the other side is both prejudicial and unfair, the petitioner's conduct may nevertheless affect the relief which the court thinks fit to grant under subsection (3). In my view there is no independent or overriding requirement that it should be just and equitable to grant relief or that the petitioner should come to the court with clean hands.
18. Those remarks have been found equally applicable in an Australian context: Morgan v 45 Flers Avenue at 707 per Young J; Joint v Stephens at [136].
19. Young J, in McWilliam v L J R McWilliam Estates Pty Ltd (1990) 20 NSWLR 703 at 712, observed that: It is also a feature of many of these cases that potential plaintiffs bait potential defendants in order to produce more evidence of oppression. The fact that defendants often rise to the bait is regrettable, but it is also understandable in a family situation.
20. In Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 at [90] per Spigelman CJ it was said that the fairness of the defendant's actions must be judged by reference to the conduct of the plaintiff and, in some cases, the conduct of the plaintiff might be such as to give rise to a legitimate basis to exclude the plaintiff from management of a company. This reflects the need for the conduct to be demonstrated to be unfairly prejudicial: Re New South Wales Bar Association (2014) 315 ALR 146 at [77] per Brereton J.
21. Where nominee directors are concerned, it is clear that such directors can act with the interests of their appointors in mind, providing that they do so in the genuine belief that they are also acting consistently with the interests of the company as a whole: Re Broadcasting Station 2GB Pty Ltd [1964-5] NSWR 1648 (Re Broadcasting Station 2GB) at 1662-1663; ACCC v Malaysian Airline System Berhad (2010) 271 ALR 91 at [148]; cf SGH Ltd v Commissioner of Taxation (2002) 210 CLR 51 at [30].
22. In Re Broadcasting Station 2GB, Jacobs J observed: I am satisfied that these additional directors were, to all intents and purposes, the nominees of the Fairfax companies who would be likely to act and who would be expected by the Fairfax interests to act in accordance with the latter's wishes. At this point I feel that a critical stage in the analysis is reached. It is my view that conduct of the kind which I have related is not reprehensible unless it can be inferred that the directors so nominated, would so act even if they were of the view that their acts were not in the best interests of the company. This is not a conclusion that can be lightly reached and I see no evidence in the case upon which I can reach that conclusion. … The view which I take of the conduct of the directors does not in my approach to this matter amount to oppression of any shareholder nor improper conduct so long as they bona fide believed that the Fairfax companies would act in the interests of the companies as a whole.
23. It may be oppressive if directors or majority shareholders conduct the affairs of a company in a way that advances their own interests or the interests of others, to the detriment of a minority shareholder: Re Bright Pine Mills Pty Ltd [1969] VR 1002 (Re Bright Pine Mills). AIVT says that it may be oppressive to require a party to fund contentious litigation against itself, citing Trojan Equity Ltd v CMI Ltd (2011) 87 ACSR 144 (Trojan v CMI) and Re D G Brims and Sons Pty Ltd (1995) 16 ACSR 559 (Re D G Brims).
24. In Re D G Brims the company in question was a closely held corporation that manufactured timber products. The applicants, the granddaughter of the founder and her family, became dissatisfied with the management of the company. Byrne J considered at 592 that (footnotes incorporated into text): Many thousands of dollars of company funds have been spent on lawyers, accountants and valuers in defending these proceedings on behalf of the majority shareholders. This is unfair and infringes the basal principle that "the powers, and the funds, of a company may be used only for the purposes of the company" (Advance Bank Australia Ltd v FAI Insurances Ltd (1987) 9 NSWLR 464, 493, cited approvingly in ANZ Executors & Trustee Company Ltd v Qintex Australia Ltd [1991] 2 Qd R 360, 370). No doubt a small part of the expenditure was justifiable; for example, in discovery, and in resisting such orders as that the company purchase the shares or pay a dividend for 1991. Expenditure to protect its discrete interests or for other proper purposes of the company may be made from company resources. The essential dispute here, however, is between the shareholders; and company funds should not have been used to defend the majority shareholders (Re a Company (No 4502 of 1988) [1992] BCLC 701; Re a Company (No 1126 of 1992) [1994] 2 BCLC 146; Coombs v Dynasty Pty Ltd (1994) 14 ACSR 60, 94. The board acted on legal advice, which is no defence: see Re M Dalley & Co Pty Ltd (1968) 1 ACLR 489, 492 and footnote 96). The company was not separately represented. After the case concludes, in accordance with a December 1993 board resolution, the other respondents were to be asked to pay any costs of representing them beyond those incurred for the company. This inverts the proper approach, which in this case required that the majority shareholders meet the great bulk of the costs of representing all the respondents. This unfair conduct, in which all respondents joined, is discriminatory.
25. In Trojan v CMI the applicant was seeking relief because of alleged oppressive conduct by the board of CMI Limited. The issue of relevance on the application was whether or not CMI Limited's participation in the proceedings was necessary or expedient in the interests of the company as a whole, or whether it was for the improper purpose of assisting other respondents. McMurdo J, as her Honour then was, made the following observations: [27] At this point some circumstances should be noted. The first is that unlike many oppression proceedings, not all of the members of the company are on one side or the other of the record. The Company's issued capital consists of 33,752,634 ordinary shares which are held by 1,271 members together with 28,005,311 class A shares which are held by 1,119 members. More than 99 per cent of the ordinary members, holding nearly 46 per cent of the ordinary shares, are not parties. More than 99 per cent of the class A members, holding 80.5 per cent of the class A shares, are not parties. Accordingly, there are many shareholders who are at least potentially affected by the outcome of these proceedings, at least insofar as relief is claimed against the Company. This is not a case of the kind in Pickering v Stephenson, where Sir John Wickens V-C said: "It seems to me that where a quasi partnership of this sort is divided into a majority and a minority who differ on the question of internal administration, and litigation results from the difference, it is contrary to the spirit of the partnership to pay the expense of the litigation out of the general fund…" Shareholders who are not parties have an interest in the outcome as shareholders, such that a proper participation in the proceedings by the Company would serve a legitimate purpose as distinct from merely assisting one side of the dispute against the other. [28] Trojan argues that it can be appropriate for a company whose affairs are the subject of oppression proceedings to be heard on the appropriate form of relief, but not to participate in the preceding litigation by which an entitlement to relief is determined. In other words, it is suggested that the Company be permitted to participate only after the facts have been found. That approach has support in some of the authorities. However, the proceedings involve allegations which it is in the Company's interest to contest. For example, there is an issue as to the proper construction of the constitution of the Company, specifically in its provision for dividends to be paid to class A shareholders. The Company has a clear interest in the outcome of that issue. There are other issues for which the Company, as a listed public company, has a proper interest in the findings to be made as well as in the ultimate relief, because of the potential for those findings to affect the market for its shares. For example, the Company has pleaded to allegations concerning its financial position at various times, the conduct of and results of voting at meetings of the Company, the use of company resources, the validity of decision-making by its directors and whether it has complied with requirements of the Corporations Act.

Winding up pursuant to s 461(1)(k) or s 232

1. There is no principle or assumption that, in all cases, it will be inappropriate to wind up a company that is solvent: Hillam (No 2) at [68]-[70]. The use of the words "just and equitable" in s 461(1)(k) allows the court to "subject the exercise of legal rights to equitable considerations": Ebrahimi v Westbourne Galleries Ltd [1973] AC 360.
2. An order under s 461(1)(k) may be made in circumstances where it is impossible to maintain the object or purpose for which a company was founded or where there has been an irreconcilable breakdown in the relationship between members: Re Tivoli Freeholds Ltd [1972] VR 445; Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343.
3. However, a winding up order is frequently recognised as being a remedy of last resort, particularly when a company is solvent: Re Amazon Pest Control Pty Limited [2012] NSWSC 1568 (Amazon Pest Control) at [31]-[32].
4. If the breakdown of relations between the members has not frustrated the commercially viable and sensible operations of the company, this will tend against ordering a winding up: Amazon Pest Control at [19]; Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 at [50] (Tomanovic v Argyle). Tomanovic v Argyle was reversed on appeal, but on a different point, see Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256.
5. When a court is minded to order a winding up on just and equitable grounds, in a situation where a company is solvent, the court will sometimes order a stay to give the parties an opportunity to negotiate a buy-out: Amazon Pest Control at [33], Tomanovic v Argyle at [53].
6. The ability of the minority shareholder to transfer their interest will be relevant. In Tomanovic v Argyle at [51], Austin J noted that if there is no evidence that the board will refuse to register a transfer in favour of a respectable transferee, this operates against winding up being ordered: Tomanovic v Argyle at [52]; Amazon Pest Control at [22].

Loss

1. In cases where there has been actual loss, the law does not permit difficulties of estimation to defeat the remedy for breach of contract: Fink v Fink (1946) 74 CLR 127 at 143; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 349. This, however, does not relieve the plaintiff of the burden of proving on the balance of probabilities that there has been such a loss: Brirek Industries Pty Ltd v Mckenzie Group Consulting Pty Ltd (Vic) (No 2) [2015] VSCA 185 (Brirek Industries) at [44]. Recovering substantial as opposed to nominal damages is predicated upon the plaintiff proving both the fact and the amount of damage: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 (Amann Aviation) at 99, see also 80, 118, 137-8. As Lord Goddard CJ put it in Bonham-Carter v Hyde Park Hotel (1948) 64 TLR 177 at 178 (followed, inter alia, by the Full Court of the Supreme Court of Western Australia in Michael Kellaway International v Shark Bay Airport (unreported, 13 November 1997)): Plaintiffs must understand the fact that if they bring actions for damages it is for them to prove their damage; it is not enough to write down the particulars, and, so to speak, throw them at the head of the Court saying: 'This is what I have lost; I ask you to give me these damages'. They have to prove it.
2. In circumstances where precise evidence is not available, the Court must do the best it can: Amann Aviation at 83. However, in a situation where precise evidence is available, the Court expects it: Brirek Industries at [44].
3. In Nilon v Bezzina [1988] 2 Qd R 420 at 424 it was said that "[t]he degree of precision with which damages are to be proved is proportionate to the proof reasonably available". In Ratcliffe v Evans [1892] 2 QB 524 at 533-4 the Court opined that "[a]s much certainty and particularity must be insisted on … as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done".
4. Austin J made the following observations in Sovereign Motor Inns Pty Ltd v Bevillesta (No 2) [2002] NSWSC 7 at [77]: There is an important distinction between a case where it is difficult to award damages, and to do so involves making an estimate as to which there cannot be mathematical precision, and a case where the problems of assessment of damages are so great, or the plaintiff's evidence is so weak, as to lead the Court to conclude that the plaintiff has failed to prove its case with respect to its allegation of loss.

Breach of directors' duties

1. A director will be liable to account for any profit or benefit obtained as a consequence of a breach of her or his directors' duties: see, eg, Boardman v Phipps [1967] 2 AC 46; Queensland Mines Ltd v Hudson (1978) 18 ALR 1; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 (Hospital Products); Chan v Zacharia (1984) 154 CLR 178; Warman International v Dwyer (1995) 182 CLR 544. In the alternative, they may be liable to pay equitable compensation: Breen v Williams (1996) 186 CLR 71 at 135-136; Streeter v Western Areas Exploration Pty Ltd (No 2) (2011) 278 ALR 291 at [368].
2. A diversion of a business opportunity from the company to a director or a company associated with a director will constitute a breach of directors' duties: see, eg, Howard v Federal Commissioner of Taxation (2014) 253 CLR 83 (Howard v FCT) at [59]-[64] per Hayne and Crennan JJ. In many cases this sort of conduct will breach both the no-conflict and the no-profit rules. The High Court, in Warman International Ltd v Dwyer (1995) 182 CLR 544 at 557-8, made the following point: The objectives which the rules seek to achieve are to preclude the fiduciary from being swayed by considerations of personal interest and from accordingly misusing the fiduciary position for personal advantage.
3. Fiduciary duties, although they are strict in nature, will be limited by reference to the scope of the relationship that gives rise to them: Howard v FCT at [34] per French CJ and Keane J; Hospital Products at 69.
4. In Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110 at 139 Hill J observed that the corporate opportunity need not be identical to the endeavours of the company for the duties to be breached, providing the opportunity is "sufficiently in the same ball park".
5. Austin has proposed a "line of business" test to the effect that a director or officer may not take up an opportunity for profit if it is within the scope of the business of the company as currently carried on and as planned to be carried on: "Fiduciary Accountability for Business Opportunities" in P Finn (ed) Equity and Commercial Relationships (1987, The Lawbook Co Ltd) at 158ff. Heydon, Leeming and Turner describe this test as having "much to commend" it: Equity, Doctrines and Remedies (5th ed, 2014, LexisNexis Butterworths) at [5-115]. The Institute submits that this approach should be adopted by this Court.
6. Establishing a competing business may constitute a breach of fiduciary duties: see, eg, Cook v Deeks [1916] 1 AC 554; Green v Bestobell Industries [1982] WAR 1; Southern Real Estate Pty Ltd v Dellow (2003) 87 SASR 1 (Southern Real Estate); Re Cheal Industries [2012] NSWSC 261.
7. In Southern Real Estate Debelle J, with whom Nyland and Lander JJ agreed, made the following remarks: 21 As a director of Southern Real Estate, Ms Dellow was subject to both statutory and fiduciary duties. Sections 180-184 of the Corporations Act 2001 (Cth) list the duties of directors of companies. Section 185 provides that those duties are in addition to and do not derogate from any rule of law imposing duties on directors of corporations. In other words, the statutory duties and fiduciary duties of directors exist side by side, each in aid of the other. 22 Ms Dellow was subject to a duty to act in good faith in the best interests of Southern Real Estate. That duty is imposed by s 181 of the Corporations Act. The duty is so fundamental and has been established for so long as a fiduciary duty that it has been described as a trite proposition: Kinsela v Russell Kinsela Pty Ltd (in liq) (1986) 4 NSWLR 722 at 729; see also Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656 at 671; Southern Resources Ltd v Residues Treatment & Trading Co Ltd (1990) 56 SASR 455 at 472. The nature of the fiduciary duty was spelled out by Dixon J in Mills v Mills (1938) 60 CLR 150 at 185 in these terms: Directors of a company are fiduciary agents, and a power conferred upon them cannot be exercised in order to obtain some private advantage or for any purpose foreign to the power. It is only one application of the general doctrine expressed by Lord Northington in Aleyn v Belchier (1758) 28 ER 634 at 637: "No point is better established than that, a person having a power, must execute it bona fide for the end designed, otherwise it is corrupt and void." 23 If directors act in a way to promote their own interest or promote the private interest of others, they have not acted in the best interests of the company: Kinsela v Russell Kinsela Pty Ltd (in liq) (at 729). 24 Ms Dellow was also subject to a duty not to use her position as a director improperly to gain an advantage for herself or for any other person or to cause detriment to Southern Real Estate: s 182 of the Corporations Act. This duty plainly flows from and might be regarded as one aspect of the duty to act in good faith in the best interests of the company. The duty spells out the obligations of a director not to allow personal interests to conflict with a duty to the company. That obligation stems from the fact that a director is a fiduciary: see Dixon J in Mills v Mills. There must be a real or substantial possibility of a conflict: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 103 per Mason J; Chan v Zacharia (1984) 154 CLR 178 at 198 per Deane J. The question whether a director has acted for a proper purpose, namely, for the benefit of the company, is to be objectively determined: Permanent Building Society v Wheeler (1994) 11 WAR 187 at 218 per Ipp J. Thus, the duty may be expressed by saying that a director is under an obligation not to promote his personal interests by making or pursuing a gain in circumstances in which there is a conflict or a real or substantial possibility of a conflict between his personal interests and those of the persons whom he is bound to protect: Aberdeen Railway Co v Blaikie Bros [1843-60] All ER Rep 249 cited with approval by Mason J in Hospital Products (at 103). Shortly after in his reasons in Hospital Products (at 104-105) Mason J referred to the reasons of Dixon and McTiernan JJ in Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 at 82 where their Honours observed there would be misconduct amounting to a ground justifying dismissal for a manager to take steps during his employment to prepare a position to which he could retreat with a large part of his employer's business in the event that it should become necessary or desirable to vacate the managership. His conduct would constitute a breach of the fiduciary obligations of the employee to the company. In the case of a director, the position is even clearer.
8. In Markwell Bros Pty Ltd v CPN Diesels (Qld) Pty Ltd [1983] 2 Qd R 508 at 519 Thomas J observed "[g]enerally speaking, alternate directors are in the eyes of the law in the same position as any other director. As such they are subject to the normal duties which a director owes to his company." In First Conferences Services Ltd v Bracchi [2009] EWHC 2176 (Ch) at [25], adopted recently by Bergin CJ in Eq in Ezystay Systems Pty Ltd v Link 2 Pty Ltd [2015] NSWSC 1105 at [238], Peter Smith J considered: It is becoming increasingly common with the computerisation of information for employees who wish to set up their own competing business to help themselves to their employers' confidential information. Some of this material is not necessarily confidential as such and is capable of being found with hard work. However the employees do not wish to go through the hard work and in effect what they do is they seek to take advantage of their employers' time effort and expense in putting together valuable material which provides a tool to an emerging business. Instead of doing their own work using their own brains they simply hijack the employers' gathered material. This gives them what is called "a springboard" for their business to be up and running almost immediately at the expense of the former employer.

Accessorial liability

1. An allegation of "knowing assistance" refers to knowing participation in a dishonest and fraudulent design: Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609 at [9]-[12], [84]-[91], [103]-[125].
2. This requires that the relevant person had knowledge of the essential elements of the contravention and practical involvement in the contravening conduct: Re Waterfront Investments Group Pty Ltd (in liq) [2015] NSWSC 18 at [125]. It refers to a dishonest and fraudulent design with "knowledge of circumstances which would indicate the facts to an honest and reasonable man": Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 (Farah v Say-Dee) at 163-164 (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
3. The Sage defendants make the submission that "knowing receipt" requires the receipt of property in breach of trust: Farah v Say-Dee at 89, 145 (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ). Further, they say that goodwill "is inseparable from the conduct of a business" and is "an indivisible item of property": Commissioner of Taxation v Murry (1998) 193 CLR 605 at 609. The Institute says that the goodwill and assets of the Sage Fitness Business are property, citing Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488 at 496, 499.

Trade marks

1. Pursuant to s 17 of the Trade Marks Act 1995 (Cth), "a trade mark is a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods and services so dealt with or provided by any other person".
2. Section 6 defines "sign" in the following terms "…includes, the following or any combination of the following, namely, any letter, word, name, signature, numeral, device, brand, heading, label, ticket, aspect of packaging, shape, colour, sound or scent".
3. In E & J Gallo Winery v Lion Nathan Australia Pty Ltd (2010) 241 CLR 144 at [41]-[43], the High Court said: 41. The concept of "use" of a trade mark which informs ss 92(4)(b), 100(1)(c) and 100(3)(a) of the Trade Marks Act must be understood in the context of s 17, which describes a trade mark as a sign used, or intended to be used, to "distinguish" the goods of one person from the goods of others. 42. Whilst that definition contains no express reference to the requirement, to be found in s 6(1) of the Trade Marks Act 1955 (Cth), that a trade mark indicate "a connexion in the course of trade" between the goods and the owner, the requirement that a trade mark "distinguish" goods encompasses the orthodox understanding that one function of a trade mark is to indicate the origin of "goods to which the mark is applied. Distinguishing goods of a registered owner from the goods of others and indicating a connection in the course of trade between the goods and the registered owner are essential characteristics of a trade mark. There is nothing in the relevant Explanatory Memorandum to suggest that s 17 was to effect any change in the orthodox understanding of the function or essential characteristics of a trade mark. 43. In Coca-Cola Co v All-Fect Distributors Ltd a Full Court of the Federal Court of Australia said: Use 'as a trade mark' is use of the mark as a 'badge of origin' in the sense that it indicates a connection in the course of trade between goods and the person who applies the mark to the goods…That is the concept embodied in the definition of trade mark in s 17 ̶ a sign used to distinguish goods dealt with in the course of trade by a person from goods so dealt with by someone else. That statement should be approved.
4. The following sections are also relevant: 41 Trade mark not distinguishing applicant's goods or services (1) An application for the registration of a trade mark must be rejected if the trade mark is not capable of distinguishing the applicant's goods or services in respect of which the trade mark is sought to be registered (the designated goods or services) from the goods or services of other persons. Note: For goods of a person and services of a person see section 6. (2) A trade mark is taken not to be capable of distinguishing the designated goods or services from the goods or services of other persons only if either subsection (3) or (4) applies to the trade mark. (3) This subsection applies to a trade mark if: (a) the trade mark is not to any extent inherently adapted to distinguish the designated goods or services from the goods or services of other persons; and (b) the applicant has not used the trade mark before the filing date in respect of the application to such an extent that the trade mark does in fact distinguish the designated goods or services as being those of the applicant. (4) This subsection applies to a trade mark if: (a) the trade mark is, to some extent, but not sufficiently, inherently adapted to distinguish the designated goods or services from the goods or services of other persons; and (b) the trade mark does not and will not distinguish the designated goods or services as being those of the applicant having regard to the combined effect of the following: (i) the extent to which the trade mark is inherently adapted to distinguish the goods or services from the goods or services of other persons; (ii) the use, or intended use, of the trade mark by the applicant; (iii) any other circumstances. Note 1: Trade marks that are not inherently adapted to distinguish goods or services are mostly trade marks that consist wholly of a sign that is ordinarily used to indicate: (a) the kind, quality, quantity, intended purpose, value, geographical origin, or some other characteristic, of goods or services; or (b) the time of production of goods or of the rendering of services. Note 2: For goods of a person and services of a person see section 6. Note 3: Use of a trade mark by a predecessor in title of an applicant and an authorised use of a trade mark by another person are each taken to be use of the trade mark by the applicant (see subsections (5) and 7(3) and section 8). (5) For the purposes of this section, the use of a trade mark by a predecessor in title of an applicant for the registration of the trade mark is taken to be a use of the trade mark by the applicant. Note 1: For applicant and predecessor in title see section 6. Note 2: If a predecessor in title had authorised another person to use the trade mark, any authorised use of the trade mark by the other person is taken to be a use of the trade mark by the predecessor in title (see subsection 7(3) and section 8). 60 Trade mark similar to trade mark that has acquired a reputation in Australia The registration of a trade mark in respect of particular goods or services may be opposed on the ground that: (a) another trade mark had, before the priority date for the registration of the first mentioned trade mark in respect of those goods or services, acquired a reputation in Australia; and (b) because of the reputation of that other trade mark, the use of the first mentioned trade mark would be likely to deceive or cause confusion. Note: For priority date see section 12. 88 Amendment or cancellation-other specified grounds (1) Subject to subsection (2) and section 89, a prescribed court may, on the application of an aggrieved person or the Registrar, order that the Register be rectified by: (a) cancelling the registration of a trade mark; or (b) removing or amending an entry wrongly made or remaining on the Register; or (c) entering any condition or limitation affecting the registration of a trade mark that ought to be entered. (2) An application may be made on any of the following grounds, and on no other grounds: (a) any of the grounds on which the registration of the trade mark could have been opposed under this Act; (b) an amendment of the application for the registration of the trade mark was obtained as a result of fraud, false suggestion or misrepresentation; (c) because of the circumstances applying at the time when the application for rectification is filed, the use of the trade mark is likely to deceive or cause confusion; (e) if the application is in respect of an entry in the Register-the entry was made, or has been previously amended, as a result of fraud, false suggestion or misrepresentation. Note 1: For prescribed court see section 190. Note 2: For file, registered owner and this Act see section 6.
5. In summary then, s 41 of the Trade Marks Act provides that a trade mark must be rejected if it is not reasonably capable of distinguishing the applicant's goods and services.
6. Again in summary, s 60 of the Act provides that a trade mark may be opposed on the ground that another mark (which does not need to be registered) had acquired a reputation in Australia for the relevant goods and services and because of the reputation of that other mark, the proposed mark would be likely to deceive or cause confusion.
7. Section 88(2)(c) provides that the court may order cancellation of a trade mark if, because of the circumstances applying when the application is made, the use of the trade mark is likely to deceive or cause confusion.
8. Each case will, of course, turn on its own facts, but an opponent's use of the same mark can be a deciding factor in determining whether or not a trade mark is reasonably capable of distinguishing the relevant goods and services: Colorado Group Ltd v Strandbags Group Pty Ltd (2007) 164 FCR 506 at [30], [180]-[181].
9. In Australian Co-operative Foods Ltd v Norco Co-operative Ltd [1999] 46 NSWLR 267, Bryson J collected the relevant authorities as follows: 87 Dealing with s 114 of the Trade Marks Act 1905 (where the words used were "likely to deceive" ) Kitto J, in Southern Cross Refrigerating Company v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592 at 595 said:- "(ii) It is not necessary, in order to find that a trade mark offends against the section, to prove that there is an actual probability of deception leading to a passing-off. While a mere possibility of confusion is not enough-for there must be a real, tangible danger of its occurring (Reckitt & Colman (Australia) Ltd. v. Boden (1945) 70 CLR 84, at pp. 94, 95; Sym Choon & Co. Ltd. v. Gordon Choons Nuts Ltd. (1949) 80 CLR 65, at p. 79) it is sufficient if the result of the user of the mark will be that a number of persons will be caused to wonder whether it might not be the case that the two products come from the same source. It is enough if the ordinary person entertains a reasonable doubt. (iii) In considering the probability of deception, all the surrounding circumstances have to be taken into consideration. (This includes the circumstances in which the marks will be used, the circumstances in which the goods will be bought and sold, and the character of the probable purchasers of the goods: Jafferjee v. Scarlett (1937) 57 CLR 115, at p. 120.)" 88 In the Moove Case - Murray Goulburn Co-operative Co. Limited v NSW Dairy Corporation & Anor (1990) 24 FCR 370 in the Full Court of the Federal Court their Honours said (at 377):- "The decision whether the use of the trade mark is likely to deceive or cause confusion is in the end a question of impression and common sense: the Australian Berlei Case (1973) 129 CLR 353 at 357. See also "Bali" Trade Marks [1969] RPC 472 per Lord Upjohn at 497. Although it is a matter to be decided by the trial judge, it is a 'jury question' on which, in a case like this, the judge is entitled to give effect to his own opinion as to the likelihood of deception and confusion and in doing so is not confined to the evidence of the witnesses called at trial: 'G E' Trade Mark [1973] RPC 297 at 321-2." 89 In the passage which their Honours cited in the Australian Berlei Case at 357 Barwick CJ said:- "However, not only is the likelihood or unlikelihood of deception or confusion a question of fact but it is very much a matter of impression."
10. In cases such as Toddler Kindy Gymbaroo Pty Ltd v Gymboree Pty Ltd (2000) 100 FCR 166 at [94]-[95] it was held that for the purposes of s 60 the Court can draw conclusions about a trade mark's reputation based on evidence about the business' day to day operations and the way it promotes itself. It is sufficient if the Court is satisfied that consumers would be "caused to wonder" or would "entertain reasonable doubt" about whether the services came from the same trade source: see, eg, Southern Cross Refrigerating Company v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592 at 595; Registrar of Trade Marks v Woolworths Ltd (1999) 93 FCR 365 at [50].
11. The determination of whether a trade mark is likely to deceive or cause confusion is a "question of impression and common sense": Murray Goulburn Co-operative Co Ltd v NSW Dairy Corporation (1990) 24 FCR 370 at 377.

Witnesses

1. Each of the Institute and the Shareholder Defendants and AIVT made submissions about the credibility of a number of the witnesses.
2. It is important therefore that I record my view of those witnesses prior to embarking on analysis of the factual material.

Mr Robert Hornsey

1. Mr Hornsey is the nominee of AIVT on the Board of the Institute. He has been a director of both the Institute and AIVT since 2001. He is also a director of ACI and Sage.
2. I formed a most unfavourable view of Mr Hornsey. My view of him at times waivered between a person who was utterly ill prepared for the exercise of cross examination to that of a person who was deliberately less than forthright and gave intentionally false evidence. On occasions his responses were palpably absurd.
3. His unreliability as a witness was bluntly exposed by the evidence he gave with respect to the abandoned issue concerning franchising compliance. In his affidavit in the Oppression Proceedings Mr Hornsey deposed that "none of the majority shareholders in the Institute have sought to remedy" a contravention of the Franchising Code of Conduct by the Institute, notwithstanding that the Institute was advised of such non-compliance in October 2012 by a firm of solicitors, HWL Ebsworth. The particular allegation was pleaded in the Oppression FASOC [146].
4. Mr Hornsey had deposed on oath that he believed the particular allegation to be true in his affidavit verifying the pleading dated 13 November 2014.
5. On any view of the evidence that allegation was untrue and his attempt to perpetuate it quite dishonest.
6. The true position was that the Institute, its directors and licensees had taken a number of steps to address the non-compliance identified by HWL Ebsworth. Specifically, on 20 November 2011 the Board of the Institute resolved to engage HWL Ebsworth to draft an amended licensee agreement to address the non-compliance. That law firm prepared an amended "License Agreement" to be executed by each licensee. Each licensee in turn (other than AIF Vic/Tas) executed the amended agreements. Mr Hornsey conceded that he was well aware of all of these matters when he swore his affidavit and verified the statement of claim in the Oppression Proceedings.
7. Mr Hornsey said that he accepted that HWL Ebsworth's advice was that the amended agreements were compliant with the Code of Conduct, that the Institute had acted in accordance with the solicitors' advice by ensuring the amended agreements were executed by each licensee, and that he could not identify anything that the solicitors had missed in drafting the amended agreement.
8. It became clearly apparent in the course of his evidence that Mr Hornsey was the architect of the very situation he complained of, namely his refusal to sign on behalf of AIF Vic/Tas created the very situation whereby there was a non-complying franchise agreement in place.
9. Somewhat pathetically, in cross examination he tried to insist that the other shareholders had failed to make a "genuine attempt" to remedy the non-compliance. Quite frankly, his attempt to explain the lack of genuineness on the part of the other shareholders, each of whom was asked to sign the amended documents and did, was absurd. Mr Hornsey, somewhat incomprehensibly, tried to suggest that the proposed amended terms did not suit him from a commercial point of view and somehow or other it was not his fault that there was a non-complying franchising agreement. Not only was this an absurdity, it really displayed a wholly unreasonable stance on his part. He either could not or would not see the problem which he had caused himself, deliberately or otherwise.
10. His stance in relation to the franchising compliance issue bordered on the preposterous. I found it astounding that he could swear an affidavit in those terms knowing what the true position was.
11. The licence fee issue was another example where Mr Hornsey got himself into difficulty. In his first affidavit in the Oppression Proceedings Mr Hornsey deposed to the fact that in 2011 the Board of the Institute "under the control of the Hurst, Champion and Creagh "block", voted to change the contribution fees such that AIVT was made to pay a higher contribution than any other group member". As is pointed out by the Shareholder Defendants Mr Hornsey had, however, neglected to say in his affidavit that he had voted in favour of that very resolution.
12. In cross examination he said that the omission was not misleading because he only voted in favour of the resolution as the majority "ganged up" on him. I regarded that evidence as fanciful and a sheer fabrication. I am satisfied the true position was that Mr Hornsey agreed to the particular resolution because as he saw it from a "dollars and cents" position it did not create any particular inequality between him and other relevant persons.
13. Mr Hornsey in a somewhat opportunistic manner, in my view, made derogatory remarks about Mr Weir from the witness box. He asserted that Mr Weir was not independent of the shareholders and tried to suggest that he had some possible financial interest in the sale of the Institute. Not only was there no evidentiary material to support such a proposition but counsel for AIVT, I have no doubt responsibly, refrained from putting such a proposition to Mr Weir in cross examination.
14. Mr Hornsey then decided to volunteer that Mr Weir had been associated with a company that had gone into liquidation. When pressed by the Court Mr Hornsey acknowledged that he mentioned that in the hope that the Court would infer something negative about Mr Weir from that fact. That was gratuitous, intended to prejudice and if I may say quite ill-conceived on his part.
15. The Institute in its written submissions descends into a somewhat exquisite amount of detail about many other examples of unsatisfactory evidence given by Mr Hornsey. I have considered each of them carefully and I am of the view that each of the observations are pertinent and appropriate (see the closing submissions of the Institute at [18]-[57]).
16. Insofar as any issue in the proceedings turns upon Mr Hornsey's credit I would not accept anything he said unless it was corroborated.
17. The difficulty with Mr Hornsey's evidence and hence with the Oppression Proceedings in particular (he being the principal witness called by AIVT), is that it appears to me that any conduct he disagrees with, he readily characterises it as unfair and therefore oppressive in circumstances where the real substance of his complaint is that he is merely in disagreement with what was proposed, frequently because it was unacceptable for him or his interests from a commercial point of view.
18. By about December 2012 Mr Hornsey was foreshadowing a possible oppression claim. He conceded in cross examination that from as early as December 2012 he had been "branding" conduct, either conduct of the Institute or conduct of the majority shareholders, as oppressive (T125/47-59).
19. From the above examples and other evidence he gave I am satisfied much of his behaviour, rather than being the product of irrationality, was in fact part of an exercise in provocation in which he deliberately set out to manufacture disputation or escalated situations beyond what was reasonably necessary in the circumstances. It seems to me that he had formed the view that the Institute and those who controlled it were out of touch, perhaps with commercial reality. I consider the evidence supports the view, which I have come to, that he deliberately orchestrated disputes from time to time.

Ms Tuchtan

1. The Institute submits that Ms Tuchtan was clearly anxious when she gave her evidence and to some degree allowances should be made for that level of anxiety. However, it submits that I should also find that she was an unreliable witness as to fact.
2. I am certainly satisfied that her evidence, for example, about the response she allegedly gave Ms Ward when asked about her involvement in the Sage Business was, I think, deliberately misleading and given to prevaricate. She appreciated the sensitivity of her position with Sage and I consider she was less than forthright with Ms Ward when Ms Ward sought to get information from her. It may well be that she was under the influence of Mr Hornsey which, of course, is unsatisfactory in and of itself.
3. Although she was in my view certainly less than frank in her dealings with Ms Ward and sought (at the very least) to obscure her real involvement with Sage, for reasons I will expand upon, that does not determine a number of other important issues concerning her, especially those relating to her alleged liability as an accessory.

Ms Richardson

1. I have come to a somewhat unfavourable view of this witness as well. First, she gave evidence which I think was inconsistent. Secondly, she tried to explain unconvincingly what Mr MacGowan's precise role was and in my view got into great difficulty trying to make her evidence comprehensible.
2. Part of her problem, I am satisfied, was her wearing two hats (AIF Vic/Tas and Sage) from time to time and as a result she was, in my view, simply incapable of clearly distinguishing from time to time which role she was in fact fulfilling. On that basis it would be entirely understandable why her requests of Mr MacGowan might appear ambiguous. However, in short, in my view she rather pretended she was a successful chameleon, whereas she was in fact not. From my vantage point the evidence was somewhat unconvincing and implausible in a number of respects.

Ms Ward

1. Ms Ward has been CEO of the Institute since November 2012. She is not a shareholder in the Institute. She has no financial interest in the outcome of the Oppression Proceedings.
2. The Shareholder Defendants invite me to find that she was "frank, precise and forthright" in giving her evidence. AIVT on the other hand invites me to find that she was "evasive, selectively forgetful and preoccupied with ill directed pedantry".
3. I have to say, however, that in relation to her evidence generally, but specifically in relation to the 2014-16 Funding Offer issue, she frankly and candidly accepted that the funding agreement was a very valuable asset for AIF Vic/Tas and that that entity was vulnerable to whether the Institute did or did not sign the acceptance document and that she knew clearly there was a deadline for doing so.
4. On the other hand, it was submitted by AIVT that her evidence was confusing and that she was more concerned with protecting the Institute's case. Further it was suggested that she was argumentative and that in so far as her credit was relevant I should reject her evidence as unreliable.
5. Importantly, however, in my mind, she had no financial interest in the outcome of the proceedings. I do think she did make relevant concessions and I think her evidence was generally responsive. I am satisfied that on occasions Mr Hornsey behaved in a most aggressive and belligerent way towards her. His behaviour was unacceptable. Indeed I am satisfied he deliberately set out to provoke her. On balance, I consider her to be a reliable witness because her evidence was largely consistent with contemporaneous documents.

Mr Weir

1. AIVT accepts that Mr Weir was an honest witness "but at times reluctant to give up on a proposition that he considered useful to [the Institute]". I did not form that impression.
2. He is the independent Chair of the Institute and has held that role since September 2005. He was the nominee of AIF Qld but he was not a director of the company and had no interest in it. He had no particular interest in the outcome of the Oppression Proceedings.
3. Again, I thought his answers were responsive and, quite frankly, he had a difficult job on his hands at relevant times amongst other things trying to manage Mr Hornsey who, it seemed to me, was intent on provoking anyone and everyone opposed to his position. I would therefore accept Mr Weir's evidence.

Mr Hurst

1. Mr Hurst is a director of the Institute. He is also a director of each of AIF NSW, AIF Qld, AIF WA and AIF SA/NT. In my view he gave evidence which was entirely consistent with that of Ms Ward and Mr Weir and which, in turn, was also consistent with contemporaneous documents.
2. Again he gave his evidence responsively and I did not gain the impression that he sought to evade answers. In my view he also gave his evidence thoughtfully. Unsurprisingly, there was no attempt to attack his credit. Again, I would accept him as a reliable witness of the truth.

Mr Creagh

1. Mr Creagh is a director of the Institute and has been since its incorporation in 2001. He is also a director of AIF Qld and AIF WA. Through AIF WA Mr Creagh has an indirect interest in AIF Qld and AIF SA/NT.
2. Again, I formed the impression Mr Creagh gave his evidence responsively, candidly and without seeking to be evasive. He gave an entirely plausible explanation of why he thought the 50/25/25 methodology was no longer appropriate. He explained that since the time he had been CEO he had formed the view that a "100% revenues based model" should be the preferred model except that it was politically unacceptable amongst the group. He said, however, that there had been a gradual progression towards a higher revenue based model. At first 50/25/25 and then ultimately 75/25.
3. His evidence was convincing, rational and, if I may say so, provided a perfectly reasonable explanation for such a progression. Again, no particular criticism is made of his evidence by AIVT and for good reason.

The Licence Fee issue

1. The three sets of proceedings earlier described are intertwined in more ways than one. To give but one example, the Institute makes a claim for unpaid licence fees. There is a separate set of proceedings dedicated to that issue. AIVT on the other hand resists that claim but in turn submits that the cumulative effect of a number of matters including the Licence Fee Proceedings forms part of the matrix of oppressive conduct.
2. However, viewed in isolation the Licence Fee Proceedings largely involve the construction of the relevant RLA.
3. The issue between the parties is whether or not the Board of the Institute in purporting to resolve upon certain increases in fees amounted to "a variation" in accordance with the RLA. AIF Vic/Tas submits that the resolutions did not amount to a valid "variation" in accordance with the RLA and therefore the resolution amounted to a substitution of the regime as set out in Schedule 2 to the RLA, which was entirely foreign to what the parties to the agreement intended.
4. In addition AIF Vic/Tas submits that the fee increases were not imposed "loyally" or in "good faith" and hence were in breach of the RLA.
5. If either argument is correct, the purported increases are said to be ineffective.
6. It is accepted that the AIF Vic/Tas RLA (in respect of which each other shareholder enter into a substantially identical agreement in or around May 2010) was drawn in the context of a variation to the shareholders agreement effective 10 May 2010 (executed 6 May 2010). This variation relevantly inserted a new clause 29 relating to potential licensing arrangements.
7. That new clause provided inter alia that: A shareholder must at all times be the appointed licensee of [the Institute] in the shareholders appointed territory subject to any valid nominations pursuant to this clause. A shareholder may with the consent of [the Institute] (which consent shall not be unreasonably refused) nominate a nominee to undertake its rights, duties, obligations and responsibilities under the terms of any licence agreement with [the Institute] and with respect to the provision of physical fitness training in the shareholders designated territory as required under the terms of [the Shareholders' Agreement]…
8. The VicTas RLA included the following operative terms: 1. AIF Vic/Tas, as nominee of AIVT, agreed to provide "Services", being defined only as "the delivery of courses, assessments, and the issuing of qualifications for fitness, business and massage" (background/recitals and clause 1.1); 2. The Institute appointed AIF Vic/Tas as "licensee" to "exclusively provide the Services on behalf of [the Institute]" in the regions of Victoria and Tasmania until 16 May 2015 (with a mandatory requirement for AIF to renew the agreement for a further five years if there is no persisting default) (clauses 2 and 3); 3. notwithstanding the use of the phrase "on behalf of" in the AIF Vic/Tas RLA, clause 33.1 stated that "nothing in this agreement constitutes either party as employee, agent, joint venturer or partner of the other or creates any agency, joint venture, or partnership for any purpose"; 4. if the AIF Vic/Tas RLA is terminated, then the licensee has to change its name to a name approved by the Institute (which approval cannot be unreasonably withheld) and which would not be confused with Athe Institute's name (clause 4.3.3); 5. if the AIF Vic/Tas RLA is terminated, then the licensee is able to "trade and provide services similar to the [Services]" under a new 'approved' name (clause 4.4); 6. in providing the Services the licensee is prohibited from providing, or advertising its provision of, Services outside of its territory (clause 5.2 and 5.3); 7. the licensee is required to devote all of its time attention and abilities to providing the [Services] during the term and agreed not to engage in other business without prior written consent of [the Institute] (clause 5.9); 8. the licensee is to ensure that each of its senior management (which term is defined)142 does not to engage in other business "during the normal business hours" without prior written consent of [the Institute] (clause 5.10); 9. the 'fees' being payable by the licensee during the term are those "set out in Schedule 2" of the AIF Vic/Tas RLA (clause 6.1); 10. Schedule 2 lists only the following "fees payable" by the licensee to AIF National: SCHEDULE 2 License Fees $15,000 per month Marketing and promotion fees 1.6% of the income for the month Product development fee $3,000 per month Page 29 of 84 1. The term "senior management" is defined in clause 1.1 of the AIF Vic/Tas RLA, as the employer positions of Mission Commander, Team Captain (Finance and Administration Manager), Team Captain (Training Manager) and Careers Team Manager Captain (Sales and Marketing Manager). Mr Hornsey's 13 March 2015 affidavit at [40]-[46] identifies those who filled those positions at relevant dates. Mr Hornsey's obligation as CEO to work full time in the AIF Vic/Tas business is, of course, subject to and affected by the letter of 10 December 2010; 2. clause 6.2 (to which I will return in detail) provides that the Institute may "vary the fees payable" if the Institute inter alia obtains at least 75% approval of the Institute's Board to do so; 3. clause 9.1 sets out the licensee's responsibilities as including: 1. in providing the Services and using the intellectual property the licensee must comply with the requirements prescribed by the AQTF (clause 9.1); 2. deliver the Services in a competent, ethical and professional manner (clause 9.1.1); 3. be diligent in the protection of the Institute's interests and the interests of other licensees of the Institute (clause 9.1.1.2); 4. act loyally and faithfully towards the Institute (clause 9.1.5); 5. conduct its business in an orderly and businesslike manner (clause 9.1.6); 6. comply with all laws enforced in the Territory relating its performance under the agreement (clause 9.1.9); 7. carry out its obligations under this agreement in a proper and businesslike manner (clause 9.1.10); 8. comply with any reasonable directive or instructions given from or given by the Institute in connection with the agreement. 1. clause 9.2. sets out what the licensee cannot do and includes an obligation not to conduct or engage in any business other than the business or providing the Services in the territory on behalf of the Institute during the term (sub-clause 9.2.4) and trade or provide the services under another name or entity without the written consent of the Institute (sub-clause 9.2.6); 2. Among other things, the Institute: 1. is required to provide AIF Vic/Tas "with all reasonable forms of assistance that are necessary or conducive to [AIF Vic/Tas] performing its duties and discharging its responsibilities under the [AIF Vic/Tas RLA]" (clause 10.1.1); 2. "must act loyally and faithfully towards [AIF Vic/Tas]" (clause 10.1.5); 3. "must inform [AIF Vic/Tas] of any information known to [the Institute] that may prejudice [AIF Vic/Tas]'s performance of duties or obligations under the [AIF Vic/Tas RLA]" (clause 10.1.7); 4. The Institute must carry out its obligations under the VicTas RLA in a proper and businesslike manner (clause 10.1.10); 1. the AIF Vic/Tas RLA can only be amended in writing signed by the Institute and AIF Vic/Tas (clause 22.1); 2. At all times, contributions were made towards funding the 'national office' of AIF
9. The Institute relies upon clause 6.2 in support of its construction, which was to the effect that the notion of "variation" simply as it were meant a change. Clause 6 provides as follows: Fees 6.1 The licensee must pay to the Institute the fees during the term as set out in schedule 2. 6.2 The Institute may vary the fees payable by the licensee provided that the Institute: 6.2.1 obtains the approval of at least 75% of its board for the variation; and 6.2.2 provides to the licensee at least 3 months notice of the proposed variation, and in the event that the licensee objects to the varied fees the parties agree to refer the dispute to dispute resolution under clause 34 6.3 The fees payable by the licensee to the Institute must be paid: 6.3.1 in arrears on or before the last day of the month in which the Institute's tax invoice is issued; and 6.3.2 by direct debit, electronic transfer or other agreed method. 6.4 The licensee must pay to the Institute interest on all fees outstanding as at the ate which is one calendar month after the due date. 6.5 Interest payable by the licensee under clause 6.4 is to be calculated; 6.5.1 at the rate of 2% of the fees then outstanding; and 6.5.2 on monthly rests.
10. It submits that this clause gave it express power to vary the fees payable by licensees. Further it submits that the law has always permitted price variation clauses (equivalent clauses such as clause 6.2) without the need for fresh consideration for each variation. Further, it submitted that the obvious commercial sense of such a proposition cannot be gainsaid, especially here where the Institute had been established on the basis that it would not generate any profit but it would rather cover its expenses from year to year. On that basis the Institute needed as a matter of commercial reality to be able to fix licence fees in order to ensure its ongoing ability to meet its cash requirements.
11. On the other hand AIF Vic/Tas submits that the first and second licence fee increases were resolutions that did not have the effect of "varying" the licence fees payable but rather involved a complete "substitution" of a new single monthly fee in lieu of the three previously existing fees.
12. It is submitted that it did so by reference not to the AIF Vic/Tas RLA alone but rather by reference to all licensing agreements between the Institute and the respective licensees.
13. In particular the argument is directed to Resolution 3 of the meeting of 26 November 2012 and Resolution 4 of the meeting of 10 September 2013. The Institute and AIF Vic/Tas both accepted that clause 6.2 of the RLA creates a valid power to vary fees payable under it. The real debate between the parties, as I have already observed, concerns the ambit of the term "vary" contained in clause 6.2. The Institute submits that there is no basis for reading down that power so as to authorise a variation of what were the three separate rates in Schedule 2 but not to permit any other variation that effects that notion. The Institute submits that the clause should not be given such a narrow construction. It concedes there might be an argument, for example, if the clause read that the Institute could "vary the rates set out in Schedule 2". On that basis it might be narrowly construed. I am not satisfied that submission is necessarily correct.
14. AIF Vic/Tas, on the other hand, submits that the power to vary in clause 6.2 of the RLA is to be construed in light of the obligations imposed by clause 10 and the amendment to clause 22.1. It is submitted that those clauses are consistent with a narrow ambit being given to the power in clause 6.2.
15. Clause 10 deals in some little detail as to what is described as the Institute's "responsibilities". I must confess I find nothing in clause 10 which, in my view, as a matter of reasonable construction relates in any direct, or for that matter indirect, way to clause 6.2.
16. Clause 22.1 provides that the "Agreement" "may be amended only in writing signed by the parties". Agreement is defined (clause 1) as "the Agreement between the parties contained in this document". Again, I am not persuaded that clause 22.1 either directly or indirectly affects the construction of clause 6.2.
17. AIF Vic/Tas accepts that fees could be increased as and when required by the Institute subject to the requisite 75% of the Board resolving accordingly. Clearly the parties did not intend, therefore, an increase in fees as such to be an amendment or change requiring the requisite written consent in clause 22.1. In other words, a bespoke mechanism for the variation of fees is contained in clause 6.
18. AIF Vic/Tas submits that the term "vary" is and should be understood relevantly to mean "to change or alter as in form, appearance, character, common degree". The Macquarie Dictionary is called in aid for that definition. I do not consider that definition assists AIF Vic/Tas.
19. The Institute submits that the word "vary" simply means "change" and should be given its full effect. As a matter of ordinary English it submits that the resolutions varied (or "changed" or "altered") the licence fees payable.
20. The Institute further submits that there is no basis in the text or the context for reading down the power to vary the fees. It submits businesses change in a variety of ways for a variety of reasons and therefore there is every reason to reserve to the Institute power to alter fees in the manner which best suits its business, particularly having regard to the long term nature of the RLA.
21. The Institute accepts that it was under an obligation to act loyally and faithfully (which obligation it denies it breached), but says there is no basis for finding a breach of clause 6.2.
22. The Institute further submits that the clause builds in its own protection in that fees can only be varied if 75% of the shareholders agree, and only on three months' notice. Clause 6.2, it submits, also specifically incorporates the dispute resolution process in clause 34.
23. Next, the Institute submits that the construction advanced by AIF Vic/Tas provides no greater protection for a licensee. It submits that the Institute could achieve in substance the same outcome by varying the particular rates in Schedule 2, for example by adopting fixed licence fees totalling 25% of the Institute's budget and marketing and promoting fees to cover 75% of the Institute's budget, noting that marketing and promotion must be regarded as a broad category.
24. AIF Vic/Tas submits that as clause 6.2 is arguably ambiguous it is permissible within established principles to construe it against the background of surrounding circumstances as known to both licensor and licensee.
25. Starting from a different premise but on the pure construction point, both the Institute and AIF Vic/Tas rely upon various facts as "mutually known" surrounding circumstances. There is, however, an overlap on some of the facts relied upon. There is no particular virtue, in my view, in identifying what each party relies upon, but in short each side selects aspects of the historical backdrop. The principal reason why precise attribution is unnecessary is that whatever facts or circumstances are selected or highlighted, no different result, in my view, is objectively concluded.
26. However, each year the Institute submits an annual budget to its Board which identifies its anticipated annual expenditure.
27. The Institute is operated on a non-profit basis, as mentioned above.
28. Each of the other regional licensees had entered into an RLA on relevantly identical terms, which included Schedule 2 along with clause 6.2
29. Clause 6.1 when read in the context of Schedule 2 required the payment by each licensee of three different fees, only one of which, the marketing and promotion fee, was referable to a monthly income of the licensee.
30. Prior to the RLA being entered into, the Institute obtained its annual funding from shareholders (after the RLAs were entered into the funding, for the Institute was to come from the regional licensees by way of licence fees).
31. On 25 or 26 July 2002 the Institute determined that the ACT shareholders should contribute 10% of its expenses and the other five shareholders should contribute 18% each.
32. As at 17 March 2006 all directors of the Institute agreed in principle to national funding based on revenue. Resolution 5 was that the licence fees were "as a percentage of revenue to be determined by the Board on a regular basis".
33. On 7 September 2007 the Institute adopted fixed monthly funding for October to December 2007. It varied between the shareholders/licensees, with AIF Qld (being the previous corporate vehicle for that region) contributing $25,000 per month, AIF NSW and AIF Vic/Tas $20,000, AIF WA $18,000 and AIF SA/NT $17,000.
34. The Institute also resolved that the "CEO bring to the Board… a new fee scheme using a fixed rate for 50% of required funds and the remaining via a percentage of revenue calculation".
35. On 28 February 2008 the Institute determined that AIF SA/NT make a monthly contribution of $17,000 and other shareholders contribute $20,000 per month.
36. On 27 March 2008, all shareholders were to pay an additional amount of $5,000 per month.
37. On 2 December 2008 the Institute determined that the newly substituted AIF Qld should start paying licence fees from 1 April 2009 at 50% until 30 June 2009, 75% until 31 December 2009, 100% thereafter, and then pay an additional $10,000 per month for a further 15 months from 1 April 2010. This was confirmed noting that the other shareholders were paying $20,000 per month on 5 February 2009.
38. In May 2009 the introduction of contributions by reference to revenue was revived. On 5 May 2009 the Institute by majority adopted a budget which I am satisfied included contributions based on a percentage of turnover. While the director nominated by AIF NSW voted against the resolution in May the proposal was adopted unanimously (on Mr Hornsey's motion) on 11 June 2009. On 6 August 2009 the Institute adopted a method which was ultimately reflected in the RLAs (entered into in 2010) being a fixed fee of $15,000, 1.5% of income for national marketing and $3,000 for product development.
39. The quantum of the annual Institute budget varied from year to year.
40. On 9 June 2011 the Institute determined that the licensees would be charged as to 50% of the annual budget split equally, 25% based on budgeted turnover, and 25% based on population in the region. This has become known in the case as the 50/25/25 allocation. Mr Hornsey voted in favour of such an arrangement.
41. On 9 February 2012 the Institute decided by majority (Mr Hornsey opposing) that the preferred method was to calculate fees based on 75% of turnover and 25% of the annual budget shared equally.
42. This became known as the 75/25 allocation.
43. On 16 March 2012 after two unsuccessful motions (including one seconded by Mr Hornsey for a 50/25/25 allocation) the Institute by majority (Mr Hornsey opposing) decided to calculate the licence fees based on a 75/25 allocation.
44. The Institute submits that what can be drawn from the surrounding circumstances is that it has operated consistently in approaching the variation of fees or shareholder contributions to reflect changing circumstances from time to time.
45. The Institute submits that its conduct in varying the fees from time to time is consistent with the unopposed business practice before each of the shareholders/licensees entered into their respective RLAs in 2010. The Institute further submits that during the period 2001 to 2010 the Institute raised money by obtaining contributions payable under the Shareholders Agreement. It submits that there has been over the years a consistent practice of varying the fees so that the different shareholders/licensees did not necessarily contribute the same amount.
46. It submits there is nothing in the surrounding circumstances that would provide any basis for reading down the Institute's power to vary fees in clause 6.2 of the RLA. Further it says that there was never any understanding or agreement that each region should always contribute equally to the Institute's expenses. It submits that charging a fee based on revenue gives a much better reflection of each licensees' use of (and benefit derived from) the Institute's brand and services.
47. The Institute insofar as it is relevant relies upon Mr Hornsey's evidence to the following effect: 1. That from time to time various state organisations have done better than others (T72.47); 2. That the fitness training industry is reasonably volatile and that some years one State will do well and then they will not do so well in the following year (T73/5-15); 3. The percentage of gross revenue is simple, transparent and easier to administer (T102/41-44); 4. A fee based on revenue means that the more a licensee uses the brand the more the licensee pays (T103/10-13); 5. A fee based on revenue is easy to budget, forecast and adjust (T103/21-22);
48. The Institute invites me to take into account the fact that as a national body it has grown substantially over the past ten years.
49. It seems to me that the surrounding circumstances, whichever way one looks at them, support the proposition that the Board varied the fees from time to time as it was perfectly entitled to do with the requisite majority. Of course in the original Schedule 2 the fees comprised licence fees, marketing and promotion fees, and a product development fee. But to suggest that those fees would, subject to any increase, remain the only fees specifically identified as such leads in my view to an unnecessary degree of inflexibility and hence places an undue restriction on what is clearly a commercial agreement. The only thing that remained immutable was the notion that the licensee "must pay" the fees. As I say, to suggest that these were the only fees and that there could be no additional fees added or identified if the appropriate 75% of the shareholders thought it desirable for that to occur is both an unreasonable, and in my view an untenable, construction to place on this arrangement.
50. AIF Vic/Tas submits that a closer analogy here, however, is to draw the distinction between a "mere" variation on the one hand and a new agreement embodying different obligations on the other. It is accepted by AIF Vic/Tas that in such circumstances there will be matters of degree involved in determining the question of whether the parties by the terms of the latter agreement are presumed to have or had intended that one set of obligations be substituted for an antecedent set of obligations. In the present case, it argues that both the form and substance of the 26 November 2012 resolution (and indeed the later resolution of 10 September 2013) was to substitute the obligation on the part of AIF Vic/Tas to pay the three fees provided for in Schedule 2 (referable to three distinct uses of the funds so provided) with a quite different obligation to pay a single monthly fee. Such a change it is argued was outside the scope of the variation power in clause 6.2. I am unable to agree.
51. I do not regard clause 6 in its entirety or clause 6.2 in particular as in any way obscurely worded. Quite the opposite, it talks about fees in a global sense in the body of the clause. It is only when one goes to Schedule 2 that one sees the types of fees then thought to be appropriate by the relevant Board. But what is clear is that the "fees" are those which from time to time are approved by at least 75% of the shareholders.
52. If it was intended that the three designated fees set out originally in Schedule 2 were the only fees ever thought to be appropriate, on one view there would be very little need for variation or at least variation could be indexed to CPI or some other limiting factor in order to provide certainty in the long term. It would have been easy to use words expressly limiting the definition of fees. In my view, as a matter of common sense and on the plain construction it seems to me the impugned resolutions did exactly what they were intended to do, namely "vary" the fees payable by licensees in accordance with clause 6.2 of the RLA.

Were the relevant fee increases imposed "loyally and faithfully"

1. AIF Vic/Tas says this term of the RLA (clause 10.1.5) has in any event been breached even if what occurred at both meetings amounted to a variation for the purposes of clause 6.
2. AIF Vic/Tas submits that fees payable by shareholders and licensees have been altered by agreement from time to time prior to the First Licence Fee Increase. In the period up to early 2012 the Board had maintained a relatively equitable apportionment of fees across all licensees, where 100% of the Institute's budget was funded equally between shareholders (except for the ACT).
3. On 9 June 2011, six months after AIF Vic/Tas had entered into the AIF Vic/Tas RLA and at a time when AIF Vic/Tas had significantly increased its income by reason of it having obtained VET Funding, the Institute's Board approved apportioning fees for the budget in the forthcoming year (2012) along the following basis: 1. 50% of the total budget to be borne equally between licensees; 2. 25% on budgeted turnover; 3. 25% based on population.
4. It is accepted by both the Institute and AIF Vic/Tas that Mr Hornsey likely voted in favour of that proposal. However, AIF Vic/Tas submits that it only covered the budget year concerned and did not purport to be a substitution of the regime for fees contemplated in the Schedule. Hence it says that at the conclusion of the 2012 financial year the "default", as it is put by AIF Vic/Tas, of Schedule 2 would have come back into operation. I have to confess I do not see any force whatsoever in that argument.
5. In any event at the Board meeting of 9 February 2012 the minutes record that the Board (except for Mr Hornsey) resolved to adopt a "preferred methodology" where only 25% of the budget would be shared and the remaining 75% would be "calculated on annual turnover".
6. AIF Vic/Tas also points out that those minutes record that a document titled "Funding for National Office" was tabled at the meeting and it set out various alternative scenarios.
7. AIF Vic/Tas submits that it cannot be gainsaid that the change from a Schedule 2 methodology or a change from a 50/25/25 methodology had the effect that AIF Vic/Tas was to pay substantially more licence fees than any other region. AIF Vic/Tas also points out that the effect of obtaining VET Funding was radically to transform AIF Vic/Tas's financial performance vis-à-vis the other regions.
8. However, as the Institute points out, any change in internal, or for that matter external, circumstances would likely effect the way in which existing fees (however calculated) impact on different licensees. Any variation in the structure of fees would have different relative effects (when viewed from the perspective of one metric or another) on different licensees. It submits, for example, that if the Institute varied the fee by doubling the fixed fees payable by all licensees, that may be regarded as having a worse impact on the smaller licensees.
9. But as the Institute also points out, even on the formula contained in Schedule 2 AIF Vic/Tas would pay more than any other region for the two years in which it had the highest revenue. For the 2012/2013 years fees representing 1.6% of revenue for AIF Vic/Tas would be around $18,000 to $20,000 per month (that is in addition to the $18,000 fixed amount contemplated by Schedule 2).
10. The Institute submits it was really forced to vary the fees from the formula in Schedule 2 because the Institute's budget was more than the amount that would be paid by all licensees pursuant to that formula. The various proposed solutions contained in the Funding for National Office document were necessary, the Institute submits, because every director considered that fee regime should be varied. The disagreement was really about the formula to be adopted, not the fact of variation. The Institute says, I consider plausibly, that this is why there is no substance in the suggestion that if the directors could not achieve unanimity they should have left the fees to be calculated in accordance with Schedule 2 of the RLA.
11. On 16 March 2012 the Board resolved to "split" the contribution of fees payable with 25% of the annual budget being shared equally and 75% of the forthcoming budget to be measured by reference to revenue with an adjustment to reflect actual net invoiced revenue.
12. Mr Hornsey, of course, had agreed with the 50/25/25 allocation. The Institute submits that whilst not relevant to the construction of the RLA (being post contractual conduct) it is nonetheless directly relevant to whether fees adopted later were varied "loyally and faithfully". The Institute submits, in my view appropriately, that if the 50/25/25 formula is consistent with acting loyally and faithfully it could not logically be suggested that a 75/25 allocation was not merely because it has a greater impact on AIF Vic/Tas when analysed from the perspective of certain calendar years when AIF Vic/Tas had the highest revenue.
13. AIF Vic/Tas submits that there is something curious or strange about the dynamics of the Board meeting of 16 March 2012. They advert to the changing alliances as it were in respect of the various resolutions. AIF Vic/Tas submits that Mr Weir's evidence for the 50/25/25 methodology corroborates the stand taken on 9 June 2011 when that methodology was unanimously adopted.
14. AIF Vic/Tas also points to the concession made by Messrs Weir and Hurst that the ultimate methodology agreed upon at the meeting was the financial benefit of the individual shareholders in the majority and to the detriment of AIF Vic/Tas. I do not consider that to be of any moment.
15. AIF Vic/Tas is critical of Messrs Hurst and Creagh's evidence and their motivations. It questions in one sense their integrity, or alternatively their competence. In passing I should observe that in the absence of candidly confronting either witness with such a suggestion I consider that it is hardly appropriate for AIF Vic/Tas to make any insinuations relevantly in relation to those two witnesses.
16. As the Institute points out the value of sales is inherently a close reflection of the volume of use of brand and intellectual property. Mr Hornsey indeed gave evidence that fees calculated by reference to revenue would mean that "the more you utilise the brand the more you pay". (T103/11-13)
17. AIF Vic/Tas submits that as far as the minutes of 9 February 2012 and 16 March 2012 were concerned, they did not disclose any reason why the 75/25 ought to be the preferred methodology over the 50/25/25 methodology adopted from 9 June 2011. AIF Vic/Tas submits that by imposing a substantially higher licence fee on it than the other regions for providing what it submits were exactly the same benefits under the RLAs, the Institute did not act loyally or faithfully towards AIF Vic/Tas. Instead it is submitted the Institute exercised its powers to confer a financial benefit on the other states or alternatively by way of a misconceived purpose that it was in the wider interest of all concerned (which in turn was said to reflect a misunderstanding of the role of the Institute as licensor under the RLA and of the obligations imposed on the licensor vis-à-vis AIF Vic/Tas).
18. AIF Vic/Tas also submits that a broad interpretation of clause 6.2 underlying the fee increase enabled the Institute unilaterally to impose fees on the licensee and to remove AIF Vic/Tas's power of negotiation. In my view it is the correct construction, however.
19. Further, it submits that as a matter of fact both the First and Second Licence Fee Increases substantially increased the fees payable by AIF Vic/Tas in circumstances where AIF Vic/Tas objected strongly. AIF Vic/Tas says it had its objections overridden by the majority, where the majority in turn voted in favour of the increases by medium of appointed shareholders who received significant decreases in the fees they would otherwise have to pay.
20. AIF Vic/Tas also submits that there is no evidence or suggestion that it would receive any increase in services from the Institute in return for having fee increases forced upon it. Lastly, it submits there is simply no evidence that the Schedule 2 fees or the methodology used in making up the First Licence Fee Increase was unfair or discriminatory against other shareholders and/or licensees and the evidence justifying the preferred methodology (the 75/25 appointment) is scant or of little or no weight.
21. On balance I am not satisfied there is any basis for concluding that the adoption of the impugned methodology was in breach of the loyalty and faithfulness obligation in clause 10.1.5. There are numerous reasons for this, many of which have already been stated. However, in summary, the Institute had an historical basis or practice of changing the method of calculation from time to time, and, after objection from Mr Hornsey's lawyers, the Board responded by taking independent legal advice from HWL Ebsworth.
22. The Board resolved to obtain that advice on 17 September 2012.
23. That advice was provided on 9 October 2012. The advice confirmed the Institute's power to vary the licence fees as proposed and it also stressed the importance of the fees being proportionate to the relative market share of the other licensees in a national market due to competition law provisions. The advice indicated that the gross turnover was an appropriate indicator of market share.
24. At the Board meeting on 26 November 2012 when the First Licence Fee Increase was adopted the Board specifically noted that Mr Stuart Westgarth, solicitor from HWL Ebsworth, had advised that the changes would be enforceable. Mr Hornsey never sought his own opinion on the agreement.
25. It seems to me that absent some theory that the advice was a contrivance (which could hardly be imagined) this history indicates that the Board, in my view, acted both responsibly and reasonably in checking its legal rights before it considered and resolved to adopt the particular proposal.
26. Mr Hornsey had no objection himself to revenue based fees in 2006 or 2007, nor with the 50/25/25 allocation. It suited him at the time.
27. I am satisfied and accept the evidence of Mr Creagh, Mr Hurst and Mr Weir in so far as they explained their reasons for adopting the 75/25 allocation.
28. Mr Weir's position, I think, is particularly significant given his status as independent Chair of the Board.
29. Mr Creagh on the other hand explained that whilst personally as CEO he formed the view that a 100% revenue based model would be the preferred model, he viewed it as politically unacceptable amongst the group, and that a compromise was something everyone was looking for. Mr Hornsey's view of compromise was of course 50/25/25.
30. In my view the various reasons of the majority directors, I think, can be properly described as objectively rational. They are consistent with reasons outlined in the two reports that were tabled before the Board by Mr Martin Hartcher on 9 February 2012 and on 16 March 2012.
31. It cannot be gainsaid that AIF Vic/Tas's revenue increased substantially when government funding became available. That is merely a fact of life. However I do not think that that alone, or in combination with other factors, supports any sort of conclusion that the Institute wished actively to discriminate against AIF Vic/Tas. After all, they were not the only licensee applying for government funding. AIF SA/NT had obtained government funding in the 2013 calendar year. In addition there is simply no suggestion that the Institute adopted a formula less weighted towards revenue when other regions do better than AIF Vic/Tas. On the contrary, AIF NSW had the highest revenue in the 2015 financial year and paid the highest licence fees accordingly. It should be remembered that the resolutions were very clear that the 75/25 allocation was "commencing" in the 2013 financial year and would continue thereafter.
32. I am not satisfied that the relevant fees were imposed in anything other than in good faith, nor can I detect anything resembling an act of disloyalty. Hence I do not consider the imposition of that methodology led to a breach of clause 10.1.5 on that basis.

Use of Separate RTO Status

1. This issue is not alleged to form part of the oppressive conduct. It arises, however, in the context of the Licence Fee Proceedings.
2. The Institute alleges that AIF Vic/Tas in using its own RTO status is in breach of the AIF Vic/Tas RLA. This is because it is conducting business using its own RTO accreditation. It is also alleged by the Institute that AIF Vic/Tas is using the Institute's intellectual property. Further, that it is holding itself out as having its own RTO accreditation.
3. AIF Vic/Tas has been providing some specified training services using its on RTO accreditation since at least 1 January 2015.
4. In this context it is convenient to refer to a number of clauses of the RLA.
5. First AIF Vic/Tas must not provide training services other than in accordance with the RLA. So much is clear from clause 5.2.
6. In addition, in providing the services AIF Vic/Tas must only use the software, training materials, administration materials, internal and external documentation and internal and external advertising and promotional material as approved by the Institute and/or supplied by the Institute. Again, so much is clear from clause 9.1.4.
7. In addition, AIF Vic/Tas must not conduct or engage in any business other than the business of providing services on behalf of the Institute within its territory (that is Victoria and Tasmania). Again, this is made clear by clause 9.2.4.
8. AIF Vic/Tas must not use the intellectual property in a manner in any way that indicates that AIF Vic/Tas is the owner of the intellectual property. This is clear from clause 16.3. "Intellectual property" is defined as including all intellectual property and proprietary rights relating to the Institute's RTO accreditation.
9. These clauses must by necessity be read in their full contractual context. Importantly in that regard, recitals C, D and E in my view make it clear that AIF Vic/Tas is providing services "on behalf of" the Institute. In particular, Recital C and D state expressly that the services are provided "on behalf of the Institute" but also, importantly, in accordance with the Institute's "registered training organisation accreditation".
10. Clause 2.1 provides that AIF Vic/Tas is appointed licensee "exclusively" to provide the services on behalf of the Institute within the territory.
11. Clauses 5.1 and 5.9 require AIF Vic/Tas to provide the services and to devote all of its time, attention and abilities to providing the services.
12. In addition, clause 9.1.5 requires AIF Vic/Tas to act loyally and faithfully towards the Institute. Also, clause 10.1.3 requires the Institute to maintain its RTO accreditation for the delivery of the services.
13. Those clauses when viewed in context, in my view, make it plain that the parties objectively intended that AIF Vic/Tas would deliver the "services" as defined within its territory on behalf of the Institute and under the umbrella of the RTO accreditation maintained by the Institute.
14. The Institute submits that from a commercial point of view this is unsurprising. It submits that it would need to be able to control its brand, and provide services nationally in compliance with its RTO obligations. I agree.
15. The RLA also provides that AIF Vic/Tas must comply with any "reasonable" directive or instruction given by the Institute in connection with the RLA (Clause 9.1.14).
16. On 7 April and 1 May 2014 the Institute directed AIF Vic/Tas to cancel its own RTO accreditation, remove all reference to its RTO accreditation from its materials, and to cease using its own RTO accreditation. AIF Vic/Tas refused to do so. Of course, under clause 9.1.14 the directive has to be regarded as reasonable, but in the light of the contractual obligations as I see them it seems to me the Institute's request was indeed that. That is subject to one qualification concerning the 2014-16 Funding Offer issue to which I will return.
17. The response on the part of AIF Vic/Tas as I best understand it is that the RLA does not expressly prevent AIF Vic/Tas from obtaining its RTO accreditation. It is also submitted that the definition of "services", referring as it does to the delivery of courses, assessments and the issuing of qualifications for fitness, business and massage, makes no reference to those activities being done using the Institute's RTO status.
18. AIF Vic/Tas submits that clauses 5.9 and 9.2.4 oblige a licensee not to engage in any other business without the prior written consent of the Institute. It submits, however, that by using its own RTO in the provision of services under the AIF Vic/Tas RLA it could not be seen to be engaging in "other business". In my view I think that flies in the face of the express terms of clause 5.9. If AIF Vic/Tas is, pursuant to its own RTO, delivering services, and delivering similar if not identical services as it would under the Institute's RTO, I do not see how AIF Vic/Tas could comply with clause 5.9 which requires it to devote "all" of its time to providing the services in accordance with the RLA which must reasonably mean the services provided on behalf of the Institute using the RTO accreditation.
19. Again in relation to clause 9.1.4 the submission is that there is nothing in the plain reading of the clause that requires the licensee to provide services using only the Institute's RTO. Again, I disagree. I consider that submission is contrary to the plain intention of the parties as evinced in the various clauses, to which I have already referred.
20. In relation to clause 10.1.3 AIF Vic/Tas somewhat glibly, in my view, submits that although this imposes an obligation on the Institute to maintain its RTO accreditation the clause does not prevent licensees from delivering services under their own RTO. Again, I think this flies in the face of the express language of the RLA.
21. AIF Vic/Tas's construction of clause 16.3 is to similar effect, namely that the words do not prevent AIF Vic/Tas performing services and using its own RTO. Again I reject that construction.
22. AIF Vic/Tas submits that the recitals are only aspirational and do not form part of the operational part of the agreement. It seems to me as a matter of principle that is not correct. Since the circumstances surrounding the making of a contract may relevantly be relied upon as an aid to construction. It seems to me recitals may similarly be relied upon. There is plenty of authority to that effect: see Square Mile Partnership Ltd v Fitzmaurice McCall Limited [2007] 2 BCL 23. I certainly accept again as a matter of principle recitals cannot in the face of clear language be used to control, cut down or qualify such language in a contract. Here, however, it seems to me the language of the various clauses I have referred to are abundantly clear. The recitals are merely corroborative of the objective intention of the parties, especially in relation to the RTO accreditation.
23. In addition, AIF Vic/Tas submits that to the extent that the Institute could have required AIF Vic/Tas to stop using its own RTO it can only do so if such a request was reasonable and, in the circumstances, here the request was not. It is said that the request was unreasonable because the Institute had not accepted the VET funding for AIF Vic/Tas. The funding would have been procured by the Institute through a utilisation of its RTO. As I have said, I will return to this. In summary, however, as I later explain, the VET Funding problem was entirely caused by Mr Hornsey's intractable and unreasonable conduct. To that extent the Institute's position in this context was, in my view, entirely reasonable.
24. Further, however, it is submitted that in early December 2013 the Institute had in fact sought to restrict AIF Vic/Tas's ability to perform any services using the Institute's RTO and demanded Mr Hornsey cease delivering them until a Service Delivery Agreement was executed.
25. In turn it is said the Services Delivery Agreement by imposing significant fees was onerous and unnecessary given AIF Vic/Tas already had the 2010 MOU in place.
26. Further, it is said Ms Ward conceded that from a compliance point of view there was no difference between AIF Vic/Tas utilising its own RTO or that of the Institute.
27. Further, that neither Mr Weir nor Ms Ward made any objection when they were informed by Mr Hornsey on 18 December 2013 that AIF Vic/Tas intended to obtain its RTO. They submit there was no objection until 7 April 2014.
28. AIF Vic/Tas also submits that from as early as 30 October 2001 it had been proposed that all states would eventually obtain their own RTO status.
29. It is true that Mr Hornsey gave a number of reasons for causing AIF Vic/Tas to obtain its own RTO accreditation. For example, he expressed concerns about non-compliance by the Institute with Australian Skills Quality Authority (ASQA) requirements.
30. I should say there does not seem in my view to be any factual foundation for the suggestion that the Institute was at risk of breaching the ASQA requirements. Its activities had been audited by an independent auditor and it was thought to be at low risk of non-compliance (see Ms Ward's affidavit of 12 March 2015 [9] and [18]). Indeed, at the time Mr Hornsey caused AIF Vic/Tas to register its own RTO accreditation, ASQA had not conducted an audit of the Institute nor had the Institute received from ASQA an indication that they would do so.
31. So far as the desire on the part of AIF Vic/Tas to obtain funding from the Victorian government is concerned, the Institute submits that AIF Vic/Tas is very much the author of its own misfortune and, for reasons later expressed, I agree. In any event the Institute submits that it is ready and willing to accept funding offers for the benefit of AIF Vic/Tas provided AIF Vic/Tas takes the steps reasonably necessary for the Institute to protect itself and secure its obligations in respect of that funding.
32. I am of the view that the parties objectively intended that so far as the RLA was concerned the only entity which would have, and at all times maintain, accreditation was the Institute. In all the circumstances it was perfectly reasonable of the Institute to make the relevant request of AIF Vic/Tas.
33. Notwithstanding these findings the appropriate remedy for the Institute is a matter of some complexity. I will return to this.

The Sage Proceedings

1. The significance of the Sage Proceedings is twofold. First, the Institute as plaintiff brings a number of claims that emerge as a result of the establishment of the Sage fitness business which is said to be in competition with the business of the Institute and its licensees.
2. Those proceedings on the part of the Institute involve allegations of breaches of directors' duties and related breaches of fiduciary obligations. In addition there is a claim for causing AIF Vic/Tas to breach the RLA and register its own trade mark which it is submitted should be cancelled under s 88 of the Trade Marks Act 1995 because it is likely to mislead or cause confusion and because it is not reasonably capable of distinguishing the services of Sage or ACI from that of the Institute.
3. The Institute has withdrawn its separate claim for misleading and deceptive conduct and hence passing off. However, it continues to submit that the similarity between the brands, advertisements and get up of the Sage fitness business and the Institute's brands, advertisements and get up is relevant to the remaining claims because it forms part of the strategy upon which Mr Hornsey and Ms Tuchtan have embarked upon, in breach of their directors' duties. Whilst context is important the Institute cannot have it both ways. If these allegations are not relied upon in and of themselves as a source of liability their weight and forensic utility will arguably be of little moment.
4. In response AIVT seeks to rely upon the Sage Proceedings as a factor in its Oppression Proceedings. It submits that the claim was always patently weak (including the passing off and claims against Mr Kinghorn, the latter of which were abandoned long ago, as well as the accessorial claims which, it is submitted, have never been properly pleaded or particularised).
5. It is submitted that there is no bona fide commercial purpose in the Sage Proceedings and that they were in fact brought for the benefit of the Institute's shareholders, not the Institute, and the proceedings amount to "threatening, issuing and maintaining" groundless, patently weak claims which lack bona fides and accordingly are oppressive to AIVT (as the appointor of AIF Vic/Tas).

Setting Up the Sage Business

1. When Mr Hornsey first established a "Sage" business in 2008 the Institute asserts that it understood it was because Mr Hornsey and his associates were interested in providing massage training courses. Mr Hurst made this point in his evidence at [22]. I do not consider that could be regarded as controversial. He was not in reality challenged about that.
2. As early as March 2010 Mr Hurst, in his then capacity as Commander in Chief of the Institute, stressed that "Sage must be separated completely from AIF Vic/Tas at all levels". There is no evidence that Mr Hornsey disagreed with that proposition and indeed he accepted that situation, at a meeting on 27 February 2014 as he informed Mr Pettit that Sage was a separate business and that he was keeping Sage and the Institute separate (T233/20-25). I have no doubt he fully intended to confront and allay any fears or suspicion that Sage would impact on the Institute.
3. On 23 May 2012 ACI registered "fitness" among its services for its RTO accreditation. At this stage Mr Hornsey had not incorporated Sage. Mr Hornsey says that he had already had in mind that the Sage business would move into fitness. Indeed he accepted that he had this intention as early as 2007 (T158). There is certainly no evidence that he informed the Institute of this in that year. Mr Hornsey also acknowledged earlier in his evidence that it would be inappropriate to set up a competing business and to keep it a secret from the Institute (T72/37). I am satisfied he deliberately kept it secret in the early stages.
4. In 2012 the Sage business expanded into aged care and child care.
5. The first active steps to enter the fitness market with Sage business, the Institute submits, appear to have been taken in late 2012. Sage was incorporated in 25 October 2012.
6. Very close to this date (on 23 October 2012) Mr Kinghorn asked Mr Evans (group training and development manager for Sage) for course material for a fitness course. There is reference in an email from Mr Evans to Ms Tuchtan (copy to Mr Hornsey) requesting some information about an "old fitness course we own". Mr Hornsey said in his evidence that the course referred to was created before the establishment of the Institute (T278/45-T279/15). Apart from Mr Hornsey's assertion, however, there does not appear to be any support in the evidence for such a proposition.
7. On 12 November 2012 Ms Richardson circulated an email to, amongst other people, Mr Hornsey, with proposed Sage logos including one for the fitness business.
8. On 13 November 2012 Ms Richardson placed a bid in ACI's name on the phone number 1300 664 664. The Institute has sought to make something of this by reason of the Institute's number at the time being 1300 669 669. Ms Richardson in any event informed Mr Hornsey that she had made a bid for the number.
9. On 19 November 2012 ACI registered the trade mark "Sage Institute of Fitness".
10. On 28 November 2012 ACI obtained the number 1300 664 664 for $750.
11. On 28 November 2012 Ms Richardson sent an email indicating an intention to set up the Sage fitness business from 5 January 2013 to the "AP" email address and a Mr Len Corley, copied to a Ms Carolyn Fuerst. Ms Richardson sent a further email on 29 November 2012 indicating that she had spoken to Mr Hornsey and there might be some delay in the process. Indeed, ACI put off the launching of the Sage Fitness Business for another 12 months.
12. The Institute submits that it was no accident or coincidence that Mr Hornsey and his associates started taking these steps to set up the business in late 2012. They submit that at that time AIF Vic/Tas had enjoyed a very substantial increase in sales, perhaps referable to the change in the industry following the availability of the Victorian government funding. They further submit that disagreements started to emerge between Mr Hornsey and his fellow directors in the Institute about the appropriate methodology for calculating licence fees under the RLA as at about this time. However, matters appear to have been put on hold until late in 2013.
13. In any event ACI resumed active steps to establish and promote the Sage fitness business in late 2013.
14. On 14 August 2013 ACI registered the trade mark for "the Institute" with its leaf logo.
15. On 11 October 2013 Ms Richardson circulated an email about proposed advertising for the Sage fitness business to, amongst other persons, Mr Hornsey and Ms Tuchtan. However, the advertising and marketing did not start immediately. Indeed, it did not start until about November 2013.
16. An email exchange between Ms Richardson and Mr Rick Munn (as careers team captain for AIF Vic/Tas) on 16 October 2013 indicates that Mr Munn, at least, expected the Sage fitness business to be "similar to AIF" and that the type of course was "similar to [the Institute] but with a Diploma".
17. On 29 October 2013 Ms Richardson emailed a Mr Stuart Leggatt of Admark saying amongst other things that they would be launching the Sage Institute of Fitness in the new year. In a further email to Mr Leggatt of the same day Ms Richardson said: Originally we wanted to make Sage the Jetstar to the Qantas Australian Institute of Fitness. We now want to flip this and have Sage Institute of Fitness as the Qantas of the Fitness education industry.
18. Similarly, Mr Hornsey asserted in his evidence that he decided to make Sage the "Qantas" offering (T297/15-26). The Institute submits that, leaving labels to one side, Mr Hornsey had personally placed himself in a position of conflict and in doing so he preferred his own interests and those of Sage and ACI to the interests of the Institute.
19. At the beginning of 2014 it would appear that ACI and Sage launched the Sage fitness business. This included its website, radio announcements and a Facebook page.
20. At one point the Sage fitness business was advertised at Russell Street and Wheelers Hill, which were the AIF Vic/Tas sites. However, the Institute accepts that this was not intentional and Ms Richardson sent an email to Mr Colm MacGowan of 80/20 Internet Marketing (80/20) asking for it to be removed.
21. On 15 January 2014 Ms Richardson sent an email to staff at AIF Vic/Tas and Sage encouraging them to go to the Sage fitness business Facebook page and "like" the page.
22. On 20 January 2014 Ms Richardson sent an email to the Institute group (AIF Vic/Tas) and the Sage group encouraging people to follow the Sage companies on Twitter.
23. On 1 February 2014 and 8 February 2014 newspaper advertisements were placed for both the Sage Business and the Institute. The Institute submits that the advertisements were twice as large for Sage as they were for the Institute.
24. On 11 February 2014 Ms Richardson sent an email to the Institute group (AIF Vic/Tas) and the Sage group inviting expressions of interest in being involved in new Sage fitness business advertisements which were being prepared.
25. During this period Sage or ACI retained the company referred to above called 80/20 to provide services in connection with the promotion of the Sage fitness business.
26. In late 2013 ACI and Sage started promoting the Sage fitness business in other states and territories, to be launched at the beginning of 2014. The Institute submits that "the evidence is clear" that the Institute's business and the Sage fitness business compete for a number of reasons. First, they submit that Mr Hornsey agreed that the Sage fitness business would endeavour to secure the custom of the same people who are customers of AIF Vic/Tas (T162/28-42). Mr Hornsey's response, however, was that the products were different.
27. The Institute also points to the fact that Mr Hornsey agreed that in 2012 he had decided he wanted to set up the Sage fitness business to "compete actively against" AIF Vic/Tas (T161/26-29). Further, Mr Hornsey conceded quite frankly that Sage and AIF Vic/Tas were competing in the same market but again as he put it "with quite a different product but it was competing in the same market, yes" (T244/12-13).
28. The Institute also points to the fact that Ms Tuchtan agreed that ACI and the Institute had been in competition since 2013 (T203.24-26). Ms Richardson also confirmed in her evidence that when she learned that Mr Hornsey wanted to set up the Sage fitness business that AIF Vic/Tas and Sage would be competing for people who wanted to be trained as trainers in the fitness industry.
29. The Institute submits that Mr Hornsey was in an obvious position of conflict in establishing, operating and benefiting from the Sage fitness business. Further, they submit it was a poor reflection on Mr Hornsey's credit that he refused to concede the conflict.
30. The Institute submits that it is obvious that customers of the Institute are or were re-directed to the Sage fitness business and the conflict manifested itself in a number of ways that inevitably damaged the brand of the Institute.
31. First, the Institute submits that the decision to treat the Sage fitness business as offering the "Qantas" end product, thereby demoting the Institute brand to "Jetstar", in and of itself leads to damage given that Mr Hornsey was well aware that the Institute had promoted itself as a national body and industry leader offering a premium product. The Institute points to clause 2.1 of the Shareholders' Agreement which provides that the shareholders were to pursue the objective of promoting and advancing their interests as "leading businesses dedicated to education and training in the fitness industry in the respective territories". As an aside, the Institute points to Mr Creagh's evidence in which he did not accept that it was a true reflection of the relative products of the Institute and Sage to say that the former is like Jetstar and the latter like Qantas (T844/2-43).
32. The Institute submits that an important factual matter is that for all practical purposes there was no internal separation between AIF Vic/Tas and the Sage fitness business. Alive to the complications and probable consequences of not keeping the businesses separate, the Institute was, as I have already said, provoked to insist with some degree of prescience that "Sage must be separated completely from [AIF Vic/Tas] at all levels" (CB2/626).
33. Mr Hornsey asserted that he did in fact keep the Sage business and the Institute Business separate. The Institute submits that not only is that inaccurate but the facts clearly support the contrary position.
34. The Institute submits that properly viewed the facts support a substantial overlap of employees. They give an example of 6 January 2014 where Sage HR emailed both Sage email lists and AIF Vic/Tas email lists announcing that a Ms Nikita Whist had joined the team and would be "working both across the Australian Institute of Fitness and Sage Institute of Education". On 6 March 2014 Ms Whist had to be reminded by staff of the Institute not to send emails about Institute matters from her Sage email address.
35. On 21 March 2014 Sage HR emailed both Sage email lists and the AIF Vic/Tas email lists announcing that Mr Sammut had been appointed as Sage Training Manager having worked with the Institute since 2011.
36. At a meeting of 27 February 2014 Mr Hornsey said that Mr Munn, Ms Betham and Mr Sammut had resigned (or would shortly resign) from AIF Vic/Tas to work for ACI. The Institute points to Ms Tuchtan's LinkedIn profile (CB3/2314) which described her as academic director of both AIF Vic/Tas and ACI.
37. Further, Ms Richardson's LinkedIn profile described her as "Owner and Director of the Advertising and Marketing and Human Resources at AIF Vic/Tas and Sage" (CB42407). There are other emails pointed to by the Institute where employees sent emails indicating that they were undertaking some role for both AIF Vic/Tas and Sage as follows: Mr Matthew Broughton (designer) emailed material from his AIF Vic/Tas email address but discussing Sage matters. The same applies to a Mr Liam Liddicoat (senior career scout or career agent).
38. It is further submitted that the evidence supports an inference that employees were encouraged to regard themselves as working for a single group of companies controlled by Holdings. Mr Hornsey said in his evidence that "most of our 300 odd employees are employed by the Institute [sic] and are employed across the group according to what their role is" (T235/4-5).
39. The Institute also points to an "Information Addendum" dated 16 July 2014 for ACI which describes ACI as "part of the Institute Group of Companies" whose brands are stated to include the Institute and Sage. The Institute also points to a number of employees who had adopted email signatures and logos indicating that they represented both the Institute and Sage. They point to an email of Ms Richardson's of 22 April 2014 to a Ms Mutimer of Think Tank Social in relation to a forthcoming presentation describing Mr Hornsey, Mr Corley and Ms Tuchtan as having roles in both Sage and AIF Vic/Tas. The Institute also points to events which occurred between December 2011 and June 2012 involving Ms Tuchtan in which she engaged a Mr Langtree of Aegis Services Australia Pty Ltd to advise on issues relating to government funding for both the Institute and Sage (CB2/1177-1179, CB21183-1186).
40. The Institute submits that this overlap leads in turn to a confusion of roles and creates a very serious risk of the re-direction (intentional or unintentional) of customers from the Institute to the Sage Business. As a matter of common sense that is clearly correct.

Promoting the Sage fitness business

1. The Institute submits that from the start the Sage fitness business was developed and promoted in a way that emulated the Institute's business, and deliberately so.
2. There are two ways in which it is submitted that this occurred. First, in the similarity between the advertisements including colour schemes and look and feel between the Institute and the Sage fitness business. Second, in the social media strategy implemented through 80/20 and the dealings with 80/20 generally.
3. As to the similarity in online, television, and printed advertisements, the Institute relies on: the promotion of itself as "the Institute"; the prominent use of a lime green colour; the Sage telephone number being similar to the Institute's number; the print advertising including photographs of Ms Michelle Bridges and Commando Steve for the Institute and Sage respectively, being two people who are closely associated in the public eye by reason of their roles on television; and the "look and feel" of the advertisements.
4. The Institute acknowledges that it no longer presses the separate claim that either of AIVT or AIF Vic/Tas engaged in misleading and deceptive conduct. Nevertheless, it submits that the close proximity of certain activities is a significant part of Mr Hornsey and Ms Tuchtan's breaches of directors' duties because of the way in which it dovetails with their "Qantas vs Jetstar" strategy. The submission is that both companies were being promoted, as it were, by closely related corporate entities with substantially overlapping staff and the internal confusion or lack of separation forms part of a strategy that advances the "Sage Fitness brand at the expense of the Institute brand".
5. The Institute points to Ms Richardson's evidence to the effect that when she retained 80/20 she did so wearing both the Sage and AIF Vic/Tas hats (T446/11-29).
6. At [195] of the Institute's submissions there are 16 detailed examples given which support the proposition that Ms Richardson was perfectly willing to use information received from the Institute to help Mr MacGowan to promote Sage (including with a view to ensuring that Sage was better recognised than the Institute). She, of course, is not singled out as having any personal liability.
7. Those examples are not denied and I am satisfied that one can reasonably draw the inference that Ms Richardson was communicating with Mr MacGowan in order to "pick the eyes" out of the offering of the Institute and favourable aspects of it to the advantage of Sage.
8. Perhaps one good example is that of 13 November 2014. Mr MacGowan sent a lengthy email to Ms Richardson (against a backdrop of significant communications between the two of them in the months leading up to November) in which Mr MacGowan compared the relative positions of Sage and the Institute in digital media. Ms Richardson accepted in her evidence (T496/32-43, T497/25-40) that she had an expectation about Sage "leapfrogging" the Institute in Sydney and Brisbane, and that Mr MacGowan had been retained to achieve that very outcome as best he could. It was also understood that Mr MacGowan's task was to ensure as best he could that Sage out performed AIF Vic/Tas in Victoria and that Ms Richardson wanted Mr MacGowan to advise her, at least when she "had her Sage hat on", as to how the Sage business could outperform AIF Vic/Tas in Victoria.
9. The Institute submits that I should reject Ms Richardson's assertion that she had given specific instructions to 80/20 that the Sage fitness business material was to be different from the Institute material and also to reject her assertion that Mr MacGowan's advice about promoting Sage was unsolicited. I must say I am of the view that I should do exactly that. I rather think she really in truth never turned her mind to such a precise distinction. She was merely assisting her husband with a new and rival business enterprise.
10. Further the Institute submits that there was never any real or genuine attempt on the part of Ms Richardson to observe any level of confidentiality with confidential Institute data (which she gave to Mr MacGowan) and that she did so quite deliberately. I agree. Mr MacGowan, of course, was not called to give evidence in the proceedings and Ms Richardson not only confirmed that he was available to do so but that he was still being paid for his professional services (T475/15-18).
11. It also seems to me that Ms Richardson kept very much to herself that she had retained Mr MacGowan to engage in a process of comparison between the Institute website and the Sage fitness business website. There was also no doubt in my mind that Mr MacGowan understood his role as requiring him to make a series of suggestions in relation to how the Sage website could be improved, vis-à-vis the Institute website.
12. The Institute accepts that competitors clearly monitor each other's activities, but submits that this evidence goes beyond such an acceptable strategy. It submits that Ms Richardson was using her position at AIF Vic/Tas to obtain or use information in marketing strategy with the specific object of making it available to Sage's business and consultants. Further, it submits that she was doing so with the specific object of improving the Sage fitness business' market position vis-à-vis that of the Institute. Further, it submits that the media strategy was specifically targeted at the Institute. During this whole period, it is submitted, she retained the position within AIF Vic/Tas by virtue of which she was able to get immediate access to the Institute's marketing strategy and reports. Ms Richardson regularly reported to Mr Hornsey concerning what was occurring during the ACI or Sage marketing meetings and the like (T453/15-16). Indeed, the Institute submits that as Mr Hornsey and Ms Richardson are married it is inconceivable that Mr Hornsey was not aware of what Ms Richardson was doing and, if I may say so, vice versa. These submissions in their entirety are undoubtedly correct and I am satisfied that Ms Richardson's loyalties lay with Sage.
13. A further example of the Sage defendants preferring their Sage interests to the Institute's interests was the preparation, it is said, of the Sage and Institute stands at the 2014 FILEX Convention and the Expo.
14. The Institute submits that AIF Vic/Tas was responsible for organising the Institute's stand at the 2014 Expo. As early as June 2013 the Institute's stand for the 2014 Expo had been booked with Diversified Exhibitions Australia Pty Ltd (Diversified). It was for 54 square metres at stand L2.
15. Ms Richardson was in touch with Diversified on behalf of the Institute from at least around 5 August 2013. As at 22 November 2013 Diversified had offered to provide the Institute stand L2 at no costs (in return for the Institute's marketing) and a discount on a smaller stand J2 (18 square metres). Ms Richardson accepted that she presumed the smaller stand would be for the Sage fitness business (T432/23-46).
16. At a marketing committee meeting of the Institute on 3 December 2013 Ms Richardson specifically said she would need the Institute stand to be six metres by nine metres. This was the size of the Institute stand at the Expo in previous years. On 11 December 2013 Ms Richardson emailed Mr Cosgrove specifically stating that she had the same size stand as the previous year (ie six metres by nine metres).
17. On 6 January 2014 Ms Richardson sent Diversified an email asking for the invoices to be arranged in a way that gave the proposed Sage stand (ie the smaller stand J2) at no charge as well as giving the impression that Diversified was charging (in addition to the contra arrangements) for the larger stand L2 then designated for the Institute. Somewhat oddly, Ms Richardson asked that this arrangement not be disclosed to the Institute or to Network. When pressed in cross examination she said she did this because the Institute did not yet know that Sage was at the Expo and Ms Richardson did not want them to know (T435/10-12).
18. As at 23 January 2014 Diversified confirmed Sage's smaller J2 stand and the Institute's larger L2 stand.
19. Sometime before 3 March 2014 the Sage defendants made the decision to switch the stands so that Sage received the larger L2 stand (54 sq metres) and the Institute the smaller J2 stand (18 sq metres). The organisers of the Expo were willing to give the Institute a 54 sq metre stand in front of the main public entrance in return for advertising and marketing with no actual cash payment.
20. The Institute points to the fact that Ms Richardson tried to say that the Institute received its stand for free whilst Sage had to pay for part of its stand (T436/50-T437/14). That to one side, the Institute says that Diversified was willing to give the Institute a 54 sq metre stand for its marketing spend and it received a stand that was a third of the size. The Institute further points out that there was no payment expected by Diversified from either Sage or the Institute and so much is made clear from its email of 26 February 2014.
21. When Mr Cosgrove learned about the switch and raised it with Mr Hornsey on 1 April 2014 Mr Hornsey asserted that it had always been their intention to have the stands that way around. The excuse given for swapping the stands was that AIF NSW would not lend AIF Vic/Tas a stand for the larger area. The Institute, however, submits that it provided brand and marketing that the Expo organisers regarded as valuable enough to offer a 54 sq metre stand on a free basis. Moreover AIF Vic/Tas, as the local licensee in the place where Expo would occur, was plainly going to receive greater benefit than other licensees as the Expo would provide it with an excellent local marketing and sales opportunity. Whilst AIF Vic/Tas would be marketing the Institute brand it would make sales on its own behalf. The Institute submits there is simply no evidence that there was any obligation (or even expectation) that AIF NSW would provide their stand. It is therefore submitted that there was every reason to expect AIF Vic/Tas to prepare the larger Institute stand just as ACI was willing to prepare the larger Sage stand.
22. The Institute submits that the only rational explanation for the swap was a decision to prefer the Sage fitness business over the Institute's business. I am not satisfied the evidence on balance points, however, to that conclusion.
23. The Institute submits that given Mr Hornsey's role in Sage and in AIF Vic/Tas it was inevitable that he knew in substance everything that was occurring in both organisations of any relevance. That must as a matter of common sense be correct.
24. Further it is submitted that despite his position as a director of AIF Vic/Tas, Mr Hornsey pursued the business opportunity for the benefit of ACI or Sage and indeed took active steps by which he placed himself and those around him in a position of conflict between his personal interest and the interests of the Sage fitness business on the one hand and the business and interests of the Institute on the other. Again, I regard that as plainly correct.
25. The Institute submits that it conducts its fitness training business through its various licensees. It submits that it has a brand and goodwill which belongs to it. In any event, it submits that the conduct of its business through the licensees is something that it is entitled to protect. Again, I agree.
26. The Institute also submits that during this period Ms Tuchtan was an employee of, and owed duties to, the Institute under the terms of her employment agreement. That employment agreement required her to devote all of her time, attention and abilities during work hours to her Institute employment duties and not to undertake duties that conflicted with her roles with the Institute, and to obtain the Institute's written consent prior to engaging in any other business or undertaking other employment. It is submitted that she in turn breached those obligations. As will emerge, I am not satisfied on the evidence about her being in breach.
27. Further, it is submitted that by reason of Ms Richardson's conduct as a senior executive of ACI and Sage, as well as that of Mr Hornsey and Ms Tuchtan, ACI and Sage should be seen to be knowingly involved in the breaches of directors' duties of Mr Hornsey and Ms Tuchtan. In my view Mr Hornsey and Ms Richardson's conduct leads to that consequence. For reasons which are later expanded I have doubts about the consequences of Ms Tuchtan's conduct in that regard.

Freedom to compete

1. Mr Hornsey agreed that it was inappropriate to set up a competing business and keep it secret from the other directors and shareholders as well as asserting that he was completely honest and open with other directors and shareholders in relation to his plans. (T72/41-45). Those two pieces of evidence in my view do not necessarily stand together. The simple reason is that Mr Hornsey was not at all times frank about what he was doing in relevant respects.
2. The Sage Defendants submit that there was an agreement or understanding that shareholders and directors of the Institute were free to participate in competing businesses. In that regard they rely upon the so-called agreement struck on 5 December 2006 to the effect that shareholders would be free to participate in competing businesses (CB1/431).
3. The Institute submits that the whole of the document needs to be considered and when that is done it is clear that there was no such agreement but rather a proposal to enter into a new memorandum of understanding to replace the Shareholders' Agreement. It is submitted by the Institute that the parties never entered into a new memorandum of understanding. Mr Hornsey agreed with that latter proposition in cross examination (T143/50-144/35).
4. In any event, the Institute submits that on no view of the evidence could it be said that there was ever an agreement which involved permission to create a competing business which would act to the detriment of the Institute and hence damage its goodwill. Further it is submitted that none of the Institute's witnesses were cross examined about any alleged agreement that permitted freedom for any relevant parties to be involved in competing businesses without the Institute's consent.
5. It is submitted that Mr Hornsey's evidence is such that it should be found that he planned the Sage Fitness Business as early as 2007 and that he never candidly informed his fellow directors of this intention nor ultimately what he had in mind. Further, it is submitted that it is simply not to the point that either Mr Hornsey, or for that matter Ms Tuchtan, believed that they were entitled to compete with the Institute or to have interests in competing businesses. Further, it is submitted that at least Mr Hornsey, if not Ms Tuchtan, must have appreciated that they simply did not have the fully informed consent of the Institute to do what they were doing and that their conduct lacked good faith and that they must have appreciated it could only harm the Institute and benefit Mr Hornsey and Ms Tuchtan's other interests. So far as Mr Hornsey goes I am satisfied that those submissions are correct, and that the evidence supports findings to that effect. So far as Ms Tuchtan is concerned I am not satisfied the evidence quite supports those propositions.
6. Further, the Institute submits that the reliance upon the separate existence of the business known as Network as some form of justification is entirely misplaced: I agree. The Institute accepts that Mr Champion and Mr Hurst both have an interest in Network and that part of Network's business involves the provision of similar services to those provided by the Institute. The critical difference, however, in my view, is that Network was an existing business at the time of the Institute's inception (CB1/20-33) and, more to the point, the Institute had given its fully informed consent to the continuation in it of Mr Hurst's and Mr Champion's interests. Indeed, all of the evidence suggests an entirely co-operative relationship between Network and the Institute. Further, it is submitted Mr Hurst and Mr Champion made consistent efforts to ensure they were not in positions of conflict as regards the Institute and Network and if they were in conflict (or perceived conflict), they removed themselves from that conflict. I am invited to accept the evidence from Mr Hurst who indicated that he had gone to some trouble to keep the two businesses separate. I am satisfied that the evidence supports these propositions.
7. The Institute also relies upon obligations owed by AIF Vic/Tas under the RLA. Those obligations were to ensure that its senior management did not engage in other business or undertake other employment during normal business hours without the Institute's prior approval (clause 5.10) and an obligation to be diligent in the protection of the Institute's interests and those interests of other licensees (clause 9.1.2) and an obligation to act loyally and faithfully towards the Institute (clause 9.1.5). I agree with that submission.
8. It is submitted that AIF Vic/Tas, controlled by Mr Hornsey and Ms Tuchtan, had allowed the Sage fitness business to be established and operated by them. Allowing the various matters to occur as described above placed AIF Vic/Tas in breach of the relevant clauses of the RLA. In particular, it is further asserted that AIF Vic/Tas also breached its obligation under clause 5.10. I consider that submission as far as Mr Hornsey goes is correct, but again I am not satisfied as to Ms Tuchtan's precise role. I agree Mr Hornsey's conduct had the effect of placing AIF Vic/Tas in breach of the AIF Vic/Tas RLA.
9. The Institute says that the consent given on 9 December 2010 by the Institute to Mr Hornsey and Mr Charles Tuchtan to be involved in other business during normal business hours, of course, never applied to Ms Tuchtan, but in any event was given in the context of Mr Hornsey and Ms Tuchtan wanting to be involved in the Sage business at a time when it had no involvement with fitness services and therefore there was no question of competition. I am satisfied that that submission is a correct analysis of the evidence.
10. The Institute also submits that it has established itself as a prominent force in the fitness industry and that it promotes itself under the name "The Institute". That is also clear, in my view, on the evidence. However, the precise significance of this aspect of the matter is the subject of further consideration in the context of the trade mark issue.
11. ACI had registered "The Institute" as a trade mark for the provision of educational services (CB3/1580). The trade mark, as discussed later, is, however, juxtaposed against three stylised leaves.
12. The Institute submits that having regard to its established reputation as "The Institute", ACI's use of the purported trade mark is likely to deceive or cause confusion and therefore s 88 of the Trade Marks Act would be engaged. I have significant reservations about this and will return to it later in the judgment.
13. The Sage defendants submit that there is simply no basis to conclude that AIF Vic/Tas, as opposed to ACI, set up, promoted or operated Sage. I am not satisfied this is the correct analysis. For obvious reasons ACI through Mr Hornsey as director and Ms Richardson as senior executive make ACI's involvement a reality. Mr Hornsey was at all times a director of AIF Vic/Tas and through Mr Hornsey AIF Vic/Tas was obviously privy to his machinations and directions.
14. It is submitted by the Sage Defendants that ACI and AIF Vic/Tas are separate businesses. It (ie ACI), of course, as a matter of reality has, however, to accept that some staff have dual roles, for example, Ms Richardson is the Marketing/Advertising Director of both ACI and AIF Vic/Tas but, it is submitted, there is nothing preventing her from wearing different hats depending upon which business she is attending to at any given time. Again, as far as it goes that is correct, but it does not confront the reality of the situation.
15. Further, it is submitted, AIF Vic/Tas only had four employees and that the conduct complained of did not relevantly identify any of the relevant employees except Mr Hornsey who, it submits, was permitted to engage in other work in any event. Again, that may be so, but these persons were clearly working directly or indirectly under Mr Hornsey's direction.
16. On the other hand, reliance is placed upon the Institute's Board resolution of 9 December 2010 and the written consent dated 10 December 2010 purporting to permit Mr Hornsey to engage in his work outside of the Institute and AIF Vic/Tas. It is said the Institute is thereby unable to rely upon clause 5.9 insofar as it concerns Mr Hornsey's conduct, while Ms Tuchtan was never employed by AIF Vic/Tas in any "senior management" role as defined in the AIF Vic/Tas RLA. I do not accept this.
17. Further, it is said the AIF Vic/Tas stand at the 2014 Expo was in a form previously approved by the Institute and it included large banners that were visible across the Expo venue and, further, that it was attended by competent staff. It is submitted that the reason a larger stand was not used was that AIF NSW was not prepared to allow the larger stand used at the previous expos to be used by AIF Vic/Tas at the 2014 Expo and that a new stand would have cost $20,000, which AIF Vic/Tas was not prepared to spend. It is submitted, therefore, that AIF Vic/Tas RLA clause 9.1.2 did not require AIF Vic/Tas to spend $20,000 on a larger stand. Further, it is submitted that it could not be a breach by AIF Vic/Tas of clause 9.2.1 for Ms Richardson, an employee of the Institute and not an employee of AIF Vic/Tas, to recommend to ACI (in her capacity as ACI's marketing/advertising director) that Sage adopt some of the same generic publicly available promotion strategies used by AIF Vic/Tas or other fitness education providers (such as SMS responses to web enquiries, social media promotions, YouTube videos and website banners. Further, it is submitted that ACI did not intend to replicate or clone the Institute or to promote Sage at the expense of AIF Vic/Tas. As to the expenditure of $20,000, I agree there was no requirement to expend that sum. The problem otherwise, however, is that Ms Richardson was unashamedly assisting her husband, Mr Hornsey, to set up and run a rival business entity, which can hardly be described in context as benign or accidental. That said, I have already outlined the precise machinations in connection with the 2014 Expo, which I consider somewhat equivocal.
18. It is submitted that Ms Richardson engaged Mr MacGowan to advise on internet marketing matters for the Institute, AIF Vic/Tas and ACI. To the extent she did so for ACI it is submitted she was not acting as an employee or agent of AIF Vic/Tas. Further it is submitted the information from Mr MacGowan was not used against the Institute's interest nor that of any of its regional licensees. It is, however, accepted that Ms Richardson in fact from time to time passed on information from Mr MacGowan to Mr Cosgrove of the Institute for its benefit.
19. In addition it is said that clause 9.1.5 of the RLA did not require AIF Vic/Tas to spend $20,000 to secure a stand for AIF Vic/Tas at the 2014 Expo. As I have said, I agree with that proposition. Nor did it require AIF Vic/Tas to ensure that Sage (a separate business) avoided using the same generic publicly available and promotional strategies used by the Institute or to avoid using Mr MacGowan for the benefit of all concerned. The use of generic publicity is more problematic, but in any event I am not satisfied that the evidence is in a state that permits of any precise findings on the topic.
20. The Sage Defendants submit that the Institute has failed to particularise and quantify any damage flowing from these alleged breaches of the RLA in any event. A request to identify the Institute's loss or damage was made prior to the commencement of the Sage Proceedings but was never answered. The only loss or damage pleaded by the Institute, it is said, is a loss of goodwill or decline in the value of the Institute. It is pointed out that no evidence of any loss has ever been adduced and no particulars were ever provided after subpoenas and discovery and it is submitted the Institute could not, in fact, suffer any loss when the businesses providing fitness training courses are not the Institute but its regional licensees. I am not satisfied that is an accurate assertion and I will return to this.
21. Further, it is submitted that absent actual loss or damage it is unclear why the above claims under the RLA are still pursued other than as a part of a deliberate strategy of oppression towards interests associated with AIF Vic/Tas and for the apparent benefit of other regional licensees. Again, I will return to this.
22. The Sage defendants highlight the fact that the Institute's submission is to the effect that there was some alleged strategy (or conspiracy) between Mr Hornsey and Ms Tuchtan to set up and promote Sage to the detriment of AIF Vic/Tas in breach of their duties "supposedly" owed to the Institute.
23. It is further submitted that the matters upon which the Institute relies namely the size of printed advertisements, the characterisation of Sage as "Qantas" and AIF Vic/Tas as "Jetstar", Mr Hornsey's hope that Sage would be dominant, the overlap of employees, and the fact that AIF Vic/Tas and Sage both had stands at the 2014 Expo which were switched does not bear up to scrutiny. Again, I am not satisfied that is entirely accurate. In my view the facts, when viewed in context, show a deliberate strategy on Mr Hornsey's part to establish, promote and attempt to ensure the success of Sage, a competitor with the Institute (as I see it) whilst at the same time being a director of both entities.
24. The Sage defendants submit that the purported strategy is not proven simply because it was in the interests of Mr Hornsey and Ms Tuchtan for Sage and AIF Vic/Tas to do as well as possible (not for AIF Vic/Tas to fail). Further it is submitted that even if the "strategy" existed at its highest it would involve a breach of duties owed by Mr Hornsey or Ms Tuchtan to AIF Vic/Tas and not the Institute.
25. The Sage defendants submit that there are at least two threshold issues with the Institute's claim. The first is the failure to identify what are the "interests" of the Institute and the apparent conflation of those "interests" with those of the Institute's regional licensees. Because the Institute does not conduct any courses (only licensees do), ACI/Sage does not compete with the Institute but only with the Institute's regional licensees. The existence of a promotion of the "Sage Institute of Fitness", therefore, could have no impact on the Institute's "interests" (however they are identified) as it is only the Institute's licensees (not the Institute itself) which stand to lose out from the existence of competitors. Further, it is submitted that once this distinction is recognised between the Institute's "interests" and those of other regional licensees there is no scope for allegations of disloyalty against Mr Hornsey or Ms Tuchtan, nor is there any breach of the no-conflict or no-profit rules. For reasons that follow I do not agree with those propositions.
26. It is submitted that directors' duties are not owed to individual shareholders (the Institute's regional licensees) but to the company as a whole. Further, since the Institute operates as a not-for-profit (and is therefore not harmed by the existence of ACI as a competitor to its regional licensees) the only "real or substantial possibility of conflict of interest" is between the interest of ACI and the interests of the Institute's licensees and/or between the interests of ACI and the interests of AIF Vic/Tas. Those potential conflicts (and any associated profits) are not relevant to the present action. Again, I am of the view that is a somewhat simplistic appraisal of the situation.
27. It is submitted by the Sage defendants that the Institute's claim is misguided because it involves the Institute bringing proceedings for the benefit of others, that it is the regional licensees whose interests are affected. I do not agree.
28. The Sage defendants go on to submit that the scope of the duties owed by Mr Hornsey and/or Ms Tuchtan to the Institute must accommodate a number of considerations. First, that the Institute was formed to "promote and advance the interest of the shareholders as leading businesses…in the fitness industry in their respective territories". Its ability to serve that function, that is promotion and advancement, it is submitted could not be threatened by the existence of other education providers who compete with the Institute's regional licensees. Again, I do not accept that as a tenable proposition.
29. Further, it is submitted that the Institute's role, post the entering into of the RLAs, is (as the RLAs apply to licensees in the regions) to use the Institute's intellectual property and to assist the licensees in the provision of the "services" as defined. Likewise its ability to serve that function is, again, not threatened by the existence of other education providers who compete with the Institute's regional licensees. That proposition, in my view, is not self-evidently correct.
30. Further, Sage offers as its principal product a Diploma of Fitness, a full time twelve month on-campus programme at a cost of over $15,000 - the nearest equivalent offered by the Institute's regional licensees being an online (self-paced) Diploma of Fitness with a tuition fee of $5,990. Sage also only offers Certificate III and Certificate IV as part of a secondary school based programme.
31. In summary, on this point the Sage defendants submit that the nature of the Institute and the relationship between it and its directors is such that its involvement in competing businesses has always been contemplated and accepted. Further, it is pointed out that the Institute's main product is its master training (Certificate III and Certificate IV in Fitness), with an entry level course costing $6,000 to $7,000 delivered over a three month period. That is, in my view, an inaccurate gloss.
32. In summary, Sage accepts that it and the Institute's products compete but says they are very different offerings.
33. It is submitted that whether there was any breach of directors' duties owed to AIF Vic/Tas is a separate question which does not arise in these proceedings and is a matter in respect of which the Institute has no standing.
34. A further point that is made is that the other problem facing the Institute is that the obligation to act in the best interests of the Institute and the statutory obligations under ss 182 and 183 focus on the duties and powers of a director of the Institute and the misuse of that position as a director of the Institute (or an employee in Ms Tuchtan's case in respect of s 182). The focus, therefore, is on the misuse of information obtained because they are or have been a director of the Institute.
35. Sage submits that the claims by the Institute do not identify, nor does the evidence establish, a misuse of position by Mr Hornsey as a director of the Institute (as opposed to a director of AIF Vic/Tas and/or ACI), nor does it identify any information obtained by Mr Hornsey in that capacity.
36. It is further submitted that the claims against Ms Tuchtan must fail for additional reasons, namely that an alternate director is not in the same legal position as a director unless she or he has actually acted in that capacity. It is submitted there is simply no evidence of Ms Tuchtan attending the Institute's Board meetings or acting as a director of the Institute. That seems to me to be correct.
37. It is said that a further fiduciary claim against Ms Tuchtan as an employee of the Institute must also fail given her lack of involvement in setting up the Sage fitness business. Ms Tuchtan ceased to be an employee of the Institute on 4 June 2013 before Sage commenced operation and relevantly before much of the conduct complained of in the pleadings. I consider that also to be correct.
38. It is also said that the duties of Mr Hornsey as a director of the Institute and Ms Tuchtan as an alternate director did not require them to cause AIF Vic/Tas to spend $20,000, for example, to secure a larger stand at the 2014 Expo. Nor is there any evidence that Ms Tuchtan as opposed to Ms Richardson had any involvement in relation to the AIF stand at the 2014 Expo. I regard that as correct as well.
39. Further, it is submitted that there is simply no evidence that either Ms Tuchtan or Mr Hornsey had any significant involvement in online promotion strategies for Sage. Further, it is submitted that it could not be part of their fiduciary obligations to ensure that Sage did not use any of the same generic publicly available strategies used by the Institute or to prevent the engagement of Mr MacGowan. In part that is correct as to generic material, but the former proposition, especially in relation to Mr Hornsey, has an air of unreality about it.
40. It is submitted that there is simply no evidence to support the assertion that either Mr Hornsey or Ms Tuchtan made improper use of their position as directors of the Institute. It is submitted there is simply no evidence at all of Ms Tuchtan doing anything and nor is there any evidence of Mr Hornsey doing anything other than attending Board meetings.
41. The Institute, on the other hand, makes three complaints against Ms Tuchtan based upon contract. It alleges that between February 2011 and June 2013 (prior to Sage Institute of Fitness commencing operations) Ms Tuchtan allegedly had fortnightly teleconferences and engaged in correspondence with Mr Kinghorn about the "Sage" branded business. It is submitted that this allegedly conflicted with her role as the Institute's training manager and conflicted with her role as an alternate director of the Institute.
42. Further it is asserted that between 15 December 2011 and 28 March 2012 Ms Tuchtan engaged consultants and prepared a report in relation to "Sage" branded businesses. Again, this is said to be in breach of her employment contract. Further, on April 2013 she is alleged to have sent copies of the Institute's confidential cover sheet to officers of Sage in breach of her employment contract.
43. In response the Sage Defendants submit there could be no conflict with Ms Tuchtan's Institute role because at the time the alleged events occurred the "Sage" branded businesses were not competing in the fitness market. Further, it is submitted it could not be suggested that engagement of consultants or the preparation of a report amounted to "engaging in business" and in any event there is no evidence that the cover sheets were imparted in confidence. I think that is correct. On the evidence I am not satisfied Ms Tuchtan should bear any liability as alleged. Mr Hornsey is quite a separate matter.

Accessorial claims

1. The Institute alleges that accessorial liability attaches to ACI and Sage in respect of Mr Hornsey and Ms Tuchtan's alleged breaches of duty in respect of the setting up and promotion of the Sage business, not securing a large and prominent display at the Expo, causing or permitting Sage Institute of Fitness to emulate some of the Institute's internet promotional strategies and/or bundling fitness courses. In addition Ms Richardson as a senior executive of ACI and Sage also implicates both companies.
2. The Sage defendants submit that there can be no "knowing assistance" or "knowing concern". Knowing assistance it submits has to involve knowing participation in a dishonest and fraudulent design and none is pleaded nor is any admitted or disclosed in the evidence.
3. "Knowing concern" requires that the relevant person had knowledge of the essential elements of the contravention and had a practical involvement in the contravening conduct. It is further submitted that the Institute's pleading fails to specify what facts or elements were known by ACI, what kind of knowledge was involved, what basis there was for the knowledge involved, and what participation or assistance ACI gave.
4. Further, it is submitted, the allegations that ACI knowingly received a benefit "caused by Hornsey and Ms Tuchtan's breach of duties" is again unexplained in the pleadings and entirely unclear.
5. Specifically dealing with Ms Tuchtan it is submitted that the accessorial liability alleged is in respect of "conduct" in respect of Mr Hornsey. The Sage Defendants submit that if the allegations against Mr Hornsey fail then obviously the accessorial claims against Ms Tuchtan must likewise fail. Further, they make the point that accessorial liability is again not properly pleaded or particularised and, more importantly, not established. The latter is correct but I do not see the liability of Mr Hornsey and Ms Tuchtan as intertwined to that extent.
6. So far as Ms Tuchtan's evidence is concerned it is submitted that it should be found that she disclosed to the Institute's Mr Hurst, in particular on 23 April 2009, her involvement in the AIF Vic/Tas Board which sometimes included ACI. Further, it would be accepted she did not issue the June 2011 instruction to include fitness on ACI's RTO. She was appointed a director of Sage on 25 October 2012 but there is simply no evidence that she was aware that there was any business plan for that company to commence trading at that time. Again, I consider that on the evidence those propositions are correct.
7. It is submitted that she was simply not aware of ACI's intention to start the Sage fitness business until after June 2013, when she ceased employment with the Institute, although the possibility of offering fitness courses had existed since June 2011. I agree there is strictly no evidence in my view which would support any knowledge on her part.
8. I should say that on the evidence, and for what it is worth, it seems to me she had no involvement in the selection of the telephone number for Sage, nor the trade mark.
9. It is accepted, however, that she knew from after 2013 that by opening, ACI would begin to compete with AIF Vic/Tas within the fitness industry. But there is no evidence that she ever directed her mind to the so called "Qantas and Jetstar" type arrangement or offering.
10. I am also satisfied there is no evidence that she saw or approved the Sage website before it went on line or was involved in its graphic design.
11. Further, I am satisfied there is no evidence that she was involved in the 2014 Expo.
12. The Institute, however, commences its response by confronting, as it were, the assertion that AIF Vic/Tas did not have any role in relation to the Sage Fitness business and that AIF Vic/Tas in fact only had four employees. The Institute submits the assertion that it was not AIF Vic/Tas but ACI that operated the Sage Fitness business might have some force but for the evidence of integration of the two businesses. I consider that proposition on the evidence to be correct.
13. The Sage defendants, however, as mentioned above, assert that AIF Vic/Tas only had four employees, and that none of them other than Mr Hornsey is said to have engaged in the conduct complained of. The Institute questions the reality of that submission. It makes reference to a number of provisions of the RLA including the appointment of AIF Vic/Tas "to exclusively provide the services on behalf of the Institute" (clause 2.1). It also draws attention to clause 5.1 which requires "the licensee to provide the services" and clause 5.5.1 which require AIF Vic/Tas to employ "the senior management" which is defined as the Mission Commander, the A Team Captain, the Training Team Captain and the Careers Team Captain. The Institute accepts that whilst this clause suggests that other persons involved in providing the services may not necessarily be employees of AIF Vic/Tas, such persons must be regarded as agents or representatives of AIF Vic/Tas and AIF Vic/Tas must be responsible for their conduct, vis-à-vis the Institute. The Institute's position on this matter is to be accepted and preferred in my view, as a matter of fact. There was a clear overlap of employees. Their precise roles may be a little obscure, but their functions overlapped in their attempts to serve two masters.
14. Lastly, in relation to the AIF Vic/Tas RLA the Institute refers to clause 16.1 and the granting of an exclusive licence to AIF Vic/Tas to use the Institute's intellectual property - no other entity is permitted by the AIF Vic/Tas RLA to use it. That I consider has the consequence of implicating the employees, at least theoretically.
15. In so far as the Sage defendants appear to mount a positive case that AIF Vic/Tas had off-loaded the provision of the "the services" under the RLA to third parties with whom the Institute had no contractual relationship, that in and of itself, it is submitted by the Institute, would still lead to a breach of the RLA. I agree. To find otherwise would render the RLA a somewhat useless document, as a matter of commercial common sense.
16. It is submitted by the Institute that the better view is that the Institute was relevantly an employing entity and that employees with roles in the AIF Vic/Tas business must be regarded as agents or representatives of the Institute. It is submitted that Ms Richardson certainly conceded that she had an AIF Vic/Tas hat on as well as a Sage hat (T499/9-24). On the basis of that evidence, in my view, she should be seen as an agent or representative accordingly.
17. It is submitted further by the Institute that various clauses of the RLA require AIF Vic/Tas to ensure that it and its employees comply with the Institute's policy and, for example, that its employees wear approved uniforms when providing services. It is submitted it could not seriously be contended that by the device of setting up a separate entity, AIF Vic/Tas could be persuaded to circumvent those obligations. Equally, I agree with that proposition. It would be, in my view, disingenuous to suggest otherwise.
18. I agree that once those propositions are accepted then the lack of separation between the AIF Vic/Tas and Sage businesses, and the significant number of people who clearly had Institute roles as well as being involved in Sage, demonstrate that AIF Vic/Tas has been involved in the promotion of Sage. Again, as a matter of practical reality that must be so. To that extent I consider that AIF Vic/Tas has beached the AIF Vic/Tas RLA.
19. The Institute further submits that AIF Vic/Tas through its directors, employees and agents promoted its business as "Jetstar" to Sage's "Qantas" and allowed the same people (allegedly wearing different hats) to engage in the conduct of which complaint is made. That is, in my mind, clear on the facts. In any event, in my view the characterisation as different types of aircraft carriers is unhelpful. First, the Qantas/Jetstar analogy is, after all, only Mr Hornsey's characterisation. What I think is clear is that he was deliberately intending to make Sage more attractive than the Institute, and that would almost certainly be at the expense of the Institute. He therefore set out whilst a director of the Institute to devise a rival business which would directly compete with the Institute and which would inevitably damage its goodwill, or at least in the knowledge that would be the likely result of his conduct. His assertion that he could legitimately do so is, I consider, fanciful.
20. The so-called written consent of 10 December 2010 read in context, I do not consider on the evidence that the Institute should be seen as ever having consented to Mr Hornsey having business interests that were intended to compete directly with the Institute to its detriment.
21. In my view, Mr Hornsey's conduct in setting up and promoting the Sage business was deliberate, for a time covert, and in a number of respects, in my view, quite dishonest. The suggestion that he and Ms Richardson had the motivation or competence assiduously to keep separate at all times the Institute's and Sage's interests is, in my view, as a matter of fact and practical reality absurd. Whilst a director of the Institute and AIF Vic/Tas, Mr Hornsey deliberately pursued the Sage business opportunity for his own benefit and for the obvious benefit of ACI and AIF Vic/Tas and placed himself quite deliberately in a position of conflict between personal interests and the interests of the Sage fitness business on the one hand and the interests of the Institute on the other.
22. As to the inability or failure to quantify damage, the Institute acknowledges that it cannot quantify damage otherwise than by reference to lost profits. That said that does not mean the claim has no commercial purpose because findings of breach combined with an award of nominal damages would be sufficient for the Institute to establish that AIF Vic/Tas should not be permitted to engage in this type of conduct under the RLA.
23. As far as the submission that the Institute has no relevant interest to protect is concerned, the Institute submits that such an allegation is artificial. I agree. In my view the Institute has a business because, under its RTO and under its umbrella of central management administration, and using its intellectual property brand and goodwill, a range of education and training services in the fitness industry are provided to students across Australia.
24. It seems to me that the Sage fitness business is in direct competition with the Institute's business (and the business of the Institute's licensees, at least in Victoria, Tasmania, New South Wales and Queensland). Moreover, the potential cannibalisation of the business of AIF Vic/Tas by the Sage fitness business has a direct and palpable impact on the Institute. Among other things it would undoubtedly have an impact on the Institute's brand and goodwill including an impact on its national standing as an RTO accredited provider of premium quality services in the fitness industry. Even Mr Hornsey conceded that the Institute, by reason of the operation of the Sage fitness business, would receive less revenue from AIF Vic/Tas.
25. In my view the Institute has amply demonstrated a legitimate commercial purpose in seeking the relief outlined.
26. It is submitted by the Institute, quite correctly, therefore, that any reduction in the business and revenues of AIF Vic/Tas correspondingly reduces the amount of licence fees payable by AIF Vic/Tas to the Institute under the AIF Vic/Tas RLA, imposing an additional financial burden on other licensees to make up any funding shortfall, but overall constraining the Institute's business activities.
27. Further, the Institute makes the point that it is simply not an answer that it only conducts its fitness training business through its various licensees. Again, I agree. The brand and the goodwill belong to the Institute. These submissions are, in my view, as a matter of legal and commercial reality, correct. The mere fact that the Institute does not retain profits is also, I consider, not to the point. It has marketed and promoted itself and on the evidence has a commercial presence and hence reputation.
28. Of course the Institute owns the intellectual property and is responsible for maintaining the goodwill of the business nationally. The licensees provide the services in their respective regions "on behalf of the Institute". The Institute, therefore, is entitled to insist for the benefit of the Institute as a whole that its directors not place themselves in a position of conflict and then derive private profits from the conflicted position.
29. The Institute submits that Ms Tuchtan had been Mr Horney's alternate director on the Institute's Board from 30 April 2009 to 4 May 2012, and since 10 September 2013. Ms Tuchtan was also an employee of the Institute between 4 May 2009 and 4 June 2013. However, I am of the view that as alternate director a person would only attract liability, relevantly, when performing the role of director. Ms Tuchtan in that regard and in other respects falls into, I think, a different category to Mr Hornsey. On the evidence I do not consider she can be seen as having done anything relevantly in the capacity of director of the Institute.
30. The Institute submitted that any activity which has the effect of diverting business opportunity away from the Institute or an entity associated with the Institute must give rise to a breach of the duties to avoid conflict, their duties not to use their position for their own benefit or the benefit of third parties, and their duties not to use information by reason of their position for their own benefit or the benefit of third parties. That is correct obviously as a matter of principle but again whilst, I am satisfied, it is true of Mr Hornsey, whose conduct was blatant, I am not satisfied about Ms Tuchtan's role on the facts. Further, I am not satisfied that Ms Tuchtan was sufficiently privy to Mr Hornsey's scheming so as to characterise her conduct as dishonest in the relevant sense, especially when one applies s 140 of the Evidence Act. I do not see her on the evidence as having, for example, procured or induced any breach of fiduciary obligations. Nor do I consider, as I have said, on the evidence there is relevant dishonesty on her part (see Farah v Say-Dee [173]-[179]). On the evidence I do not consider it can be said that she procured or induced the reach of any relevant fiduciary obligation owed, for example, by Mr Hornsey.
31. In my view, Mr Hornsey's conduct amounted to a misuse of his position for the purposes of s 182 and he was therefore in breach of his fiduciary obligations. I am not persuaded the same findings should be made in relation to Ms Tuchtan.
32. As to the contractual and accessorial claims against Ms Tuchtan, the Institute submits that the documentary evidence indicates that she was involved in steps taken to establish the Sage fitness business in late 2012 and early 2013. She was a director of the relevant entities and was copied in on email correspondence including that referring to the "old fitness course". I am not persuaded that is correct on the facts but, even if it is, in my view, it is not determinative of any liability on her part.
33. It is submitted that Ms Tuchtan sent an email on 13 April 2013 (signed as Dean of Studies for the Institute) attaching Institute cover sheets and saying "these are the ones [Mr Kinghorn] wants changed". The Institute submits that her attempt to explain this makes little sense and should not be accepted. I agree her explanation is unacceptable, but again I do not regard that as determining her liability.
34. It is submitted that it should be concluded that Ms Tuchtan actively participated in helping Mr Hornsey set up the Sage fitness business and did so knowing that Mr Hornsey was in a position of conflict and that the Institute had not given its consent, informed or otherwise, to the establishment of the Sage fitness business. It is submitted that that is sufficient for accessorial liability, even if it were not found that Ms Tuchtan was liable for breach of directors' duties in her own right. Again, I do not consider that to be correct on the facts. I have formed that view keeping firmly in mind the difference between reasonable inference and speculation.
35. As to the claims for breach of her employment contract, Ms Tuchtan's employment obligations included devoting all of her relevant time and attention to the Institute. It is said she was not entitled to undertake any other duties that may be deemed to be in conflict or in competition with those of the Institute. I am not satisfied, however, the Institute has proved satisfactorily a breach on her part.
36. The Institute submits that as Mr Hornsey and Ms Tuchtan are and were the controlling minds relevantly of ACI and Sage, being two of the three directors of both companies, it can be inferred that ACI and Sage knew everything that was known to Mr Hornsey and Ms Tuchtan and had an obvious involvement in the contravening conduct (in the sense of participation or assistance), because they are the corporate entities that own and operate the Sage fitness business. I agree so far as Mr Hornsey is concerned.
37. Further, there is no need separately to demonstrate dishonest on the part of ACI and/or Sage: Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6. As to knowing receipt, the Institute accepts that the authorities require a receipt of property and that information is not property. It is, however, submitted that goodwill and assets of the Sage fitness business are property and there need be no greater identification than that. Again, I agree.

The Trade Mark Case

1. The Institute submits that the registration by ACI of the relevant trade mark is likely to mislead or cause confusion.
2. The Institute submits that the evidence establishes that it had a reputation that involved promoting itself as the "Institute". In my view, that is correct on the evidence.
3. The question is whether, even if the Institute did have a reputation in the name "Institute" in the fitness education industry, ACI's trade mark would be likely to cause confusion and thereby be misleading.
4. The Institute submits that the hurdle for "confusion" is a lower one than the hurdle for misleading conduct.
5. ACI submits that the trade mark involves a logo consisting of three stylised leaves and the words "The Institute".
6. It submits the mere fact that the Institute claims that it refers to itself as "The Institute" does not lead to a likelihood of deception or confusion on the part of consumers, notwithstanding some evidence of actual confusion. I do not regard the latter as determinative.
7. It is submitted there is simply no potential for confusion, first because "The Institute" is not a term exclusively or distinctively associated with the Institute. It submits it is a generic description and terms such as "Institute", "College" and "Academy" have been used in the fitness industry before and since the Institute's existence and, in any event, the Institute on the evidence is in fact known as AIF or the Australian Institute of Fitness. The Institute, it is said, is simply attempting to monopolise the word.
8. The Institute in relation to the last point denies it is seeking to monopolise the expression "The Institute", but says rather it is seeking to have the mark removed so that ACI does not monopolise it. It seems to me that that submission both overlooks and seeks unduly to trivialise the composite nature of the use of the term and logo. The Institute purports to recognise this aspect of the matter in the reply submissions, but submits all that it needs to establish is that the trade mark is "likely to cause confusion".
9. Secondly, it is submitted ACI offers a range of services including general services and there is no evidence that it has used or is intending to use the trade mark to promote its fitness training courses. The goods and services listed for the trade mark make no reference to fitness, gyms or personal training.
10. Thirdly, it is submitted that the Institute's policy is not to use the "The Institute" in isolation but only after it has used its full name, "The Australian Institute of Fitness". It is submitted there is therefore no possibility of confusion.
11. Fourthly, it is said the trade mark with its stylised leaves and text differs markedly from the Institute's logo, leaving no potential for confusion. The Institute does not claim to use a similar logo or device in any of its promotions.
12. Fifthly, the Institute, it was submitted, is not entitled to monopolise generic descriptive terms as "Institute", which as I have said is perhaps widely or frequently used in a variety of contexts.
13. I agree with those submissions. In all of the circumstances I do not consider that there is a real and tangible danger of confusion occurring. The stylised leaves are, in my view, sufficiently distinctive so as to militate against a reasonable doubt being entertained in the relevant sense.
14. In any event, it seems to me that it could not reasonably be said that the word "Institute", which generally means an organisational body created for a particular purpose, does or would of itself exclusively refer to the Institute, so as to cause confusion as a matter of practical reality. In saying this I have not ignored the evidence pointing to some confusion on the part of ACI's employees but, on balance and for the reasons expressed, I do not regard the likelihood of confusion as real such as to warrant the remedy sought.

The Oppression Proceedings

1. In the Oppression Proceedings there originally were ten separate matters relied upon as amounting to oppression in and of themselves or alternatively as part of what was said to be an "overbearing" campaign against Mr Hornsey and his interests.
2. During the final submissions, however, AIVT made it clear that certain of the matters had to be considered together by reason of the fact that forensically they could not stand alone as separate and identifiable acts of oppression.
3. The various pleaded instances of oppression in the FASOC are not pleaded in chronological order. In my view it is important that they should be so analysed because I consider that not only provides a more reliable historical backdrop and context in which to view them, but more importantly to assess accurately the alleged cumulative effect of them.
4. To that end it is convenient to list the allegations in chronological order: 1. Initially there was an allegation that the Institute and Shareholder Defendants had caused the Institute to enter into Licence Agreements in circumstances where those agreements were required to comply but did not comply with the Franchising Code of Conduct and that the Institute and Shareholder Defendants had failed subsequently to rectify that non-compliance. That, of course, was abandoned. 2. On 26 November 2012 and 10 September 2013 the Board of the Institute varied the licence fees payable by each of the licensees including AIF Vic/Tas, which variations were said to be invalid or in contravention of the Shareholders' Agreements or Licence Agreements; 3. In August 2013 the Board of the Institute created a subcommittee of the Board - otherwise known as the "Disputes Committee" - for the purpose of dealing with disputes between the Institute and AIVT, AIF Vic/Tas and Mr Hornsey, from which Mr Hornsey had been improperly excluded; 4. On 24 March 2014 the Institute commenced the Licence Fee Proceedings against AIF Vic/Tas; 5. Commencing in March 2014 the Institute, it was alleged, improperly excluded Mr Hornsey from participation in various meetings of its Board and from meetings of the Institute's executive team; 6. Commencing in April 2014 the Institute had issued several notices of default to AIF Vic/Tas under the AIF Vic/Tas RLA for alleged breaches of that agreement by AIF Vic/Tas; 7. In April 2014 the Institute did not the 2014-16 Funding Offer in circumstances where AIVT alleges that the Institute was contractually bound to do so; 8. In May 2014 the Institute filed a response to a bullying complaint made against Mr Hornsey in the Fair Work Commission by the Institute's Executive Officer, Ms Ward, without giving Mr Hornsey or AIF Vic/Tas an opportunity to respond to the allegations in the complaint; 9. The Institute improperly threatened to commence and did commence the Sage Proceedings; and 10. The Institute improperly passed resolutions on a number of occasions requiring shareholders to make loans to the Institute including for the purposes of funding litigation in the interests of the Shareholder Defendants.
5. In their written submission the Shareholder Defendants submitted that although not expressly abandoned, five of the above issues should be taken to have been abandoned in the light of the cross examination of, or rather more to the point, the alleged failure to cross examine, Ms Ward, Mr Weir, Mr Hurst and Mr Creagh, in that it was not put to any of them that their conduct in relation to the Disputes Committee, the Licence Fee Proceedings, excluding Mr Hornsey from meetings, the repeated serving of notices of default and the commencement of the Sage Proceedings, was undertaken by each of them for an improper purpose, or was in some way unfair or was in some way designed to preclude Mr Hornsey from exercising his legitimate functions as a director of the Institute.
6. Tantalising and tempting as that submission may be and notwithstanding the absence of cross examination on some or all of those topics, I certainly did not regard AIVT as having abandoned anything except those to which explicit reference has already been made.
7. In any event, the test for oppression is an objective one, and although proof of some improper purpose or ulterior motive may well make the finding of oppression irresistible, the absence of such motivation will not and cannot in and of itself defeat charge of oppression.

Some preliminary issues

1. The Shareholder Defendants put forward what they described as preliminary points which they submitted would in large measure, if not entirely, dispose of the Oppression Proceedings.
2. First, from an historical perspective, they submitted that the licence fee dispute was the genesis of the Oppression Proceedings.
3. It is further submitted that Mr Hornsey made the decision not to pay the licence fees in circumstances where he knew and understood that the Institute operated on a cash neutral basis with the effect that any non-payment of fees would leave the Institute's budget in deficit. It is therefore submitted that it was unsurprising that tensions between Mr Hornsey and others rose quickly after that time, as it was in effect a deliberately provocative move on his part. It is submitted that it was highly likely, therefore, that suspicions would be heightened and misunderstandings and conflict likely to occur.
4. There seems little doubt on the evidence that many, if not all, of the directors, and Ms Ward herself, were seriously at odds with Mr Hornsey by late 2013, and/or early 2014.
5. In my view, Mr Hornsey's decision not to pay the licence fees had an inflammatory effect and thereby escalated a rather tense environment amongst all concerned, and rather set the tone for the events that followed.
6. It is submitted that given the genesis of the dispute much of the conduct on the part of the Institute, for example, should reasonably be seen as perfectly rational responses to Mr Hornsey's provocation.
7. I should observe, of course, that on the licence fee issue I have already determined that in my view the increases were valid and legitimate variations in accordance with the AIF Vic/Tas RLA.
8. The second point made is that the various instances of the alleged oppression identified by AIVT involve claims that the Institute or the Shareholder Defendants have undertaken conduct which is to the detriment of AIF Vic/Tas rather than AIVT. It is submitted that the impugned conduct did not affect a shareholder of the Institute but rather a third party. It is therefore submitted that conduct of that description could not offend ss 232(d) or 232(e) of the Corporations Act.
9. With respect to s 232(d) it is submitted that AIF Vic/Tas is not a shareholder of the Institute. Thus any conduct of the Institute that may injure AIF Vic/Tas could not be said to be contrary to or in any way affect "the interests of the members as a whole".
10. With respect to s 232(e), that provision speaks in terms of conduct that is "oppressive to, unfairly prejudicial to, or unfairly discriminatory against a member… whether in that capacity or in any other capacity". Again, AIF Vic/Tas is not a member of the Institute, and for that reason conduct which injures AIF Vic/Tas simply falls outside the description of s 232(e).
11. Further it is submitted that that conclusion is not affected by the words "in that capacity or in any other capacity" as they appear in s 232(e). That phrase, it is submitted, operates where a member of a company also deals with a company in other capacities (eg. as a director or employee). It is also submitted that the provision has no work to do where the person affected by the impugned conduct is an altogether different person from the person who is a member of the company. It is further submitted that that is particularly so in the present case given that AIVT has no interest in AIF Vic/Tas. In conclusion, it is submitted that even assuming it were relevant to consider conduct which may indirectly injure a member of a company through its ownership of a subsidiary, that circumstance does not arise here. This submission is said to be sufficient to enable the Court to dismiss AIVT's claims in the Oppression Proceedings with respect to the licence fee issue, the Licence Fee Proceedings, the notice issue, the Victorian funding issue and the bullying complaint issue.
12. However, as is pointed out by the AIVT, the plaintiff in the Oppression Proceedings is AIVT and not AIF Vic/Tas. AIVT sues in respect of oppressive acts against it certainly in its capacity as appointor of the licensee under clause 29 of the Shareholders' Agreement as varied on 7 May 2010.
13. AIVT accepts that a third party who is not a member cannot bring an oppression action under Part 2F.1 of the Corporations Act. However, it submits that the notion of standing under this Part is a broad one and would, for example, extend to plaintiffs who are not registered at the time of the oppressive behaviour (but who later became registered): Re Spargos Mining NL (1990) 3 ACSR 1. I am of the view that is a correct analysis.
14. It is also submitted that the words "or in any other capacity" in s 232(e) make the provision wider than the predecessor provision (s 186 of the Companies (New South Wales) Code), where relief was only available in respect of conduct affecting a member only in that capacity. I agree.
15. AIVT also submits that in relation to s232(d) the question of whether or not the conduct of the company's affairs is "contrary to the interests of the members as a whole" is determined not by reference to the "actual shareholders" but to the interest of an individual "hypothetical member". Again, I consider that that is correct.
16. It may be accepted that the present situation is, on one view, somewhat unusual, but as is pointed out by AIVT it is not a case where all of the alleged oppressive conduct directed towards AIF Vic/Tas affects only "an altogether different person to the person who is a member of the company", as is suggested by the Shareholder Defendants.
17. As is pointed out by AIVT, the shareholders were required to become licensees pursuant to clause 29 of the Shareholders Agreement as varied, although they were given the option of having that obligation performed through a nominee. AIVT submits that if it had never taken up the option of the nomination clause it would nevertheless have been able to rely upon conduct against it as a licensee to establish oppression. Again, I consider that proposition is correct.
18. AIVT submits, however, that the relationship of licensee and licensor is effectively indistinguishable from the relationship between the Institute and its members. Further, it submits, in my view again correctly, in the present case the fact of being licensees is the way in which members receive the benefits of membership and the return on their investments in the Institute. Viewed in that context the licensing requirement, it is submitted, is not independent of membership.
19. I agree with the submission of AIVT that there would be nothing to prevent the Court from considering conduct that directly affects AIF Vic/Tas as being relevant and it is not merely an indirect way in considering the oppression of AIVT as AIF Vic/Tas' appointor under cl 29 of the Shareholders Agreement as varied. Accordingly, I do not think the relationship adverted to in [73] of the Shareholder Defendants' closing submissions, when properly analysed, is an impediment to AIVT seeking the relief it does in FASOC.
20. The third preliminary point (which I have to some extent discussed above) is that it was not put to Ms Ward, Mr Weir, Mr Hurst or Mr Creagh that they engaged in any of the impugned conduct in bad faith or for some ulterior motive. It was not, for example, suggested to these witnesses that they would ever deliberately set out to injure AIVT or Mr Hornsey, or that they acted otherwise than as a result of a belief that they were acting bona fide in the interests of the company. In that event, it is submitted, the Court should be slow to find that any of the impugned conduct was objectively unfair. It is submitted that in the absence of proof of bad faith or a lack of probity the Court would pay considerable deference to the management decisions of the Institute's executive team and directors. Poor management, it is submitted, does not constitute (of itself) oppressive behaviour.
21. With some justification the Shareholder Defendants point to the fact that although AIVT pleads that AIF NSW and AIF WA have "effective control of the Institute Board" and that, in turn, Messrs Hurst, Creagh and Champion have "control of the majority shareholders" of the Institute, and whilst it may be true that Messrs Hurst, Creagh and Champion effectively operate as a "block" with Mr Hornsey and/or AIVT effectively powerless to oppose decisions of the majority and that that may be to their detriment, there was no attempt to expose or to demonstrate that this was, in any sense of the word, unfair. It is said simply to be a fact of life. There was certainly no attempt to suggest that it was done in any way that was deliberately unfair, nor was it suggested that there was some commitment between the various people to vote uniformly so as to operate as a block, nor to suggest to Ms Ward, the CEO, that she simply did as she was told by Messrs Hurst, Creagh and/or Champion to effect that outcome. That was abundantly plain from the way in which the trial was conducted.
22. It would seem to me that it is correct to say, as do the Shareholder Defendants, that the evidence rises no higher than establishing that Mr Hurst and Mr Creagh have financial interests in a number of shareholders in the Institute which was, of course, never in issue. But I agree there is nothing to suggest, nor does it logically follow, that those interests have given them de facto control of the Institute itself.
23. More to the point, I am satisfied the evidence does not support a conclusion that Mr Hurst and Mr Creagh operated as a "block" at all. It is fairly clear that Mr Hornsey is and was at odds with all of the other directors of the Institute on at least how the Institute should be run. The fact of a disagreement or disharmony has placed Mr Hornsey in the minority and there appears to be a broad agreement between the other directors on governance and commercial issues. I consider, however, that it does not objectively follow that the majority position is the result of anything other than the bona fide independent views of each of the other directors of the Institute. Therefore there is nothing unfair objectively in AIVT being outvoted at Board meetings, nor does it follow that the majority is acting unfairly or improperly as a block.
24. As I have observed the simple fact is that Mr Hornsey and the other directors disagree on many if not most issues. That Mr Hornsey is and has been outvoted points rather towards philosophical differences which have caused the parties to go their own ways.
25. A mere disagreement by a minority interest with a majority cannot logically lead to oppression. There has to be objective unfairness or discrimination.
26. In passing I observe that in or about December 2012 Mr Hornsey was already foreshadowing a possible oppression claim. He conceded in cross examination that from as early as that time he had been "branding" conduct of the company or conduct of the majority shareholders as oppressive (T125/47-59). However, each of the various instances of alleged oppression requires careful consideration.

Licence fee issues

1. AIVT submits that the unfairness in the 75/25 methodology as compared with the Schedule 2 fees and/or the 50/25/25 methodology is not merely a matter of "dollars and cents".
2. It is submitted by the Institute that under the 50/25/25 methodology it would always be the case that the shareholder/licensee with the highest revenue would pay a higher amount in respect of the 25% attributable to revenue but mainly to the extent of 25% of the fee.
3. AIVT, however, submits that the change to 75/25 methodology was such as to mean that a successful shareholder/licensee would find itself bearing a significantly higher share of the budgeting needs of the Institute whilst still only retaining 20% of the voting rights.
4. Further, AIVT submits that there was no evidence in 2012 in the course of considering the "Funding the National Office" document as to why Schedule 2 fees or the 50/25/25 methodology was unfair, inefficient or indeed how the (then) proposed 75/25 methodology was said to address any unfairness, inefficiency or prejudice to the Institute by reason of the Schedule 2 structure or the 50/25/25 methodology.
5. AIVT submits that the fact that historically (that is prior to the RLA) fees to fund the Institute's costs may have been determined by reference to "revenue" of the members is not in and of itself determinative of the issue as to whether it was permissible to substitute the fee structure set out in Schedule 2 of the AIF Vic/Tas RLA (being an agreement between the Institute and AIF Vic/Tas not between AIF Vic/Tas and other licensees or shareholders).
6. It is further submitted that the historical practice of fee allocation shows that of the several variations of fee methodologies used from 2002 from 2009 a methodology which included a "revenue recognition" component had been adopted in June 2009, although by August 2009 that methodology had been rejected in favour of three pronged fee structure and what would be later drafted into Schedule 2 of the AIF Vic/Tas RLA.
7. Although I have dealt with this issue, AIVT submits again in this context that the 50/25/25 methodology in June 2011 was not a substitution of the Schedule 2 fees. In fact it is submitted the resolution must be understood in terms, namely limited to the forthcoming financial year. It is submitted that AIF Vic/Tas agreed to the variation of the fees because it had minimal commercial effect as compared with the Schedule 2 fees. As I have already said, I regard that position as somewhat glib.
8. AIVT also submits that there is no suggestion that thereafter it was estopped from taking exception to any further change in the methodology. So much cannot be gainsaid.
9. Lastly, AIVT submits that there was a need for fresh consideration to match a variation in the contract and that the requirement for consideration was not expunged by the variation clause in the agreement per se. I do not accept that submission. Such a clause, in my view, does allow the parties to anticipate particular forms of variation in accordance with the terms of the particular clause. In my view that is precisely what has happened and I have already ruled accordingly above.
10. The Shareholder Defendants, on the other hand, correctly, in my view, submit that Mr Hornsey accepted in his evidence that the fairness or otherwise of the licence fee resolutions that he purports to challenge are matters about which reasonable minds may differ (T104/25-38). In my view, again, so much could not be gainsaid.
11. The Shareholder Defendants accept that matters need to be assessed objectively rather than by recourse to Mr Hornsey's subjective beliefs. But they submit the fact that he conceded that the impugned resolutions raised a question about which there may be a range of reasonable opinions is a strong indication that they are not objectively unfair. I agree.
12. I consider it is also an accurate observation that Mr Hornsey, as the person said to be intimately affected by the change, was unable to articulate why a system of setting regional licence fees based on turnover is unfair or prejudicial at all. I do consider there is a certain innate fairness with that proposition which Mr Hornsey, it seems, fails to appreciate.
13. For reasons I have already adverted to the Institute, since its inception, has operated on a cash-neutral basis. The Institute has levied fees on shareholders or licensees each year in accordance with the Institute's budgeted expenses for that year with a view to the Institute receiving sufficient funding to cover its costs without generating a profit.
14. Although I have recounted earlier in the context of the construction arguments some of the historical material it is worth supplementing that material in a number of respects. I do so at the risk of repetition.
15. Mr Hornsey accepted, for example, that the industry in which the Institute and its shareholders operated is reasonably volatile. (T70/30-45) In some years one shareholder or licensee may do better and in the next it might not do as well. For example, AIF Vic/Tas experienced a $730,000 deterioration in net income between the 2007 and 2008 financial years, which Mr Hornsey said was not anything particularly unusual in the industry (T73/35-37).
16. The original shareholders of the Institute executed the Shareholders Agreement which provided that the Institute was to be funded by contributions from each shareholder in proportion to their shareholding. Notwithstanding that agreement the shareholders of the Institute soon contemplated moving to a model whereby shareholders would contribute in proportion to their revenues. If I may say so, not only is that a matter about which reasonable minds may differ but there is, as mentioned above, an innate fairness about it.
17. At the meeting of the Board of the Institute on 17 March 2006 all directors, but importantly including Mr Hornsey, agreed to assist with national funding based on revenue. Again, at the meeting on 7 September 2007 the Board unanimously resolved that AIF Qld, which had the highest revenue amongst the shareholders at the time, would pay the highest monthly contribution of any shareholder. Mr Hornsey voted in favour of that resolution.
18. Again, the resolutions on 7 September 2007 and 11 June 2009 were not only voted for by Mr Hornsey, but at the June 2009 meeting he moved the resolution himself. At the 2007 meeting the resolution invited the CEO to bring a new fee scheme to the Board no later than November that year using a fixed rate for 50% of required funds and the remaining by a percentage of revenue calculation. The June 2009 meeting moved a resolution to the effect that the mechanism for measuring the quantum of monthly fees in the 2010 budget should be accepted as presented and that income was to be the method for calculation.
19. Mr Hornsey unashamedly admitted that the June 2009 resolution pleased him, in effect because commercially the amount of money that AIVT was required to pay suited him.
20. As is pointed out by the Shareholder Defendants, in December 2010 the position was significantly altered when the Institute entered into the AIF Vic/Tas RLA. Each of the other regions had themselves earlier executed licensing arrangements in equivalent terms, and since that time the Institute levied fees on licensees under the Licensing Arrangements rather than on shareholders under the Shareholders' Agreement.
21. The Shareholder Defendants submit that because it is AIF Vic/Tas that is the licensee under the RLA and not AIVT, any complaint under the agreement lies with AIF Vic/Tas and not AIVT. It therefore submits if licence fees have been improperly levied under the AIF Vic/Tas RLA that could not possibly constitute the oppression of AIVT because that does not have any effect on AIVT whatsoever. However for reasons which I have already identified it does seem to me that AIVT has standing to make such a complaint.
22. On 9 June 2011 the Board of the Institute considered the question of the appropriate method of setting the licence fee for the year commencing 1 July 2012. The Board unanimously (including Mr Hornsey) endorsed a method whereby 50% of the Institute's budgeted costs would be shared equally among the licensees, 25% would be allocated based on the proportionate share of budgeted turnover, and 25% would be based on the region's proportion of the Australian population.
23. As I understand AIVT's position on this matter, had the methodology remained 50/25/25 there would not be a problem, and if the Board had resolved that was to remain the position indefinitely Mr Hornsey would not have opposed it. The difficulty with Mr Hornsey's position, and therefore that of AIVT, is that leaving the construction issue to one side, each of Mr Hornsey, AIVT and AIF Vic/Tas obviously accepted the abandonment of the previous Schedule 2 fee calculation. The 50/25/25 is indeed a methodology in which a percentage of fees are to be calculated by reference to budgeted turnover. It is difficult to detect precisely how such a change could be regarded as objectively unfair. When the 75/25 methodology was first voted on at the board meeting in March 2012 Mr Hornsey proposed an alternative resolution of 50/25/25. He did not complain that the Schedule 2 fee arrangement was to be apparently abandoned.
24. For Mr Hornsey's part the unfairness with the 75/25 methodology was apparently because it did not replicate the Schedule 2 fees structure and because setting fees by reference to turnover did not necessarily reflect profitability. Somewhat monotonously, I have to say Mr Hornsey himself voted in favour of 50/25/25 which had the effect of abandoning the Schedule 2 fees regime. Secondly, as a matter of principle, Mr Hornsey had over a significant period of time, supported proposals which used revenue share as a means of determining licensee and Shareholder contributions.
25. The Shareholder Defendants advanced a number of reasons why they submit objectively the change in methodology could not lead to any finding of unfairness in the relevant sense.
26. First they submit that the Institute plainly had power to vary the fees pursuant to clause 6.2 of the Licence Agreements. I agree and I have found accordingly.
27. Secondly they submit the Institute had long been moving towards a revenue based fee structure prior to 2012 and that Mr Hornsey had voted in favour of the resolutions to that effect on numerous occasions. I accept that as an accurate historical fact.
28. Thirdly it is submitted that AIVT has failed to demonstrate that the move from the agreed 50/25/25 methodology to 25/75 methodology involved any particular unfairness. I consider Mr Hornsey's evidence amply supports that he was not able to articulate any point of principle between the two methodologies but rather he could only at the relevant time the 75/25 methodology impacted upon AIF Vic/Tas in a "dollars and cents way adversely".
29. The Shareholder Defendants submit that the Institute has maintained the 75/25 methodology since 26 November 2012 even in circumstances where AIVT has not had the largest revenues. That certainly militates against any motivation deliberately and adversely to affect AIF Vic/Tas.
30. Fifthly the Shareholder Defendants submit that there is a commercial logic to imposing fees based on revenues. I agree with that. The revenues are what they are and I certainly cannot detect anything objectively unfair or unreasonable in a board seeking to implement a scheme of the sort here based on revenue.
31. Lastly the Shareholders submit that it was not suggested to either of Messrs Weir, Hurst or Creagh that the 75/25 methodology was grounded in bad faith or undertaken for the purposes of inflicting financial damage upon AIVT. The idea of the methodology was based, of course, on two papers titled "Funding the National Office" prepared by the then-CEO Mr Hartcher which considered various alternatives. Viewed objectively, it does not seem to me that those papers did any more than float variations out of a genuine desire to arrive at a result in the interests of the Institute as a whole.
32. When Mr Hornsey raised objections to the Institute's proposal to impose the 75/25 methodology the Institute took steps to obtain legal advice on the question. That advice was provided to the Board of the Institute on or about 9 October 2012 and it is therefore apparent that when the Board ultimately adopted that methodology it did so not only having carefully considered Mr Hartcher's papers but no doubt the advice received.
33. I am simply unable to detect any objective unfairness given the context and the history of this matter. In those circumstances I am satisfied that on this issue the Board's resolutions could not constitute contraventions of s232(d) or 232(e) of the Corporations Act.

VET funding issues

1. AIVT submits that the 2010 MOU is still binding and on foot and that the Institute is bound by it, never having purported to terminate it.
2. AIVT also submits that pursuant to the MOU it purported to take effect from 21 June 2010 and unless terminated would remain on foot, there being no sunset clause.
3. AIVT further submits that the MOU could only be amended by agreements with such agreement to be noted on the document or provided in an appendix.
4. Further it submits that under the 2010 MOU AIF Vic/Tas was required to perform services in compliance with the requirements of Skills Victoria and in accordance with the offers of VET funding made by the relevant government agency.
5. It is submitted AIF Vic/Tas was required to reimburse the Institute for costs it incurred in relation to the 2010 MOU. The Institute, it was said, was specifically required to perform tasks required to reapply for VET funding if and when such funding became available and to open a bank account to hold all funds received from Skills Victoria under accepted offers of VET funding. It was submitted that those funds were "solely the property of AIF Vic/Tas".
6. It is submitted that in respect of the bank account to be established the Institute granted "reasonable access, reporting and transfer rights" to AIF Vic/Tas representatives, but that such rights could be revoked if in the Institute's reasonable opinion the "use application or handling of the VET funds by AIF Vic/Tas was not in accordance with the minimum performance and funding arrangements with Skills Victoria or contrary to ATF Standards".
7. AIF Vic/Tas had been receiving VET funding from the Victorian government from July 2010 under funding offers accepted by the Institute for the benefit of AIF Vic/Tas.
8. AIF Vic/Tas received approximately $6.34 million for the 2010/11 year, $11.89 million for the 2011/12 year, and $8.83 million for the 2012/13 year.
9. On or about 26 November 2013 the Institute received the 2014-16 Funding Offer. Rather than accept the 2014-16 Funding Offer the Institute asserted (through Ms Ward by email of 2 December 2013) that: 1. The 2014/2016 funding offer represented a substantial change to previous funding offers that had been received and accepted by the Institute; and 2. that the sub-contracting arrangement between the Institute and AIF Vic/Tas would need to be approved by the Department.
10. AIVT submits that contrary to Ms Ward's stated concern there was not indeed a "substantial" change at all.
11. First, the 2014-16 Funding Offer requirement that any sub-contracting agreement needed to prohibit further sub-contracting, AIVT submits, had been in the previous two VET funding offers. Further the requirement to provide a copy of any sub-contracting agreements to Skills Victoria had also been in the two previous VET funding offers.
12. Further, it is submitted that the reference to the Skills Victoria requirements for the Institute to obtain pre-approval if it wanted to sub-contract out the services to a non-RTO such as AIF Vic/Tas was indeed new and disputes that it was a matter of substance or a substantial impediment to the Institute accepting the 2014/16 Funding.
13. AIVT says that pursuant to clauses 10.1.1 and 10.15 of the AIF Vic/Tas RLA, obligations were in any event imposed on the Institute to provide AIF Vic/Tas with all reasonable forms of assistance and AIF Vic/Tas had the exclusive right to perform the services in any event in Victoria.
14. Further, it is said that the 2010 MOU required the Institute to perform the task of reapplying for VET Funding.
15. AIVT also says that the Victorian government was already well aware of the structure of the Institute and its relationship with its licensees and no concern had ever been expressed by it to the Institute in relation to any of its various arrangements.
16. AIVT submits that Ms Ward obtained advice from HWL Ebsworth on 3 December 2013 which, in any event, set out a plan as to how the Institute should go about obtaining AIF Vic/Tas's agreement to enter into a services delivery agreement. AIVT points out that Ms Ward obtained further advice from HWL Ebsworth on 5 December 2013 which advice concluded that if the acceptance document was lodged with the Department it was difficult to see any exposure to the Institute if an undertaking was provided not to claim funding. Further, AIVT submits that Ms Ward did not provide a copy of HWL Ebsworth's 5 December 2013 advice to Mr Hornsey.
17. On 6 December 2013, just two days prior to the deadline for the acceptance for the 2014-16 Funding Offer, Ms Ward sent Mr Hornsey a proposed services delivery agreement. Pursuant to that proposed agreement it was made clear (recital C) that the agreement was intended to replace the 2010 MOU. Further, in addition to reimbursing the Institute's costs AIF Vic/Tas would also have to pay $60,000 per annum to the Institute. In addition, the directors of AIF Vic/Tas were required to give personal guarantees in respect of the obligations of AIF Vic/Tas under the services delivery agreement.
18. AIVT submits that Ms Ward's covering email which purported to justify these matters, stated that the proposed services delivery agreement contained conditions which had been required by the Victorian government and reflected resolutions of the board of the Institute. AIVT submits that none of these justifications was warranted.
19. AIVT submits that the 2014-16 Funding Offer did not require or warrant personal guarantees or a $60,000 fee payment. Secondly, it says there simply were no board resolutions to that effect. It submits that whilst a resolution on 8 December 2011 had set out a proposed fee to be paid, that resolution had in effect lapsed in the course of the meetings on the 26 November 2012 and 25 February 2013. AIVT also submits that Ms Ward's evidence was confused about which resolution she had, in fact, relied upon when sending her 6 December 2013 email.
20. Indeed, AIVT points out that Ms Ward accepted in her evidence that the $60,000 fee requirement and the requirement of personal guarantees were extraneous to government requirements (T597/31 - 598/22).
21. AIVT accepts that although an extension of time for acceptance of the 2014-16 Funding Offer was granted by the Victorian government, Mr Hornsey (on behalf of AIF Vic/Tas) had made it clear at an 11 February 2014 meeting that he would not cause AIF Vic/Tas to enter into any agreement that required AIF Vic/Tas to pay an annual fee of $60,000 or which required personal guarantees from its directors.
22. On 15 April 2014 Ms Ward circulated an email prior to the Institute's Board meeting which was scheduled for the next day. Mr Hornsey asserts that he read that report for the first time on 16 April 2014 and discovered that the Victorian government had decided (on 8 April 2014) to let the 2014-16 Funding Offer lapse if it was not accepted by 5pm on 17 April 2014. When Mr Hornsey raised this at the 17 April 2014 meeting Mr Hurst requested that AIF Vic/Tas give an undertaking not to deliver services in any way or at any time under the 2014-16 Funding Offer until a suitable written agreement was reached between the Institute and AIF Vic/Tas. As a condition precedent of any undertaking or agreement it was made clear that personal guarantees were required by directors of the AIF Vic/Tas licensee.
23. The 2014/16 offer was obviously not accepted by the Institute by 5pm 17 April 2014 and was later withdrawn.
24. AIVT submits that as a long as the 2010 MOU was on foot (and it submitted it was) there was no need for AIF Vic/Tas to give such an undertaking or enter into any new agreement that gave a more favourable portion to the Institute. By insisting on the various matters outlined, AIVT submits that the Institute failed to act in accordance with the 2010 MOU in failing both to perform the tasks required of it and in particular to re-apply for funding. It was also, it was said, in breach of clauses 10.1 and 10.1.5 which required the Institute to provide AIF Vic/Tas with "all reasonable forms of assistance". Further, it was submitted that in not applying for the funding the Institute was not acting loyally and faithfully towards AIF Vic/Tas. AIVT submits that, in any event, Mr Hornsey had already given an undertaking which he had confirmed in writing and which was acknowledged by Ms Ward. AIVT points to the evidence of Mr Weir and Ms Ward, in which they suggest that the undertaking given was not sufficient because it had been sent in an email and signed off "Rgds", as disingenuous, and say that in truth there was a complete breakdown in trust and confidence between the Institute and AIF Vic/Tas.
25. AIVT submits that the only other shareholder/licensee who had ever received government funding was AIF SA/NT. Mr Hurst as the AIF SA/NT director sat on the Institute's Board.
26. AIVT draws a comparison between the various drafts of proposed agreement which were proffered to AIF SA/NT of 7 January, 24 March and 14 July 2014.
27. It points out that the first draft provided for a similar fee structure as that set out in the version given to AIF Vic/Tas on 6 December 2013 (that is, 3% of the government funding to go to the Institute up to a maximum of $60,000 a year). The second draft, however, AIVT points out, was amended substantially such that it sought to impose a yearly fee of only $2,000, which fee structure remained in the final executed version.
28. AIVT also points out that in the first and second draft directors' guarantees were required. However, in the final draft Messrs Hurst and Creagh were removed as guarantors although Mr Chatterton and several additional non-corporate guarantors were added and AIF NSW and AIF WA stood as corporate guarantors.
29. AIVT submits that the Institute had a contractual obligation found in part in the 2010 MOU and in part in the RLA to lodge the acceptance document. Instead, AIVT says it sought to utilise its commercial position to extract a commercial advantage to which it was not entitled under the 2010 MOU and which was not required by or mandated by the 2014-2016 Funding Offer.
30. AIVT submits that the Institute's behaviour was akin to exerting or attempting to exert economic duress and in those circumstances its conduct should be seen in the oppression context as "commercially unfair".
31. On the other hand, from an historical vantage point the Shareholder Defendants accept that the starting point is the 2010 MOU entered into by AIF Vic/Tas on 24 August 2010. They accept that the MOU governed the terms by which the Institute would apply for government funding from the Victorian government, which terms would be provided to AIF Vic/Tas for the purposes of its provision of training services in that state.
32. They point out however that the 2010 MOU was necessary because only the Institute, as the registered training organisation, could accept funding from the Victorian government but the services themselves were to be provided by AIF Vic/Tas.
33. Mr Hurst's evidence was to the effect that the 2010 MOU was prepared quickly to meet the pressing needs of AIF Vic/Tas with respect to government funding. It had not been prepared by a lawyer, but by Ms Tuchtan who was then still an employee of the Institute.
34. The 2010 MOU, the Shareholder Defendants submit, contained various provisions which were designed to protect the Institute in circumstances where it fell to AIF Vic/Tas to comply with the requirements imposed by the Victorian government with respect to the provision of education services. Among those provisions was one which required that the directors of AIF Vic/Tas provide personal guarantees ensuring that the Institute was not exposed in the event of any problems arising from the provision of funding by Skills Victoria.
35. However, as the Shareholder Defendants also point out, notwithstanding that AIVT agreed to this term, no such guarantees have ever been provided by the directors of AIF Vic/Tas.
36. At the time the 2010 MOU was negotiated and agreed Mr Hurst was the CEO of the Institute. He left that role in December 2010 and was replaced by Mr Hartcher. The Shareholder Defendants point out that Mr Hurst's evidence was that at or around the time Mr Hartcher commenced in that role Mr Hurst advised Mr Hartcher that the 2010 MOU would need to be replaced by "a more complete and comprehensive agreement". Mr Hurst was not challenged on this evidence. Mr Hurst expanded upon his view on the topic in his final report dated December 2011.
37. Importantly, however, the Shareholder Defendants point out the report was presented at the meeting of the Board of the Institute on 8 December 2011 and a resolution by a majority was passed (Mr Hornsey opposing the motion) in the following terms: That any region wanting to apply or maintain government funding on average of $30,000 per month must enter into a services agreement with the Institute and must pay the following fees: A one off initiation fee of $5,000 per month to advise and assist the region in planning, preparing and submitting an application for funding. Ongoing fees of no less than $900 per month or 3% of government funding per month whichever is the greater up to a maximum of $5,000 per month to commence in the first month funds are received.
38. The Shareholder Defendants point out that the resolution was passed some years prior to the events concerning funding in 2014 about which AIVT now complains. Further, they point out that it was passed at a time when there was no dispute between AIVT or the Shareholder Defendants as to the management of the Institute. It was not suggested, they also point out, to each of Mr Weir, Mr Hurst or Mr Creagh that this resolution was motivated by anything other than a bona fide belief by each of them that it was an appropriate resolution in the light of the additional risks and expenses that were involved in the Institute applying for government funding on behalf of its licensees.
39. They submit with some justification that Mr Hornsey must be taken to have been aware since December 2011 at the latest that the Institute would seek to secure additional fees in the future if AIF Vic/Tas continued to apply for government funding.
40. In November 2012 Mr Hartcher was replaced by Ms Ward as CEO of the Institute. At that time Mr Hurst spoke to Ms Ward and again suggested that the 2010 MOU should be replaced with a more complete and comprehensive document.
41. Ms Ward prepared a report to the Board of the Institute in the middle of April 2013. Amongst other things she said: In preparation to develop an agreement with South Australia in relation to their government funding, I have reviewed the Memorandum of Understanding with Vic/Tas. I advise that this document should be replaced with a formal agreement and will commence work on both documents to ensure similar terms.
42. By April 2013, therefore, Ms Ward had determined for herself that revision of the 2010 MOU was necessary and was undertaking a process of revision of that agreement in conjunction with developing a similar agreement for AIF SA/NT. In doing so, Ms Ward's objective was to ensure similar terms were in any such agreement between the Institute and each licensee who might receive government funding.
43. At a meeting of the Board of the Institute on 2 May 2013 Ms Ward presented her report and was directed by the Board to finalise the agreement. Mr Hornsey was present at that meeting and the minutes do not record any objection or dissent or, indeed, any reaction one way or the other on his part.
44. Ms Ward and Mr Weir gave evidence (Ms Ward at T604/22-33 and Mr Weir at T711-40-43) that after April 2013 the Board was not involved in the Institute's effort to negotiate a revision, but that it was largely left to Ms Ward.
45. On 10 December 2013 Ms Ward sent a memorandum to the Board concerning 2014-15 Funding Offer. Ms Ward stated in her memorandum that the proposed contract was a "substantial departure from the original 2010 contract". She also stated that one step that needed to be taken was to "draft an execution agreement between AIF Vic/Tas and the Institute" that covered sub-contracting arrangements and supported the 2014-2016 VET Funding contract.
46. There may be some legitimate debate as to whether her appreciation as to the "substantial departure" was, in fact, an accurate one. However, as the Shareholder Defendants point out, if she did make a mistake about that it was only an error of judgment and, although it may say something about her competence, it says nothing about it being objectively unfair. On the basis of the materials I consider it is reasonable to infer that Ms Ward must have believed there was a "substantial departure". There is nothing to suggest that that belief was not genuine. More to the point, if that is what the Board was told it is a little difficult to see how other directors of the Institute could be criticised for simply taking as read the advice and/or assertions of the CEO. As the Shareholder Defendants point out, in my view quite correctly, there can be no oppression in a Board of directors relying in good faith on the advice of the company's management.
47. In response to her memorandum Mr Hurst wrote to Ms Ward by email on 11 December 2013 and said: Perhaps you should seek input from all licensees not just SA and Vic/Tas. The agreement may be applied to some or all licensees in the future in the changing landscape of government funding. For it to be a reasonable template the other licensees should have input now.
48. On 13 December 2013 Ms Ward provided her December 2013 report to the Board. In that report Ms Ward advised that she would be meeting with Mr Hornsey and Ms Tuchtan on 18 December 2013 "to discuss…a services agreement to cover the sub-contracting arrangement".
49. The matter does not appear to have been raised with the Board again until its meeting on 11 February 2014. The minutes record that Mr Hornsey was asked "in his capacity as Mission Commander of AIF Vic/Tas" as to the status of the execution of the MOU agreement by AIF Vic/Tas of the document that had been provided in "draft form". The minutes record Mr Hurst leaving the meeting and thereafter Mr Hornsey requesting that it be noted in the minutes that AIF Vic/Tas was not prepared to sign the document with the requirement of a personal guarantee, the $60,000 per annum fee and "more than 20% of NO cost".
50. Next, on 15 April 2014 Ms Ward informed the board that the Victorian government had indicated that the funding offer had to be accepted by 17 April 2014. This would appear to be the first time that the board was informed of this particular deadline. It certainly left very little time for any steps to be taken to resolve the matter.
51. The matter was then raised at the Board meeting on 17 April 2014. I think it is reasonable to infer from those minutes that a concerted effort was made to reach a resolution, albeit somewhat belatedly. However, Mr Weir proposed that the meeting be adjourned so the 2014-16 Funding Offer could be discussed. The atmosphere was clearly a heated one. Mr Hurst asked that it be noted that prior to the adjournment of the meeting on 16 April 2014 and again to the Chair prior to the resumption on 17 April 2014 that Mr Horsey had used threatening words to the effect that he would hold "[the Institute] accountable" and that he would "see you in court unless the Board immediately approved the AIF Vic/Tas govt funding application".
52. It was then noted that Mr Hornsey had indicated that he was either unwilling or unable to agree to the proposal that had been put. Ms Ward also asked that it be noted in the minutes, "that R Hornsey had been abusive towards her and if this continued she would ask to remove herself from the meeting".
53. On the other hand, Mr Hurst requested that it be noted that the Board recognised that the government funding contract which required acceptance by 17 April 2014 was of value to the AIF Vic/Tas licensee. It was also noted in his request that the "Company" was willing to expedite and finalise the contract if appropriate confirmations were received by the AIF Vic/Tas licensee as previously requested. The Board adjourned the meeting to enable the "Chair and CEO" to negotiate a resolution. That was made contingent upon the resolution involving three things: A written undertaking that AIF Vic/Tas would not deliver training under the Funding Contract until a written services agreement was agreed, an undertaking that both sides would work in good faith to finalise such an agreement within 30 days and an undertaking that the directors of AIF Vic/Tas would give personal guarantees.
54. The Shareholder Defendants submit that this was merely a practical common-sense solution to a pressing problem. Whatever that may mean, the position taken by the Board, I think it is fair to say, was consistent with what had been the Institute's official position since December 2012. The Institute was insisting upon a formal services agreement to replace the 2010 MOU. It was willing to accept written undertakings as an interim measure in an attempt to preserve the funding opportunity whilst Mr Weir, Ms Ward and Mr Hornsey negotiated the terms of a new services agreement. I am satisfied on the evidence that Mr Hornsey however simply refused to negotiate. He was not prepared to contemplate, seemingly any alternative proposal.
55. Mr Hurst gave evidence to the effect that the proposal was designed to remove timing pressure and to preserve the business opportunity for AIF Vic/Tas whilst protecting the interests of the Institute. AIF Vic/Tas refused to accept the proposed resolution and made no counter proposal. The Shareholder Defendants I think correctly point out that Mr Hurst was not challenged in relation to this aspect of his evidence (affidavit of Mr Hurst of 17 July 2015 at [60]).
56. As is also pointed out by the Shareholder Defendants, these events were occurring against a backdrop in which litigation had been commenced by the Institute against AIF Vic/Tas for non-payment of licence fees. Those proceedings had been commenced on 20 March 2014. By this stage the parties were clearly dealing with each other, at least from the Institute's point of view, I accept, on quite a formal arms-length basis.
57. In his evidence Mr Hornsey asserted that he was quite willing to give the undertaking, but that the other directors of the Institute sought to impose additional terms and conditions which were not recorded in the minutes (257/17-T258/7).
58. Mr Hornsey said explicitly that "they wanted to add extra things" (T257/20). He went on further to say that he would have signed the undertaking that afternoon (by implication) if it were not for the additional requests being made. It was put to Mr Hornsey that he had said nothing in his affidavit to the effect that he offered the undertaking in the adjournment or the break in the meeting. His response was an evasive one. He said (T258/1-4) that it really was not about the undertaking, it was about the fact that there were other conditions.
59. There is, it should be noted, no mention of additional conditions being requested in the minutes. Nor has there been any suggestion that the minutes have in any way been altered or amended to obscure such items. Mr Hornsey made no mention of such additional terms or conditions in his affidavit evidence. Further, Mr Hurst denied the imposition of such additional terms and conditions.
60. In the circumstances I am satisfied that Mr Hornsey simply contrived that part of his evidence on the run.
61. I am of the view that the Institute's failure to accept the 2014-16 Funding Offer needs to be viewed in its historical context. It must be said that the Board was undoubtedly attempting to put in place structures and protocols relating to government funding. It had sought to do so by reviewing what had taken place in the past. It had determined to adopt such measures as long ago as December 2011. Obviously Mr Hornsey did not approve or agree with what the Board had in mind.
62. As is pointed out by the Shareholder Defendants, the VET funding issue in late 2013 and early 2014 was a matter over which Ms Ward and Mr Weir had sole carriage. There is certainly no evidence that any other directors had any involvement in the issue until the middle of April 2014. Again, as is pointed out by the Shareholder Defendants, upon the assumption that Ms Ward and/or Mr Weir mismanaged the timing of the application, this may well point to incompetence or poor management, but not oppression. I entirely agree.
63. When the issue did become urgent on 17 April 2014 the Board made an offer to resolve the impasse on the basis of a written undertaking. As a matter of common sense I do not regard that as an unreasonable request. In particular, as the Shareholder Defendants submit, the terms of the undertakings were no more onerous than those imposed by the 2010 MOU. In particular, the requirement for personal guarantees from directors was a term which AIF Vic/Tas had agreed to in the 2010 MOU. Again, I consider that to be correct.
64. Mr Hornsey, on the other hand, conveyed, as was his clear intention, I think, a position of utter inflexibility in relation to certain of the terms proposed for the new services agreement. Sadly, from his vantage point, others took a different view and, in my opinion, a reasonably different view. It may be because of the outstanding litigation against AIF Vic/Tas for the licence fees that Mr Hornsey and his coterie were on a war footing. It simply may be that he was engaging in brinkmanship which in the end did not pay off. Whatever it was, compromise or conciliation did not seem to enter his head.
65. However, there is little doubt that Mr Hornsey had litigation in mind as at 17 April 2014 (indeed on the facts earlier), but in any event his statement "I will see you in court" is recorded in the minutes. I am satisfied on the facts that Mr Hornsey's attitude at the meeting of 17 April 2014 was driven by an attempt deliberately to provoke and perpetuate a controversy rather than applying a common-sense, commercial approach to the resolution of that which stood between AIF Vic/Tas and potential funding from the Victoria government.
66. Ms Ward's attempts to negotiate the agreement with AIF Vic/Tas was, of course, occurring simultaneously with negotiations to implement a similar agreement with AIF SA/NT. Those latter negotiations had effectively been consummated by 24 March 2014 and, amongst other things, included directors' guarantees. It is true, as is pointed out by AIVT, that the final form of the AIF SA/NT agreement contained shareholder guarantees rather than directors' guarantees but I am satisfied that the same or similar would ultimately have been available to Mr Hornsey on 17 April 2014. That is made abundantly plain in terms, in my view, by Ms Ward's email to Mr Hornsey at 4.17pm on 17 April 2014. Mr Hornsey (whatever the terms) would have none of it.
67. The Shareholder Defendants submit in addition that there was no obligation on the Institute in any event to accept the 2014-16 Funding Offer under the 2010 MOU. They submit that the agreement only required the Institute to "re apply for funding if and when such funding becomes available" rather than to accept government funding on any terms. I think it is fair to distinguish the process of application from the process of acceptance. It cannot be that if for whatever reason the Victorian government sought to impose unreasonable terms they had to be accepted. On balance, I am inclined to accept that construction of the MOU, and as a consequence the Institute's decision not to accept the 2014-16 Funding Offer in and of itself did not involve a breach of the 2010 MOU.
68. In addition, I consider the point is also appropriately made by the Institute that on 17 April 2014 what AIF Vic/Tas was seeking was a benefit beyond anything which it or AIVT was entitled to under the Institute's contractual arrangements. In short it is submitted, I consider correctly by the Shareholder Defendants, that what AIF Vic/Tas sought were additional benefits from the Institute in the form of the Institute agreeing to additional contractual arrangements with the Victorian government. The Institute's refusal to grant that benefit in my view therefore could not amount to oppression: Thomas Jewellers (Australia) Pty Ltd v Royal Arcade Pty Ltd (1994) 14 ACSR 352 at 356.
69. In light of that history I am not satisfied that AIVT has substantiated or made out a claim of oppression in relation to this particular set of allegations. I do not believe that Mr Weir or Ms Ward's conduct rises any higher than arguably a mistiming or a mismanagement. On the other hand, perhaps as the result of the Licence Fee Proceedings, but in any event, Mr Hornsey adopted an utterly inflexible position. It is fairly obvious that commercial pragmatism was not going to be exercised by him. He had an entirely different agenda. However, I fail to see how the behaviour or conduct on the part of those concerned could as a matter of fact or law amount to oppression.

Funding levy issues

1. From April to May 2014 the Institute (through the majority shareholders and their nominee board directors) had issued demands for loans from AIVT, (which AIVT was obliged to pay or else effectively lose its shares under clause 8(5) of the Shareholders' Agreement) and which loans were in part being used to fund disputes in which the Institute, it is asserted on behalf of AIVT, had no proper or legitimate interest (namely the Sage Proceedings), which AIVT submitted only benefitted the regional licensees. There were also the Licence Fee Proceedings, which so far as they concerned purported variations to the AIF Vic/Tas RLA, again were said to benefit only other regional licensees.
2. AIVT submits that notwithstanding the effect of the funding demands (namely to expose a shareholder to the risk of losing its shareholding in the Institute) and the context in which the demands had been made (namely to fund in part disputed litigation in which the Institute had no direct interest), the Institute failed to provide information as to the loan sums including how they had been applied and the purpose for which they were required. AIVT submits that the imposition of these "funding levies" amounted to commercially unfair conduct. Further, it submits that these levies were improperly used to fund the Institute's disputes (driven by the majority) against AIF Vic/Tas and its associated entities.
3. AIVT submits that this amounts prima facie to unfairness in forcing one's opponent to partially bankroll litigation, against itself. Further, the alleged oppression is said to be compounded by the fact that part of the litigation related to increasing the licence fees (itself an oppressive act, it was asserted). Further this was not for the benefit of the Institute but rather for the benefit of other regional licensees who had their fees reduced by the various fee increases. Put that way, the arguments have a superficially disarming effect.
4. AIVT submits that the case in the Sage Proceedings was inherently weak and could only have been brought to protect not the Institute (a nonoperational company as it was described), but the businesses of the regional licensees.
5. AIVT points to the fact that other members of the Board met without Mr Hornsey to determine an amount to be levied. In addition, the funding levies were significant sums which were required to be met in a short period and Mr Hornsey's requests for information about why the funding levies were necessary, how amounts were determined in advance of meetings, and how such funds were applied, had not been substantially responded to.
6. AIVT submits that the Institute retained its solicitors to carry out the prosecution of various matters well before disputes manifested themselves in a court and in a way which did not candidly convey to Mr Hornsey, as best I understand the argument, precisely what the levies were for.
7. Invoices relating to "Federal Court Proceedings", "Hornsey workplace misbehaviour", and "member disputes" were all raised. AIVT submits that leaving the Federal Court proceedings to one side, the workplace misbehaviour and the member disputes were matters in which the Institute had no apparent interest or reason to engage lawyers.
8. AIVT appears to accept Ms Ward's evidence, namely that the purpose of the funding levies was in "part" to make up for a deficit in the Institute's expenses arising from a shortfall in licence fees payable by AIF Vic/Tas.
9. AIVT submits that at no point prior to the trial did the Institute purport to justify the levies on the basis of a need to fund tax liabilities or capital expenditure.
10. On its calculations, according to AIVT the levies had the effect of raising approximately $2.1 million in addition to any amount needed to account for any licence fee shortfall. In those circumstances it is submitted that the conduct amounts to oppression in the relevant sense.
11. The Shareholder Defendants point out that there were four relevant resolutions by the Board to levy shareholder loans on AIVT. The first, on 3 June 2014, of $160,000. The second, on 4 September 2014, of $34,000. The third, on 29 October 2014, of $78,000, and the fourth, on 6 March 2014, of $204,000.
12. The Shareholder Defendants acknowledge that in reality Mr Hornsey's complaint is twofold. First, he was denied information about the purposes for which the loans had been sought and, secondly, there was a contention that the loans had been used to fund in part the Institute's litigation against AIVT's related entities and to that extent it was to fund legal expenses for the benefit of the Institute's shareholders rather than the benefit of the Institute.
13. The Shareholder Defendants submit that when Mr Hornsey's evidence is carefully considered he, in effect, conceded in cross examination that at all times he knew why the additional funding was required so there was never a mystery about it. Mr Hornsey certainly conceded (T114/40-116/15) that in refusing to pay the loans when called upon he was well aware it would irritate other shareholders. He also acknowledged that he knew that in the interim New South Wales and Western Australia actually lent money to the Institute so it could continue its operations. He also acknowledged that at that time "he was not asked to make any contribution". He also asserted that although everyone knew he would not pay it was unfair for a request to be made to him to pay.
14. The Shareholder Defendants submit that Mr Hornsey's complaint that he was denied information is without merit because he had a complete understanding of the circumstances that led to the need for funding. It is submitted that his request for information should really be understood as an attempt by him to provoke, frustrate or delay attempts on the part of the Institute to get funds in.
15. The Shareholder Defendants submit that the true complaint of Mr Hornsey was that the Board had varied the licence fees on 26 November 2012 by implementing the 75/25 methodology and that it was that change which to Mr Hornsey's mind meant that other licensees were not paying their fair share of the licence fees. It is submitted that the funding levy issue, as it were, cannot in substance be separated from the licence fee issue. I think there is much to be said for that argument. The issue, in my view, certainly has to be viewed in its historical context.
16. The Shareholder Defendants submit that the funding levy issue should be resolved consistently with the licence fee issue. Further, if the introduction of the 75/25 methodology did not constitute oppression, neither did the shareholder levies and vice versa. The Shareholder Defendants go on to submit that if AIF Vic/Tas loses the Licence Fee Proceedings, AIVT will in fact benefit from the repayment of each of the shareholder loans. I agree that that is the consequence.
17. Lastly, the Shareholder Defendants submit that as the levies were applied equally among all shareholders in identical terms, they were clearly for the benefit of the Institute. In fact, the levies replaced those loans by seeking an equal contribution from each shareholder on an interest-free basis. The Shareholder Defendants submit that it was clearly in the interests of the Institute to fund itself on an interest-free basis rather than incurring borrowing costs. However, it is submitted that it was clearly not unequal among shareholders for the Institute to borrow from each of them equally on identical terms. I agree.
18. Although, perhaps, this issue is primarily a matter for the Shareholder Defendants, the Institute makes a number of supplementary submissions. It submits that there was simply a shortfall in the Institute's budget caused by unpaid licensee fees and hence unbudgeted legal fees. It submits that there was no obligation to keep the loan funds quarantined from the Institute's other funds. Further, it submits there is nothing sinister in the fact that in terms of cashflow the funds received from the loans were in part applied to other expenses of the Institute (such as capital expenditure). I agree with that submission.
19. The Institute submitted that it had adduced evidence to explain the subject matter of the various fees incurred. Given the fact that the allegations in relation to Ms Ward's complaint to the Fair Work Commission were withdrawn, I consider it can be inferred as a consequence the costs incurred in connection with that complaint were entirely justified. The Institute, I accept, had credible information on the basis of which it formed the view that Ms Ward had been the subject of bullying by Mr Hornsey. But that to one side, I am satisfied that AIVT's complaints about calls by the Institute for funding are of no substance. The genesis of any shortfall in funding is largely, if not entirely, due to AIF Vic/Tas's refusal to pay licence fees fixed in accordance with the RLA. AIVT and those associated with it, quite frankly, are the authors of their own misfortune in that regard. The Institute relies upon the explanation given by Mr Weir. Mr Weir, it should be observed, does not go into any detail about the costs and chose not to waive client legal privilege. Frankly, on that basis I can give his evidence very little if any weight. But drawing any adverse inferences against the Institute by reason of it insisting on its rights is equally inappropriate. The reality is, in my view, that the onus is on AIVT to show that the costs were not properly incurred and I consider it has failed to discharge that onus on the facts.
20. It should not be forgotten that Mr Hornsey conceded that he was preparing to sue the Institute alleging oppression as early as 20 February 2014 (T225/40-49). He was disgruntled about the licence fee methodology adopted by the Institute and had been since 2012. He started taking active steps to set up the Sage Fitness business in late 2012. The Institute was under siege as a result of Mr Hornsey's behaviour. It ill behoves him, in my view, having been the primary cause of the cash flow shortfall by refusing to pay the licence fees, to complain about these levies. In the context in which the various amounts were levied, I am simply not satisfied that they can be seen as objectively oppressive behaviour.

Cross claim: alleged breach of the MOU

1. AIF Vic/Tas asserts that the 2010 MOU entered into on 24 August 2010 was breached by the Institute failing to accept the 2014-16 Funding Offer. I have dealt with this issue indirectly already.
2. However, it appears to be common ground that the 2010 MOU provides for the Institute to apply for funding from the Victorian government for the benefit of AIF Vic/Tas. It is submitted by the Institute that that contractual obligation must be viewed in the light of the full contractual regime between the parties. That must be correct.
3. The Institute submits that the 2010 MOU created material, additional work and risk for the Institute in a number of respects. The report of the Commander in Chief to the Board on 8 December 2011 noted that the government funding arrangements (with their associated regulatory requirements) increased the risks for the Institute, thereby increasing the assistance and oversight that needed to be provided by the Institute.
4. To reflect this, the 2010 MOU required AIF Vic/Tas to reimburse the Institute for all costs that in its reasonable opinion are incurred "directly or in association with" the MOU. These specifically included "work conducted by [the Institute's] employees or consultants". The 2010 MOU also required the directors of AIF Vic/Tas to give personal guarantees.
5. At some point after Ms Ward was appointed CEO at the end of 2012 she reviewed the 2010 MOU and formed the view that it did not adequately protect the Institute in its dealing with AIF Vic/Tas. In her report to the Board on 15 April 2013 she advised that the document should be replaced with a formal agreement and informed the board that she proposed to commence work on the document and a proposed similar agreement for AIF SA/NT.
6. At the Board meeting of the Institute on 2 May 2013 the Institute resolved (without any recorded objections from Mr Hornsey) that there be "a review of the MOU between AIF Vic/Tas and the Institute office in respect of the arrangements for government funding with a view to entering into an agreement that adequately details the arrangements". Again, there is no record of Mr Hornsey opposing the proposal foreshadowed in Ms Ward's report or the proposal at that meeting.
7. In late 2013 the Institute received the 2014-16 Funding Offer. By 2013 the Victorian government had introduced new requirements that were not reflected in the 2010 MOU.
8. The Institute submits that the new 2014-16 Funding Offer was different in the sense that it contemplated sub-contracting to a non-RTO entity, but only with written approval. The earlier agreement (clause 5) arguably only applied to a particular kind of sub-contracting in recognition of the fact the RTO "defers day to day responsibility for all or part of the management and conduct of training delivery and assessment". In other words, clause 5 only permitted "sub-contracting" if the sub-contractor was an RTO.
9. The lack of clarity on this issue in relation to the previous position under the 2013 agreement obviously provides an important context in which to determine whether the Institute acted reasonably in forming the view that the contractual arrangements should be more clearly defined before the 2014-16 Funding Offer was accepted.
10. Whether she was right or whether she was wrong, it does not really seem to seriously be in issue that Ms Ward believed in good faith that the new sub-contracting requirements were more strict. She appears to have gleamed this impression from some of the information she received from the Victorian government and in part from discussions with HWL Ebsworth.
11. On 4 December 2013 Ms Ward and Mr Hornsey agreed that the 2010 MOU did not adequately reflect the requirements for Victorian funding and that a new services agreement should be entered into (affidavit of Ms Ward of 12 March 2015 at [17] and [20]). They also agreed that AIF Vic/Tas should provide a binding written undertaking that no claims would be made by AIF Vic/Tas in relation to the 2014/2016 Funding offer until a services agreement had been signed and the arrangement approved by the Victorian government.
12. This was confirmed by Ms Ward in an email sent the next day (5 December 2013) (CB3/1861). Mr Hornsey denied that there was an agreement but I am unable to accept his denial. The agreement on 4 December 2013 is consistent, in my view, with the Board resolution on 2 May 2013 and with Ms Ward's follow up email.
13. The Institute submits that the undertaking was important and that the Institute needed to be protected, as the entity with the RTO status, from AIF Vic/Tas providing services and expecting funding from the Victorian government without the new services agreement (which both parties agreed was necessary).
14. Ms Ward arranged for the preparation of a new draft services delivery agreement. When she sent the draft to Mr Hornsey on 6 December 2013 she made it plain that it was for his consideration and that it was to form part of their negotiations on the agreement. She asked him to let her know when he would like to meet and invited feedback on the services agreement "once you and your lawyers have had time to consider it".
15. Clearly, Mr Hornsey objected to the draft services delivery agreement, but it seems to me he simply refused to respond to attempts by Ms Ward to engage with him about the draft.
16. As I have already observed, the Institute submits that Mr Hornsey refused to provide a binding written undertaking of the kind he had been asked for and, indeed, one which he had agreed he would provide. Mr Hornsey sought to rely on his email of 7 December 2013 in which he had given an undertaking "that Vic/Tas would not commence any delivery in 2014… until National and Vic/Tas have reached an agreement in respect of delivery under this contract".
17. The Institute submits that this was inadequate for a number of reasons. Further, that it was an entirely reasonable course and appropriate for Ms Ward (and later Mr Weir and other directors of the Institute) to press for a binding written undertaking.
18. Ms Ward had received legal advice that it was important to ensure a binding undertaking was in place. In his email of 5 December 2013 Mr Rowe of HWL Ebsworth explained that this might arguably be a technical breach of the proposed contract but, if no training courses were provided then it was difficult to see how it could be the cause of any loss. Mr Rowe finished his advice by recommending a course that included lodging acceptance of the offer but subject to AIF Vic/Tas providing "satisfactory written undertakings".
19. Ms Ward pointed out in her email reply to Mr Hornsey's 7 December 2013 email (of the same date) that the word "agreement" needed to be clarified and that an informal oral agreement would not be enough but might satisfy the terms of the undertaking that Mr Hornsey said that he had given.
20. In Mr Hornsey's email of 7 December 2013 he merely concluded with "Rgds". Ms Ward and Mr Weir were concerned that this was inadequate as his signature was not at the bottom of the email. AIVT, in a mocking fashion, suggests that such an omission was not only trivial, but in effect this evidence was a contrivance on the part of Ms Ward or Mr Weir.
21. The Institute points out, however, that the sign-off, as it were, would not be regarded as bearing his signature for the purposes of s 9 of the Electronic Transactions Act 2000 (NSW) or s 9 of the Electronic Transactions (Victoria) Act 2000 (Vic).
22. Further, it points out that Ms Ward as a lay person had received legal advice that she should insist on something that was signed by Mr Hornsey and that clearly bound AIF Vic/Tas (to avoid the risk of Mr Hornsey arguing later that he sent the email in some other capacity). Mr Hornsey, in a somewhat provocative fashion, simply refused to abide by the specific request to provide a written (and signed) undertaking. He could as easily have done so.
23. On 18 December 2013 there was a somewhat long and tense meeting with Mr Hornsey, Ms Tuchtan and Mr Weir as recorded by Ms Ward in her notes typed the following day. Ms Ward repeated the invitation to negotiate about the services agreement. She also said that in the meantime the Institute needed a binding undertaking. She suggested Mr Hornsey speak with his lawyers and ask them to draft an undertaking "that was legally binding on Vic/Tas that they would not take any action under the 2014 Contract if the Victorian funding offer was accepted". Again, Ms Ward's notes appear to indicate that Mr Hornsey agreed. Mr Hornsey denies that Ms Ward asked him to speak to his lawyers about the matter. Given Ms Ward's contemporaneous note and the fact that, in my view, she had no reason not to truthfully and accurately record what had been said, I accept her evidence as accurate as to what she invited Mr Hornsey to do and I reject his denial.
24. Mr Hornsey never did put forward a clear and express binding undertaking. Criticism was made of Ms Ward and Mr Weir in cross examination because the Institute never proffered a form of undertaking for Mr Hornsey to sign. I regard that criticism as having little, if any, merit. Mr Hornsey knew unequivocally what he was being asked to do and in a somewhat stubborn and belligerent fashion was intent on not complying with the letter of the request.
25. On 30 January 2014 Mr Weir wrote to Mr Hornsey about a number of matters including to remind him that they had agreed on 18 December 2013 that the item to be addressed was the execution by AIF Vic/Tas of a document undertaking not to claim government funding pursuant to the current application.
26. At the next Board meeting on 11 February 2014 Mr Hornsey asked as to the status of the "MOU Agreement" that had been provided in draft form. Mr Hornsey asked that three requirements which were contained in the draft services agreement be noted and the Chair asked that it be noted that Ms Ward write to AIF Vic/Tas with a view to receiving a formal response regarding the proposed services agreement.
27. On 9 March 2014 Ms Ward emailed Mr Hornsey seeking a formal response. In her report to the Board on 15 April 2014 in advance of the next Board meeting Ms Ward noted that she had received no response to her email of 9 March 2014.
28. As I have already said, this matter was then the subject of discussion at the Board meeting on 17 April 2014. Mr Hornsey asserted that there was written evidence of his undertaking, being the email by which he had acknowledged that the undertaking had been provided. However, the Institute submits, and I agree, that it was entitled to take the position that this was insufficient and that there was nothing to indicate that this reference to an oral undertaking was binding or that AIF Vic/Tas might not regard itself as free to depart from it. More to the point, on the face of it Mr Hornsey had agreed to provide a written undertaking on numerous occasions and then refused to provide one without indicating the reason for his refusal.
29. At the meeting the Board attempted once again to resolve the issue. Mr Hurst proposed a written undertaking by AIF Vic/Tas that it would not deliver funding under the funding contract until a written agreement was reached. The proposal also included an undertaking by both parties to work in good faith to finalise the agreement within 30 days and a condition precedent to the personal guarantees would be required by the directors of AIF Vic/Tas. Mr Hornsey rejected this and the matter was taken no further.
30. In an attempt to engage with Mr Hornsey, later on 17 April 2014 Ms Ward sent an email inviting an undertaking on proposed terms quoted in the email being "that Vic/Tas will not commence any delivery at any time under the new three year contract until a written agreement signed by both parties (the Institute and AIF Vic/Tas) and that the sub-contracting arrangement had been approved by the Victorian government". She also said that directors' guarantees would be required, but in the alternative shareholder agreements from individuals could be negotiated. Again, Mr Hornsey did not respond.
31. On 13 May 2014 the 2014/2016 funding offer was withdrawn.
32. The Institute submits that Mr Hornsey's conduct in pressing for the 2014-16 Funding Offer to be accepted without negotiating in good faith about the terms of the services agreement (or providing the written undertaking that had been sought) was unreasonable.
33. It is true that Mr Hornsey insisted that he had given a verbal undertaking confirmed in his email of 7 December 2013. But he would take it no further, for reasons best known to himself. He knew what was required and could easily have rectified the matter. Indeed, there is not the slightest suggestion that had Ms Ward sent him a written undertaking in his mood at the time he would have signed it. He was intent, in my view, on being obstructive.
34. Mr Hornsey also insisted that the directors of AIF Vic/Tas should not be required to give personal guarantees. However, the request for personal guarantees is not only somewhat conventional but was something that AIF Vic/Tas had already accepted in the 2010 MOU. Indeed, Mr Hornsey said (T149/41) in relation to the 2010 MOU that if he had been asked to give a personal guarantee he would have given it.
35. Mr Hornsey also insisted that the arrangement should not include a fee of $60,000 per year. Mr Hornsey had no intention, it seems, of negotiating that figure, notwithstanding the fact that AIF Vic/Tas had already promised in the 2010 MOU to reimburse the Institute for all costs and expenses including for work conducted by Institute employees. The Board of the Institute had passed a resolution on 8 December 2011 adopting a fee in the same terms and the Institute points out quite fairly that the Board revisited the issue in November 2012 and it first rejected a motion for such fees on 7 November 2012 and then deferred consideration of it on 26 November 2012. It also accepts that it had not adopted such a fee but submits that it was entirely appropriate for Ms Ward to adopt it as a starting point in the draft services agreement. Again, I agree with that proposition.
36. Of course, Mr Hornsey had said on 11 February 2014 that he would not sign anything that provided for AIF Vic/Tas to pay more than 20% of the Institute's costs. Again, the Institute accepts that this may in part have been referable to the larger licensee fee debate but, it says, also amounted to Mr Hornsey saying that he refused to pay more than 20% of national office costs in connection with any services delivery agreement. But again, the Institute quite rightly points out that this attitude was quite inconsistent with AIF Vic/Tas' promise in the 2010 MOU to reimburse the Institute for all costs and expenses including work conducted by the Institute's employees.
37. Mr Hornsey's attitude was clearly one of inflexibility. Despite repeated invitations he was simply not prepared to negotiate, or seemingly even to have cordial discussions, except those which were entirely on his terms. The Institute submits that if he really wished to engage with it in good faith, and if he really did not intend to provide services under the 2014-16 Funding Offer until the services agreement had been negotiated, why he would refuse to give the undertakings in terms that the Institute sought?
38. The Institute points out that Mr Hornsey accepted in cross examination that notwithstanding that on three occasions after his email of 7 December 2013 he was asked to provide a written, signed confirmation of the undertaking, he just decided that he was not going to do it (T240/23). This was despite Mr Weir, the independent Chair of the Board, saying that the email of 7 December 2013 was unacceptable as an undertaking (T250/28).
39. Mr Hornsey gave as an excuse for not agreeing to the undertaking that additional things were being required of him. Such requirements are not reflected in the minutes and I reject Mr Hornsey's evidence in that regard. Not once did he articulate in any email or written communication that he was being asked unreasonably for some additional requirements. I simply cannot accept his evidence as truthful or accurate.
40. Mr Hornsey agreed that as early as 20 February 2014 he and his solicitors were preparing to sue the Institute alleging oppression. The Institute submits that the more likely inference is that (contrary to his denials in cross examination) Mr Hornsey was deliberately trying to generate disputes with the Institute or other shareholders in the hope of creating an impression that AIVT was an oppressed minority. There is, on the evidence, much to be said for this. However, the mere fact that he was contemplating litigation and remaining inflexible in negotiations is, on one view, merely consistent with him believing he had a grievance. Equally, that does not turn what he was doing into reasonable behaviour on his part, given existing contractual obligations.
41. The Institute also points out that Mr Hornsey accepted that by early 2014 ACI had already registered fitness as part of its RTO accreditation scope and Mr Hornsey's activities in establishing Sage fitness business were well underway.
42. Mr Hornsey, in my view, fully appreciated from Ms Ward's emails of 5 and 6 December 2013 that the Institute required a draft services agreement as a starting point for negotiations. Further, Mr Hornsey clearly appreciated that Ms Ward in her email of 7 December 2013 was trying to engage him in a negotiation. Again, in her email of 9 December 2013 she invited Mr Hornsey to provide any information that he would like to be considered in developing the agreement.
43. In his email of 11 December 2013 Mr Hurst welcomed the extension of time from the Victorian government to give the Institute time to consult and negotiate without time pressures. Mr Hornsey received that email.
44. Mr Hornsey accepted (T217/6-14) that at the meeting of 18 December 2013 Ms Ward said that he could negotiate the draft services agreement and that the issue of directors' guarantees could be discussed.
45. At the 11 February 2014 Board meeting Mr Hornsey had stated his position that he could not sign a document with personal guarantees or a fee of $60,000 per year and which required paying any more than 20% of the Institute's office costs. Mr Weir asked that it be noted that Ms Ward would write to AIF Vic/Tas "with a view to receiving a formal response". Ms Ward did that on 9 March 2014. Mr Hornsey never responded.
46. The Institute agreed with an alternative arrangement with AIF SA/NT and, in my view, there is nothing to suggest the Institute would not have been willing to negotiate with AIF Vic/Tas in the same way, and arrive at a substantially identical outcome.
47. Again, as I have already observed, AIVT of course points to the services delivery agreement entered into with AIF SA/NT and seeks to draw a number of adverse comparisons between that and the arrangement offered to AIF Vic/Tas. However, I do not think those criticisms are valid or reasonable for a number of reasons.
48. First, the draft services agreement provided by the Institute to AIF SA/NT on 7 January 2014 was identical to the draft services agreement provided by the Institute to AIF Vic/Tas on 6 December 2013 in so far as it made provision for directors' guarantees and a maximum fee of $60,000 plus GST (CB 3/1999/2012 and CB3/1864-1876).
49. It is accepted that the services delivery agreement with AIF SA/NT ultimately included guarantees from shareholders rather than directors. Nonetheless, that resulted in a long list of guarantors including a large number of individuals. On the other hand, AIF Vic/Tas was asked for guarantees from its directors or from individuals standing behind its shareholders in circumstances where AIF Vic/Tas was already obliged to give director guarantees under the 2010 MOU.
50. By contrast with AIF SA/NT where the shareholder guarantees involved individuals (as shareholders) providing guarantees, the only shareholder of AIF Vic/Tas was Holdings. That would reasonably give limited additional protection to the Institute about performance of the proposed agreement.
51. Mr Hornsey agreed in cross examination that he would have accepted Ms Ward's suggestion of shareholder guarantees from individuals (T271/42-45).
52. As to the fee agreed with AIF SA/NT, that fee was the result of negotiation in circumstances where AIF SA/NT was not then receiving government funding.
53. In summary, the Institute submits that it did not breach the 2010 MOU as alleged.
54. First, it submits the relevant clause of the 2010 MOU requires the Institute to "perform the required tasks to reapply for funding if and when such funding becomes available". The Institute applied for and obtained the 2014-16 Funding Offer. So much cannot be gainsaid. In addition, Ms Ward's report of 25 October 2013 stated that the application documents for the Victorian government funding had been submitted prior to 31 October 2013.
55. Further, her report of 4 November 2013 stated that they had "forwarded all documents required for the pre-contract assessment processes currently being undertaken by the Department" and, further, Ms Ward gave oral evidence that the Institute had reapplied (T623/6-8).
56. On the other hand, the Institute submits, in my view quite correctly, that there was no contractual obligation on it to accept an offer for funding regardless of its terms. However, whilst it may be accepted that there was an obligation on the Institute to do such things as were reasonably necessary to ensure the other party had the benefit of the contract, it submits it was only required to do all things reasonably necessary. Further it submits, again in my view correctly, that where AIF Vic/Tas and Mr Hornsey were unreasonably refusing to take steps legitimately required by the Institute to protect its own position and its RTO accreditation, it could hardly follow that the Institute had breached this implied obligation.
57. Secondly, the failure on Mr Hornsey's part to provide a written, binding undertaking as requested and the failure to negotiate on his part about the draft services delivery agreement was a breach by AIF Vic/Tas of its obligations under the RLA and its implied obligations under the 2010 MOU. Again, I think that is correct. The Institute submits, again appropriately, that its obligations under the 2010 MOU must be regarded as dependent on AIF Vic/Tas complying with these obligations, at least in so far as they are directly relevant to the Institute's exposure under its RTO status from accepting the funding offer in question. The Institute submits, and again I agree, that in the circumstances it was entitled to allow the 2014-16 Funding Offer to lapse. The Institute submits, I think with force, that for AIF Vic/Tas to succeed on its cross claim would be equivalent to permitting it to take advantage of its own wrongdoing. I agree.
58. In the circumstances I consider the loss of the benefit of the 2014/2016 Funding offer was a result of AIF Vic/Tas refusing via Mr Hornsey to respond sensibly, commercially and reasonably to what were relevantly reasonable requests. As I have, again, already said, in the circumstances I think it only had itself to blame. I am satisfied, therefore, that there was no breach of the 2010 MOU by the Institute and I would therefore dismiss the cross claim.

The Licence Fee Proceedings

1. I have already determined the question of construction, but the issue that remains is whether there is any impropriety in the directors of the Institute resolving to commence the Licence Fee Proceedings.
2. I have determined that the two relevant resolutions involved variations which the Board was perfectly entitled to pass. In my view, therefore, to that extent there can be no question as to the propriety of commencing those proceedings. As the amounts claimed are due and payable I cannot accept that it was improper or inappropriate for the Institute to make the claims given the refusal of AIF Vic/Tas to pay them. Nor do I think it could possibly or rationally be described as an act of unfaithfulness or disloyalty to do so.
3. The allegation here that this and other conduct of the Institute could amount to oppressive behaviour seems to me to be somewhat misconceived. In the instant case it could not be suggested (nor was it in cross examination) that the Court's procedures were being invoked for an illegitimate purpose. It was not put to either of Ms Ward, Mr Weir, Mr Hurst or Mr Creagh that the proceedings were commenced otherwise than as a result of a bona fide belief that the Institute had a lawful claim against AIF Vic/Tas.
4. On this issue, if indeed it was going to be suggested that the proceedings were commenced for a purpose or to effect an object beyond that which the legal process offered, I would have expected questions along those lines to be put. They were not. In addition, there would have to be materials whether by concession in cross examination or otherwise that would in effect point to something akin to oppression. For example, if it was sought to be argued that the predominant purpose of the litigation was to effect some collateral or other inappropriate advantage that, again, should have been put, and it was not. Independently of that, I am satisfied there is no evidence to support that assertion.
5. In the circumstances, therefore, I do not see that the commencement or the prosecution of the Licence Fee Proceedings as amounting to oppressive conduct in the relevant sense.

The exclusion issue

1. The exclusion of Mr Hornsey from meetings occurred only after the Institute commenced proceedings against AIF Vic/Tas.
2. Mr Hornsey accepted that after the Licence Fee Proceedings were commenced there was significant mistrust and antagonism between the respective parties.
3. AIVT complains that Mr Hornsey was excluded from a branding workshop at the Institute on 26 March 2014 but that Mr Hurst and Mr Champion were permitted to attend notwithstanding their interest in Network. However, the allegation is factually erroneous as Mr Hurst and Mr Champion were both excluded from the same meeting because of their involvement with Network.
4. AIVT also complained that the Institute arranged its meetings so that Mr Hornsey and other key employees of AIF Vic/Tas did not meet with the Institute's executive team at the same time as employees of each of the other licensees. The structure occurred as a result of requests made on 17 April 2014 by Mr Hurst on behalf of AIF NSW and Mr Creagh on behalf of AIF WA.
5. I am satisfied on the factual material that, especially after the Licence Fee Proceedings had commenced, Mr Hornsey displayed belligerence and hostility towards a number of people. For example, Mr Creagh explained in his evidence (T861/31-T862/7) that it had been reported to him that Mr Hornsey had been openly and bluntly critical of Mr Steven Pettit, the General Manager. Mr Creagh took the view that, whilst he was prepared to put up with criticism, he thought it was inappropriate that Mr Hornsey direct his criticism to employees.
6. Mr Creagh was not challenged on this evidence and it seems to me on the basis of at least this material the exclusion of Mr Hornsey could not amount to anything vaguely approaching oppression. In other words, if the bifurcation of the team meetings was out of a genuine belief or concern to protect employees from what was thought to be inappropriate criticism or behaviour by Mr Hornsey, then that does not seem to me to amount to unfairness.
7. In addition, AIVT also complains that Mr Hornsey was restricted from participating in the Institute's Board meetings of 18 December 2014, 19 December 2014 and 6 March 2015. The board minutes make it clear that Mr Weir sought confirmation from those present (which included Mr Hornsey) that what was to be discussed would remain confidential to those present unless disclosure was approved by the Chair. Mr Hornsey simply refused to give that confirmation and was asked to leave the meeting.
8. In his evidence (Mr Weir's affidavit of 10 March 2015 at [87] - [92]) indicated that in or about July 2014 he became concerned that Mr Hornsey was recording discussions of Board meetings without approval or consent. He regarded this to be a violation of what he described as "board ethics". He went on to explain that by October 2014 the Institute and AIF NSW, AIF WA, AIF Qld and AIF SA/NT (on the one hand) and Mr Hornsey and his associated entities on the other were engaged in numerous legal disputes. In the circumstances he considered it in the best interests of the Board to discuss matters in the absence of Mr Hornsey unless he was prepared to provide an undertaking as to strict confidentiality.
9. It is unclear whether the Shareholder Defendants fairly accept whether Mr Hornsey intended to record the meetings so as to be able to breach the confidentiality of the board. If that was indeed his aim, Mr Weir's attempt to prevent that occurring was entirely proper. If Mr Hornsey's only motivation was to keep an accurate record of what had occurred alternatives could have been devised, no doubt.
10. Mr Weir's concern about what he believed Mr Hornsey might get up to could well have been as a result of his misunderstanding of Mr Hornsey's intentions or indeed motivations.
11. The Shareholder Defendants submit that Mr Hornsey was never prohibited from attending Board meetings but, at most, was prohibited from recording meetings at a time when there were tensions and ongoing disputes between the Institute, the Shareholder Defendants, AIVT and AIF Vic/Tas.
12. It is submitted that even if Mr Weir's behaviour could be characterised as an overreaction that does not amount to oppression. Indeed, on the facts I am satisfied that there was no relevant oppressive conduct.

The Notices Issue

1. AIVT complains that the Institute issued a number of notices to AIVT and AIF Vic/Tas in the period 7 April 2014 to 3 March 2015. All of the notices were issued after the Licence Fee Proceedings had been filed and when litigation was then pending between the Institute and AIF Vic/Tas.
2. I fail to see how the notices themselves provided any burden on AIVT or AIF Vic/Tas. I agree with the Shareholder Defendants' characterisation of these notices. They were, in fact, correspondence between sophisticated parties, each of whom was represented in an ongoing legal and commercial dispute.
3. Again, I fail to see how correspondence of this sort could objectively be described as oppressive. Mr Hornsey is no shrinking violet and I do not see how they could be regarded rationally as either intimidating or harassing or, as I say, oppressive in the relevant sense.
4. Again, I agree with the Shareholder Defendants' submission that they should be viewed objectively as letters written in the context of litigation when relations between the parties were strained and, although it may have been better for some of them not to have been sent, I fail to see how they could be regarded as oppressive in the relevant sense.

The Sage Proceedings Issue

1. As will appear from the above, the Institute has had a rather limited success in the Sage Proceedings.
2. That said, one has to look at the proceedings both as a whole and in context. First, no application was made to strike the proceedings out on the basis that they were unarguable or were an abuse of process. That the proceedings amounted to an abuse of process is, in my view, the effect of the thinly disguised allegation on the part of AIVT. No such suggestion was put to anyone, nor was it pleaded.
3. If it were to be fairly suggested that the Institute issued those proceedings as a result of some predominant purpose which was to effect an object beyond that which the process offered, I would have expected that to have been put quite candidly to any number of the witnesses called on behalf of the Institute.
4. It was, however, not put to Ms Ward, Mr Weir, Mr Hurst or Mr Creagh that they caused the Institute to commence those proceedings for some improper or collateral purpose.
5. Notwithstanding the findings I have arrived at in relation to aspects of those proceedings, I am unable to conclude that the Sage Proceedings were commenced as a result of anything other than a genuine belief that there was an arguable claim or claims. Accordingly, I am not satisfied that the commencement of the claims in their entirety and/or their prosecution could be regarded as oppressive conduct. Nor am I of the view that merely because some matters were not pressed (the Institute was not alone in this regard), that fact in and of itself amounts to some concession or admission that the proceedings were commenced improperly or by reason of some collateral purpose or in the absence of a genuine belief at the time they were commenced.
6. I am not satisfied, therefore, that the commencement or indeed prosecution of the Sage Proceedings amounts to oppressive conduct.

Oppression

1. As is clear from the above, I have found against AIVT on the oppression case. Therefore ss 232 and 233 are not engaged and I can therefore not make any orders for winding up or acquisition pursuant to those provisions.
2. Notwithstanding those conclusions the question arose for debate before me as to whether, pursuant to s 461(1)(k) the court should wind up the Institute.
3. There is no doubt relations between Mr Hornsey and all others are strained and have, perhaps, reached an all-time low.
4. However, I am satisfied I should not wind up the Institute, on the just and equitable ground for a number of reasons.
5. First, it is an established, successful and solvent company operating Australia wide. It has a number of employees and has the benefit of an independent and experienced Chair, Mr Weir.
6. The Institute operates efficiently on a day to day basis and there is no deadlock at the Board level.
7. Although this judgment may have little effect on the attitudes of the parties it will have the effect of bringing a number of issues to an end, and hence provide some certainty.
8. The level of disharmony has not made the Institute commercially unviable. The parties' conduct is adequately and amply regulated in its Constitution and in the Shareholders' Agreement. For example, there is a protocol which could see consent to the assignment of minority's interest (clause 16 of the Shareholders' Agreement). As is also clear from my findings, much of the disharmony has been provoked or orchestrated by Mr Hornsey to suit what he sees to be his own commercial interests.
9. In all of the circumstances and notwithstanding the level of disharmony otherwise referred to in detail in this judgment I do not consider a winding up order to be appropriate.
10. I would make an order dismissing these proceedings.

The Sage Proceedings

1. I have found in favour of the Institute a breach of directors' duties on the part of Mr Hornsey. However, as a result of my findings liability also flows to ACI and Sage.
2. The question arises on my findings as to whether I should make a declaration that ACI and Sage hold any assets of the Sage fitness business owned by them on trust for the Institute. Alternatively, I could order an account of profits to be taken in respect of the benefits derived by those defendants. Of course, the Institute has also reserved its right of election between an account of profits and damages or equitable compensation until after profits have been identified.
3. My view is that an account of profits and/or damages under s 1317H of the Corporations Act is the more appropriate course. That would require an order that an account of profits be taken and damages could be assessed accordingly.
4. On my findings against Mr Hornsey it would, in my view, be appropriate to restrain Mr Hornsey from having any further role in the Institute for as long as he has an interest in the Sage fitness business.
5. I have also found AIF Vic/Tas was in breach of the AIF Vic/Tas RLA by reason of the operation of the Sage fitness business and accordingly a declaration to the effect in appropriate.
6. I will, of course, hear the parties on the matter as to the precise orders.

The Licence Fee Proceedings

1. I have found in favour of the Institute in these proceedings and accordingly there is an outstanding debt to be met by AIF Vic/Tas. The amount has been agreed and a judgment in that sum plus any interest would be appropriate.

Use of the separate RTO status

1. I have also found AIF Vic/Tas was in breach of the RLA by using its own RTO accreditation to provide some specific training services.
2. The question arises as to what relief should be granted to the Institute. The Institute correctly observed (final submissions of 13 August 2015 at [102]) that as a matter of discretion I may choose not to order AIF Vic/Tas to cease to supply services to students currently signed up on the expectation of funding from the Victorian government. I am certainly of that view.
3. I would be, however, disposed to restrain AIF Vic/Tas from signing up new students using its own accreditation, and to order that it make no further use of its accreditation at least while the RLA remains on foot, which would be after the expiry of the current agreement with the Victorian government. The Institute made it clear it sought nominal damages but presses for declaratory and injunctive relief (see the submissions in reply of 18 August 2015 at [27]). I am of the view that relief is appropriate in all the circumstances.
4. However, I would if need be hear the parties further on the precise form of any relief.

Costs

1. If costs cannot be agreed, I would also invite the parties to relist the matter so that the issue can be argued and determined.

Amendments 06 November 2015 - Paragraph [705], changed "cannot therefore not make" to "can therefore not make".

Paragraph [715] deleted the word "is" 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: 06 November 2015